(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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TEXAS AND VIRGINIA 75-1743247
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
THREE LINCOLN CENTRE, SUITE 1800 75240
5430 LBJ FREEWAY, DALLAS, TEXAS (Zip code)
(Address of principal executive offices)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(972) 934-9227
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED ------------------- ----------------------------------------- Common stock, No Par Value New York Stock Exchange |
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the registrant was $816,053,202 as of October 31, 2001. On October 31, 2001 the registrant had 40,841,501 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
PART I
The terms "we," "our," "us" and "Atmos" refer to Atmos Energy Corporation and its subsidiaries, unless the context suggests otherwise. The abbreviations "Mcf," "MMcf" and "Bcf" mean thousand cubic feet, million cubic feet and billion cubic feet.
ITEM 1. BUSINESS
OPERATIONS
We distribute and sell natural gas to approximately 1.4 million residential, commercial, industrial, agricultural and other customers. We operate through five divisions in service areas located in Colorado, Georgia, Illinois, Iowa, Kansas, Kentucky, Louisiana, Missouri, Tennessee, Texas and Virginia. In addition, we transport natural gas for others through our distribution system.
We provide natural gas storage services and own or hold an interest in natural gas storage fields in Kansas, Kentucky and Louisiana to supplement natural gas used by customers in Kansas, Kentucky, Tennessee, Louisiana and other states. We also provide energy management and gas marketing services to industrial customers, municipalities and other local distribution companies. We also provide electrical power generation to meet peak load demands for a municipality regulated by the Tennessee Valley Authority. In addition, we market natural gas to industrial and agricultural customers primarily in West Texas and to industrial customers in Louisiana.
FORMATION
We were organized under the laws of Texas in 1983 as Energas Company, a subsidiary of Pioneer Corporation, for the purposes of owning and operating Pioneer's natural gas distribution business in Texas. Immediately following the transfer by Pioneer to Atmos of its gas distribution business, which Pioneer and its predecessors had operated since 1906, Pioneer distributed our outstanding stock to its shareholders. In September 1988, we changed our name from Energas Company to Atmos Energy Corporation. As a result of the merger with United Cities Gas Company in July 1997, we also became incorporated in Virginia.
RECENT DEVELOPMENTS
Completion of acquisition of remaining equity interest in Woodward Marketing. We acquired a 45 percent interest in Woodward Marketing, L.L.C. in 1997 as a result of the merger of Atmos and United Cities Gas Company, which had acquired that interest in 1995. In April 2001, we acquired the 55 percent interest in Woodward Marketing, L.L.C. that we did not already own in exchange for 1,423,193 restricted shares of our common stock. The consideration is subject to an upward adjustment, based on our share price, of up to 232,547 shares plus an amount of shares to compensate for dividends paid after the completion of the acquisition. As a result of the completion of the acquisition, the guaranty by one of our subsidiaries of Woodward Marketing's $140.0 million short-term working capital and letter of credit facility increased from 45 percent to 100 percent of any amounts outstanding. Under the facility, as of September 30, 2001, $28.0 million was outstanding, and letters of credit totaling $38.8 million had been issued. Since April 1, 2001, our subsidiary has been the sole guarantor of all payables, up to $40.0 million, of Woodward Marketing for natural gas purchases and transportation services.
Completion of acquisition of natural gas operations in Louisiana. In July 2001, we acquired from Citizens Communications Company the natural gas operations of its Louisiana Gas Service Company division and its subsidiary LGS Natural Gas Company for $363.4 million in cash. Upon completion of the acquisition, we became the largest natural gas distributor in Louisiana, and our national customer base increased to about 1.4 million customers, making us the fifth largest pure natural gas local distribution company in the United States.
The acquired operations provide natural gas distribution service to approximately 279,000 residential and commercial meters in communities in southeastern and northern Louisiana. The service territory includes the suburban areas of metropolitan New Orleans (excluding Orleans Parish), the north shore of Lake Pontchar-
train and the Monroe/West Monroe metropolitan area. The unregulated operations, which include an intrastate pipeline company, provides gas transportation service to industrial customers and to the acquired operations.
Pending acquisition of Mississippi Valley Gas Company. In September 2001, we entered into a definitive agreement to acquire Mississippi Valley Gas Company, a privately held natural gas utility, for $75.0 million cash, $75.0 million of Atmos common stock and the assumption of approximately $45.0 million of long-term debt. Mississippi Valley Gas provides natural gas distribution service to more than 261,500 residential, commercial, industrial and other customers located primarily in the northern and central regions of Mississippi. Mississippi Valley Gas has a 5,500 mile distribution system and 335 miles of intrastate pipeline. It also has two underground storage facilities with 2.05 Bcf of working gas capacity. The acquisition is subject to state and federal regulatory approval. It is anticipated that the acquisition will be completed in fiscal 2002.
Atmos Power Systems, Inc. constructs power plant. In May 2001, our subsidiary, Atmos Power Systems, Inc., entered into a definitive agreement with the City of Bolivar, Tennessee Electric Department to construct a 20-megawatt electric generating plant and associated facilities. Atmos Power Systems leased the peaking plant to the Electric Department of the City of Bolivar for 10 years, with an option for Bolivar to purchase the plant beginning in the fifth year of the lease. Because of the success of this first project, Atmos is considering other opportunities to build and lease power plants. Although results to date have not been material, we anticipate growth in this type of business.
Acquisition of Southern Resources, IGS and Kentucky storage assets. Woodward Marketing completed the purchases of Southern Resources, Inc. and certain assets of Innovative Gas Services, Incorporated in the fourth quarter of fiscal year 2001 thereby expanding our gas marketing operations. We expect to complete the acquisition of certain storage assets in Kentucky in the first quarter of fiscal year 2002. The acquisition will enable us to provide additional gas storage capacity. Total cost of the acquisitions is approximately $16.0 million in cash.
STRATEGY
Our overall strategy is to:
- deliver superior shareholder value,
- continue to manage our utility operations efficiently,
- profitably grow our non-utility operations to complement our utility operations, and
- profitably grow our business through acquisitions.
We are running our operations efficiently by:
- managing our operating and maintenance expenses,
- leveraging our technology, such as our 24 hour call center, to achieve more efficient operations,
- focusing on regulatory rate proceedings to increase revenue,
- mitigating weather-related risks through weather normalized rates in some jurisdictions and purchasing weather insurance in others, and
- disposing of non-growth assets.
We are growing our non-utility operations by:
- completing the purchase of the remaining interest in Woodward Marketing,
- increasing our non-regulated gas sales, and
- entering into new non-utility businesses, such as distributed electrical power generation.
We are growing our utility business by acquiring natural gas operations, such as Louisiana Gas Service Company and LGS Natural Gas Company in July 2001 and the pending acquisition of Mississippi Valley Gas Company.
Our operations are divided into two segments, a utility operations segment, which includes our natural gas distribution and sales operations, and our non-regulated segment, which includes all of our other operations.
UTILITY OPERATIONS SEGMENT OVERVIEW
Our utility operations segment is operated through our five regulated natural gas divisions:
- Atmos Energy Louisiana Gas Company,
- Energas Company,
- Greeley Gas Company,
- United Cities Gas Company, and
- Western Kentucky Gas Company
Atmos Energy Louisiana. Our Atmos Energy Louisiana Gas division includes the operations of the assets of Louisiana Gas Service Company acquired in July 2001 and our previously existing Trans Louisiana Gas division. Our Atmos Energy Louisiana Gas division operates in Louisiana and is regulated by the Louisiana Public Service Commission, which regulates utility services, rates and other matters. In most of the areas in which we operate in Louisiana, we do so pursuant to a non-exclusive franchise granted by the governing authority of each area. Direct sales of natural gas to industrial customers in Louisiana, who use gas for fuel or in manufacturing processes, and sales of natural gas for vehicle fuel are exempt from regulation.
In connection with its review of our acquisition of Louisiana Gas Service, the Louisiana Public Service Commission has approved a rate structure that requires us to share any cost savings that result from the acquisition with the customers of Louisiana Gas Service. The shared cost savings will be the difference between operation and maintenance expense in any future year and the 1998 normalized expense for Louisiana Gas Service, indexed for inflation, annual changes in labor costs and customer growth. The customers are not assured any savings in 2001. In 2002 and in future years, the customers are assured annual savings, which will be indexed for inflation, annual changes in labor costs and customer growth. The sharing mechanism will remain in place for 20 years subject to established modification procedures.
The rates of Louisiana Gas Service are subject to a purchased gas adjustment clause that allows it to pass changes in gas costs on to its customers. In addition, on January 29, 2001, the Louisiana Public Service Commission approved a rate stabilization clause for Louisiana Gas Service for a three-year period beginning January 1, 2001. Under the rate stabilization clause, Louisiana Gas Service will be allowed to earn a return on equity within certain ranges that will be monitored on an annual basis. After the completion of the acquisition of Louisiana Gas Service, our Atmos Energy Louisiana division also became subject to the adjustment and stabilization clause.
Louisiana Gas Service is currently involved in a proceeding with the Louisiana Public Service Commission relating to past costs associated with the purchase of gas that it charged to its customers. Although, after completion of the acquisition, we took over the defense of this proceeding and will have responsibility for any finding of liability on the part of Louisiana Gas Service, we believe the outcome of this proceeding will not have a material adverse impact on our operations as Citizens has agreed to fully indemnify us for any liability as a result of this proceeding.
The Louisiana Public Service Commission approved a Rate Stabilization Clause for three years for our former Trans La Division with an allowed return on common equity between 10.5 percent and 11.5 percent. This decision increased the service charge amounts from about 20 percent to about 70 percent of actual costs and increased the monthly customer charges from $6 to $9, both effective November 1, 1999.
At and for the year ended September 30, 2001, we had 368,436 utility meters in service in Louisiana and total throughput of 12,578 MMcf. At and for the year ended September 30, 2000, we had 81,419 meters in service and total throughput of 7,448 MMcf.
Energas. Our Energas division operates in Texas. The governing body of each municipality we serve has original jurisdiction over all utility rates, operations and services within its city limits, except with respect to sales of natural gas for vehicle fuel and agricultural use. We operate pursuant to non-exclusive franchises granted by the municipalities we serve, which are subject to renewal from time to time. The Railroad Commission of Texas has exclusive appellate jurisdiction over all rate and regulatory orders and ordinances of the municipalities and exclusive original jurisdiction over rates and services to customers not located within the limits of a municipality. The Railroad Commission is currently conducting a gas cost audit of all local distribution companies in Texas, including Energas, in response to the high gas costs this past winter. At and for the year ended September 30, 2001, we had 314,734 utility meters in service and total throughput of 53,586 MMcf. At and for the year ended September 30, 2000, we had 302,662 utility meters in service and total throughput of 53,922 MMcf.
Greeley Gas. Our Greeley Gas division operates in Colorado, Kansas and Missouri and is regulated by the respective states' public service commission with respect to accounting, rates and charges, operating matters and the issuance of securities. We operate under terms of non-exclusive franchises granted by the various cities. At and for the year ended September 30, 2001, Greeley had 212,484 utility meters in service and total throughput of 37,797 MMcf. At and for the year ended September 30, 2000, Greeley had 207,161 meters in service and total throughput of 34,455 MMcf.
United Cities. Our United Cities Gas division operates in Georgia, Illinois, Iowa, Missouri, Tennessee and Virginia. In each of these states, our rates, services and operations as a natural gas distribution company are subject to general regulation by each state's public service commission. We operate in each community, where necessary, under a franchise granted by the municipality for a fixed term of years. In Tennessee and Georgia, we have performance based rates, which provide incentives for us to find ways to lower costs. Any cost savings are then shared with our customers. We also have weather normalization adjustments to our rates in Tennessee and Georgia. At and for the year ended September 30, 2001, United Cities had 308,394 utility meters in service and total throughput of 64,924 MMcf. At and for the year ended September 30, 2000, United Cities had 312,018 meters in service and total throughput of 56,698 MMcf.
Western Kentucky Gas. Our Western Kentucky Gas division operates in Kentucky and is regulated by the Kentucky Public Service Commission, which regulates utility services, rates, issuance of securities and other matters. We operate in the various incorporated cities pursuant to non-exclusive franchises granted to us by these cities. Sales of natural gas for use as vehicle fuel in Kentucky are unregulated. We have been operating under a performance based rate program since July 1998. We also have weather normalization adjustments to our rates in Kentucky. At and for the year ended September 30, 2001, Western Kentucky Gas had 182,275 utility meters in service and total throughput of 46,530 MMcf. At and for the year ended September 30, 2000, Western Kentucky Gas had 181,066 meters in service and total throughput of 47,129 MMcf.
NON-REGULATED SEGMENT OVERVIEW
Our non-regulated segment is primarily composed of the following three parts:
- Atmos Energy Marketing, LLC. Atmos Energy Marketing provides a variety of natural gas management services to natural gas utility systems and industrial natural gas consumers in several states and to our Atmos Energy Louisiana Gas, Greeley Gas, United Cities Gas and Western Kentucky Gas divisions. These services consist primarily of acquisition and provision of natural gas supplies at fixed and market-based prices, load forecasting and management, gas storage and transportation services, peaking sales and balancing services and gas price hedging through the use of derivative products. Woodward Marketing, L.L.C. is a wholly owned subsidiary of Atmos Energy Marketing.
- Atmos Pipeline and Storage, L.L.C. Atmos Pipeline and Storage owns or has an interest in underground storage fields in Kansas, Kentucky and Louisiana and provides storage services to our United Cities Gas, Greeley Gas and Atmos Energy Louisiana Gas divisions and other non-regulated customers.
- Atmos Power Systems, Inc. Atmos Power Systems constructs and operates electrical power generating plants and associated facilities. Atmos Power Systems may also enter into agreements to either lease or sell such plants.
WOODWARD MARKETING ACTIVITIES
We acquired a 45 percent interest in Woodward Marketing, L.L.C. in 1997 as a result of the merger of Atmos and United Cities Gas Company, which had acquired that interest in 1995. In April 2001, we acquired the 55 percent interest that we did not own from J.D. Woodward and others for 1,423,193 restricted shares of our common stock. Immediately following the acquisition, Mr. Woodward was elected as a Senior Vice President of Atmos in charge of all non-regulated business activities, a position he has held since April 2001. Prior to that time, Mr. Woodward had not been an officer or employee of Atmos.
The principal business of Woodward Marketing, including the activities of Trans Louisiana Industrial Gas Company, Inc., is the overall management of natural gas requirements for municipalities, local gas utility companies and industrial customers located primarily in the Southwestern and Midwestern United States. This business involves the sale of natural gas by Woodward Marketing to its customers and the management of storage and transportation contracts for its customers under contracts generally having one to two-year terms. At September 30, 2001, Woodward Marketing had a total of 78 municipal and local gas utility customers and 195 industrial customers. Woodward Marketing also sells natural gas to certain of its industrial customers on a delivered burner tip basis under contract terms from 30 days to two years. In addition, Woodward Marketing supplies us with a portion of our natural gas requirements on a competitive bid basis.
In the management of natural gas requirements for municipal and other local utilities, Woodward Marketing sells physical natural gas for future delivery and hedges the associated price risk through the use of gas futures, including forwards, over-the-counter and exchange-traded options, and swap contracts with counterparties. These financial contracts are marked-to-market at the daily close of business. Woodward Marketing links gas futures to physical delivery of natural gas and balances its futures positions at the end of each trading day. Over-the-counter swap agreements require Woodward Marketing to receive or make payments based on the difference between a fixed price and the market price of natural gas on the settlement date. Woodward Marketing uses these futures and swaps to manage margins on offsetting fixed-price purchase or sale commitments for physical quantities of natural gas, which are also carried on a mark to market basis. Options held to hedge price risk provide the right, but not the requirement, to buy or sell energy commodities at a fixed price. Woodward Marketing uses options to manage margins and to limit overall price risk exposure.
Energy related services provided by Woodward Marketing include the sale of natural gas to its various customer classes and management of transportation and storage assets and inventories. More specifically, energy services include contract negotiation and administration, load forecasting, storage acquisition, natural gas purchase and delivery and capacity utilization strategies. In providing these services, Woodward Marketing generates income from its utility, municipal and industrial customers through negotiated prices based on the volume of gas supplied to the customer. Woodward Marketing also generates income by taking advantage of the difference between near-term gas prices and prices for future delivery as well as the daily movement of gas prices by utilizing storage and transportation capacity that it controls.
Woodward Marketing also engages in limited speculative natural gas trading
for its own account, subject to a risk management policy established by us which
limits the level of trading loss in any fiscal year to a maximum of 25 percent
of the budgeted annual operating income of Woodward Marketing. Compliance with
such risk management policy is monitored on a daily basis. In addition, Woodward
Marketing's bank credit facility limits trading positions that are not closed at
the end of the day (open positions) to 2.5 Bcf of natural gas. At September 30,
2001, Woodward Marketing's open positions in its trading operations totaled 2.3
Bcf. In its speculative trading, Woodward Marketing's open trading positions are
monitored on a daily basis but are
not required to be closed if they remain within the limits set by the bank loan agreement. Woodward Marketing had an unrealized trading gain of $4.5 million for the fiscal year ended September 30, 2001, but there can be no assurance that Woodward Marketing will have any speculative trading gain in the future. In some prior years, Woodward Marketing has experienced losses in its speculative trading business. The financial exposure that results from the daily fluctuations of gas prices and the potential for daily price movements constitutes a risk of loss since the price of natural gas purchased for future delivery at the beginning of the day may not be hedged until later in the day.
Financial instruments, which subject Woodward Marketing to counterparty risk, consist primarily of financial instruments arising from trading and risk management activities and overnight repurchase agreements that are not insured. Counterparty risk is the risk of loss from nonperformance by financial counterparties to a contract. Exchange-traded future and option contracts are generally guaranteed by the exchanges.
Woodward Marketing's operations are concentrated in the natural gas industry, and its customers and suppliers may be subject to economic risks affecting that industry.
OPERATING STATISTICS
The following table shows the operating statistics of Atmos for each of the five fiscal years from 1997 through 2001. It is followed by two additional tables that show utility only sales and operating statistics by business unit for 2001 and 2000. Certain prior year amounts have been reclassified to conform with the current year presentation.
ATMOS ENERGY CORPORATION
CONSOLIDATED OPERATING STATISTICS
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------
2001 2000 1999 1998 1997
---------- ---------- ---------- ---------- ----------
METERS IN SERVICE, end of year
Residential......................... 1,243,625 970,873 919,012 889,074 870,747
Commercial.......................... 122,274 104,019 98,268 94,302 92,703
Industrial (including
agricultural)..................... 13,020 14,259 14,329 16,322 17,217
Public authority and other.......... 7,404 7,448 6,386 4,834 4,781
---------- ---------- ---------- ---------- ----------
Total meters...................... 1,386,323 1,096,599 1,037,995 1,004,532 985,448
Propane customers(1)................ -- -- 39,539 37,400 29,097
---------- ---------- ---------- ---------- ----------
Total............................. 1,386,323 1,096,599 1,077,534 1,041,932 1,014,545
========== ========== ========== ========== ==========
HEATING DEGREE DAYS(2)
Actual (weighted average)........... 2,753 2,096 3,374 3,799 3,909
Percent of normal................... 107% 82% 85% 95% 98%
SALES VOLUMES -- MMcf
Residential......................... 79,000 63,285 67,128 73,472 75,215
Commercial.......................... 36,922 30,707 31,457 36,083 37,382
Industrial(including
agricultural)..................... 33,730 38,687 35,741 44,881 46,416
Public authority and other.......... 6,892 5,520 5,793 4,937 5,195
---------- ---------- ---------- ---------- ----------
Total sales volumes............... 156,544 138,199 140,119 159,373 164,208
Transportation volumes -- MMcf........ 61,230 59,365 55,468 56,224 48,800
---------- ---------- ---------- ---------- ----------
TOTAL THROUGHPUT -- MMcf.............. 217,774 197,564 195,587 215,597 213,008
========== ========== ========== ========== ==========
PROPANE -- Gallons (000's)(1)......... -- 19,329 22,291 23,412 25,204
========== ========== ========== ========== ==========
OPERATING REVENUES (000's)
Gas sales revenues
Residential......................... $ 788,902 $ 405,552 $ 349,691 $ 410,538 $ 452,864
Commercial.......................... 342,945 176,712 144,836 184,046 193,302
Industrial (including
agricultural)..................... 208,168 171,447 117,382 161,382 168,386
Public authority and other.......... 58,539 27,198 22,330 20,504 23,898
---------- ---------- ---------- ---------- ----------
Total gas sales revenues.......... 1,398,554 780,909 634,239 776,470 838,450
Transportation revenues............... 28,668 23,610 23,101 23,971 19,885
Other gas revenues.................... 10,925 4,674 4,500 8,121 6,385
---------- ---------- ---------- ---------- ----------
Total gas revenues................ 1,438,147 809,193 661,840 808,562 864,720
Propane revenues(1)................... -- 22,550 22,944 29,091 33,194
Other revenues........................ 4,128 18,409 5,412 10,555 8,921
---------- ---------- ---------- ---------- ----------
Total operating revenues.......... $1,442,275 $ 850,152 $ 690,196 $ 848,208 $ 906,835
========== ========== ========== ========== ==========
AVERAGE SALES PRICE/Mcf............... $ 8.93 $ 5.65 $ 4.53 $ 4.87 $ 5.11
AVERAGE COST OF GAS/Mcf SOLD.......... 6.83 3.79 2.79 3.24 3.51
AVERAGE TRANSPORTATION
REVENUES/Mcf...................... .47 .40 .42 .43 .41
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See footnotes following these tables.
ATMOS ENERGY CORPORATION
UTILITY SALES AND STATISTICAL DATA BY BUSINESS UNIT(3)
YEAR ENDED SEPTEMBER 30, 2001
------------------------------------------------------------------
ATMOS
ENERGY UNITED WESTERN TOTAL
LOUISIANA ENERGAS GREELEY CITIES KENTUCKY UTILITY
--------- -------- -------- -------- -------- ----------
METERS IN SERVICE, at end of
year
Residential............... 344,870 273,850 192,056 271,233 161,616 1,243,625
Commercial................ 22,650 27,128 18,376 35,518 18,602 122,274
Industrial................ -- 11,498 414 711 397 13,020
Public authority and
other.................. 916 2,258 1,638 932 1,660 7,404
-------- -------- -------- -------- -------- ----------
Total.................. 368,436 314,734 212,484 308,394 182,275 1,386,323
======== ======== ======== ======== ======== ==========
HEATING DEGREE DAYS(2)
Actual.................... 2,076 3,782 6,041 1,315 4,534 2,753
Percent of normal......... 117% 107% 106% 104% 104% 107%
SALES VOLUMES -- MMcf(4)
Residential............... 5,257 22,905 18,027 19,978 12,833 79,000
Commercial................ 2,448 7,992 6,845 13,968 5,669 36,922
Industrial................ -- 8,395 1,224 10,473 3,018 23,110
Public authority and
other.................. 919 2,618 1,497 339 1,519 6,892
-------- -------- -------- -------- -------- ----------
Total.................. 8,624 41,910 27,593 44,758 23,039 145,924
TRANSPORTATION
VOLUMES -- MMcf(4)........ 3,954 11,676 10,204 20,166 23,491 69,491
-------- -------- -------- -------- -------- ----------
TOTAL THROUGHPUT --
MMcf(4)................... 12,578 53,586 37,797 64,924 46,530 215,415
======== ======== ======== ======== ======== ==========
OTHER STATISTICS
Operating revenues
(000's)................ $ 96,511 $311,414 $270,678 $464,498 $237,047 $1,380,148
Miles of pipe............. 7,934 13,345 6,344 7,536 3,779 38,938
Employees(5).............. 488 342 272 470 247 1,819
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See footnotes following these tables.
ATMOS ENERGY CORPORATION
UTILITY SALES AND STATISTICAL DATA BY BUSINESS UNIT(3)
YEAR ENDED SEPTEMBER 30, 2000
------------------------------------------------------------------
ATMOS
ENERGY UNITED WESTERN TOTAL
LOUISIANA ENERGAS GREELEY CITIES KENTUCKY UTILITY
--------- -------- -------- -------- -------- ----------
METERS IN SERVICE, at end of
year
Residential................ 74,943 273,664 187,121 274,580 160,565 970,873
Commercial................. 5,568 26,231 17,946 35,808 18,466 104,019
Industrial................. -- 513 406 660 407 1,986
Public authority and
other................... 908 2,254 1,688 970 1,628 7,448
------- -------- -------- -------- -------- ----------
Total................... 81,419 302,662 207,161 312,018 181,066 1,084,326
======= ======== ======== ======== ======== ==========
HEATING DEGREE DAYS(2)
Actual..................... 1,237 2,875 4,678 1,130 3,702 2,096
Percent of normal.......... 69% 81% 82% 89% 85% 81%
SALES VOLUMES -- MMcf(4)
Residential................ 3,070 19,201 14,727 14,703 11,584 63,285
Commercial................. 1,379 6,365 5,829 12,102 5,032 30,707
Industrial................. -- 1,651 1,927 13,191 3,189 19,958
Public authority and
other................... 751 2,026 1,216 228 1,299 5,520
------- -------- -------- -------- -------- ----------
Total................... 5,200 29,243 23,699 40,224 21,104 119,470
TRANSPORTATION
VOLUMES -- MMcf(4)......... 2,248 24,679 10,756 16,474 26,025 80,182
------- -------- -------- -------- -------- ----------
TOTAL THROUGHPUT
-- MMcf(4)................ 7,448 53,922 34,455 56,698 47,129 199,652
======= ======== ======== ======== ======== ==========
OTHER STATISTICS
Operating revenues
(000's)................. $45,469 $146,100 $147,116 $280,029 $121,237 $ 739,951
Miles of pipe.............. 2,283 13,169 6,000 5,140 3,437 30,029
Employees(5)............... 123 350 271 495 249 1,488
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See footnotes following these tables.
(1) Prior to August 2000, propane revenues and expenses were fully consolidated. Subsequent to August 2000, the results of propane are shown on the equity basis.
(2) A heating degree day is equivalent to each degree that the average of the high and the low temperatures for a day is below 65 degrees. The colder the climate, the greater the number of heating degree days. Heating degree days are used in the natural gas industry to measure the relative coldness of weather experienced and to compare relative temperatures between one geographic area and another. Normal degree days are based on 30-year average National Weather Service data for selected locations. Degree day information for 2001 and 2000 are presented excluding service areas with weather normalized operations. Degree day information for 1999, 1998 and 1997 does not exclude service areas with weather normalized operations as that information was not available.
(3) These tables present data for our five utility business units. Their operations include the regulated local distribution companies located in their respective service areas. The operations of Louisiana Gas are included in Atmos Energy Louisiana since July 1, 2001, the date of acquisition.
(4) Utility sales volumes and revenues reflect utility segment operations, including intercompany sales and transportation amounts.
(5) The number of employees excludes 480 and 369 Atmos shared services and customer support center employees and 62 and 28 non-utility employees in 2001 and 2000.
SEGMENT OVERVIEW
We consider each business unit within our utility segment to be a reporting unit of the utility segment and not a reportable segment. Our chief executive officer makes decisions about allocating resources to the utility segment as a whole and not to individual reporting units.
The following table summarizes certain information regarding the operations of the utility and non-regulated segments of Atmos as of and for each of the three years ended September 30, 2001. The information is net of intersegment eliminations.
NON-
UTILITY REGULATED TOTAL
---------- --------- ----------
(IN THOUSANDS)
2001
Operating revenues.............................. $1,378,159 $ 64,116 $1,442,275
Operating income................................ 127,980 2,301 130,281
Net income...................................... 49,881 6,209 56,090
Identifiable assets............................. 1,732,296 303,884 2,036,180
2000
Operating revenues.............................. $ 734,835 $115,317 $ 850,152
Operating income................................ 77,207 8,109 85,316
Net income...................................... 22,459 13,459 35,918
Identifiable assets............................. 1,246,782 101,976 1,348,758
1999
Operating revenues.............................. $ 617,313 $ 72,883 $ 690,196
Operating income................................ 49,000 5,239 54,239
Net income...................................... 10,800 6,944 17,744
Identifiable assets............................. 1,125,691 104,846 1,230,537
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The utility segment is composed of our five regulated utility divisions:
the Atmos Energy Louisiana Gas Division which operates in Louisiana, the Energas
Division which operates in Texas, the Greeley Gas Division which operates in
Colorado, Kansas and Missouri, the United Cities Gas Division which operates in
Georgia, Illinois, Iowa, Missouri, Tennessee and Virginia and the Western
Kentucky Gas Division which operates in Kentucky. For further discussion on the
utility segment operations, see "Utility Operations Segment Overview".
For a further discussion of our non-regulated segment operations see "Non-Regulated Segment Overview".
GAS SALES
Our natural gas distribution business is seasonal and highly dependent on weather conditions in our service areas. Gas sales to residential and commercial customers are greater during the winter months than during the remainder of the year. The volumes of gas sales during the winter months will vary with the temperatures during these months. The seasonal nature of our sales to residential and commercial customers is
partially offset by our sales in the spring and summer months to our agricultural customers in Texas, Colorado and Kansas who use natural gas to operate irrigation equipment.
In addition to weather, our revenues are affected by the cost of natural gas and economic conditions in the areas that we serve. Higher gas costs, which we are generally able to pass through to our customers under purchased gas adjustment clauses, may cause customers to conserve, or, in the case of industrial customers, to use alternative energy sources.
To protect against volatility in gas prices, we are hedging gas costs for the 2001-2002 heating season by utilizing a combination of financial tools and fixed forward physical contracts to stabilize gas prices. For the 2001-2002 heating season, we plan to cover approximately 64 percent of our anticipated requirements through storage and hedging instruments. The gas hedges should help moderate the effects of higher customer accounts receivable caused by higher gas prices.
We also have weather normalization adjustments in our rate jurisdictions in Tennessee, Georgia and Kentucky. We purchased weather hedges for our Texas and Louisiana operations effective for the 2000-2001 heating season. We also purchased a three-year weather insurance policy for our Texas and Louisiana operations commencing with the 2001-2002 heating season, with an option to cancel in the third year. The policy covers the entire heating season of October to March. See "Weather and seasonality" in Management's Discussion and Analysis of Operations.
Our distribution systems have experienced aggregate peak day deliveries of approximately 2.0 Bcf per day. We have the ability to curtail deliveries to certain customers under the terms of interruptible contracts and applicable state statutes or regulations which enable us to maintain our deliveries to high priority customers. We have not imposed curtailment in our Energas Division since we began independent operations in 1983 or in our Atmos Energy Louisiana Gas Division since we acquired Trans Louisiana Gas Company in 1986 and Louisiana Gas Service in 2001. The Western Kentucky Gas Division curtailed deliveries to certain interruptible customers during exceptionally cold periods in December 1989, January 1994 and during the winter of 1996. Neither the Greeley Gas Division nor its predecessor, Greeley Gas Company, has curtailed deliveries to its sales customers since prior to 1980. The United Cities Gas Division curtails interruptible service customers from time to time each year in accordance with the interruptible contracts and tariffs.
GAS SUPPLY
We receive gas deliveries through 35 pipeline transportation companies, both interstate and intrastate, to satisfy our sales market requirements. The pipeline transportation agreements are firm and many of them have pipeline no-notice storage service which provides for daily balancing between system requirements and nominated flowing supplies. These agreements have been negotiated with the shortest term necessary while still maintaining our right of first refusal.
The Western Kentucky Gas Division's gas supply is delivered primarily by the following pipelines: Williams Pipeline-Texas Gas, Tennessee Gas, Trunkline, Midwestern Pipeline and ANR. During 1998, the Western Kentucky Gas Division sought and was granted approval by the Kentucky Public Service Commission for a performance-based rate program which commenced in July 1998. Under the performance-based program, we and our customers jointly share in any actual gas cost savings achieved when compared to pre-determined benchmarks. We also have similar gas cost performance-based rate mechanisms in Georgia and Tennessee.
The United Cities Gas Division is served by 13 interstate pipelines. The majority of the volumes are transported through East Tennessee Pipeline, Southern Natural Gas, Tennessee Gas Pipeline and Columbia Gulf.
Colorado Interstate Gas Company, Williams Pipeline-Central, Public Service Company of Colorado and Northwest Pipeline are the principal transporters of the Greeley Gas Division's requirements. Additionally, the Greeley Gas Division purchases substantial volumes from producers that are connected directly to its distribution system.
The Energas Division receives sales and transportation service from various ONEOK pipeline affiliates. Also, the Energas Division purchases a significant portion of its supply from Pioneer Natural Resources which is connected directly to our Amarillo, Texas distribution system.
Louisiana Intrastate Gas Company, Acadian Pipeline, Gulf South and Williams Pipeline-Texas Gas pipelines deliver most of the Atmos Energy Louisiana Gas Division's requirements.
We also own or hold an interest in and operate numerous natural gas storage facilities in Kentucky, Kansas and Louisiana which are used to help meet customer requirements during peak demand periods and to reduce the need to contract for additional pipeline capacity to meet such peak demand periods. Additionally, we operate one propane plant and a liquified natural gas plant for peak shaving purposes. We also contract for storage service in underground storage facilities on many of the interstate pipelines serving us. See "Item 2. Properties" below for further information regarding the peak shaving facilities.
We normally inject gas into pipeline storage systems and company owned storage facilities during the summer months and withdraw it in the winter months. Our underground storage facilities in Kansas, Kentucky and Louisiana have a combined maximum daily output capability of approximately 226,000 Mcf.
We purchase our gas supply from various producers and marketers. Supply arrangements are contracted on a firm basis with various terms at market prices. The firm supply consists of both base load and swing supply quantities. Base load quantities are those that flow at a constant level throughout the month and swing supply quantities provide the flexibility to change daily quantities to match increases or decreases in requirements related to weather conditions. Except for local production purchases, we select suppliers through a competitive bidding process by sending out a request for proposal to suppliers that have demonstrated that they can provide reliable service. We select these suppliers based on their ability to deliver gas supply to our designated firm pipeline receipt points and the best cost. Major suppliers during fiscal 2001 were Reliant Energy, Sonat Marketing, Cinergy, Pioneer Natural Resources, Texaco, Woodward Marketing, ONEOK Gas Marketing, Aquila, BP Energy, Enron, Enbridge, Anadarko and Tenaska Marketing. We do not anticipate problems with securing additional gas supply as needed for our customers.
REGULATION
Each of our utility divisions is regulated by various state or local public utility authorities. We are also subject to regulation by the United States Department of Transportation with respect to safety requirements in the operation and maintenance of our gas distribution facilities. Our distribution operations are also subject to various state and federal laws regulating environmental matters. From time to time we receive inquiries regarding various environmental matters. We believe that our properties and operations substantially comply with and are operated in substantial conformity with applicable safety and environmental statutes and regulations. There are no administrative or judicial proceedings arising under environmental quality statutes pending or known to be contemplated by governmental agencies which would have a material adverse effect on us or our operations.
RATES
The method of determining regulated rates varies among the states in which we operate. The regulators have the responsibility of ensuring that utilities under their jurisdiction operate in the best interests of customers while providing the utilities the opportunity to earn a reasonable return on investment. In a general rate case, the applicable regulatory authority, which is typically the state public utility commission, establishes a base margin, which is the amount of revenue authorized to be collected from customers to recover authorized operating expense (other than the cost of gas), depreciation, interest, taxes and return on rate base. The divisions in our utility operations segment perform annual deficiency studies for each rate jurisdiction to determine when to file rate cases, which are typically filed every two to five years.
Substantially all of the sales charged by us to our customers fluctuate with the cost of gas purchased by us. Rates established by regulatory authorities are adjusted for increases and decreases in our purchased gas cost through purchased gas adjustment mechanisms. Purchased gas adjustment mechanisms provide gas
utilities a method of recovering purchased gas costs on an ongoing basis without the necessity of a rate case addressing all of the utilities' non-gas costs. These mechanisms are commonly utilized when regulatory authorities recognize a particular type of expense, such as purchased gas costs, that (i) is subject to significant price fluctuations compared to the utility's other costs, (ii) represents a large component of the utility's cost of service and (iii) is generally outside the control of the gas utility. Such purchased gas adjustment mechanisms are not designed to allow the utility to earn a profit but are designed to allow a dollar-for-dollar recovery of fuel costs. Therefore, while our operating revenues may fluctuate, gross profit (which is defined as operating revenues less purchased gas cost) is generally not eroded or enhanced because of gas cost increases or decreases.
Approximately 96 percent of our revenues in the fiscal year ended September 30, 2001, and approximately 87 percent of our revenues in fiscal 2000 were derived from sales at rates set by or subject to approval by local or state authorities. Generally, the regulatory authority reviews our rate request and establishes a rate structure intended to generate revenue sufficient to cover our costs of doing business and provide a reasonable return on invested capital.
The following table sets forth major rate requests made by us or other parties during the most recent five years and the action taken on such requests:
AMOUNT
EFFECTIVE AMOUNT RECEIVED
JURISDICTION DATE REQUESTED (REDUCED)
------------ --------- --------- ---------
(IN THOUSANDS)
Texas
West Texas System.................................. 11/01/96 $ 7,676 $ 5,800 (a)
12/01/00 9,827 3,011
Amarillo System.................................... 01/01/00 4,354 2,200
Louisiana............................................ 11/01/99 (b) -- (b)
Kentucky............................................. 12/21/99 14,127 9,900 (c)
Colorado............................................. 01/21/98 -- (1,600)(d)
05/04/01 4,200 2,750
Iowa................................................. 03/05/01 (e) (326)(e)
Georgia.............................................. 12/02/96 5,003 3,160
Illinois............................................. 07/09/97 1,234 428
10/23/00 2,100 1,367
Virginia............................................. 10/01/98 -- (248)(f)
04/01/01 2,100 (534)
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(a) This increase includes $500,000 applicable to areas outside the city limits which became effective in April 1997.
(b) The Louisiana Public Service Commission approved a Rate Stabilization Clause for three years for our former Trans La Division with an allowed return on common equity between 10.5 percent and 11.5 percent. This decision increased the service charge amounts from about 20 percent to about 70 percent of actual costs and increased the monthly customer charges from $6 to $9, both effective November 1, 1999.
(c) The Kentucky rate order also included a provision for a five-year pilot program for weather normalization which began in November 2000.
(d) Rate reduction as a result of settlement in a case initiated by the Colorado Consumer Council.
(e) Rate reduction as a result of an agreement initiated by the Iowa Consumer Advocate Division of the Department of Justice.
(f) Rate reduction as a result of a settlement with the Virginia State Corporation Commission staff.
COMPETITION
We are not currently in significant direct competition with any other distributors of natural gas to residential and commercial customers within our service areas. However, we do compete with other natural gas suppliers and suppliers of alternate fuels for sales to industrial and agricultural customers. We compete in all aspects of our business with alternative energy sources, including, in particular, electricity. Competition for residential and commercial customers is increasing. Promotional incentives, improved equipment efficiencies and promotional rates all contribute to the acceptability of electrical equipment. Electric utilities offer electricity as a rival energy source and compete for the space heating, water heating and cooking markets. The principal means to compete against alternative fuels is lower prices, and natural gas historically has maintained its price advantage in the residential, commercial and industrial markets. In addition, through Atmos Energy Marketing, we compete with other natural gas brokers in obtaining natural gas supplies for customers.
EMPLOYEES
At September 30, 2001, we had 2,361 employees. See "Utility Sales and Statistical Data by Business Unit" for the number of employees by business unit.
ITEM 2. PROPERTIES
We own an aggregate of 38,938 miles of underground distribution and transmission mains throughout our gas distribution systems. These mains are located on easements or rights-of-way which generally provide for perpetual use. We maintain our mains through a program of continuous inspection and repair and believe that our system of mains is in good condition. We also own and operate one propane peak shaving plant with a total capacity of approximately 180,000 gallons that can produce an equivalent of approximately 3,300 Mcf daily. We also own a liquefied natural gas storage facility with a capacity of 500,000 Mcf which can inject a daily volume of 30,000 Mcf into the system, as well as underground storage fields, as discussed below, that are used to supplement the supply of natural gas in periods of peak demand.
We have six underground gas storage facilities in Kentucky and four in Kansas. We own a 25 percent interest in a gas storage facility in Napoleonville, Louisiana. This gas storage facility is operated by Acadian Gas Pipeline System who also owns the remaining 75 percent interest. Our 25 percent usable capacity is 364,782 Mcf. In addition to the usable capacity we maintain 332,917 Mcf of cushion gas to maintain reservoir pressure. The Napoleonville facility has a maximum daily delivery capability of approximately 56,000 Mcf. We also have a contract through March 2003 with Bridgeline Gas Distribution LLC for 250,000 Mcf of usable storage capacity in a storage facility in Sorrento, Louisiana. The Sorrento facility has a maximum daily delivery capability of approximately 25,000 Mcf.
Our total storage capacity is approximately 21.9 Bcf. However, approximately 10.3 Bcf of gas in the storage facilities must be retained as cushion gas to maintain reservoir pressure. The maximum daily delivery capability of these storage facilities is approximately 226,000 Mcf.
Substantially all of our properties in our Greeley Gas Division and United Cities Gas Division with net book values of approximately $174.4 million and $314.1 million are subject to liens under First Mortgage Bonds assumed in our mergers with Greeley Gas Company and United Cities Gas Company. At September 30, 2001, the liens collateralized $17.0 million of outstanding 9.4 percent Series J First Mortgage Bonds due May 1, 2021, and $92.2 million of outstanding Series P, Q, R, T, U and V First Mortgage Bonds due at various dates from 2004 through 2022.
Our administrative offices are consolidated in Dallas, Texas under one lease. We also maintain field offices throughout our distribution system, the majority of which are located in leased premises.
Net property, plant and equipment at September 30, 2001 included approximately $1,280.6 million for utility and $54.8 million for non-regulated.
We hold franchises granted by the incorporated cities and towns that we serve. At September 30, 2001, we held 544 such franchises having terms generally ranging from five to 25 years. We believe that each of our franchises will be renewed.
ITEM 3. LEGAL PROCEEDINGS
See Note 5 of notes to consolidated financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth quarter of fiscal 2001.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information as of September 30, 2001, regarding the executive officers of the Company. It is followed by a brief description of the business experience of each executive officer.
YEARS OF
NAME AGE SERVICE OFFICE CURRENTLY HELD
---- --- -------- ---------------------
Robert W. Best................ 54 4 Chairman, President and Chief Executive
Officer
John P. Reddy................. 48 3 Senior Vice President and Chief Financial
Officer
R. Earl Fischer............... 62 39 Senior Vice President, Utility Operations
J. D. Woodward III............ 51 -- Senior Vice President, Non-Utility
Operations
Louis P. Gregory.............. 46 1 Senior Vice President and General Counsel
Wynn D. McGregor.............. 48 13 Vice President, Human Resources
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Robert W. Best was named Chairman of the Board, President and Chief Executive Officer in March 1997. He previously served as Senior Vice President -- Regulated Businesses of Consolidated Natural Gas Company (1996-March 1997) and was responsible for its transmission and distribution companies.
John P. Reddy was named Senior Vice President and Chief Financial Officer in September 2000. From April 2000 to September 2000, he was Senior Vice President, Chief Financial Officer and Treasurer. Mr. Reddy previously served the Company as Vice President, Corporate Development and Treasurer from December 1998 to March 2000. He joined the Company in August 1998 from Pacific Enterprises, a Los Angeles, California based utility holding company whose principal subsidiary was Southern California Gas Co. where he was Vice President of Planning and Advisory Services responsible for corporate development and merger and acquisition activities. Mr. Reddy was with Pacific Enterprises from 1980 to 1998 in various management and financial positions.
R. Earl Fischer was named Senior Vice President, Utility Operations in May 2000. He previously served the Company as President of the Energas Division from January 1999 to April 2000 and as President of the Western Kentucky Division from February 1989 to December 1998.
J. D. Woodward was named Senior Vice President, Non-Utility Operations in April 2001. Prior to joining the Company, Mr. Woodward was President of Woodward Marketing, LLC from January 1995 to March 2001.
Louis P. Gregory joined the Company as Senior Vice President and General Counsel in September 2000. Prior to joining the Company, he practiced law from April 1999 to August 2000 with the law firm of McManemin & Smith. Prior to that, he served as a consultant and independent contractor from August 1996 to December 1998 for Nomas Corp. (formerly known as Lomas Mortgage USA, Inc.) and Siena Holdings, Inc. (formerly known as Lomas Financial Corporation).
Wynn D. McGregor was named Vice President, Human Resources in January 1994. He previously served the Company as Director of Human Resources from February 1991 to December 1993 and as Manager, Compensation and Employment from December 1987 to January 1991.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our stock trades on the New York Stock Exchange under the trading symbol "ATO." The high and low sale prices and dividends paid per share of our common stock for fiscal 2001 and 2000 are listed below. The high and low prices listed are the actual closing NYSE quotes for shares of our common stock.
DIVIDENDS
HIGH LOW PAID
------ ------ ---------
FISCAL YEAR 2001
Quarter ended:
December 31............................................. $26.25 $19.31 $.290
March 31................................................ 25.25 21.50 .290
June 30................................................. 24.46 21.45 .290
September 30............................................ 23.64 19.79 .290
-----
$1.16
=====
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DIVIDENDS
HIGH LOW PAID
------ ------ ---------
FISCAL YEAR 2000
Quarter ended:
December 31............................................. $25.00 $20.00 $.285
March 31................................................ 20.19 15.56 .285
June 30................................................. 20.56 14.75 .285
September 30............................................ 23.25 18.50 .285
-----
$1.14
=====
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See Note 3 of notes to consolidated financial statements for restriction on payment of dividends. The number of record holders of our common stock on September 30, 2001 was 30,524.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data of the Company and should be read in conjunction with the consolidated financial statements included herein.
YEAR ENDED SEPTEMBER 30
--------------------------------------------------------------
2001 2000 1999 1998 1997
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Operating revenues....... $1,442,275 $ 850,152 $ 690,196 $ 848,208 $ 906,835
========== ========== ========== ========== ==========
Net income............... $ 56,090 $ 35,918 $ 17,744 $ 55,265 $ 23,838
========== ========== ========== ========== ==========
Diluted net income per
share.................. $ 1.47 $ 1.14 $ .58 $ 1.84 $ .81
========== ========== ========== ========== ==========
Cash dividends declared
per share.............. $ 1.16 $ 1.14 $ 1.10 $ 1.06 $ 1.01
========== ========== ========== ========== ==========
Total assets at end of
year................... $2,036,180 $1,348,758 $1,230,537 $1,141,390 $1,088,311
========== ========== ========== ========== ==========
Long-term debt at end of
year................... $ 692,399 $ 363,198 $ 377,483 $ 398,548 $ 302,981
========== ========== ========== ========== ==========
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
This section provides management's discussion of the financial condition, cash flows and results of operations of Atmos Energy Corporation with specific information on liquidity, capital resources and results of operations. It includes management's interpretation of such financial results, the factors affecting these results, the major factors expected to affect future operating results and future investment and financing plans. This discussion should be read in conjunction with the Company's consolidated financial statements and notes thereto.
CAUTIONARY STATEMENT FOR THE PURPOSES OF THE SAFE HARBOR UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The statements contained in this Annual Report on Form 10-K may contain
"forward-looking statements" within the meaning of Section 21E of the Securities
Exchange Act of 1934. All statements other than statements of historical fact
included in this Report are forward-looking statements made in good faith by the
Company and are intended to qualify for the safe harbor from liability
established by the Private Securities Litigation Reform Act of 1995. When used
in this Report, or any other of the Company's documents or oral presentations,
the words "anticipate," "expect," "estimate," "plans," "believes," "objective,"
"forecast," "goal" or similar words are intended to identify forward-looking
statements. Such forward-looking statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
expressed or implied in the statements relating to the Company's strategy,
operations, markets, services, rates, recovery of costs, availability of gas
supply and other factors. These risks and uncertainties include the following:
adverse weather conditions such as warmer than normal weather in the Company's
service territories; national, regional and local economic conditions, including
competition from other energy suppliers as well as alternative forms of energy;
recent national events; regulatory approvals, including the impact of rate
proceedings before various state regulatory commissions; successful completion
and integration of pending acquisition; inflation and increased gas costs,
including their effect on commodity prices for natural gas; increased
competition; further deregulation or "unbundling" of the natural gas
distribution industry; hedging and market risk activities and other
uncertainties, all of which are difficult to predict and many of which are
beyond the control of the Company. Accordingly, while the Company believes these
forward-looking statements to be reasonable, there can be no assurance that they
will approximate actual experience or that the
expectations derived from them will be realized. Further, the Company undertakes no obligation to update or revise any of its forward-looking statements whether as a result of new information, future events or otherwise.
RATEMAKING ACTIVITY
The following is a discussion of our ratemaking activity for rate cases that are currently pending as of September 30, 2001 or rate proceedings completed during the three years ended September 30, 2001.
Results of our rate activity for the three years ended September 30, 2001 can be summarized as follows: net annual rate increases totaling $6.4 million implemented in 2001, annual rate increases totaling $12.1 million implemented in 2000 and no rate changes in 1999.
In August 1999, the Energas Division filed rate cases in its West Texas System cities and Amarillo, Texas, requesting rate increases of approximately $9.8 million and $4.4 million. The Energas Division received an increase in annual revenues of approximately $2.1 million in base rates plus an increase of $.1 million in service charges in Amarillo, Texas, effective for bills rendered on or after January 1, 2000. The agreement with Amarillo also provided for changes in the rate structure to reduce the impact of warmer than normal weather and to improve the recovery of the actual cost of service calls. The Energas Division's request for an annual increase of approximately $9.8 million from the 67 cities served by its West Texas System was denied. In March 2000, this decision was appealed to the Railroad Commission of Texas. Subsequently, 59 cities representing approximately 58 percent of Energas' customers ratified a non-binding Settlement Agreement. The Settlement Agreement capped the rate increase at $3.0 million and entitled the ratifying cities to accept a rate increase below $3.0 million in the event the Railroad Commission adopted a lesser increase for the non-ratifying cities. Eight cities declined to participate in the settlement and a hearing with the Railroad Commission was held in August 2000. In December 2000, the Railroad Commission approved an increase in annual revenues of approximately $3.0 million effective December 1, 2000. In addition, the Railroad Commission approved a new rate design providing more protection from warmer than normal weather for our West Texas System.
In June 1999, the Trans La operations of the Atmos Energy Louisiana Gas Division appeared before the Louisiana Public Service Commission for a rate investigation and to redesign rates to mitigate the effects of warm winter weather. A decision was rendered by the Louisiana Commission in October 1999 that increased service charges associated with customer service calls and increased the monthly customer charges from $6 to $9, both effective November 1, 1999. While these changes are revenue neutral, they have mitigated the impact of warmer than normal winter weather on earnings. The decision also included a three-year rate stabilization clause which will allow the Trans La operations of Atmos Energy Louisiana Gas Division's rates to be adjusted annually to allow us to earn a minimum return on equity of 10.5 percent.
In connection with its review of our acquisition of Louisiana Gas Service, the Louisiana Public Service Commission approved a rate structure that requires us to share any cost savings that result from the acquisition with the customers of Louisiana Gas Service. The shared cost savings will be the difference between operation and maintenance expense in any future year and the 1998 normalized expense for Louisiana Gas Service, indexed for inflation, annual changes in labor costs and customer growth. The customers are not assured any savings in 2001. In 2002 and in future years, the customers are assured annual savings, which will be indexed for inflation, annual changes in labor costs and customer growth. The sharing mechanism will remain in place for 20 years subject to established modification procedures.
In May 1999, the Western Kentucky Gas Division requested from the Kentucky Public Service Commission an increase in revenues, a weather normalization adjustment and changes in rate design to shift a portion of revenues from commodity charges to fixed rates. In December 1999, the Kentucky Commission granted an increase in annual revenues of approximately $9.9 million. The new rates were effective for services rendered on or after December 21, 1999. In addition, the Kentucky Commission approved a five-year pilot program for weather normalization beginning in November 2000.
On June 9, 1998, the Kentucky Commission issued an Order approving a three year experimental Performance-based Ratemaking mechanism related to gas procurement and gas transportation activities filed
by the Western Kentucky Gas Division. The Performance-based Ratemaking mechanism is incorporated into the Western Kentucky Gas Division's gas cost adjustment clause. As discussed above, it provides for sharing of purchased gas cost savings between the consumers and us. We recognized other income of $0.2 million and $2.1 million under the Kentucky Performance-based Ratemaking mechanism in fiscal 2001 and fiscal 2000. The experimental Performance-based Ratemaking mechanism expired on June 30, 2001 and the Kentucky Commission has extended it while it considers the Western Kentucky Gas Division's request for another mechanism.
In November 2000, the Greeley Gas Division filed a rate case with the Colorado Public Utilities Commission for approximately $4.2 million in additional annual revenues. In May 2001, we received an increase in annual revenues of approximately $2.8 million from the Colorado Public Utilities Commission. The new rates went into effect on May 4, 2001.
Effective April 1, 1999, the Tennessee Regulatory Authority approved the United Cities Gas Division's request to continue its Performance-based Ratemaking mechanism related to gas procurement and gas transportation activities for a three-year period. The Tennessee Regulatory Authority revised the mechanism from the original two-year experimental period, by increasing the cap for incentive gains and/or losses to $1.25 million per year. Similar to Tennessee, the Georgia Public Service Commission renewed our Performance-based Ratemaking program for an additional three years effective May 1, 1999. The gas purchase and capacity release mechanisms of the Performance-based Ratemaking mechanism are designed to provide us incentives to find innovative methods to lower gas costs to our customers. We recognized other income of $1.0 million and $0.2 million in fiscal years 2001 and 2000 for the Georgia and Tennessee Performance-based Ratemaking mechanisms.
In February 2000, the United Cities Gas Division filed a rate case in Illinois with the Illinois Commerce Commission requesting an increase in annual revenues of approximately $3.1 million. After review by the Illinois Commerce Commission, the amount requested was revised to approximately $2.1 million. The United Cities Gas Division received an increase in annual revenues of approximately $1.4 million. The new rates went into effect on October 23, 2000 and are collected primarily through an increase in monthly customer charges.
In March 2000, the United Cities Gas Division filed a rate case in Virginia with the State Corporation Commission of the Commonwealth of Virginia requesting an increase in annual revenues of approximately $2.3 million. The State Corporation Commission of Virginia reviewed the filing to determine if it met the appropriate rules and regulations. In July 2000, we refiled the case requesting an increase in revenues of approximately $2.1 million. The Commission accepted the revised filing. In April 2001, the United Cities Gas Division agreed to an annual rate reduction of $0.5 million effective beginning with the April 2001 billing cycle.
In March 2001, the United Cities Gas Division and the Iowa Consumer Advocate Division of the Department of Justice reached an agreement for an annual rate reduction of $0.3 million relating to our Iowa operations. The rate reduction was effective in March 2001.
We continue to monitor rates in all of our service areas to ensure that they are adequate for the recovery of service costs and return on investment.
On September 10, 2001, the United Cities Gas Division filed a request for accounting order related to uncollectable delinquencies associated with Moratorium Order of Georgia Public Service Commission dated January 17, 2001. In our request, we asked the Georgia Commission to issue an accounting authority order authorizing us to defer as a regulatory asset all costs incurred in connection with the Moratorium on disconnects ordered by the Georgia Commission which lasted from January 17, 2001 through April 1, 2001. On September 28, 2001, the Georgia Commission issued an order authorizing us to create a mechanism for the recovery of uncollectable delinquencies with an effective date of November 1, 2001. The United Cities Gas Division is authorized to recover through the recovery mechanism up to $500,000.
WEATHER AND SEASONALITY
Our natural gas distribution business and irrigation sales business is seasonal and dependent upon weather conditions in our service areas. Natural gas sales to residential, commercial and public authority customers are affected by winter heating season requirements. This generally results in higher operating revenues and net income during the period from October through March of each year and lower operating revenues and either net losses or lower net income during the period from April through September of each year. Sales to industrial customers are much less weather sensitive. Sales to agricultural customers, who typically use natural gas to power irrigation pumps during the period from March through September, are affected by rainfall amounts. The effects of colder than normal winter weather in 2001 and the effects of significantly warmer than normal winter weather in 2000 and 1999 on our consolidated volumes delivered are illustrated by the following degree day information. The degree day information for 2001 and 2000 presented below excludes service areas with weather normalized operations. Information concerning service areas with weather normalized operations for 1999 was not available; thus, degree day information presented for 1999 includes service areas having weather normalized operations.
YEAR ENDED SEPTEMBER 30,
------------------------
2001 2000 1999
------ ------ ------
Sales volumes -- Bcf........................................ 156.6 138.2 140.1
Transportation volumes -- Bcf............................... 61.2 59.4 55.5
----- ----- -----
Total.................................................. 217.8 197.6 195.6
===== ===== =====
Degree days:
Actual.................................................... 2,753 2,096 3,374
Percent of normal......................................... 107% 81% 85%
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The effects of weather that is above or below normal are partially offset in the Tennessee and Georgia jurisdictions served by the United Cities Gas Division and in the Kentucky jurisdiction served by the Western Kentucky Gas Division through weather normalization adjustments. The Georgia Public Service Commission, the Tennessee Regulatory Authority and the Kentucky Public Service Commission have approved weather normalization adjustments. The weather normalization adjustments, effective October through May each year in Georgia, and November through April each year in Tennessee and Kentucky, allow the United Cities Gas Division and the Western Kentucky Gas Division to increase the base rate portion of customers' bills when weather is warmer than normal and decrease the base rate when weather is colder than normal. The net effect of the weather normalization adjustments was a decrease in revenues of approximately $3.3 million for 2001 compared to an increase in revenues of $4.1 million and $4.4 million in 2000 and 1999. Approximately 375,000 or 26 percent of our meters in service are located in Georgia, Tennessee and Kentucky. We did not have weather normalization adjustments in our other service areas during the year ended September 30, 2001. We also received approval to change our rate structure in our West Texas System of the Energas Division beginning in December 2000 to help offset some of the negative effects of weather.
In July 2000, we entered into an agreement to purchase weather hedges for our Texas and Louisiana operations effective for the 2000 - 2001 heating season. The hedges were designed to help mitigate the effects of weather that was at least seven percent warmer than normal in both Texas and Louisiana while preserving any upside. The cost of the weather hedges was approximately $4.9 million which was amortized over the 2000 - 2001 heating season. The cost of the weather hedges was more than offset by the positive effects of colder weather on our gross profit.
In June 2001, we purchased a three year weather insurance policy with an option to cancel in the third year if we obtain weather protection in our rate structures. The policy is for our Texas and Louisiana operations and covers the entire heating season of October to March beginning with the 2001 - 2002 heating season. The cost of the three year policy was approximately $13.2 million which was prepaid and will be amortized over the appropriate heating seasons based on degree days. The insurance is designed to protect against weather that is at least seven percent warmer than normal.
We have historically hedged 20 percent of our gas supply through the use of our underground storage assets. This hedging process will continue. For the 2001 - 2002 heating season, we plan to cover approximately 64 percent of our anticipated flowing gas requirements through storage and futures and fixed forward contracts at a weighted average cost of slightly less than $4.00 per Mcf. This should provide protection to us and our customers against sharp increases in the price of natural gas during the 2001 - 2002 heating season.
For further information regarding the impact of weather and seasonality on operating results, see Note 16, "Selected Quarterly Financial Data (unaudited)" in notes to consolidated financial statements herein.
CAPITAL RESOURCES AND LIQUIDITY
(SEE "CONSOLIDATED STATEMENTS OF CASH FLOWS")
Fiscal 2001 was a year in which total cash inflows exceeded total cash outflows. This was generally the result of increased cash flows from operating activities as a result of colder than normal weather partially offset by increased capital expenditures. Net proceeds from the issuance of long-term debt were used to finance the Louisiana Gas Service Company and LGS Natural Gas Company acquisition in 2001. Net proceeds from our equity offering were used to reduce commercial paper debt. Common stock issued primarily through our Employee Stock Ownership Plan and our Direct Stock Purchase Plan was also used to finance operations.
CASH FLOWS FROM OPERATING ACTIVITIES
Items on the Consolidated Statement of Cash Flows for the year ended September 30, 2001 reflect changes in balances for the year, net of assets acquired and liabilities assumed in the acquisition of the additional interest in Woodward Marketing, L.L.C. and the assets of Louisiana Gas Service Company and LGS Natural Gas Company. See Note 10 of the accompanying notes to consolidated financial statements.
Cash flows from operating activities as reported in the consolidated statement of cash flows totaled $83.0 million for 2001 compared to $54.2 million for 2000 and $84.7 million for 1999. The increase in net cash provided by operating activities from 2000 to 2001 was primarily the result of increases in net income and other current liabilities and a decrease in accounts receivable and deferred gas costs partially offset by an increase in cash held on deposit in margin accounts and a decrease in accounts payable. Also, the net change in our assets/liabilities from risk management activities added to the increase in net cash provided by operating activities in 2001. The increase in net income was primarily due to higher gross profits due to increased volumes and rate increases. The increase in gross profits was partially offset by an increase in operating expenses and an increase in interest expense. Also reducing gross profit was a decrease in miscellaneous income (expense) as a result of charges incurred related to our performance based-ratemaking mechanisms and the cost of weather hedges purchased for our Louisiana and Texas operations. In addition, miscellaneous income (expense) was reduced in 2001 as the result of a gain recognized on the sale of certain non-regulated assets in 2000 which did not occur in 2001.
CASH FLOWS FROM INVESTING ACTIVITIES
During the last three years, a substantial portion of our cash resources was used to fund technology improvements, acquisitions and our ongoing construction program to provide natural gas services to a growing customer base. Net cash used in investing activities totaled $468.1 million in 2001 compared with $100.1 million in 2000 and $109.6 million in 1999. Capital expenditures in fiscal 2001 amounted to $113.1 million, compared with $75.6 million in 2000 and $110.4 million in 1999. The increase in capital expenditures from 2000 to 2001 was primarily the result of additional capital requirements needed due to our growing customer base. Included in investing activities for 2001 is $363.4 million used to acquire the assets of Louisiana Gas Service Company and LGS Natural Gas Company as discussed in Note 2 of the notes to consolidated financial statements. Included in investing activities in 2000 was $32.0 million used to acquire the Missouri natural gas distribution assets of Associated Natural Gas. Currently budgeted capital expenditures for fiscal 2002 total approximately $122.0 million and include funds for additional mains, services, meters and equipment. In fiscal 2002, we also plan to complete the Mississippi Valley Gas Company acquisition for $150.0 million plus the assumption of approximately $45.0 million of long-term debt as discussed in Note 2 of
the notes to consolidated financial statements. Capital expenditures and acquisitions for fiscal 2002 are planned to be financed from internally generated funds and financing activities as discussed below. In 2001, we had $5.4 million in expenditures for assets to be used in leasing activities. In connection with our acquisition of Woodward Marketing, we received $8.6 million in cash. In 2001, we received net proceeds of $6.6 million in connection with the sale of certain utility assets. In 2000, we received net proceeds of $6.5 million in connection with the sale of certain propane assets to Heritage Propane Partners, L.P.
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash provided by financing activities totaled $393.0 million for 2001 compared with $44.7 million for 2000 and $28.7 million for 1999. Financing activities during these periods included issuance of common stock, dividend payments, short-term borrowings from banks under our credit facilities and issuance and repayment of long-term debt. The increase in cash provided by financing activities in 2001 as compared to 2000 was due primarily to the issuance of long-term debt and the issuance of common stock during 2001. In 2001 we received $347.1 million in net proceeds from our $350.0 million debt offering in May 2001. The net proceeds were used to help finance the completion of the Louisiana Gas Service Company and LGS Natural Gas Company acquisition in July 2001. Long-term debt repayments totaled $17.7 million, $14.6 million and $61.0 million for 2001, 2000 and 1999. Repayments of long-term debt in 2001, 2000 and 1999 consisted of annual installments under the various loan documents. During 2001, short-term debt decreased $48.8 million due primarily to the use of the net proceeds from our equity offering in December 2000 to reduce commercial paper debt. During 2000, short-term debt increased $81.7 million due to the effect of warmer weather on net income for 2000, the acquisition of the Missouri natural gas distribution assets of Associated Natural Gas for $32.0 million and increases in accounts receivable, cost of gas stored underground and deferred charges. During 1999, short-term debt increased $101.9 million due largely to lower net income and cash requirements of $61.0 million for repayments of long-term debt and capital expenditures of $110.4 million primarily for technology improvements.
Issuance of common stock. We issued 674,468, 704,540 and 849,481 shares of common stock in 2001, 2000 and 1999 under our various plans. See the Consolidated Statements of Shareholders' Equity and Note 6 of the accompanying notes to consolidated financial statements for the number of shares previously issued and available for future issuance under each of our plans. In addition to the shares issued under our various plans, we also issued 6,741,500 shares through our equity offering in December 2000 and 1,423,193 shares of restricted common stock for the acquisition of the remaining 55 percent of Woodward Marketing in April 2001. The net proceeds from the equity offering were used to reduce commercial paper debt as discussed above.
Cash dividends paid. We paid $44.1 million in cash dividends during 2001 compared with $36.0 million in 2000 and $33.9 million in 1999. We raised the dividend $.02 per share during 2001 and $.04 per share during each of 2000 and 1999. The increase in cash dividends in 2001 over 2000 was also due to the increase in the number of shares outstanding as discussed above.
LIQUIDITY
The excess of cash inflows over outflows has resulted in a slight decrease in debt as a percentage of total capitalization, including short-term debt, as shown in the table below.
SEPTEMBER 30
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2001 2000
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(IN THOUSANDS, EXCEPT PERCENTAGES)
Short-term debt............................... $ 201,247 13.4% $ 250,047 24.4%
Long-term debt................................ 713,094 47.6% 380,764 37.2%
Shareholders' equity.......................... 583,864 39.0% 392,466 38.4%
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Total capitalization, including short-term
debt........................................ $1,498,205 100.0% $1,023,277 100.0%
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The debt as a percentage of total capitalization, including short-term debt, was 61.0 percent and 61.6 percent at September 30, 2001 and 2000. Our long-term plans are to decrease the debt to capitalization ratio to nearer its target range of 50-52 percent through cash flow generated from operations, continued issuance of new common stock under our Direct Stock Purchase Plan and Employee Stock Ownership Plan, access to the debt and equity capital markets and limiting annual maintenance capital expenditures. It is likely that the debt to capitalization ratio will remain in its current range in the near term.
At September 30, 2001, we had short-term committed credit facilities totaling $318.0 million. One short-term unsecured credit facility is for $300.0 million and serves as a backup liquidity facility for our commercial paper program. At September 30, 2001, $171.0 million of commercial paper was outstanding. On August 2, 2001, this facility was renewed for $300.0 million with an option to increase the amount by $100.0 million. We have a second facility in place for $18.0 million. At September 30, 2001, $2.2 million was outstanding under this credit facility. These credit facilities are negotiated at least annually and are used for working capital purposes.
At September 30, 2001, our Woodward Marketing subsidiary has an uncommitted credit facility for $140.0 million which is used for its non-regulated business. Atmos Energy Marketing, LLC, our wholly owned subsidiary, is the sole guarantor of all amounts outstanding under this facility. At September 30, 2001, $28.0 million was outstanding under this credit facility. Related letters of credit totaling $38.8 million further reduced the amount available under this facility. Woodward Marketing also has up to $100.0 million available from Atmos for its non-regulated business. At September 30, 2001, $100.0 million was outstanding.
At September 30, 2001, we also had uncommitted short-term credit lines of $40.0 million, all of which were unused. The uncommitted lines are renewed or renegotiated at least annually with varying terms and we pay no fee for the availability of the lines. Borrowings under these lines are made on a when-and as-available basis at the discretion of the banks.
The loan agreements pursuant to which our Senior Notes and First Mortgage Bonds have been issued contain covenants by us with respect to the maintenance of certain debt-to-equity ratios and cash flows and restrictions on the payment of dividends. See Note 3 of the accompanying notes to consolidated financial statements for more information on these covenants.
FUTURE CAPITAL REQUIREMENTS
We believe that internally generated funds, our credit facilities, commercial paper program and access to the public debt and equity capital markets will provide necessary working capital and liquidity for capital expenditures and other cash needs for fiscal 2002.
RESULTS OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 2001 COMPARED WITH YEAR ENDED SEPTEMBER 30, 2000
Operating revenues increased by 70 percent to $1.4 billion for 2001 from
$850.2 million for 2000. The most significant factors contributing to the
increase in operating revenues were a 58 percent increase in average sales price
due to the increased cost of gas and a 10 percent increase in sales and
transportation volumes due to colder weather. During 2001, excluding service
areas with weather normalized operations, temperatures were 31 percent colder
than in the corresponding period of the prior year and were seven percent colder
than the 30-year normal. The total volume of gas sold and transported for 2001
was 217.8 Bcf compared with 197.6 Bcf for 2000. The average sales price per Mcf
sold increased $3.28 to $8.93 primarily due to an increase in the average cost
of gas. During the early part of our 2001 fiscal year, natural gas prices
throughout the country began to increase significantly. The average cost of gas
per Mcf sold increased to $6.83 for 2001 from $3.79 for 2000. Although we expect
to recover our purchased gas costs from customers through purchased gas
adjustment mechanisms, generally there is a lag between the time we pay for gas
purchases and the time when regulators allow us to place higher rates in service
and recover those gas costs. As a result, we have from time to time used
short-term borrowings to temporarily finance unrecovered purchased gas costs.
Where permitted, we have increased our purchased gas adjustments to help
mitigate the increased cost of gas.
Subsequent to September 30, 2001, gas prices had declined to approximately $2 to $3 per Mcf. In addition, as a result of the increased gas costs, our accounts receivable balances during fiscal 2001 increased significantly and, consequently, we also increased our allowance for doubtful accounts, which we consider to be adequate. We do not, however, expect this rise in natural gas prices to have a material adverse effect on our financial condition, results of operations or net cash flows.
In addition, operating revenues increased due to the impact of rate increases in Kentucky, Illinois, Colorado, Amarillo, Texas, and West Texas. Also contributing to the increase in operating revenues was the addition of approximately 48,000 customers in Missouri due to the Associated Natural Gas acquisition completed in fiscal 2000 and the addition of approximately 279,000 residential and commercial meters in Louisiana due to the completion of the Louisiana Gas Service Company acquisition in July 2001. However, operating revenues were partially offset by a reduction related to our former propane assets which were placed into a joint venture partnership in August 2000.
Gross profit increased by 15 percent to $374.7 million for 2001 from $325.7 million for 2000. The increase in gross profit was due primarily to the increase in volumes sold to weather sensitive customers, an increase of $5.1 million in transportation revenues due to higher average transportation revenue per Mcf and increased volumes and a $6.7 million non-recurring adjustment to purchased gas cost to reflect state filings. In addition, gross profit increased due to the impact of rate increases and additional customers, partially offset by a reduction related to our former propane operations, as discussed previously. Changes in the cost of gas do not directly affect gross profit because the fluctuations in gas prices are passed through to our customers.
On April 1, 2001, we completed our acquisition of the remaining 55 percent interest in Woodward Marketing, L.L.C. As a result of this acquisition, the revenues and expenses of Woodward Marketing are now shown on a consolidated basis.
Operating expenses increased to $244.9 million for 2001 from $240.4 million for 2000. Operation and maintenance expense decreased due to savings resulting from the continued cost control initiatives started during fiscal 2000 and reduced operation and maintenance expenses associated with our former propane operations which were placed into a joint venture partnership in fiscal 2000. An increase in the provision for doubtful accounts of $8.5 million and pension costs of $4.5 million partially offset this decrease. Pension costs will increase by $4.4 million in fiscal 2002 over fiscal 2001. Depreciation and amortization expense increased due to the completion of the Louisiana Gas Service Company and LGS Natural Gas Company acquisition in July 2001. Taxes other than income increased as a result of increased city franchise taxes and state gross receipts taxes, which are revenue based. However, these taxes are paid by our customers; thus, these amounts are offset in revenues through customer billings and have no effect on net income.
Operating income increased 53 percent for 2001 to $130.3 million from $85.3 million for 2000. The increase in operating income resulted primarily from increased gross profit described above.
Equity in earnings of Woodward Marketing, L.L.C. was $8.1 million for the six months ended March 31, 2001 compared with $7.3 million for the year 2000.
Miscellaneous income (expense) decreased $9.3 million to $(1.9) million for 2001 compared to $7.4 million for 2000. This decrease was due primarily to charges incurred related to our Performance-based Ratemaking mechanisms and the amortization of $4.9 million related to weather hedges purchased for our Louisiana and Texas operations. In addition, we recognized a gain of $5.8 million in 2000 resulting from the sale of certain non-utility assets. No such gain occurred in 2001. Partially offsetting the decrease in miscellaneous income (expense) during 2001 was an increase of $3.0 million in interest income due primarily to interest income earned on the proceeds from our $350.0 million debt offering in May 2001. We invested these proceeds in short-term investments until the completion of the Louisiana Gas Service Company and LGS Natural Gas Company acquisition in July 2001.
Interest expense increased $3.2 million to $47.0 million for 2001 compared to $43.8 million for 2000. This increase was due primarily to interest expense on the $350.0 million debt offering in May 2001.
Net income increased for 2001 by $20.2 million to $56.1 million from $35.9 million for 2000. This increase in net income resulted primarily from the increase in sales volumes due to the colder than normal weather and the impact of rate increases discussed above.
YEAR ENDED SEPTEMBER 30, 2000 COMPARED WITH YEAR ENDED SEPTEMBER 30, 1999
Operating revenues increased by 23 percent to $850.2 million in 2000 from $690.2 million in 1999. The most significant factors contributing to the increase in operating revenues were a 25 percent increase in average sales price due to the increased cost of gas and the impact of rate increases in Amarillo, Texas and Kentucky. The average sales price per Mcf sold increased $1.12 or 25 percent to $5.65 in 2000 primarily due to an increase in the average cost of gas. The average cost of gas per Mcf sold increased 36 percent to $3.79 for 2000 from $2.79 for 1999. Also contributing to the increase in operating revenues was an increase in our non-regulated West Texas irrigation sales volumes related to irrigation demand and, secondly, to higher average sales prices reflecting higher gas costs. The increase in irrigation revenues was due to decreased rainfall during the growing season in West Texas in 2000. Partially offsetting the increase in operating revenues was a one percent decrease in sales volumes due to warmer weather. For 2000, excluding service areas with weather normalized operations, temperatures were five percent warmer than in 1999 and were 18 percent warmer than the 30-year normal. The total volume of gas sold for 2000 was 138.2 Bcf compared with 140.1 Bcf for 1999.
Gross profit increased by nine percent to $325.7 million for 2000 from $299.8 million for 1999. The increase in gross profit was due primarily to the impact of rate increases discussed previously. The increase in gross profit was also due to the addition of approximately 48,000 Missouri customers due to the acquisition of the Missouri natural gas distribution assets of Associated Natural Gas and increased volumes associated with the irrigation business. The increase in gross profit was slightly offset by a decrease in volumes sold to weather sensitive customers. Changes in the cost of gas do not directly affect gross profit because the fluctuations in gas prices are passed through to our customers.
Operating expenses decreased to $240.4 million for 2000 from $245.6 million for 1999. Operation and maintenance expense decreased due to savings resulting from the cost control initiatives implemented during 2000 due to the warm winter weather. However, this decrease was partially offset by an increase in the provision for doubtful accounts of $8.8 million. The increase in the provision for doubtful accounts occurred during the transition from local offices to a centralized customer service center and the implementation of a new company-wide customer billing system. During this transition, we temporarily suspended service cutoffs and our normal efforts to collect past due receivables. Actions to address those issues were initiated in 2000. Depreciation and amortization expense also increased during 2000 as a result of the first full year of depreciation being recognized on our process improvement initiatives related to the new customer information and billing system and the accounting and human resource systems placed into service during 1999, as well as the acquisition of the Missouri natural gas distribution assets of Associated Natural Gas in May of 2000.
Operating income increased 57 percent for 2000 to $85.3 million from $54.2 million in 1999. The increase in operating income resulted primarily from increased gross profit and decreased operating expenses described above.
Miscellaneous income (expense), net increased $4.4 million to $7.4 million in 2000 compared to $3.0 million in 1999. The increase was primarily due the $5.8 million ($3.7 million after tax) gain resulting from the sale of certain non-utility assets.
Interest charges increased $6.7 million to $43.8 million in 2000 from $37.1 million in 1999. The increase in 2000 was primarily due to $3.7 million of interest being capitalized in 1999 in connection with the significant technology projects being completed in 1999 and higher average debt outstanding and higher interest rates for 2000. The increase in average debt outstanding was related to funding infrastructure, technology, process changes and customer support investments, as well as additional working capital needed for the increasing gas costs.
Net income increased for 2000 by $18.2 million to $35.9 million from $17.7 million for 1999. The increase in net income for 2000 resulted primarily from the impact of rate increases in 2000 and the increase in miscellaneous income. Net income was also improved as a result of lower operating expenses.
FACTORS THAT MAY AFFECT FUTURE PERFORMANCE OF THE COMPANY
Our performance in the future will primarily depend on the results of our utility operations. Several factors exist that could influence Atmos' future financial performance, some of which are described below. They should be considered in connection with evaluating forward-looking statements contained in this report or otherwise made by or on behalf of us since these factors could cause actual results and conditions to differ materially from those projected in these forward-looking statements.
ADVERSE WEATHER CONDITIONS
Our natural gas sales volumes and related revenues are directly correlated with heating requirements that result from cold winter weather. Our agricultural sales volumes are associated with the rainfall levels during the growing season in our West Texas irrigation market. Weather is one of the most significant factors influencing our performance. However, as was more fully discussed above, we have purchased weather insurance to mitigate the effect of warmer than historically normal weather in our Texas and Louisiana service areas. In addition, weather normalized rates are in effect in several of our jurisdictions, which should mitigate the adverse effects of warmer or drier than normal weather on our operating results.
NATIONAL, REGIONAL AND LOCAL ECONOMIC CONDITIONS
Our operations will always be affected by the conditions and overall strength of the national, regional and local economies, including interest rates, changes in the capital markets and increases in the costs of our primary commodity, natural gas. These factors impact the amount of residential, industrial and commercial growth in our service territories. Higher costs of natural gas in recent years have already lead many of our customers to conserve in the use of our gas services and could lead to even more customers utilizing such conservation methods.
RECENT NATIONAL EVENTS
Our company and our operations have already been indirectly impacted by the tragic events of September 11, 2001. The terrorist activities on that day have heightened our awareness of safety and security concerns and have prompted a company-wide review and assessment of the adequacy of our safety and security procedures relating to the protection of our customers, employees and our physical assets. We will continue to monitor and assess our safety and security procedures and will take all precautions necessary to minimize any adverse effects on us or our operations. Accordingly, through taking these added precautions, we believe that we have minimized any potential adverse effects that any future terrorist activities could have on us or our operations.
REGULATORY APPROVALS
Our utility business is subject to various regulated returns on its rate base in each of the 11 states in which we operate. We monitor the allowed rates of return, our effectiveness in earning such rates and initiate rate proceedings or operating changes as needed. In addition, in the normal course of the regulatory environment, assets are placed in service and historical test periods are established before rate cases can be filed. Once rate cases are filed, regulatory bodies have the authority to suspend implementation of the new rates while studying the cases. Because of this process, we must temporarily suffer the negative financial effects of having placed assets in service without the benefit of rate relief, which is commonly referred to as "regulatory lag". In addition, our debt and equity financing programs are also subject to approval by regulatory bodies in five states, which could limit our ability to take advantage of favorable market conditions.
SUCCESSFUL COMPLETION AND INTEGRATION OF PENDING ACQUISITION
Our acquisition strategy depends on our ability to successfully acquire and integrate the operations of companies such as Mississippi Valley Gas Company, which acquisition is currently pending. Acquisitions such as Mississippi Valley should help us achieve greater economies of scale by spreading the fixed costs of the utility business over a larger customer base. Completion of this acquisition is subject to state and federal regulatory approval. In addition, the integration of this acquisition into our operations during the next fiscal year will require a substantial commitment of financial resources and management time.
INFLATION AND INCREASED GAS COSTS
We believe that inflation has caused, and will continue to cause, increases in certain operating expenses, and has required, and will continue to require, assets to be replaced at higher costs. We have a process in place to continually review the adequacy of our gas rates in relation to the increasing cost of providing service and the inherent regulatory lag in adjusting those gas rates. Historically, we have been able to budget and control operating expenses and investment within the amounts authorized to be collected in rates and intend to continue to do so. The ability to control expenses is an important factor that will influence future results.
In addition, the rapid increases in the price of purchased gas during the past year caused us to experience a significant increase in short-term debt because we must pay suppliers for such gas when it is purchased long before such costs may be recovered through the collection of monthly customer bills for gas delivered. Also, the increases in purchased gas costs caused more customers to be slow to pay their gas bills, leading to accounts receivable that were higher than normal which in turn lead to higher short-term debt levels and increased bad debts in fiscal 2001. Should the price of purchased gas increase significantly in the upcoming heating season, we would expect similar increases in our short-term debt and accounts receivable during fiscal 2002.
INCREASED COMPETITION
We are facing increased competition from other energy suppliers as well as electric companies and from energy marketing and trading companies. In the case of industrial customers, such as manufacturing plants, and agricultural customers, adverse economic conditions, including higher gas costs, could cause such customers to use alternative sources of energy such as electricity or to bypass our systems in favor of special competitive contracts with lower per-unit costs.
DEREGULATION OR UNBUNDLING
We are closely monitoring the development of unbundling initiatives in the natural gas industry. Unbundling is the separation of the provision and pricing of local distribution gas services into discrete components. It typically focuses on the separation of the distribution and gas supply components and the resulting opening of the regulated components of sales services to alternative unregulated suppliers of those services. Because of brand loyalty in our service areas, and our enhanced technology and distribution system infrastructures, we believe that we are now positively positioned as unbundling evolves. Consequently, we do not expect there would be a significant adverse effect on our business should unbundling or further deregulation of the natural gas distribution service business occur.
HEDGING AND MARKET RISK ACTIVITIES
Utility Hedging Activities
To protect against volatility in gas prices, we are hedging gas costs for the 2001-2002 heating season by utilizing a combination of financial tools and fixed forward physical contracts to stabilize gas prices. For the 2001-2002 heating season, we plan to cover approximately 64 percent of our anticipated requirements through storage and hedging instruments. The gas hedges should help moderate the effects of higher customer accounts receivable caused by higher gas prices.
WOODWARD MARKETING ACTIVITIES
We acquired a 45 percent interest in Woodward Marketing, L.L.C. in 1997 as a result of the merger of Atmos and United Cities Gas Company, which had acquired that interest in 1995. In April 2001, we acquired the 55 percent interest that we did not own from J.D. Woodward and others for 1,423,193 restricted shares of our common stock. Immediately following the acquisition, Mr. Woodward was elected as a Senior Vice President of Atmos in charge of all non-regulated business activities, a position he has held since April 2001. Prior to that time, Mr. Woodward had not been an officer or employee of Atmos.
The principal business of Woodward Marketing, including the activities of Trans Louisiana Industrial Gas Company, Inc., is the overall management of natural gas requirements for municipalities, local gas utility companies and industrial customers located primarily in the Southwestern and Midwestern United States. This business involves the sale of natural gas by Woodward Marketing to its customers and the management of storage and transportation contracts for its customers under contracts generally having one to two-year terms. At September 30, 2001, Woodward Marketing had a total of 78 municipal and local gas utility customers and 195 industrial customers. Woodward Marketing also sells natural gas to certain of its industrial customers on a delivered burner tip basis under contract terms from 30 days to two years. In addition, Woodward Marketing supplies us with a portion of our natural gas requirements on a competitive bid basis.
In the management of natural gas requirements for municipal and other local utilities, Woodward Marketing sells physical natural gas for future delivery and hedges the associated price risk through the use of gas futures, including forwards, over-the-counter and exchange-traded options, and swap contracts with counterparties. These financial contracts are marked-to-market at the daily close of business. Woodward Marketing links gas futures to physical delivery of natural gas and balances its futures positions at the end of each trading day. Over-the-counter swap agreements require Woodward Marketing to receive or make payments based on the difference between a fixed price and the market price of natural gas on the settlement date. Woodward Marketing uses these futures and swaps to manage margins on offsetting fixed-price purchase or sale commitments for physical quantities of natural gas, which are also carried on a mark to market basis. Options held to hedge price risk provide the right, but not the requirement, to buy or sell energy commodities at a fixed price. Woodward Marketing uses options to manage margins and to limit overall price risk exposure.
Energy related services provided by Woodward Marketing include the sale of natural gas to its various customer classes and management of transportation and storage assets and inventories. More specifically, energy services include contract negotiation and administration, load forecasting, storage acquisition, natural gas purchase and delivery and capacity utilization strategies. In providing these services, Woodward Marketing generates income from its utility, municipal and industrial customers through negotiated prices based on the volume of gas supplied to the customer. Woodward Marketing also generates income by taking advantage of the difference between near-term gas prices and prices for future delivery as well as the daily movement of gas prices by utilizing storage and transportation capacity that it controls.
Woodward Marketing also engages in limited speculative natural gas trading for its own account, subject to a risk management policy established by us which limits the level of trading loss in any fiscal year to a maximum of 25 percent of the budgeted annual operating income of Woodward Marketing. Compliance with such risk management policy is monitored on a daily basis. In addition, Woodward Marketing's bank credit facility limits trading positions that are not closed at the end of the day (open positions) to 2.5 Bcf of natural gas. At September 30, 2001, Woodward Marketing's open positions in its trading operations totaled 2.3 Bcf. In its speculative trading, Woodward Marketing's open trading positions are monitored on a daily basis but are not required to be closed if they remain within the limits set by the bank loan agreement. Woodward Marketing had an unrealized trading gain of $4.5 million for the fiscal year ended September 30, 2001, but there can be no assurance that Woodward Marketing will have any speculative trading gain in the future. In some prior years, Woodward Marketing has experienced losses in its speculative trading business. The financial exposure that results from the daily fluctuations of gas prices and the potential for daily price movements constitutes a risk of loss since the price of natural gas purchased for future delivery at the beginning of the day may not be hedged until later in the day.
Financial instruments, which subject Woodward Marketing to counterparty risk, consist primarily of financial instruments arising from trading and risk management activities and overnight repurchase agreements that are not insured. Counterparty risk is the risk of loss from nonperformance by financial counterparties to a contract. Exchange-traded future and option contracts are generally guaranteed by the exchanges.
Woodward Marketing's operations are concentrated in the natural gas industry, and its customers and suppliers may be subject to economic risks affecting that industry.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The risk inherent in our market risk sensitive instruments is the potential loss arising from adverse changes in natural gas commodity prices and interest rates as discussed below. The sensitivity analysis does not, however, consider the effects that such adverse changes may have on overall economic activity nor do they consider additional actions we may take to mitigate exposure to such changes. Actual results may differ.
GAS PRICES
We purchase natural gas for our regulated and non-regulated natural gas operations. Substantially all of the cost of gas purchased for regulated operations is recovered through purchased gas adjustment mechanisms. We have a limited market risk in gas prices related to gas purchases in the open market at spot prices for sale to non-regulated energy services customers at fixed prices. As a result, our earnings could be affected by changes in the price and availability of such gas. To protect against volatility in gas prices, we from time to time hedge our gas costs by purchasing futures contracts. Our utility segment does not use such financial instruments for trading purposes and we are not a party to any leveraged derivatives. Market risk is estimated as a hypothetical 10 percent increase in the portion of our gas cost related to fixed-price non-regulated sales. Based on projected fiscal 2002 non-regulated gas sales at fixed prices, such an increase would result in an increase to cost of gas of approximately $2.7 million in fiscal 2002, before considering the effect of swap agreements outstanding as of September 30, 2001. As of September 30, 2001, we had entered into swap agreements to lock in gas costs for certain outstanding fixed-price sales agreements. We plan to mitigate the risk of increased gas purchase costs for fixed-price customers by entering into swap agreements to lock in purchased gas cost for estimated sales volumes in fiscal 2002.
In April 2001, we acquired the 55 percent interest in Woodward Marketing that we did not already own. Woodward Marketing's principal business is the management of natural gas requirements for municipalities, local gas utility companies and industrial customers located primarily in the Southwestern and Midwestern United States. This business involves the sale of natural gas and the management of storage and transportation contracts for customers under contracts generally having one to two-year terms. Woodward Marketing also sells natural gas to industrial customers on a delivered burner tip basis under contract terms from 30 days to two years. In the management of natural gas requirements for municipal and other local utilities, Woodward Marketing sells natural gas for future delivery and hedges price risk through the use of gas futures including forwards, over-the-counter and exchange-traded options, futures and swap contracts. Financial contracts are marked-to-market at the daily close of business.
Woodward Marketing also engages in limited speculative natural gas trading for its own account, subject to a risk management policy established by us which limits the level of trading loss in any fiscal year to a maximum of 25 percent of the budgeted operating income of Woodward Marketing. Compliance with such risk management policy is monitored on a daily basis. In addition, Woodward Marketing's bank credit facility limits open trading positions to 2.5 Bcf of natural gas. At September 30, 2001, Woodward Marketing's open positions in its trading operations totaled 2.3 Bcf. In its trading, Woodward Marketing's open trading positions are monitored on a daily basis but are not required to be closed if within the limits set by the bank credit facility. The financial exposure that results from the daily fluctuations of gas prices and the potential for daily price movements have an impact on the net open position. Based on its open positions at September 30, 2001, a $.50 increase in market strip would result in a $1.2 million decrease in the speculative trading gain. A $.50 decrease in market strip would result in a $1.2 million increase in the speculative trading gain.
Woodward Marketing uses gas futures contracts, including but not limited to, over-the-counter and exchange-traded options and swap agreements, in the conduct of its business. Woodward Marketing links gas futures to physical delivery of natural gas and balances its futures positions at the end of each trading day. Over-the-counter swap agreements require Woodward Marketing to receive or make payments based on the difference between a fixed price and the market price of natural gas on the settlement date. Woodward Marketing uses futures and swaps to manage margins on offsetting fixed-price purchase or sale commitments for physical quantities of natural gas. Options held to hedge price risk provide the right, but not the requirement, to buy or sell energy commodities at a fixed price. Woodward Marketing uses options to manage margins and to limit overall price risk exposure.
Counterparty risk is the risk of loss from nonperformance by financial counterparties to a contract. Financial instruments, which subject Woodward Marketing to counterparty risk, consist primarily of financial instruments arising from trading and risk management activities and overnight repurchase agreements that are not insured. Exchange traded future and option contracts are generally guaranteed by the exchanges.
Woodward Marketing's operations are concentrated in the natural gas industry, and its customers and suppliers may be subject to economic risks affecting that industry. Therefore, an economic downturn in the industry could have an adverse affect on the creditworthiness of Woodward Marketing's customers. Woodward Marketing manages credit risk to attempt to minimize its exposure to uncollectible receivables. In compliance with Woodward Marketing's existing credit policy, prospective and existing customers are reviewed for creditworthiness and customers not meeting minimum standards, at the discretion of management, provide security deposits and are subject to various requisite secured payment terms.
INTEREST RATES
Our earnings are affected by changes in short-term interest rates as a result of our issuance of short-term commercial paper and our other short-term borrowings. If market interest rates for short-term borrowings average two percent more in fiscal 2002 than they did during fiscal 2001, our interest expense would increase by approximately $4.0 million.
Market risk for fixed-rate long-term obligations is estimated as the potential increase in fair value resulting from a hypothetical one percent decrease in interest rates and amounts to approximately $57.5 million based on discounted cash flow analyses.
As of September 30, 2001, we were not engaged in other activities which would cause exposure to the risk of material earnings or cash flow loss due to changes in interest rates, foreign currency exchange rates or market commodity prices.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
Management is responsible for the preparation, presentation and integrity of the financial statements and other financial information in this report. The accompanying financial statements have been prepared in accordance with generally accepted accounting principles and include estimates and judgments made by management that were necessary to prepare the statements in accordance with such accounting principles.
The Company maintains a system of internal accounting controls designed to provide reasonable assurance that assets are safeguarded from loss and that transactions are executed and recorded in accordance with established procedures. The concept of reasonable assurance is based on the recognition that the cost of maintaining a system of internal accounting controls should not exceed related benefits. The system of internal accounting controls is supported by written policies and guidelines, internal auditing and the careful selection and training of qualified personnel.
The financial statements have been audited by the Company's independent auditors. Their audit was made in accordance with auditing standards generally accepted in the United States, as indicated in the Report of Independent Auditors and included a review of the system of internal accounting controls and tests of transactions to the extent they considered necessary to carry out their responsibilities for the audit.
Management has considered the internal auditors' and the independent auditors' recommendations concerning the Company's system of internal accounting controls and has taken actions that are believed to be cost-effective in the circumstances to respond appropriately to these recommendations. The Audit Committee of the Board of Directors meets periodically with the internal auditors and the independent auditors to discuss the Company's internal accounting controls, auditing and financial reporting matters.
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Atmos Energy Corporation
We have audited the accompanying consolidated balance sheets of Atmos Energy Corporation as of September 30, 2001 and 2000, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended September 30, 2001. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Atmos Energy Corporation at September 30, 2001 and 2000, and the consolidated results of its operations and its cash flows for each of the three years in the period ended September 30, 2001, in conformity with accounting principles generally accepted in the United States. Also in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
ERNST & YOUNG LLP
Dallas, Texas
November 2, 2001
ATMOS ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30
-----------------------
2001 2000
---------- ----------
(IN THOUSANDS,
EXCEPT SHARE DATA)
ASSETS
Property, plant and equipment............................... $2,055,986 $1,546,569
Construction in progress.................................... 53,881 33,234
---------- ----------
2,109,867 1,579,803
Less accumulated depreciation and amortization.............. 774,469 597,457
---------- ----------
Net property, plant and equipment......................... 1,335,398 982,346
Current assets
Cash and cash equivalents................................. 15,263 7,379
Cash held on deposit in margin account.................... 66,666 --
Accounts receivable, less allowance for doubtful accounts
of $16,151 in 2001 and $10,589 in 2000................. 124,046 77,264
Inventories............................................... 6,041 6,456
Gas stored underground.................................... 89,555 64,222
Assets from risk management activities.................... 95,968 --
Deferred gas cost......................................... 10,999 37,184
Other current assets and prepayments...................... 15,713 8,101
---------- ----------
Total current assets................................... 424,251 200,606
Intangible assets........................................... 12,125 878
Goodwill.................................................... 64,745 3,110
Noncurrent assets from risk management activities........... 29,771 --
Deferred charges and other assets........................... 169,890 161,818
---------- ----------
$2,036,180 $1,348,758
========== ==========
CAPITALIZATION AND LIABILITIES
Shareholders' equity
Common stock, no par value (stated at $.005 per share);
100,000,000 shares authorized; issued and outstanding:
2001 -- 40,791,501 shares, 2000 -- 31,952,340 shares... $ 204 $ 160
Additional paid-in capital................................ 489,948 306,887
Retained earnings......................................... 95,132 83,154
Accumulated other comprehensive income (loss)............. (1,420) 2,265
---------- ----------
Shareholders' equity................................... 583,864 392,466
Long-term debt.............................................. 692,399 363,198
---------- ----------
Total capitalization................................... 1,276,263 755,664
Current liabilities
Current maturities of long-term debt...................... 20,695 17,566
Short-term debt........................................... 201,247 250,047
Accounts payable and accrued liabilities.................. 84,471 73,031
Taxes payable............................................. 11,620 10,844
Customers' deposits....................................... 32,351 9,923
Liabilities from risk management activities............... 119,484 --
Other current liabilities................................. 41,161 21,085
---------- ----------
Total current liabilities.............................. 511,029 382,496
Deferred income taxes....................................... 138,934 131,619
Noncurrent liabilities from risk management activities...... 7,412 --
Deferred credits and other liabilities...................... 102,542 78,979
---------- ----------
$2,036,180 $1,348,758
========== ==========
|
See accompanying notes to consolidated financial statements
ATMOS ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED SEPTEMBER 30
--------------------------------------
2001 2000 1999
------------ ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Operating revenues.......................................... $1,442,275 $850,152 $690,196
Purchased gas cost.......................................... 1,067,555 524,446 390,402
---------- -------- --------
Gross profit................................................ 374,720 325,706 299,794
Gas trading margin.......................................... 488 -- --
Operating expenses
Operation................................................. 133,240 140,249 148,065
Maintenance............................................... 6,368 7,648 9,141
Depreciation and amortization............................. 67,664 63,855 56,874
Taxes, other than income.................................. 37,655 28,638 31,475
---------- -------- --------
Total operating expenses............................... 244,927 240,390 245,555
---------- -------- --------
Operating income............................................ 130,281 85,316 54,239
Other income
Equity in earnings of Woodward Marketing, L.L.C. ......... 8,062 7,307 7,156
Miscellaneous income (expense), net....................... (1,874) 7,437 2,967
---------- -------- --------
Total other income..................................... 6,188 14,744 10,123
Interest charges, net....................................... 47,011 43,823 37,063
---------- -------- --------
Income before income taxes.................................. 89,458 56,237 27,299
Income taxes................................................ 33,368 20,319 9,555
---------- -------- --------
Net income............................................. $ 56,090 $ 35,918 $ 17,744
========== ======== ========
Basic net income per share.................................. $ 1.47 $ 1.14 $ .58
========== ======== ========
Diluted net income per share................................ $ 1.47 $ 1.14 $ .58
========== ======== ========
Cash dividends per share.................................... $ 1.16 $ 1.14 $ 1.10
========== ======== ========
Weighted average shares outstanding:
Basic..................................................... 38,156 31,461 30,566
========== ======== ========
Diluted................................................... 38,247 31,594 30,819
========== ======== ========
|
See accompanying notes to consolidated financial statements
ATMOS ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
ACCUMULATED
COMMON STOCK OTHER
------------------- ADDITIONAL COMPREHENSIVE
NUMBER OF STATED PAID-IN INCOME RETAINED
SHARES VALUE CAPITAL (LOSS) EARNINGS TOTAL
---------- ------ ---------- ------------- -------- --------
(IN THOUSANDS, EXCEPT SHARE DATA)
Balance, September 30, 1998................. 30,398,319 $152 $271,637 $ -- $ 99,369 $371,158
Comprehensive income:
Net income................................ -- -- -- -- 17,744 17,744
Unrealized holding gains on investments,
net..................................... -- -- -- 917 -- 917
--------
Total comprehensive income.............. 18,661
Cash dividends ($1.10 per share)............ -- -- -- -- (33,882) (33,882)
Common stock issued:
Restricted stock grant plan............... 56,850 -- 1,732 -- -- 1,732
Direct stock purchase plan................ 694,905 4 17,429 -- -- 17,433
ESOP...................................... 89,435 -- 2,362 -- -- 2,362
Long-term stock plan for United Cities
Division................................ 6,450 -- 150 -- -- 150
Outside directors stock-for-fee plan...... 1,841 -- 49 -- -- 49
---------- ---- -------- ------- -------- --------
Balance, September 30, 1999................. 31,247,800 156 293,359 917 83,231 377,663
Comprehensive income:
Net income................................ -- -- -- -- 35,918 35,918
Unrealized holding gains on investments,
net..................................... -- -- -- 1,348 -- 1,348
--------
Total comprehensive income.............. 37,266
Cash dividends ($1.14 per share)............ -- -- -- -- (35,995) (35,995)
Common stock:
Direct stock purchase plan................ 440,990 2 8,588 -- -- 8,590
ESOP...................................... 258,049 1 4,842 -- -- 4,843
Long-term stock plan for United Cities
Division................................ 4,200 -- 66 -- -- 66
Outside directors stock-for-fee plan...... 2,601 1 50 -- -- 51
Cancellation of restricted stock.......... (1,300) -- (18) -- -- (18)
---------- ---- -------- ------- -------- --------
Balance, September 30, 2000................. 31,952,340 160 306,887 2,265 83,154 392,466
Comprehensive income:
Net income................................ -- -- -- -- 56,090 56,090
Unrealized holding losses on investments,
net..................................... -- -- -- (3,685) -- (3,685)
--------
Total comprehensive income.............. 52,405
Cash dividends ($1.16 per share)............ -- -- -- -- (44,112) (44,112)
Common stock issued:
Direct stock purchase plan................ 411,159 2 8,682 -- -- 8,684
ESOP...................................... 225,945 1 5,098 -- -- 5,099
Long-term stock plan for United Cities
Division................................ 15,300 -- 240 -- -- 240
Long-term incentive plan.................. 17,172 -- 272 -- -- 272
Directors equity incentive compensation
plan.................................... 2,740 -- 60 -- -- 60
Outside directors stock-for-fee plan...... 2,152 -- 50 -- -- 50
Woodward Marketing, L.L.C. acquisition.... 1,423,193 7 26,650 -- -- 26,657
Public offering........................... 6,741,500 34 142,009 -- -- 142,043
---------- ---- -------- ------- -------- --------
Balance, September 30, 2001................. 40,791,501 $204 $489,948 $(1,420) $ 95,132 $583,864
========== ==== ======== ======= ======== ========
|
See accompanying notes to consolidated financial statements
ATMOS ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED SEPTEMBER 30,
---------------------------------
2001 2000 1999
--------- --------- ---------
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................ $ 56,090 $ 35,918 $ 17,744
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization:
Charged to depreciation and amortization.............. 67,664 63,855 56,874
Charged to other accounts............................. 2,806 3,065 4,800
Deferred income taxes................................... 18,501 18,251 31,874
Deferred lease income................................... (979) -- --
Net assets/liabilities from risk management
activities............................................. 13,881 -- --
Gain on sale of non-regulated assets.................... -- (5,831) --
Changes in assets and liabilities:
Increase in cash held on deposit in margin account...... (62,181) -- --
(Increase) decrease in accounts receivable.............. 65,032 (11,260) (29,576)
Decrease in inventories................................. 374 2,037 7,010
(Increase) decrease in gas stored underground........... (3,376) (17,518) 4,256
(Increase) decrease in deferred gas cost................ 15,440 (31,353) (6,101)
(Increase) decrease in other current assets and
prepayments............................................ (6,646) (4,930) 488
Increase in deferred charges and other assets........... (12,143) (13,053) (12,012)
Increase (decrease) in accounts payable................. (94,769) 8,643 19,425
Increase (decrease) in taxes payable.................... 791 9,607 (11,888)
Increase (decrease) in customers' deposits.............. 6,078 (909) (2,372)
Increase (decrease) in other current liabilities........ 9,019 (4,866) (4,418)
Increase in deferred credits and other liabilities...... 7,413 2,540 8,594
--------- --------- ---------
Net cash provided by operating activities.......... 82,995 54,196 84,698
CASH FLOWS USED IN INVESTING ACTIVITIES
Capital expenditures...................................... (113,109) (75,557) (110,353)
Acquisitions.............................................. (363,399) (32,000) --
Retirements of property, plant and equipment, net......... (1,460) 957 757
Assets for leasing activities............................. (5,377) -- --
Increase in cash from acquisition......................... 8,644 -- --
Proceeds from sale of assets, net......................... 6,625 6,467 --
--------- --------- ---------
Net cash used in investing activities.............. (468,076) (100,133) (109,596)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in short-term debt................ (48,800) 81,743 101,904
Net proceeds from issuance of long-term debt.............. 347,099 -- --
Repayment of long-term debt............................... (17,670) (14,567) (61,000)
Cash dividends paid....................................... (44,112) (35,995) (33,882)
Issuance of common stock.................................. 14,405 13,550 21,726
Net proceeds from equity offering......................... 142,043 -- --
--------- --------- ---------
Net cash provided by financing activities.......... 392,965 44,731 28,748
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents........ 7,884 (1,206) 3,850
Cash and cash equivalents at beginning of year.............. 7,379 8,585 4,735
--------- --------- ---------
Cash and cash equivalents at end of year.................... $ 15,263 $ 7,379 $ 8,585
========= ========= =========
|
See accompanying notes to consolidated financial statements
ATMOS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of business -- Atmos Energy Corporation and its subsidiaries are engaged primarily in the natural gas utility business as well as certain non-regulated businesses. We distribute through sales and transportation arrangements natural gas to approximately 1.4 million residential, commercial, public authority and industrial customers through our five regulated utility divisions: Atmos Energy Louisiana Gas Division in Louisiana; Energas Division in Texas; Greeley Gas Division in Colorado, Kansas and Missouri; United Cities Gas Division in Illinois, Tennessee, Iowa, Virginia, Georgia and Missouri; and Western Kentucky Gas Division in Kentucky. Such business is subject to federal and state regulation and/or regulation by local authorities in each of the states in which the utility divisions operate. Our shared services unit is located in Dallas, Texas and our customer support centers are located in Amarillo, Texas and Metairie, Louisiana. Our non-regulated businesses include various energy service businesses as described below.
Through Atmos Energy Marketing, LLC, we are engaged in gas marketing and energy management services. Atmos Energy Marketing provides gas supply management services to industrial customers, municipalities and local distribution companies including our five regulated utility divisions. Woodward Marketing, L.L.C. is a wholly owned subsidiary of Atmos Energy Marketing.
Through Atmos Pipeline and Storage, L.L.C., we own and operate natural gas storage fields in Kansas, Kentucky and Louisiana to supplement natural gas used by customers of the regulated utility divisions in Kansas, Kentucky, Tennessee and Louisiana and to provide storage services to other customers including customers in other states.
Through Atmos Power Systems, Inc., we construct and operate electrical power generating plants and associated facilities. Atmos Power Systems may also enter into agreements to either lease or sell such plants.
In addition, our non-regulated businesses market gas to industrial customers in West Texas, provide various retail services and own an indirect interest in Heritage Propane Partners as described below.
We were formerly engaged in the retail and wholesale distribution of propane gas through United Cities Propane Gas, Inc. On February 15, 2000, we entered into an agreement to form a joint venture which combined our propane operations with the propane operations of three other unrelated companies. The combined joint venture was named U.S. Propane, L.P. On June 15, 2000, U.S. Propane, in which we are a 19 percent partner, entered into an agreement to combine its operations with Heritage Holdings, Inc. Upon closing of this transaction, which occurred in August 2000, U.S. Propane owns all of the general partnership interest and approximately 30 percent of the limited partnership interest in Heritage Propane Partners, a publicly traded master limited partnership. Through our ownership in U.S. Propane, we own an approximate 6 percent interest in Heritage Propane Partners.
Principles of consolidation -- The accompanying consolidated financial statements include the accounts of Atmos Energy Corporation and its subsidiaries. Each subsidiary is wholly-owned and all material intercompany transactions have been eliminated.
Prior to April 1, 2001, we owned a 45 percent interest in Woodward Marketing and accounted for that ownership using the equity method of accounting for investments. Subsequent to April 1, 2001, we own 100 percent of Woodward Marketing and account for that ownership on a consolidated basis. See Note 2, "Acquisitions".
Subsequent to August 10, 2000 we account for our interest in U.S. Propane using the equity method of accounting.
Intangible assets -- Intangible assets consist of customer contracts. The weighted average amortization period is 10 years.
ATMOS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Goodwill -- Total goodwill was $64.7 million and $3.1 million at September 30, 2001 and 2000. Goodwill applicable to the utility segment was $49.8 million and zero at September 30, 2001 and 2000. Goodwill applicable to the non-regulated segment was $14.9 million and $3.1 million at September 30, 2001 and 2000. Goodwill applicable to the utility segment resulted from the acquisition of the Louisiana Gas Service Company assets on July 1, 2001 and is not subject to amortization under the provisions of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets." Goodwill applicable to the non-regulated segment was amortized over 20 years through September 30, 2001. Effective October 1, 2001, goodwill applicable to the non-regulated segment will not be amortized under the provisions of Statement of Financial Accounting Standards No. 142.
Impairment of Long-Lived Assets -- We periodically evaluate whether events or circumstances have occurred that indicate that excess of cost over net assets acquired and other long-lived assets may not be recoverable or that the remaining useful life may warrant revision. When such events or circumstances are present, we assess the recoverability of long-lived assets by determining whether the carrying value will be recovered through the expected future cash flows. In the event the sum of the expected future cash flows resulting from the use of the asset is less than the carrying value of the asset, an impairment loss equal to the excess of the asset's carrying value over its fair value is recorded. To date, no such impairment has been recognized.
Regulation -- Our utility operations are subject to regulation with respect to rates, service, maintenance of accounting records and various other matters by the respective regulatory authorities in the states in which we operate. Our accounting policies recognize the financial effects of the ratemaking and accounting practices and policies of the various regulatory commissions. Regulated utility operations are accounted for in accordance with Statement of Financial Accounting Standards No. 71, "Accounting for the Effects of Certain Types of Regulation." This statement requires cost-based rate regulated entities that meet certain criteria to reflect the authorized recovery of costs due to regulatory decisions in their financial statements.
We record regulatory assets which represent assets that are being recovered through customer rates or are probable of being recovered through customer rates. Significant regulatory assets as of September 30, 2001 included the following: merger and integration costs of $24.2 million, net of related reserves and accumulated amortization and environmental costs of $3.7 million. Regulatory liabilities represent probable future reductions in revenues associated with amounts that are to be credited to customers through the ratemaking process. As of September 30, 2001, we had recorded a regulatory liability of $3.8 million for deferred income taxes.
Revenue recognition -- Sales of natural gas are billed on a monthly cycle basis; however, the billing cycle periods for certain classes of customers do not necessarily coincide with accounting periods used for financial reporting purposes. We follow the revenue accrual method of accounting for natural gas revenues whereby revenues applicable to gas delivered to customers, but not yet billed under the cycle billing method, are estimated and accrued and the related costs are charged to expense. Estimated losses due to credit risk are reserved at the time revenue is recognized.
Accounts receivable and allowance for doubtful accounts -- Accounts receivable consists of natural gas sales to residential, commercial, industrial, agricultural and other customers. The allowance for doubtful accounts is computed based on the aging of outstanding accounts receivable and historical collections experience and represents in management's opinion, an adequate allowance to provide for probable uncollectable accounts.
Utility property, plant and equipment -- Utility property, plant and equipment is stated at original cost net of contributions in aid of construction. The cost of additions includes direct construction costs, payroll related costs (taxes, pensions and other fringe benefits), administrative and general costs and an allowance for funds used during construction. (See allowance for funds used during construction below). Major renewals
ATMOS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and betterments are capitalized while the costs of maintenance and repairs are charged to expense as incurred. The costs of large projects are accumulated in construction in progress until the project is completed. When the project is completed, tested and placed in service, the balance is transferred to the utility plant in service account included in the rate base and depreciation begins. Property, plant and equipment is depreciated at various rates on a straight-line basis over the estimated useful lives of the assets. The composite rates were 3.7 percent for 2001, 4.1 percent for 2000 and 4.0 percent for 1999. At the time property, plant and equipment is retired, the cost, plus removal expenses less salvage, is charged to accumulated depreciation.
Allowance for funds used during construction -- Allowance for funds used during construction represents the estimated cost of funds used to finance the construction of major projects. Under regulatory practices, the costs are capitalized and included in rate base for ratemaking purposes when the completed projects are placed in service. Interest expense of $1.2 million and $3.7 million were capitalized in 2001 and 1999. No interest expense was capitalized during 2000.
Non-utility property, plant and equipment -- Balances are stated at cost and depreciation is generally computed on the straight-line method for financial reporting purposes.
Inventories -- Inventories consist primarily of materials and supplies and merchandise held for resale. These inventories are stated at the lower of average cost or market.
Gas stored underground -- Net additions of inventory gas to storage and withdrawals of inventory gas from storage are priced using the average cost method for all our utility divisions, except for the United Cities Gas Division, where it is priced on the first-in first-out method. Gas stored underground and owned by Atmos Pipeline and Storage is priced on the last-in first-out method. Pursuant to the United Cities Gas Division's purchased gas adjustment clause, the liquidation of a LIFO layer would be reflected in subsequent gas adjustments in customer rates and does not affect the results of operations. Gas in storage that is retained as cushion gas to maintain reservoir pressure is classified as property, plant and equipment and is priced at cost.
Risk management assets, non-regulated segment -- We use storage, transportation and requirements contracts, forwards, over-the-counter and exchange-traded options, futures and swap contracts to conduct our risk management activities. We use the mark-to-market method to account for these activities in accordance with Emerging Issues Task Force Issue No. 98-10, "Accounting for Energy Trading and Risk Management Activities." Under this method, the aforementioned contracts are reflected at fair value, inclusive of future servicing costs and valuation adjustments, with resulting unrealized gains and losses recorded as assets or liabilities from risk management activities on the consolidated balance sheet. Current period changes in the assets and liabilities from risk management activities are recognized as net gains or losses on the consolidated statement of income. Changes in the assets and liabilities from risk management activity result primarily from changes in the valuation of the portfolio of contracts, maturity and settlement of contracts and newly originated transactions. Market prices and models used to value these transactions reflect our best estimate considering various factors including closing exchange and over-the-counter quotations, time value and volatility factors underlying the contracts. Values are adjusted to reflect the potential impact of liquidating our positions in an orderly manner over a reasonable period of time under present market conditions. Changes in market prices directly affect our estimate of the fair value of these transactions.
At September 30, 2001, we had 3,800 open contracts, representing 2.3 Bcf notional volumes, that were marked to market with average contract maturities of less than two years. The $4.5 million mark-to-market gain associated with these positions was recorded as unrealized trading margin on the consolidated statement of income.
Effective April 1, 2001, natural gas sales from our natural gas trading operations are netted against purchased gas costs and shown as gas trading margin on the consolidated statements of income. For the six months ended September 30, 2001, our gas trading margin consisted of a $4.0 million realized trading loss and a $4.5 million unrealized trading gain.
ATMOS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Risk management assets, utility segment -- Our business units have entered into financial instruments for the 2001-2002 heating season. The purpose of entering into these financial instruments is to protect us and our customers from unusually large winter period gas price increases. We use the mark-to-market method to account for these activities as described above. In accordance with Financial Accounting Standards No. 71 "Accounting for the Effects of Certain Types of Regulation", current period changes in the assets and liabilities from risk management activities are recorded as deferred gas costs on the consolidated balance sheet. Accordingly, there is no earnings impact as a result of the use of these financial instruments. See Note 14. Upon maturity, the contracts are recognized in purchased gas cost.
Income taxes -- Income taxes are provided based on the liability method, resulting in income tax assets and liabilities due to temporary differences. Temporary differences are differences between the tax bases of assets and liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future years. The liability method requires the effect of tax rate changes on current and accumulated deferred income taxes to be reflected in the period in which the rate change was enacted. The liability method also requires that deferred tax assets be reduced by a valuation allowance unless it is more likely than not that the assets will be realized.
Cash and cash equivalents -- We consider all highly liquid investments with an initial or remaining maturity of three months or less to be cash equivalents.
Deferred charges and other assets -- Deferred charges and other assets at September 30, 2001 and 2000 include merger and integration costs of $24.2 million and $30.0 million, net of the related reserve for possible non-recovery and accumulated amortization; the investment in Woodward Marketing of $17.4 million at September 30, 2000; and the indirect investment in Heritage Propane Partners of $23.8 million and $25.0 million in 2001 and 2000. Also included in deferred charges and other assets are assets of our qualified defined benefit retirement plans in excess of the plans' obligations of $44.4 million and $36.1 million, assets related to the nonqualified retirement plans of $25.1 million and $28.6 million, unamortized debt expense of $9.7 million and $5.4 million and deferred asset projects of $12.6 million and $10.9 million in 2001 and 2000.
Deferred credits and other liabilities -- Deferred credits and other liabilities at September 30, 2001 and 2000 include customer advances for construction of $11.7 million and $10.9 million; obligations under other postretirement benefits of $38.1 million and $25.2 million in 2001 and 2000; and obligations under our nonqualified retirement plans of $34.2 million and $31.0 million in 2001 and 2000.
Earnings per share -- The calculation of basic earnings per share is based on net income divided by the weighted average number of common shares outstanding. The calculation of diluted earnings per share is based on net income divided by the weighted average number of shares outstanding plus the dilutive shares related to the United Cities Gas Division's Long-term Stock Plan, the Long-Term Incentive Plan and Atmos' Restricted Stock Grant Plan.
Comprehensive income -- In 1999, we adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income." This statement requires reporting of comprehensive income and its components (revenues, expenses, gains and losses) in any complete presentation of general purpose financial statements. Comprehensive income describes all changes, except those resulting from investments by owners and distributions to owners, in the equity of a business enterprise from transactions and other events including, as applicable, foreign-currency items, minimum pension liability adjustments and unrealized gains and losses on certain investments in debt and equity securities. While the primary component of comprehensive income is our reported net income, the other components of comprehensive income relate to unrealized gains and losses associated with certain investments held as available for sale.
Use of estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial
ATMOS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
statements and revenues and expenses during the reporting period. Actual results could differ from those estimates.
Weather insurance and hedges -- In June 2001, we purchased a three year weather insurance policy with an option to cancel in the third year if we obtain weather protection in our rate structures. The policy is for our Texas and Louisiana operations and covers the entire heating season of October to March beginning with the 2001 - 2002 heating season. The cost of the three year policy was approximately $13.2 million which was prepaid and will be amortized over the appropriate heating seasons. The insurance is designed to protect against weather that is warmer than normal.
In July 2000, we entered into an agreement to purchase weather hedges for our Texas and Louisiana operations effective for the 2000 - 2001 heating season. The hedges were designed to help mitigate the effects of weather that was at least seven percent warmer than normal in both Texas and Louisiana while preserving any upside. The cost of the weather hedges was approximately $4.9 million which was amortized over the 2000 - 2001 heating season. The cost of the weather hedges was more than offset by the positive effects of colder weather on our gross profit.
Recently issued accounting standards not yet adopted -- In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141, "Business Combinations." This statement addresses financial accounting and reporting for business combinations and supersedes APB Opinion No. 16, "Business Combinations," and Statement of Financial Accounting Standards No. 38, "Accounting for Pre-acquisition Contingencies of Purchased Enterprises." All business combinations in the scope of this Statement are to be accounted for using the purchase method. The provisions of this Statement were applied to the acquisition of Louisiana Gas Service Company and LGS Natural Gas Company effective July 1, 2001.
In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets." This Statement addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, "Intangible Assets." This Statement addresses the accounting for goodwill and other intangible assets after they have been initially recognized in the financial statements. This Statement requires that goodwill and other intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to impairment tests. This Statement was adopted effective July 1, 2001 with respect to goodwill or other intangible assets acquired in connection with the Louisiana Gas Service Company and LGS Natural Gas Company acquisition. See Note 2 "Acquisitions". With respect to our other intangible assets and goodwill, this Statement was adopted effective October 1, 2001. The proforma effect on goodwill amortization of adopting Statement of Financial Accounting Standards No. 142 is not material.
In August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." This Statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The provisions of this Statement are effective for financial statements issued for fiscal years beginning after December 15, 2001. We are currently in the process of evaluating the impact the adoption of this Statement will have on our financial condition, results of operations or net cash flows.
Reclassifications -- Certain prior year amounts have been reclassified to conform with the current year presentation.
ATMOS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. ACQUISITIONS
COMPLETION OF ACQUISITION OF REMAINING EQUITY INTEREST IN WOODWARD MARKETING
In April 2001, we acquired from Woodward Marketing, Inc. the 55 percent interest in Woodward Marketing, L.L.C. that we did not already own in exchange for 1,423,193 restricted shares of our common stock. The consideration is subject to an upward adjustment, based on our share price, of up to 232,547 shares plus an amount of shares to compensate for dividends paid after the completion of the acquisition. The pro forma effects for the fiscal year ended September 30, 2001 of combining 100 percent of Woodward Marketing's results of operations with Atmos' consolidated results of operations are a $17.9 million increase in gas trading margin to $18.4 million, elimination of the $8.1 million equity in earnings of Woodward Marketing, a $6.2 million increase in net income to $62.3 million and a $.13 increase in diluted earnings per share to $1.60.
Such pro forma effects for the fiscal year ended September 30, 2000 are a $16.2 million increase in gas trading margin to $16.2 million, elimination of the $7.3 million equity in earnings of Woodward Marketing, a $5.7 million increase in net income to $41.2 million and a $.12 increase in diluted earnings per share to $1.26.
The acquisition enabled us to control Woodward Marketing's future direction and strategies. Results of 100 percent of Woodward Marketing's operations are consolidated with our results of operations for the third and fourth quarter of fiscal year 2001.
The following table summarizes the fair market value of the 55 percent of Woodward Marketing's assets acquired and liabilities assumed as of April 1, 2001, in thousands:
Net property, plant and equipment........................... $ 1,649
Total current assets........................................ 128,386
Other intangible assets..................................... 250
Goodwill.................................................... 12,310
Deferred charges and other assets........................... (12,085)
---------
Total assets acquired.................................. 130,510
Current liabilities......................................... (102,997)
Noncurrent liabilities...................................... (856)
---------
Net assets acquired.................................... $ 26,657
=========
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Other intangible assets represent the fair market value of non-compete contracts. The cost assigned to these contracts is being amortized over 10 years. The value assigned to goodwill was based on our belief that ownership of 100 percent of Woodward Marketing would enable us to exercise greater control over Woodward Marketing's operation, thereby increasing its value. We expect that the goodwill amount will not be deductible for tax purposes.
COMPLETION OF ACQUISITION OF NATURAL GAS OPERATIONS IN LOUISIANA
Effective July 1, 2001, we acquired the assets of Louisiana Gas Service Company and LGS Natural Gas Company for $363.4 million. The acquired assets provide natural gas distribution service through approximately 279,000 residential and commercial meters in southeastern and northern Louisiana. The service territory includes the suburban areas of metropolitan New Orleans (excluding Orleans Parish), the north shore of Lake Pontchartrain and the Monroe/West Monroe metropolitan area. The non-regulated operations, which includes an intrastate pipeline company, provide gas transportation service to industrial customers in Louisiana and to the acquired assets.
ATMOS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The acquisition increased the size of our operations in Louisiana and allowed us to achieve certain synergies and cost savings by combining the acquired operations with our existing Louisiana operations. Results of operations of the Louisiana Gas Service assets are consolidated with our results of operations for the fourth quarter of fiscal year 2001.
The following table summarizes the fair market values of the assets acquired and liabilities assumed as of July 1, 2001, in thousands:
Net property, plant and equipment........................... $313,251
Total current assets........................................ 31,423
Other intangible assets..................................... 11,200
Goodwill.................................................... 49,793
Noncurrent assets from risk management activities........... 5,355
Deferred charges and other assets........................... 958
--------
Total assets acquired.................................. 411,980
Current liabilities......................................... (45,972)
Noncurrent liabilities...................................... (2,609)
--------
Net assets acquired.................................... $363,399
========
|
Other intangible assets represent the fair market value of industrial customer contracts and are being amortized over 10 years. The value assigned to goodwill was based on our belief that the acquisition of the Louisiana Gas assets will enable us to realize cost savings in the state of Louisiana when combined with our existing Louisiana operations. We expect that the entire goodwill amount will be deductible for tax purposes.
The pro forma effects for the fiscal year ended September 30, 2001 of combining the results of operations of the Louisiana Gas assets with our consolidated results of operations are a $306.2 million increase in operating revenues to $1.7 billion, a $24.2 million decrease in net income to $31.9 million and a $.64 decrease in diluted earnings per share to $.83.
Such pro forma effects for the fiscal year ended September 30, 2000 are a $186.1 million increase in operating revenues to $1.0 billion, a $6.9 million decrease in net income to $29.0 million and a $.22 decrease in diluted earnings per share to $.92.
PENDING ACQUISITION OF MISSISSIPPI VALLEY GAS COMPANY
In September 2001, we entered into a definitive agreement to acquire
Mississippi Valley Gas Company, a privately held natural gas utility. This
acquisition will be accounted for as a purchase and will be acquired using $75.0
million in cash and the issuance of $75.0 million in our common stock. We will
also assume Mississippi Valley Gas' outstanding debt, net of working capital, of
approximately $45.0 million. Mississippi Valley Gas provides natural gas
distribution service to more than 261,500 residential, commercial, industrial
and other customers located primarily in the northern and central regions of
Mississippi. Mississippi Valley Gas has two underground storage facilities with
2.05 Bcf of working gas capacity. The acquisition must be approved by the
Mississippi Public Service Commission, the issuance of our stock must be
approved by five of the states in which we operate and the transaction must
comply with the provisions of the Hart-Scott-Rodino Antitrust Improvements Act.
It is anticipated that the acquisition will be completed in fiscal 2002.
ATMOS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. DEBT
Long-term debt at September 30, 2001 and 2000 consists of the following:
2001 2000
-------- --------
(IN THOUSANDS)
Unsecured 11.2% Senior Notes, due 2002, payable in annual
installments of $2,000.................................... $ 4,000 $ 6,000
Unsecured 9.76% Senior Notes, due 2004, payable in annual
installments of $3,000.................................... 12,000 15,000
Unsecured 9.57% Senior Notes, due 2006, payable in annual
installments of $2,000.................................... 10,000 12,000
Unsecured 7.95% Senior Notes, due 2006, payable in annual
installments of $1,000.................................... 5,000 6,000
Unsecured 10% Notes, due 2011............................... 2,303 2,303
Unsecured 7.375% Senior Notes, due 2011..................... 350,000 --
Unsecured 8.07% Senior Notes, due 2006, payable in annual
installments of $4,000 beginning 2002..................... 20,000 20,000
Unsecured 8.26% Senior Notes, due 2014, payable in annual
installments of $1,818 beginning 2004..................... 20,000 20,000
Medium term notes
Series A, 1995-1, 6.67%, due 2025......................... 10,000 10,000
Series A, 1995-2, 6.27%, due 2010......................... 10,000 10,000
Series A, 1995-3, 6.20%, due 2000......................... -- 2,000
Unsecured 6.75% Debentures, due 2028........................ 150,000 150,000
First Mortgage Bonds
Series J, 9.40% due 2021.................................. 17,000 17,000
Series P, 10.43% due 2017................................. 18,750 21,250
Series Q, 9.75% due 2020.................................. 19,000 20,000
Series R, 11.32% due 2004................................. 6,440 8,580
Series T, 9.32% due 2021.................................. 18,000 18,000
Series U, 8.77% due 2022.................................. 20,000 20,000
Series V, 7.50% due 2007.................................. 10,000 10,000
Rental property, propane and other term notes due in
installments through 2013................................. 10,601 12,631
-------- --------
Total long-term debt................................... 713,094 380,764
Less current maturities..................................... (20,695) (17,566)
-------- --------
$692,399 $363,198
======== ========
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Most of the Senior Notes and First Mortgage Bonds contain provisions that allow us to prepay the outstanding balance in whole at any time, subject to a prepayment premium. The Senior Note agreements and First Mortgage Bond indentures provide for certain cash flow requirements and restrictions on additional indebtedness, sale of assets and payment of dividends. Under the most restrictive of such covenants, cumulative cash dividends paid after December 31, 1988 may not exceed the sum of accumulated net income for periods after December 31, 1988 plus $15.0 million. At September 30, 2001, approximately $56.7 million of retained earnings was unrestricted.
ATMOS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of September 30, 2001, all of the Greeley Gas Division utility plant assets with a net book value of approximately $174.4 million are subject to a lien under the 9.4 percent Series J First Mortgage Bonds assumed by us in the acquisition of Greeley Gas Company. Also, substantially all of the United Cities Gas Division utility plant assets, totaling approximately $314.1 million, are subject to a lien under the Indenture of Mortgage of the Series P through V First Mortgage Bonds.
Based on the borrowing rates currently available to us for debt with similar terms and remaining average maturities, the fair value of long-term debt at September 30, 2001 and 2000 is estimated, using discounted cash flow analysis, to be $709.9 million and $368.8 million.
Maturities of long-term debt at September 30, 2001 are as follows (in thousands):
2002........................................................ $ 20,695
2003........................................................ 20,380
2004........................................................ 17,866
2005........................................................ 16,196
2006........................................................ 14,259
Thereafter.................................................. 623,698
--------
$713,094
========
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SHORT-TERM DEBT
At September 30, 2001, short-term debt was composed of $171.0 million of commercial paper and $30.2 million outstanding under two bank credit facilities. At September 30, 2000, it was composed of $250.0 million of commercial paper. The weighted average interest rate on short-term borrowings outstanding was 4.0 percent and 7.0 percent at September 30, 2001 and 2000.
Committed credit facilities
We have short-term committed credit facilities totaling $318.0 million. One short-term unsecured credit facility is for $300.0 million and serves as a backup liquidity facility for our commercial paper program. Our commercial paper is rated A-2 by Standard and Poor's and P-2 by Moody's. At September 30, 2001, $171.0 million of commercial paper was outstanding. On August 2, 2001, this facility was renewed for $300.0 million with an option to increase the amount by $100.0 million. We have a second facility in place for $18.0 million. At September 30, 2001, $2.2 million was outstanding under this credit facility. No amounts were outstanding under this credit facility at September 30, 2000. These credit facilities are negotiated at least annually and are used for working capital purposes.
Uncommitted credit facilities
Our Woodward Marketing subsidiary has an uncommitted credit facility for $140.0 million which is used for its non-regulated business. Atmos Energy Marketing, LLC, our wholly-owned subsidiary, is the sole guarantor of all amounts outstanding under this facility. At September 30, 2001, $28.0 million was outstanding under this credit facility. Related letters of credit totaling $38.8 million further reduced the amount available under this facility.
We also have unsecured short-term uncommitted credit lines from two banks totaling $40.0 million. There were no borrowings under these uncommitted credit facilities at September 30, 2001 and 2000. The uncommitted lines are renewed or renegotiated at least annually with varying terms and we pay no fee for the availability of the lines. Borrowings under these lines are made on a when- and as-available basis at the discretion of the banks.
ATMOS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In addition, Woodward Marketing has up to $100.0 million available from Atmos for its non-regulated business. At September 30, 2001, $100.0 million was outstanding.
4. INCOME TAXES
The components of income tax expense for 2001, 2000 and 1999 are as follows:
2001 2000 1999
------- ------- --------
(IN THOUSANDS)
Current
Federal.............................................. $13,624 $ -- $(18,761)
State................................................ 2,189 2,500 (4,081)
Deferred
Federal.............................................. 14,971 18,611 27,370
State................................................ 3,013 (345) 5,321
Investment tax credits................................. (429) (447) (294)
------- ------- --------
$33,368 $20,319 $ 9,555
======= ======= ========
|
Deferred income taxes reflect the tax effect of differences between the basis of assets and liabilities for book and tax purposes. The tax effect of temporary differences that give rise to significant components of the deferred tax liabilities and deferred tax assets at September 30, 2001 and 2000 are presented below:
2001 2000
--------- ---------
(IN THOUSANDS)
Deferred tax assets:
Costs expensed for book purposes and capitalized for tax
purposes............................................... $ 1,269 $ 382
Accruals not currently deductible for tax purposes........ 4,527 2,403
Customer advances......................................... 4,443 4,159
Nonqualified benefit plans................................ 11,098 5,595
Postretirement benefits................................... 21,638 11,907
Unamortized investment tax credit......................... 1,049 1,303
Regulatory liabilities.................................... 1,396 3,159
Tax net operating loss and credit carryforwards........... 13,154 34,255
Other, net................................................ 9,801 6,356
--------- ---------
Total deferred tax assets.............................. 68,375 69,519
Deferred tax liabilities:
Difference in net book value and net tax value of
assets................................................. (171,734) (161,290)
Pension funding........................................... (16,010) (6,708)
Gas cost adjustments...................................... 4,670 (14,130)
Regulatory assets......................................... (3,153) (4,462)
Cost capitalized for book purposes and expensed for tax
purposes............................................... (8,387) (8,864)
Other, net................................................ (12,695) (5,684)
--------- ---------
Total deferred tax liabilities......................... (207,309) (201,138)
--------- ---------
Net deferred tax liabilities................................ $(138,934) $(131,619)
========= =========
SFAS No. 109 deferred accounts for rate regulated
entities.................................................. $ 1,327 $ 1,085
========= =========
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ATMOS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Reconciliations of the provisions for income taxes computed at the statutory rate to the reported provisions for income taxes for 2001, 2000 and 1999 are set forth below:
2001 2000 1999
------- ------- ------
(IN THOUSANDS)
Tax at statutory rate of 35%............................. $31,310 $19,683 $9,555
Common stock dividends deductible for tax reporting...... (857) (774) (701)
State taxes.............................................. 3,652 1,677 841
Other, net............................................... (737) (267) (140)
------- ------- ------
Provision for income taxes............................... $33,368 $20,319 $9,555
======= ======= ======
|
We have tax credit carryforwards amounting to $12.4 million, the majority of which represent alternative minimum tax credits which do not expire. We also have net operating loss carryforwards for state income tax purposes amounting to $0.8 million which expire at varying times depending on the jurisdiction in which the net operating loss was generated.
5. CONTINGENCIES
LITIGATION
Greeley Gas Division
On September 23, 1999, a suit was filed in the District Court of Stevens County, Kansas, by Quinque Operating Company, Tom Boles and Robert Ditto, against more than 200 companies in the natural gas industry including us and our Greeley Gas Division. The plaintiffs, who purport to represent a class consisting of gas producers, royalty owners, overriding royalty owners, working interest owners and state taxing authorities, accuse the defendants of underpaying royalties on gas taken from wells situated on non-federal and non-Indian lands throughout the United States and offshore waters predicated upon allegations that the defendants' gas measurements are simply inaccurate and that the defendants failed to comply with applicable regulations and industry standards over the last 25 years. Although the plaintiffs do not specifically allege an amount of damages, they contend that this suit is brought to recover billions of dollars in revenues that the defendants have allegedly unlawfully diverted from the plaintiffs to themselves. On April 10, 2000, this case was consolidated for pre-trial proceedings with other similar pending litigation in federal court in Wyoming in which we are also a defendant along with over 200 other defendants in the case of In Re Natural Gas Royalties Quitam Litigation. In January 2001, the federal court elected to remand this case back to the Kansas state court. A reconsideration of remand was filed, but it was denied. The state court now has jurisdiction over this proceeding and has issued a preliminary case management order. We believe that the plaintiffs' claims are lacking in merit, and we intend to vigorously defend this action. While the results of this litigation cannot be predicted with certainty, we believe the final outcome of such litigation will not have a material adverse effect on our financial condition, results of operations or net cash flows because we believe that we have adequate insurance and/or reserves to cover any damages that may ultimately be awarded.
Energas Division
On May 18, 2001, a suit was filed in the 99th District Court of Lubbock
County, Texas, by the City of Lubbock, Texas, and the West Texas Municipal
Agency against Stewart & Stevenson Energy Products, Inc., a division of GE
Packaged Power, Inc. ("GE") and our Energas Division. The action arises out of
(i) the construction and installation of a gas-fired electric generating
facility designed and installed by GE and (ii) the natural gas pipeline, which
provides natural gas to the facility, that was designed and installed by our
Energas Division. The plaintiffs allege that they incurred damages as a result
of certain corrosive products that were introduced into the facility's turbine
that damaged the turbine and necessitated repair costs of
ATMOS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
approximately $0.9 million and consequential damages of approximately $4.7 million comprised of electric power purchases made by the plaintiffs from other sources while the facility was inoperative or operating below specifications. The causes of action asserted by the plaintiffs against the Energas Division include breach of contract, breach of warranty and negligence. We have denied any liability and intend to vigorously defend against the plaintiffs' claims. While the results of this litigation cannot be predicted with certainty, we believe the final outcome of such litigation will not have a material adverse effect on our financial condition, results of operations or net cash flows because we believe that we have adequate insurance and/or reserves to cover any damages that may ultimately be awarded.
Atmos Energy Louisiana Gas Division
Prior to our acquisition of the assets of Louisiana Gas Service Company, a division of Citizens Communications Company on July 1, 2001, Louisiana Gas Service Company was involved in a proceeding with the Louisiana Public Service Commission relating to past costs associated with the purchase of gas that it charged to its customers. Subsequent to our acquisition of the Louisiana Gas assets on July 1, 2001, we have taken over the defense of this proceeding and will have responsibility for administering and assuring the payment of refunds and/or credits to ratepayers that may arise from Citizens Communications' past activities with respect to the purchased gas costs. However, we believe the outcome of this proceeding will not have a material adverse impact on our financial condition, results of operations or net cash flows as Citizens Communications has agreed to fully indemnify us for any liability that may arise out of this proceeding.
United Cities Propane Gas, Inc.
United Cities Propane Gas, Inc., one of our wholly-owned subsidiaries, is a party to an action filed in June 2000 which is pending in the Circuit Court of Sevier County, Tennessee. The plaintiffs' claims arise out of injuries alleged to have been caused by a low-level propane explosion. The plaintiffs seek to recover damages of $13.0 million. Discovery activities have begun in this case. We have denied any liability, and we intend to vigorously defend against the plaintiffs' claims. While the results of this litigation cannot be predicted with certainty, we believe the final outcome of such litigation will not have a material adverse effect on our financial condition, results of operations or net cash flows because we believe that we have adequate insurance and/or reserves to cover any damages that may ultimately be awarded.
We are a party to other litigation and claims that arise out of our ordinary business. While the results of such litigation and claims cannot be predicted with certainty, we believe the final outcome of such litigation and claims will not have a material adverse effect on our financial condition, results of operations or net cash flows because we believe that we have adequate insurance and reserves to cover any damages that may ultimately be awarded.
ENVIRONMENTAL MATTERS
Manufactured Gas Plant Sites
The United Cities Gas Division is the owner or previous owner of manufactured gas plant sites in Johnson City and Bristol, Tennessee and Hannibal, Missouri which were used to supply gas prior to availability of natural gas. The gas manufacturing process resulted in certain by-products and residual materials including coal tar. The manufacturing process used by our predecessors was an acceptable and satisfactory process at the time such operations were being conducted. Under current environmental protection laws and regulations, we may be responsible for response actions with respect to such materials if response actions are necessary.
United Cities Gas Company and the Tennessee Department of Environment and Conservation entered into a consent order effective January 23, 1997, to facilitate the investigation, removal and remediation of the Johnson City site. United Cities Gas Company began the implementation of the consent order in the first
ATMOS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
quarter of 1997 which continued through September 30, 2001. The investigative phase of the work at the site has been completed. An interim removal action was completed in June 2001. The Tennessee Regulatory Authority granted United Cities Gas Company permission to defer, until its next rate case, all costs incurred in Tennessee in connection with state and federally mandated environmental control requirements.
On July 22, 1998, we entered into an Abatement Order on Consent with the Missouri Department of Natural Resources addressing the former manufactured gas plant located in Hannibal, Missouri. Through our United Cities Gas Division, we agreed to perform a removal action, a subsequent site evaluation and to reimburse the response costs incurred by the state of Missouri in connection with the property. The removal action was conducted and completed in August 1998, and the site evaluation field work was conducted in August 1999. A risk assessment for the site is currently being performed. On March 9, 1999, the Missouri Public Service Commission issued an Order authorizing us to defer the costs associated with this site until March 9, 2001. A renewal of the Order has been requested. The matter is still pending before the Commission.
As of September 30, 2001, we had incurred costs of approximately $0.9 million for the investigations of the Johnson City and Bristol, Tennessee and Hannibal, Missouri sites and had a remaining accrual relating to these sites of $0.8 million.
Mercury Contamination Sites
We have completed investigation and remediation activities pursuant to Consent Orders between the Kansas Department of Health and Environment and United Cities Gas Company. The Orders provided for the investigation and remediation of mercury contamination at gas pipeline sites which utilize or formerly utilized mercury meter equipment in Kansas. The Final Interim Characterization and Remediation Report has been submitted to the Kansas Department of Health. We are currently in the process of amending the Orders with the Kansas Department of Health to include all mercury meters that belonged to our Greeley Gas Division before the merger with Untied Cites Gas Company on July 31, 1997. These sites will be investigated and any necessary remediation will be enforced. As of September 30, 2001, we had incurred costs of $0.1 million for these sites and had a remaining accrual of $0.3 million for recovery. The Kansas Corporation Commission has authorized us to defer these costs and seek recovery in a future rate case.
We are a party to other environmental matters and claims, including those discussed above, that arise out of our ordinary business. While the ultimate results of response actions to these environmental matters and claims cannot be predicted with certainty, we believe the final outcome of such response actions will not have a material adverse effect on our financial condition, results of operations or net cash flows because we believe that the expenditures related to such response actions will either be recovered through rates, shared with other parties or covered by adequate insurance or reserves.
6. COMMON STOCK AND STOCK OPTIONS
SHAREHOLDERS' RIGHTS PLAN
We have a Rights Agreement under which each right ("Right") will entitle the holder thereof, until May 10, 2008 or the date of redemption of the Rights, to buy one share of Common Stock of Atmos at the exercise price of $80.00, subject to adjustment. At no time will the Rights have any voting rights. The exercise price payable and the number of shares of Common Stock or other securities or property issuable upon exercise of the Rights are subject to adjustment from time to time to prevent dilution. At the date upon which the rights become separate from our Common Stock (the "Distribution Date"), we will issue one right with each share of Common Stock that becomes outstanding so that all shares of Common Stock will have attached Rights. After the Distribution Date, we may issue Rights when we issue Common Stock if the Board deems such issuance to be necessary or appropriate.
ATMOS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Rights will separate from the Common Stock and a Distribution Date will occur upon the occurrence of certain events specified in the Agreement, including but not limited to, the acquisition by certain persons of at least 15 percent of the beneficial ownership of our Common Stock. The Rights have certain anti-takeover effects and may cause substantial dilution to a person or entity that attempts to acquire the Company on terms not approved by the Board of Directors except pursuant to an offer conditioned upon a substantial number of Rights being acquired. The Rights should not interfere with any merger or other business combination approved by the Board of Directors because, prior to the time that the Rights become exercisable or transferable, the Rights may be redeemed by us at $.01 per Right.
SHARES ISSUED UNDER VARIOUS PLANS
The following table presents the number of shares issued under our various plans in 2001 and 2000, as well as the number of shares available for future issuance at September 30, 2001.
SHARES AVAILABLE
SHARES ISSUED FOR ISSUANCE AT
----------------- SEPTEMBER 30,
2001 2000 2001
------- ------- ----------------
Restricted Stock Grant Plan......................... -- -- 732,750
Employee Stock Ownership Plan....................... 225,945 258,049 935,064
Direct Stock Purchase Plan.......................... 411,159 440,990 1,374,738
Outside Directors Stock-For-Fee Plan................ 2,152 2,601 35,785
United Cities Long-Term Stock Plan.................. 15,300 4,200 168,550
Long-Term Incentive Plan............................ 17,172 -- 1,482,828
Equity Incentive and Deferred Compensation Plan for
Non-Employee Directors............................ 2,740 -- 147,260
|
RESTRICTED STOCK GRANT PLAN
Our Restricted Stock Grant Plan for management and key employees of the Company, which became effective October 1, 1987 and was amended and restated in February 1998, provides for awards of common stock that are subject to certain restrictions. The Restricted Stock Grant Plan is administered by the Board of Directors. The members of the Board who are not employees of Atmos make the final determinations regarding participation in the Plan, awards under the Plan and restrictions on the restricted stock awarded. The restricted stock may consist of previously issued shares purchased on the open market or shares issued directly from us. During 1998, we increased the number of shares of our common stock that may be issued under the Restricted Stock Grant Plan by 650,000 shares. Compensation expense of $1.1 million, $2.3 million and $1.6 million was recognized in 2001, 2000 and 1999 in connection with the vesting of shares awarded under the Plan.
EMPLOYEE STOCK OWNERSHIP PLAN
Prior to January 1, 1999, we had an Employee Stock Ownership Plan and the United Cities Gas Division had a 401(k) savings plan. The Employee Stock Ownership Plan was amended effective January 1, 1999, as is more fully discussed in Note 7.
DIRECT STOCK PURCHASE PLAN
We also have a Direct Stock Purchase Plan. Participants in the Direct Stock Purchase Plan may have all or part of their dividends reinvested at a three percent discount from market prices. Direct Stock Purchase Plan participants may purchase additional shares of Atmos common stock as often as weekly with voluntary cash payments of at least $25, up to an annual maximum of $100,000.
ATMOS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OUTSIDE DIRECTORS STOCK-FOR-FEE PLAN
In November 1994, the Board adopted the Outside Directors Stock-for-Fee Plan which was approved by the shareholders of Atmos in February 1995 and was amended and restated in November 1997. The plan permits non-employee directors to receive all or part of their annual retainer and meeting fees in stock rather than in cash.
EQUITY INCENTIVE AND DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
In November 1998, the Board adopted the Equity Incentive and Deferred Compensation Plan for Non-Employee Directors which was approved by the shareholders of Atmos in February 1999. Such plan represents an amendment to the Atmos Energy Corporation Deferred Compensation Plan for Outside Directors adopted by the Company on May 10, 1990 and replaced the pension payable under the Company's Retirement Plan for Non-Employee Directors. Only non-employee directors of Atmos are eligible to participate in the Equity Incentive and Deferred Compensation Plan, the purpose of which is to provide non-employee directors with the opportunity to defer receipt of compensation for services rendered to the Company, invest deferred compensation into either a cash account or a stock account and to receive an annual grant of share units for each year of service on the Board.
STOCK-BASED COMPENSATION PLANS
We have two stock-based compensation plans that provide for the granting of stock options to officers, key employees and non-employee directors. The objectives of these plans include attracting and retaining the best personnel, providing for additional performance incentives and promoting the success of Atmos by providing employees the opportunity to acquire common stock.
UNITED CITIES LONG-TERM STOCK PLAN
Prior to the merger with Atmos, certain United Cities Gas Company officers and key employees participated in the United Cities Long-Term Stock Plan implemented in 1989. At the time of the merger on July 31, 1997, Atmos adopted this plan by registering a total of 250,000 shares of Atmos stock to be issued under the Long-Term Stock Plan for the United Cities Division. Under this plan, incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock or any combination thereof may be granted to officers and key employees of the United Cities Gas Division. Options granted under the plan become exercisable at a rate of 20 percent per year and expire 10 years after the date of grant. During 2001, 15,300 options were exercised under the plan. At September 30, 2001, there were 19,300 options outstanding, all of which were fully vested. No incentive stock options, nonqualified stock options, stock appreciation rights or restricted stock have been granted under the plan since 1996. Because of the limited nature of this plan, the pro forma effects of applying Statement of Financial Accounting Standards No. 123 would have less than a $.01 per diluted share effect on earnings per share or approximately $4,764, $8,580 and $30,852 for 2001, 2000 and 1999.
LONG-TERM INCENTIVE PLAN
On August 12, 1998, the Board of Directors approved and adopted the 1998 Long-Term Incentive Plan, which became effective October 1, 1998 after approval by the shareholders of Atmos. The Long Term Incentive Plan represents a part of our Total Rewards strategy which we developed as a result of a study we conducted of all employee, executive and non-employee director compensation and benefits. The Long Term Incentive Plan is a comprehensive, long-term incentive compensation plan providing for discretionary awards of incentive stock options, non-qualified stock options, stock appreciation rights, bonus stock, restricted stock and performance-based stock to help attract, retain and reward employees and non-employee directors of Atmos and its subsidiaries.
ATMOS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
We are authorized to grant awards for up to a maximum of 1,500,000 shares of common stock under the Long Term Incentive Plan subject to certain adjustment provisions. The option price is equal to the market price of our stock at the date of grant. The stock options expire 10 years from the date of the grant and options vest annually over a service period ranging from one to three years. At September 30, 2001, we had 1,009,330 options outstanding under the Long Term Incentive Plan at an exercise price ranging from $14.68 to $25.66.
In October 1995, Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," was issued. This statement establishes a fair value-based method of accounting for employee stock options or similar equity instruments and encourages, but does not require, all companies to adopt that method of accounting for all of their employee stock compensation plans. Statement of Financial Accounting Standards No. 123 allows companies to continue to measure compensation cost for employee stock options or similar equity instruments using the intrinsic value method of accounting described in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees". We have elected to continue using the intrinsic value method as prescribed by Accounting Principles Board No. 25. Under this method no compensation cost for stock options are recognized for stock option awards granted at or above fair market value.
A summary of activity for grants of stock options follows:
WEIGHTED
AVERAGE
NUMBER OF EXERCISE
OPTIONS PRICE
--------- --------
Outstanding -- September 30, 1998........................... -- $ --
Granted................................................... 341,000 24.43
Exercised................................................. -- --
Forfeited................................................. (16,000) 24.41
---------
Outstanding -- September 30, 1999........................... 325,000 24.43
---------
Granted................................................... 379,500 16.03
Exercised................................................. -- --
Forfeited................................................. (46,000) 22.03
---------
Outstanding -- September 30, 2000........................... 658,500 19.76
---------
Granted................................................... 439,500 23.45
Exercised................................................. (17,172) 15.82
Forfeited................................................. (71,498) 19.86
---------
Outstanding -- September 30, 2001........................... 1,009,330 $21.43
---------
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ATMOS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Information about outstanding and exercisable options, as of September 30, 2001, follows:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------- --------------------
WEIGHTED
AVERAGE
REMAINING WEIGHTED WEIGHTED
CONTRACTUAL AVERAGE AVERAGE
RANGE OF NUMBER OF LIFE EXERCISE NUMBER OF EXERCISE
EXERCISE PRICES OPTIONS (IN YEARS) PRICE OPTIONS PRICE
------------------------- --------- ----------- -------- --------- --------
$14.68 to $17.49.... 280,330 8.4 $15.63 93,445 $15.63
$17.50 to $20.24.... 32,000 8.9 19.84 10,667 19.84
$20.25 to $23.99.... 406,000 9.4 23.40 334 23.94
$24.00 to $25.66.... 291,000 7.6 24.43 181,002 24.43
-------------------------------------------------------------------------------------
$14.68 to $25.66.... 1,009,330 8.6 21.43 285,448 21.37
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A summary of outstanding options that are fully exercisable follows:
WEIGHTED
NUMBER OF AVERAGE
OPTIONS EXERCISE PRICE
--------- --------------
Exercisable -- September 30, 1999........................... -- --
Exercisable -- September 30, 2000........................... 90,503 $24.43
Exercisable -- September 30, 2001........................... 285,448 $21.37
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Pro Forma Fair Value Disclosures:
Had compensation expense for our stock options been recognized based on the fair value on the grant date under the methodology prescribed by Statement of Financial Accounting Standards No. 123, our net income and earnings per share for the three years ended September 30, would have been impacted as shown in the following table.
2001 2000 1999
----- ----- -----
Net income -- as reported (millions)........................ $56.1 $35.9 $17.7
Net income -- pro forma (millions).......................... $55.7 $35.7 $17.6
Basic earnings per share -- as reported..................... $1.47 $1.14 $0.58
Basic earnings per share -- pro forma....................... $1.46 $1.13 $0.58
Diluted earnings per share -- as reported................... $1.47 $1.14 $0.58
Diluted earnings per share -- pro forma..................... $1.46 $1.13 $0.57
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In accordance with the fair value method of determining compensation expense, the weighted average grant date fair value per share of options granted was as follows:
- $3.97 in fiscal 2001;
- $2.88 in fiscal 2000; and
- $4.10 in fiscal 1999.
ATMOS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
We used the Black-Scholes pricing model to estimate the fair value of each option granted with the following weighted average assumptions for the years ended September 30:
2001 2000 1999
---- ---- ----
Expected Life (years)....................................... 5 5 7
Interest rate............................................... 4.7% 5.8% 5.9%
Volatility.................................................. 25.5% 25.1% 22.2%
Dividend yield.............................................. 4.9% 5.0% 5.2%
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7. EMPLOYEE RETIREMENT, STOCK OWNERSHIP AND OTHER PLANS
DEFINED BENEFIT PLANS
Effective January 1, 1999, we established the Atmos Pension Account Plan which covers substantially all employees of Atmos. Opening account balances were established for participants as of January 1, 1999 equal to the present value of their respective accrued benefits under the pension plans which were previously in effect as of December 31, 1998. The Pension Account Plan credits an allocation to each participant's account at the end of each year according to a formula based on the participant's age, service and total pay (excluding incentive pay).
The Pension Account Plan also provides for an additional annual allocation based upon a participant's age as of January 1, 1999 for those participants who were participants in the prior pension plans. The plan will credit this additional allocation each year through December 31, 2008. In addition, at the end of each year, a participant's account will be credited with interest on the employee's prior year account balance. A special grandfather benefit also applies through December 31, 2008, for participants who were at least age 50 as of January 1, 1999, and who were participants in one of the prior plans on December 31, 1998. Participants are fully vested in their account balances after five years of service and may choose to receive their account balances as a lump sum or an annuity.
Our funding policy is to contribute annually an amount in accordance with the requirements of the Employee Retirement Income Security Act of 1974. Contributions are intended to provide not only for benefits attributed to service to date but also for those expected to be earned in the future.
ATMOS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
We record the accrued pension asset in deferred charges and other assets. The following table sets forth the total for the Pension Account Plan's funded status for 2001 and 2000:
2001 2000
-------- --------
(IN THOUSANDS)
Change in benefit obligation:
Benefit obligation at beginning of year................... $210,152 $200,465
Service cost.............................................. 3,557 2,352
Interest cost............................................. 16,408 14,573
Actuarial (gain) loss..................................... (875) 5,039
Acquisition/merger........................................ (385) 5,156
Benefits paid............................................. (17,979) (17,433)
-------- --------
Benefit obligation at end of year......................... 210,878 210,152
Change in plan assets:
Fair value of plan assets at beginning of year............ 279,498 282,498
Actual return on plan assets.............................. (14,807) 9,277
Acquisition/merger........................................ (385) 5,156
Benefits paid............................................. (17,979) (17,433)
-------- --------
Fair value of plan assets at end of year.................. 246,327 279,498
-------- --------
Funded status............................................... 35,449 69,346
Unrecognized transition asset............................... (72) (362)
Unrecognized prior service cost............................. (7,995) (8,878)
Unrecognized net (gain) loss................................ 17,021 (24,004)
-------- --------
Accrued pension asset....................................... $ 44,403 $ 36,102
======== ========
|
2001 2000 1999
---- ---- ----
Weighted average assumptions for end of year disclosure:
Discount rate............................................. 7.5% 8.0% 7.5%
Rate of compensation increase............................. 4.0% 4.0% 4.0%
Expected return on plan assets............................ 10.0% 10.0% 10.0%
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The plan assets consist primarily of investments in common stocks, interest bearing securities and interests in commingled pension trust funds.
ATMOS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Net periodic pension cost, which is recorded as an operation expense, for the Pension Account Plan for 2001, 2000 and 1999 included the following components:
2001 2000 1999
-------- -------- --------
(IN THOUSANDS)
Components of net periodic pension cost:
Service cost....................................... $ 3,557 $ 2,352 $ 4,232
Interest cost...................................... 16,408 14,573 14,696
Expected return on assets.......................... (27,093) (27,403) (27,846)
Amortization of:
Transition obligation (asset)...................... (290) (263) (248)
Prior service cost................................. (883) (802) (703)
Actuarial (gain)................................... -- (1,610) (1,487)
-------- -------- --------
Net periodic pension cost....................... $ (8,301) $(13,153) $(11,356)
======== ======== ========
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SUPPLEMENTAL EXECUTIVE BENEFITS PLANS
We have a nonqualified Supplemental Executive Benefits Plan which provides additional pension, disability and death benefits to the officers and certain other employees of Atmos. The Supplemental Executive Benefits Plan was amended and restated in August 1998. In addition, in August 1998, we adopted the Performance-Based Supplemental Executive Benefits Plan which covers all employees who become officers or business unit presidents after August 12, 1998 or any other employees selected by our Board of Directors in its discretion.
ATMOS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
We record the accrued pension cost in deferred credits and other liabilities. The following table sets forth the total for the Supplemental Plans' funded status for 2001 and 2000:
2001 2000
-------- --------
(IN THOUSANDS)
Change in benefit obligation:
Benefit obligation at beginning of year................... $ 47,426 $ 38,825
Service cost.............................................. 832 937
Interest cost............................................. 3,751 2,916
Actuarial loss............................................ 3,642 6,482
Benefits paid............................................. (2,806) (1,734)
-------- --------
Benefit obligation at end of year......................... 52,845 47,426
Change in plan assets:
Fair value of plan assets at beginning of year............ -- --
Employer contribution..................................... 2,806 1,734
Benefits paid............................................. (2,806) (1,734)
-------- --------
Fair value of plan assets at end of year.................. -- --
-------- --------
Funded status............................................... (52,845) (47,426)
Unrecognized transition asset............................... 292 388
Unrecognized prior service cost............................. 6,793 7,815
Unrecognized net loss....................................... 11,538 8,220
-------- --------
Accrued pension cost........................................ $(34,222) $(31,003)
======== ========
|
2001 2000 1999
---- ---- ----
Weighted average assumptions for end of year disclosure:
Discount rate............................................. 7.5% 8.0% 7.5%
Rate of compensation increase............................. 4.0% 4.0% 4.0%
Expected return on plan assets............................ 10.0% 10.0% 10.0%
|
Assets for the Supplemental Plans are held in our rabbi trusts (see Note 12) and consist primarily of investments in equity mutual funds. The market value of the rabbi trusts amounted to $25.1 million and $28.6 million at September 30, 2001 and 2000. The assets in the rabbi trusts are included on our balance sheet under deferred charges and other assets and are not presented above as plan assets.
The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the Supplemental Plans with accumulated benefit obligations in excess of plan assets were $52.8 million, $45.5 million and none, as of September 30, 2001, and $47.4 million, $41.1 million and none, as of September 30, 2000.
ATMOS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Net periodic pension cost, which is recorded as an operation expense, for the Supplemental Plans for 2001, 2000 and 1999 included the following components:
2001 2000 1999
------ ------ ------
(IN THOUSANDS)
Components of net periodic pension cost:
Service cost............................................. $ 832 $ 937 $1,151
Interest cost............................................ 3,751 2,916 2,488
Amortization of:
Transition obligation.................................... 96 96 96
Prior service cost....................................... 1,022 1,022 1,022
Actuarial loss........................................... 325 215 216
------ ------ ------
Net periodic pension cost............................. $6,026 $5,186 $4,973
====== ====== ======
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EMPLOYEE STOCK OWNERSHIP PLAN
Atmos sponsors an Employee Stock Ownership Plan for substantially all employees. Effective January 1, 1999 the Employee Stock Ownership Plan was amended to provide for deferral of a portion of a participant's salary of up to 21 percent. In addition, among other changes to the Employee Stock Ownership Plan, participants are provided with automatic matching contributions of 100 percent of each participant's salary reduction up to 4 percent of the participant's salary and are provided the option of taking out loans against their accounts subject to certain restrictions. Each participant enters into a salary reduction agreement with Atmos pursuant to which the participant's salary is reduced by an amount not more than 21 percent. Taxes on the amount by which the participant's salary is reduced are deferred pursuant to Section 401(k) of the Internal Revenue Code. The amount of the salary reduction is contributed by us to the Employee Stock Ownership Plan for the account of the participant. Matching contributions to the Plan were expensed as incurred and amounted to $3.2 million, $3.0 million, and $2.4 million for 2001, 2000 and 1999. The directors may also approve discretionary contributions, subject to the provisions of the Internal Revenue Code of 1986 and applicable regulations of the Internal Revenue Service. No discretionary contributions were made for 2001, 2000, nor 1999.
VARIABLE PAY PLAN
The Variable Pay Plan was created to give each employee an opportunity to share in the success of Atmos based on certain criteria. Each fiscal year, we establish key performance measures for the Variable Pay Plan. These performance measures are considered critical to achieving business objectives for a given year and may include such things as growth in earnings, improved cash flows or crucial customer satisfaction and safety results. Each year a performance measure is established, and we make accruals during the year of the expected pay-out based on the best estimates available at that time.
8. OTHER POSTRETIREMENT BENEFITS
Prior to January 1, 1999, Atmos sponsored two postretirement plans other than pensions. Each provided health care benefits to retired employees. One provided benefits to the United Cities Gas Division retirees and the other provided medical benefits to all other retired Atmos employees.
Effective January 1, 1999, the United Cities plan was merged into the Atmos plan and began providing benefits to future retirees that are essentially the same as provided to other Atmos employees.
ATMOS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Substantially all of our employees become eligible for these benefits if they reach retirement age while working for us and attain certain specified years of service. In addition, participant contributions are required under the plan.
We record the accrued postretirement cost primarily in deferred credits and other liabilities. The following table sets forth the total liability currently recognized for the postretirement plan other than pensions for 2001 and 2000:
2001 2000
-------- --------
(IN THOUSANDS)
Change in benefit obligation:
Benefit obligation at beginning of year................... $ 63,029 $ 56,832
Service cost.............................................. 2,274 2,543
Interest cost............................................. 5,434 4,119
Plan participants' contributions.......................... 649 653
Actuarial loss............................................ 6,023 170
Acquisitions/divestitures................................. 10,402 2,593
Benefits paid............................................. (4,961) (3,881)
-------- --------
Benefit obligation at end of year......................... 82,850 63,029
Change in plan assets:
Fair value of plan assets at beginning of year............ 11,872 9,964
Actual return on plan assets.............................. (463) 809
Employer contributions.................................... 6,757 4,118
Plan participants' contributions.......................... 649 653
Acquisitions/divestitures................................. -- 209
Benefits paid............................................. (4,961) (3,881)
-------- --------
Fair value of plan assets at end of year.................. 13,854 11,872
-------- --------
Funded status............................................... (68,996) (51,157)
Unrecognized transition obligation.......................... 18,709 20,221
Unrecognized prior service cost............................. 2,054 2,574
Unrecognized net (gain) loss................................ 4,834 (2,306)
-------- --------
Accrued postretirement cost................................. $(43,399) $(30,668)
======== ========
|
2001 2000 1999
---- ---- ----
Weighted average assumptions for end of year disclosure:
Discount rate............................................. 7.5% 8.0% 7.5%
Expected return on plan assets............................ 5.3% 5.3% 5.3%
Initial trend rate........................................ 7.0% 8.0% 9.0%
Ultimate trend rate....................................... 5.0% 5.0% 5.0%
Number of years from initial to ultimate trend............ 3 4 5
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ATMOS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Net periodic postretirement cost, which is recorded as an operation expense, for the combined postretirement benefit plans for 2001, 2000 and 1999 included the following components:
2001 2000 1999
------ ------ ------
(IN THOUSANDS)
Components of net periodic postretirement cost:
Service cost............................................. $2,274 $2,543 $2,150
Interest cost............................................ 5,434 4,119 4,360
Expected return on assets................................ (653) (540) (349)
Amortization of:
Transition obligation.................................... 1,511 1,511 1,511
Prior service cost....................................... 520 520 520
Actuarial (gain) loss.................................... -- (94) 648
------ ------ ------
Net periodic postretirement cost...................... $9,086 $8,059 $8,840
====== ====== ======
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Assumed health care cost trend rates have a significant effect on the amounts reported for the plans. A one-percentage point change in assumed health care cost trend rates would have the following effects on the latest actuarial calculations:
1-PERCENTAGE 1-PERCENTAGE
POINT INCREASE POINT DECREASE
-------------- --------------
(IN THOUSANDS)
Effect on total of service and interest cost components... $ 607 $ (448)
Effect on postretirement benefit obligation............... $8,160 $(7,021)
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We are currently recovering other postretirement benefits costs through our regulated rates under Statement of Financial Accounting Standards No. 106 accrual accounting in Colorado, Kansas, the majority of the Texas service area and Kentucky. We receive rate treatment as a cost of service item for other postretirement benefits costs on the pay-as-you-go basis in Louisiana. Other postretirement benefits costs have been specifically addressed in rate orders in each jurisdiction served by the United Cities Gas Division or have been included in a rate case and not disallowed. Management believes that accrual accounting in accordance with Statement of Financial Accounting Standards No. 106 is appropriate and will continue to seek rate recovery of accrual-based expenses in its ratemaking jurisdictions that have not yet approved the recovery of these expenses.
9. EARNINGS PER SHARE
Basic earnings per share has been computed by dividing net income for the period by the weighted average number of common shares outstanding during the period. Diluted earnings per share has been computed by dividing net income for the period by the weighted average number of common shares outstanding during the period adjusted for restricted stock and other contingently issuable shares of common stock. Net income for the years ended September 30, 2001, 2000 and 1999 for basic and diluted earnings per share are the same, as there were no contingently issuable shares of stock whose issuance would have impacted
ATMOS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
net income. A reconciliation between basic and diluted weighted average common shares outstanding at September 30 follows:
2001 2000 1999
------ ------ ------
(IN THOUSANDS)
Weighted average common shares -- basic.................... 38,156 31,461 30,566
Effect of dilutive securities:
Restricted stock......................................... 79 125 238
Stock options............................................ 12 8 15
------ ------ ------
Weighted average common shares -- diluted.................. 38,247 31,594 30,819
====== ====== ======
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10. STATEMENT OF CASH FLOWS SUPPLEMENTAL DISCLOSURES
Supplemental disclosures of cash flow information for 2001, 2000 and 1999 are presented below.
2001 2000 1999
------- ------- -------
(IN THOUSANDS)
Cash paid (received) for
Interest.............................................. $41,042 $46,243 $40,446
Income taxes.......................................... $16,808 $(7,989) $(7,184)
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In connection with our transaction related to the sale of our propane business (see Note 1 of notes to consolidated financial statements), we contributed property, plant and equipment of $38.9 million with a related accumulated depreciation of $17.1 million and deferred charges and other assets of $3.9 million in exchange for an indirect investment in Heritage Propane Partners. In addition, we received net proceeds of $6.5 million and recorded a gain on the transaction of $5.8 million.
In May 2000, we completed the acquisition, which was accounted for as a purchase, of the Missouri natural gas distribution assets of Southwestern Energy Company and subsequent thereto, its operations were included in our consolidated results. We paid $32.0 million in connection with this acquisition. Of the $32.0 million paid in cash, we recorded property, plant and equipment of $52.3 million with a related accumulated depreciation of $21.7 million, accounts receivable of $1.3 million, inventories of $0.3 million and gas stored underground of $2.0 million. In addition, we recorded accounts payable of $0.2 million, taxes payable of $0.4 million, customer deposits of $1.2 million and deferred credits of $0.4 million.
In April 2001, we completed the acquisition, which was accounted for as a purchase, of the remaining 55 percent of Woodward Marketing that we did not already own in exchange for 1,423,193 restricted shares of our common stock. Subsequent to the acquisition, Woodward Marketing's operations were included in our consolidated results. Consideration given for the stock purchase was $26.7 million. In connection with the issuance of the stock for this acquisition, we recorded property, plant and equipment of $2.1 million with a related accumulated depreciation of $0.4 million, accounts receivable of $94.8 million, gas stored underground of $10.7 million, assets from risk management activities of $9.8 million, intangible assets of $0.2 million and goodwill of $12.3 million. In addition, we received $8.6 million in cash and $4.5 million of cash held on deposit in margin accounts. We also reduced deferred charges and other assets by $12.1 million which related to the net of the amounts received in the purchase and the removal of the 45 percent equity investment we had in Woodward Marketing which we had previously owned. Liabilities assumed in the acquisition included $95.2 million in accounts payable, $0.5 million in customer deposits, $7.3 million in other current liabilities and $0.8 million in deferred credits and other liabilities.
In July 2001, we completed the acquisition, which was accounted for as a purchase, of the natural gas operations of Louisiana Gas Service Company and LGS Natural Gas Company. Subsequent to the
ATMOS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
acquisition, the operations of Louisiana Gas Service and LGS Natural Gas were included in our consolidated results. We paid $363.4 million in cash in connection with this acquisition. We recorded property, plant and equipment of $466.5 million with a related accumulated depreciation of $153.2 million, accounts receivable of $18.1 million, gas stored underground of $12.4 million, a deferred gas credit of $10.8 million, assets from risk management activities of $11.7 million, noncurrent assets from risk management activities of $5.3 million and deferred charges and other assets of $1.0 million. In addition, we recorded intangible assets of $11.2 million, goodwill of $49.8 million and $9.0 million in deferred tax assets. Liabilities assumed in the acquisition included $12.8 million in accounts payable, $16.0 million in customer deposits, $14.1 million in liabilities from risk management activities, $3.1 million in other current liabilities and $11.6 million in deferred credits and other liabilities.
11. SEGMENT INFORMATION
Our determination of reportable segments considers the strategic operating units under which we manage sales of various products and services to customers in differing regulatory environments. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. All intersegment sales prices are market based. We evaluate performance based on net income or loss of the respective operating units.
In accordance with Statement of Financial Accounting Standards No. 131, we have identified the Utility and Non-regulated segments, as described in Note 1. We consider each business unit within our utility segment to be a reporting unit of the utility segment and not a reportable segment. Our chief executive officer makes decisions about allocating resources to the utility segment as a whole and not to individual reporting units. The individual operations that comprise the non-regulated segment are not currently material to our consolidated financial position or results of operation and therefore do not require separate reporting.
Summarized financial information concerning our reportable segments is shown in the following table:
NON-
UTILITY REGULATED TOTAL
---------- --------- ----------
(IN THOUSANDS)
As of and for the year ended
September 30, 2001:
Operating revenues................................ $1,380,148 $ 67,382 $1,447,530
Intersegment revenues............................. 1,989 3,266 5,255
Depreciation and amortization..................... 65,614 2,050 67,664
Operating income.................................. 127,980 2,301 130,281
Equity in earnings of Woodward Marketing, L.L.C... -- 8,062 8,062
Interest charges, net............................. 45,313 1,698 47,011
Net income........................................ 49,881 6,209 56,090
Total assets...................................... 1,732,697 367,156 2,099,853
Equity investment in unconsolidated investee...... -- 23,840 23,840
Expenditures for additions to long-lived assets... 112,683 426 113,109
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ATMOS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NON-
UTILITY REGULATED TOTAL
---------- --------- ----------
(IN THOUSANDS)
As of and for the year ended
September 30, 2000:
Operating revenues................................ 739,951 118,855 858,806
Intersegment revenues............................. 5,116 3,538 8,654
Depreciation and amortization..................... 60,120 3,735 63,855
Operating income.................................. 77,207 8,109 85,316
Equity in earnings of Woodward Marketing, L.L.C... -- 7,307 7,307
Interest charges, net............................. 42,096 1,727 43,823
Net income........................................ 22,459 13,459 35,918
Total assets...................................... 1,253,023 112,294 1,365,317
Equity investment in unconsolidated investee...... -- 42,330 42,330
Expenditures for additions to long-lived assets... 105,012 1,128 106,140
As of and for the year ended
September 30, 1999:
Operating revenues................................ 621,211 76,360 697,571
Intersegment revenues............................. 3,898 3,477 7,375
Depreciation and amortization..................... 52,503 4,371 56,874
Operating income.................................. 49,000 5,239 54,239
Equity in earnings of Woodward Marketing, L.L.C... -- 7,156 7,156
Interest charges, net............................. 35,799 1,264 37,063
Net income........................................ 10,800 6,944 17,744
Total assets...................................... 1,152,469 94,627 1,247,096
Equity investment in unconsolidated investee...... -- 15,973 15,973
Expenditures for additions to long-lived assets... 108,454 1,899 110,353
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The following table presents a reconciliation of the operating revenues to total consolidated revenues for the years ended September 30, 2001, 2000 and 1999:
2001 2000 1999
---------- -------- --------
(IN THOUSANDS)
Total revenues for reportable segments.............. $1,447,530 $858,806 $697,571
Elimination of intersegment revenues................ (5,255) (8,654) (7,375)
---------- -------- --------
Total operating revenues....................... $1,442,275 $850,152 $690,196
========== ======== ========
|
A reconciliation of total assets for the reportable segments to total consolidated assets for September 30, 2001, 2000 and 1999 is presented below:
2001 2000 1999
---------- ---------- ----------
(IN THOUSANDS)
Total assets for reportable segments............. $2,099,853 $1,365,317 $1,247,096
Elimination of intercompany accounts............. (63,673) (16,559) (16,559)
---------- ---------- ----------
Total consolidated assets................... $2,036,180 $1,348,758 $1,230,537
========== ========== ==========
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ATMOS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes our revenues by products and services for the year ended September 30:
2001 2000 1999
---------- -------- --------
(IN THOUSANDS)
Gas sales revenues:
Residential....................................... $ 788,902 $405,552 $349,691
Commercial........................................ 342,945 176,712 144,836
Public authority and other........................ 58,539 27,198 22,330
Industrial........................................ 148,180 97,089 73,194
---------- -------- --------
Total gas sales revenues....................... 1,338,566 706,551 590,051
Transportation revenues............................. 28,668 23,610 23,035
Other gas revenues.................................. 10,925 4,674 4,227
---------- -------- --------
Total utility revenues......................... 1,378,159 734,835 617,313
Propane revenues.................................... -- 22,550 22,944
Non-Regulated revenues.............................. 64,116 92,767 49,939
---------- -------- --------
Total operating revenues....................... $1,442,275 $850,152 $690,196
========== ======== ========
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12. MARKETABLE SECURITIES
In accordance with Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities," all marketable securities are classified as available-for-sale and are reported at market value with unrealized gains and losses shown as a component of shareholders' equity labeled "unrealized holding gains (losses) on investments, net." All marketable securities are held in rabbi trusts for the Supplemental Executive Benefits Plans.
The cost, unrealized holding gain (loss) and the market value of the marketable securities are as follows:
UNREALIZED
HOLDING MARKET
COST GAIN (LOSS) VALUE
------- ----------- -------
(IN THOUSANDS)
As of September 30, 2001:
Available-for-sale securities:
Domestic equity mutual funds..................... $24,565 $(1,496) $23,069
Foreign equity mutual funds...................... 2,845 (804) 2,041
------- ------- -------
$27,410 $(2,300) $25,110
======= ======= =======
As of September 30, 2000:
Available-for-sale securities:
Domestic equity mutual funds..................... $22,557 $ 3,148 $25,705
Foreign equity mutual funds...................... 2,462 398 2,860
------- ------- -------
$25,019 $ 3,546 $28,565
======= ======= =======
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13. LEASES
We have entered into non-cancelable operating leases for office and warehouse space used in our operations. The remaining lease terms range from one to 17 years and generally provide for the payment of taxes, insurance and maintenance by the lessee. We have also entered into capital leases for division offices
ATMOS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and operating facilities. Property, plant and equipment included amounts for capital leases of $5.2 million and $4.6 million at September 30, 2001 and 2000. Accumulated depreciation for these capital leases totaled $1.9 million and $1.4 million at September 30, 2001 and 2000.
The related future minimum lease payments at September 30, 2001 were as follows:
CAPITAL OPERATING
LEASES LEASES
------- ---------
(IN THOUSANDS)
2002........................................................ $ 876 $ 9,127
2003........................................................ 876 8,361
2004........................................................ 876 8,169
2005........................................................ 843 7,992
2006........................................................ 433 7,494
Thereafter.................................................. 2,726 24,880
------- -------
Total minimum lease payments................................ 6,630 $66,023
=======
Less amount representing interest........................... (3,297)
-------
Present value of net minimum lease payments................. $ 3,333
=======
|
Consolidated lease and rental expense amounted to $5.9 million, $9.0 million and $10.6 million for fiscal 2001, 2000 and 1999. Rents for the regulated business are expensed, and we receive rate treatment as a cost of service on a pay-as-you-go basis.
14. RELATED PARTY TRANSACTIONS
Included in purchased gas cost were purchases from Woodward Marketing of $525.6 million, $228.6 million and $117.4 million in 2001, 2000 and 1999. Volumes purchased were 96.3 Bcf, 74.4 Bcf and 50.9 Bcf in 2001, 2000 and 1999. These purchases were made in a competitive open bidding process and reflect market prices. Average prices per Mcf for gas purchased from Woodward Marketing were $5.46, $3.07 and $2.31 in 2001, 2000 and 1999. In addition, we have entered into contracts with Woodward Marketing to manage a significant portion of our underground storage facilities. Woodward Marketing has acted as agent in placing financial instruments for the various business units that protect us and our customers from unusually large winter period gas price increases.
15. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Effective October 1, 2000, we adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended. This Statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that all derivative financial instruments be recognized in the financial statements and measured at fair value regardless of the purpose or intent for holding them. Changes in the fair value of derivative financial instruments are either recognized periodically in income or as deferred gas costs, depending on the classification of the derivative. Derivative instruments may be classified as either fair value hedges or cash flow hedges. The cumulative effect of the change in accounting for the adoption of this Statement did not have a material impact on our financial position, results of operations or cash flows.
ATMOS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
WEATHER HEDGES AND INSURANCE
In July 2000, we entered into an agreement to purchase weather hedges for our Texas and Louisiana operations effective for the 2000-2001 heating season. The hedges were designed to help mitigate the effects of weather that was at least seven percent warmer than normal in both Texas and Louisiana while preserving any upside. The cost of the weather hedges was approximately $4.9 million which was amortized over the 2000-2001 heating season.
In June 2001, we purchased a three year weather insurance policy with an option to cancel in the third year if we obtain weather protection in our rate structures. The policy is for our Texas and Louisiana operations and covers the entire heating season of October to March beginning with the 2001-2002 heating season. The cost of the three year policy was approximately $13.2 million which was prepaid and will be amortized over the appropriate heating seasons based on degree days. The insurance is designed to protect against weather that is at least seven percent warmer than normal.
UTILITY HEDGING ACTIVITIES
We have historically hedged 20 percent of our gas supply through the use of our underground storage assets. This hedging process will continue. For the 2001-2002 heating season, we plan to cover approximately 64 percent of our anticipated flowing gas requirements through storage and futures and fixed forward contracts at a weighted average cost of slightly less than $4.00 per Mcf. This should provide protection to us and our customers against sharp increases in the price of natural gas during the 2001-2002 heating season.
16. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized unaudited quarterly financial data is presented below. The sum of net income per share by quarter may not equal the net income per share for the year due to variations in the weighted average shares outstanding used in computing such amounts. Our businesses are seasonal due to weather conditions in our service areas. For further information on its effects on quarterly results, please see the "Weather and seasonality" discussion included in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section herein.
QUARTER ENDED
------------------------------------------------
DECEMBER 31 MARCH 31 JUNE 30 SEPTEMBER 30
----------- -------- -------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
FISCAL YEAR 2001
Operating revenues................... $442,790 $675,113 $164,260 $160,112
Gross profit......................... 109,948 138,324 61,279 65,169
Operating income..................... 48,941 73,891 3,174 4,275
Net income (loss).................... 22,972 44,074 (3,400) (7,556)
Net income (loss) per share.......... .70 1.13 (.08) (.19)
|
QUARTER ENDED
------------------------------------------------
DECEMBER 31 MARCH 31 JUNE 30 SEPTEMBER 30
----------- -------- -------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
FISCAL YEAR 2000
Operating revenues................... $224,458 $314,197 $152,362 $159,135
Gross profit......................... 89,550 118,127 60,030 57,999
Operating income (loss).............. 30,141 55,987 (2,344) 1,532
Net income (loss).................... 14,324 29,573 (4,396) (3,583)
Net income (loss) per share.......... .46 .94 (.14) (.11)
|
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding directors and compliance with Section 16(a) of the Securities Exchange Act of 1934 is incorporated herein by reference from the Company's Definitive Proxy Statement for the Annual Meeting of Shareholders on February 13, 2002. Information regarding executive officers is included in Part I of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference from the Company's Definitive Proxy Statement for the Annual Meeting of Shareholders on February 13, 2002.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference from the Company's Definitive Proxy Statement for the Annual Meeting of Shareholders on February 13, 2002.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference from the Company's Definitive Proxy Statement for the Annual Meeting of Shareholders on February 13, 2002.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. and 2. Financial statements and financial statement schedules.
The financial statements and financial statement schedules listed in the accompanying Index to Financial Statements are filed as part of this Form 10-K.
3. Exhibits
The exhibits listed in the accompanying Exhibits Index are filed as part of this Form 10-K. The exhibits numbered 10.21(a) through 10.32(b) are management contracts or compensatory plans or arrangements.
(b) Reports on Form 8-K
The Company filed a Form 8-K Current Report, Item 2, Acquisition or Disposition of Assets, dated July 1, 2001, announcing that it had acquired the assets of the Louisiana Gas Service Company division of Citizens Communications Company as well as the assets of LGS Natural Gas Company, a wholly-owned subsidiary of Citizens, effective July 1, 2001.
Under Item 7, Financial Statements and Exhibits, a description that the financial statements of the business acquired and pro forma financial information would be filed within 60 days of the required filing date of this Form 8-K. Also, an exhibit was attached: a copy of a related press release dated July 2, 2001.
The Company filed a Form 8-K/A Current Report (Amendment No. 1), Item 7 Financial Statements and Exhibits, dated July 1, 2001, disclosing the required financial statements of the business acquired and pro forma financial information relating to the acquisition of the assets of the Louisiana Gas Service Company division of Citizens Communications Company as well as the assets of LGS Natural Gas Company, a wholly-owned subsidiary of Citizens.
The Company filed a Form 8-K Current Report, Item 5, Other Events, dated September 24, 2001, announcing that the Company had entered into a definitive agreement to acquire Mississippi Valley Gas Company, a privately-held natural gas utility company for $150.0 million in stock and cash as well as the assumption of approximately $45.0 million of outstanding debt, net of working capital.
Under Item 7, Financial Statements and Exhibits, an exhibit was attached: a copy of a related press release dated September 24, 2001.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ATMOS ENERGY CORPORATION
(Registrant)
By /s/ JOHN P. REDDY
------------------------------------
John P. Reddy
Senior Vice President
and Chief Financial Officer
Date: November 20, 2001
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POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Robert W. Best and John P. Reddy, or either of them acting alone or together, as his true and lawful attorney-in-fact and agent with full power to act alone, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Form 10-K, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated:
/s/ ROBERT W. BEST Chairman, President and Chief November 20, 2001
--------------------------------------------------- Executive Officer
Robert W. Best
/s/ JOHN P. REDDY Senior Vice President and November 20, 2001
--------------------------------------------------- Chief Financial Officer
John P. Reddy
/s/ F.E. MEISENHEIMER Vice President and Controller November 20, 2001
--------------------------------------------------- (Principal Accounting
F.E. Meisenheimer Officer)
/s/ TRAVIS W. BAIN, II Director November 20, 2001
---------------------------------------------------
Travis W. Bain, II
/s/ DAN BUSBEE Director November 20, 2001
---------------------------------------------------
Dan Busbee
/s/ RICHARD W. CARDIN Director November 20, 2001
---------------------------------------------------
Richard W. Cardin
/s/ THOMAS J. GARLAND Director November 20, 2001
---------------------------------------------------
Thomas J. Garland
/s/ RICHARD K. GORDON Director November 20, 2001
---------------------------------------------------
Richard K. Gordon
/s/ GENE C. KOONCE Director November 20, 2001
---------------------------------------------------
Gene C. Koonce
/s/ THOMAS C. MEREDITH Director November 20, 2001
---------------------------------------------------
Thomas C. Meredith
/s/ PHILLIP E. NICHOL Director November 20, 2001
---------------------------------------------------
Phillip E. Nichol
/s/ CARL S. QUINN Director November 20, 2001
---------------------------------------------------
Carl S. Quinn
|
/s/ CHARLES K. VAUGHAN Director November 20, 2001
---------------------------------------------------
Charles K. Vaughan
/s/ RICHARD WARE II Director November 20, 2001
---------------------------------------------------
Richard Ware II
|
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
(ITEM 8, 14(A) 1 AND 2)
FORM 10-K
PAGE NO.
---------
Report of independent auditors.............................. 32
Financial statements and supplementary data:
Consolidated balance sheets at September 30, 2001 and
2000................................................... 33
Consolidated statements of income for the years ended
September 30, 2001, 2000 and 1999...................... 34
Consolidated statements of shareholders' equity for the
years ended September 30, 2001, 2000 and 1999.......... 35
Consolidated statements of cash flows for the years ended
September 30, 2001, 2000 and 1999...................... 36
Notes to consolidated financial statements................ 37
Supplementary Quarterly Financial Data (unaudited)........ 66
Financial statement schedule for the years ended September
30, 2001, 2000 and 1999
II. Valuation and Qualifying Accounts.................. 73
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All other financial statement schedules are omitted because the required information is not present, or not present in amounts sufficient to require submission of the schedule or because the information required is included in the financial statements and accompanying notes thereto.
SCHEDULE II
ATMOS ENERGY CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED SEPTEMBER 30, 2001
(IN THOUSANDS)
ADDITIONS
-----------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COST & OTHER AT END
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
---------- ---------- ---------- ---------- ---------
2001
Allowance for doubtful accounts....... $10,589 $26,226 -- $20,664(1) $16,151
2000
Allowance for doubtful accounts....... $ 9,231 $17,724 -- $16,366(1) $10,589
1999
Allowance for doubtful accounts....... $ 1,969 $ 8,899 -- $ 1,637(1) $ 9,231
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(1) Uncollectible accounts written off
EXHIBITS INDEX
ITEM 14.(A)(3)
PAGE NUMBER OR
EXHIBIT INCORPORATION BY
NUMBER DESCRIPTION REFERENCE TO
------- ----------- ----------------
Plan of Reorganization
2.1 Purchase and Sale Agreement (Louisiana Gas Exhibit 2.1 to Registration
Operations), by and among Citizens Utilities Statement on Form S-3/A filed
Company (now known as Citizens Communications November 6, 2000 (File No.
Company), LGS Natural Gas Company and Atmos Energy 333-73705)
Corporation, dated as of April 13, 2000
2.2 Agreement and Plan of Merger and Reorganization
dated as of September 21, 2001, by and among Atmos
Energy Corporation, Mississippi Valley Gas Company
and the Shareholders Named on the Signature Pages
hereto
Articles of Incorporation and Bylaws
3.1(a) Restated Articles of Incorporation of the Company, Exhibit 3.1 of Form 10-K for
as Amended (as of July 31, 1997) fiscal year ended September
30, 1997 (File No. 1-10042)
3.1(b) Articles of Amendment to the Restated Articles of Exhibit 3a of Form 10-Q for
Incorporation of Atmos Energy Corporation as quarter ended March 31, 1999
Amended (Texas) (File No. 1-10042)
3.1(c) Articles of Amendment to the Restated Articles of Exhibit 3b of Form 10-Q for
Incorporation of Atmos Energy Corporation as quarter ended March 31, 1999
Amended (Virginia) (File No. 1-10042)
3.2(a) Bylaws of the Company (Amended and Restated as of Exhibit 3.2 of Form 10-K for
November 12, 1997) fiscal year ended September
30, 1997 (File No. 1-10042)
3.2(b) Amendment No. 1 to Bylaws of Atmos Energy Exhibit 3.1 of Form 10-Q for
Corporation (Amended and Restated as of November quarter ended March 31, 2001
12, 1997) (File No. 1-10042)
Instruments Defining Rights of Security Holders
4.1 Specimen Common Stock Certificate (Atmos Energy Exhibit (4)(b) of Form 10-K
Corporation) for fiscal year ended
September 30, 1988 (File No.
1-10042)
4.2 Rights Agreement, dated as of November 12, 1997, Exhibit 4.1 of Form 8-K dated
between the Company and BankBoston, N.A., as Rights November 12, 1997 (File No.
Agent 1-10042)
4.3 First Amendment to Rights Agreement dated as of Exhibit 2 of Form 8-A,
August 11, 1999, between the Company and Amendment No. 1, dated August
BankBoston, N.A., as Rights Agent 12, 1999 (File No. 1-10042)
4.4 Form of Indenture between Atmos Energy Corporation Exhibit 4.1 to Registration
and U.S. Bank Trust National Association, Trustee Statement on Form S-3 filed
April 20, 1998 (File No.
333-50477)
4.5 Indenture between Atmos Energy Corporation, as Exhibit 99.3 of Form 8-K
Issuer, and Suntrust Bank, Trustee dated as of May dated May 15, 2001 (File No.
22, 2001 1-10042)
|
PAGE NUMBER OR
EXHIBIT INCORPORATION BY
NUMBER DESCRIPTION REFERENCE TO
------- ----------- ----------------
4.6(a) Indenture of Mortgage, dated as of July 15, 1959, Exhibit to Registration
from United Cities Gas Company to First Trust of Statement of United Cities
Illinois, National Association, and M.J. Kruger, as Gas Company on Form S-3 (File
Trustees, as amended and supplemented through No. 33-56983)
December 1, 1992 (the Indenture of Mortgage through
the 20th Supplemental Indenture)
4.6(b) Twenty-First Supplemental Indenture dated as of Exhibit 10.7(a) of Form 10-K
February 5, 1997 by and among United Cities Gas for fiscal year ended
Company and Bank of America Illinois and First September 30, 1997 (File No.
Trust National Association and Russell C. Bergman 1-10042)
supplementing Indenture of Mortgage dated as of
July 15, 1959
4.6(c) Twenty-Second Supplemental Indenture dated as of Exhibit 10.7(b) of Form 10-K
July 29, 1997 by and among the Company and First for fiscal year ended
Trust National Association and Russell C. Bergman September 30, 1997 (File No.
supplementing Indenture of Mortgage dated as of 1-10042)
July 15, 1959
4.7(a) Form of Indenture between United Cities Gas Company Exhibit to Registration
and First Trust of Illinois, National Association, Statement of United Cities
as Trustee dated as of November 15, 1995 Gas Company on Form S-3 (File
No. 33-56983)
4.7(b) First Supplemental Indenture between the Company Exhibit 10.8(a) of Form 10-K
and First Trust of Illinois, National Association, for fiscal year ended
as Trustee dated as of July 29, 1997 September 30, 1997 (File No.
1-10042)
4.8(a) Seventh Supplemental Indenture, dated as of October Exhibit 10.1 of Form 10-Q for
1, 1983 between Greeley Gas Company ("The Greeley quarter ended June 30, 1994
Gas Division") and the Central Bank of Denver, N.A. (File No. 1-10042)
("Central Bank")
4.8(b) Ninth Supplemental Indenture, dated as of April 1, Exhibit 10.2 of Form 10-Q for
1991, between The Greeley Gas Division and Central quarter ended June 30, 1994
Bank (File No. 1-10042)
4.8(c) Tenth Supplemental Indenture, dated as of December Exhibit 10.4 of Form 10-Q for
1, 1993, between the Company and Colorado National quarter ended June 30, 1994
Bank, formerly Central Bank (File No. 1-10042)
9 Not Applicable
Material Contracts
10.1(a) Note Purchase Agreement, dated as of December 21, Exhibit 10(c) of Form 8-K
1987, by and between the Company and John Hancock filed January 7, 1988 (File
Mutual Life Insurance Company No. 0-11249)
Note Purchase Agreement, dated as of December 21,
1987, by and between the Company and John Hancock
Charitable Trust I (Agreement is identical to
Hancock Agreement listed above except as to the
parties thereto.)
Note Purchase Agreement dated as of December 21,
1987, by and between the Company and Mellon Bank,
N.A., Trustee under Master Trust Agreement of AT&T
Corporation, dated January 1, 1984, for Employee
Pension Plans -- AT&T -- John Hancock -- Private
Placement (Agreement is identical to Hancock
Agreement listed above except as to the parties
thereto.)
|
PAGE NUMBER OR
EXHIBIT INCORPORATION BY
NUMBER DESCRIPTION REFERENCE TO
------- ----------- ----------------
10.1(b) Amendment to Note Purchase Agreement, dated October Exhibit (10)(b)(ii) of Form
11, 1989, by and between the Company and John 10-K for fiscal year ended
Hancock Mutual Life Insurance Company revising Note September 30, 1989 (File No.
Purchase Agreement dated December 21, 1987 1-10042)
Amendment to Note Purchase Agreement, dated October
11, 1989, by and between the Company and John
Hancock Charitable Trust I revising Note Purchase
Agreement dated December 21, 1987. (Amendment is
identical to Hancock amendment listed above except
as to the parties thereto.)
Amendment to Note Purchase Agreement, dated October
11, 1989, by and between the Company and Mellon
Bank, N.A., Trustee under Master Trust Agreement of
AT&T Corporation, dated January 1, 1984, for
Employee Pension Plans -- AT&T -- John Hancock --
Private Placement revising Note Purchase Agreement
dated December 21, 1987 (Amendment is identical to
Hancock amendment listed above except as to the
parties thereto.)
10.1(c) Amendment to Note Purchase Agreement, dated Exhibit 10(b)(iii) of Form
November 12, 1991, by and between the Company and 10-K for fiscal year ended
John Hancock Mutual Life Insurance Company revising September 30, 1991 (File No.
Note Purchase Agreement dated December 21, 1987 1-10042)
Amendment to Note Purchase Agreement, dated
November 12, 1991, by and between the Company and
John Hancock Charitable Trust I revising Note
Purchase Agreement dated December 21, 1987.
(Amendment is identical to Hancock amendment listed
above except as to the parties thereto.)
Amendment to Note Purchase Agreement, dated
November 12, 1991, by and between the Company and
Mellon Bank, N.A., Trustee under Master Trust
Agreement of AT&T Corporation, dated January 1,
1984, for Employee Pension Plans -- AT&T -- John
Hancock -- Private Placement revising Note Purchase
Agreement dated December 21, 1987. (Amendment is
identical to Hancock amendment above except as to
the parties thereto.)
10.1(d) Amendment to Note Purchase Agreement, dated Exhibit 4.3(d) to
December 22, 1993, by and between the Company and Registration Statement on
John Hancock Mutual Life Insurance Company revising Form S-3 filed April 20, 1998
Note Purchase Agreement dated December 21, 1987 (File No. 333-50477)
Amendment to Note Purchase Agreement, dated
December 22, 1993, by and between the Company and
Mellon Bank, N.A., Trustee under Master Trust
Agreement of AT&T Corporation, dated January 1,
1984, for Employee Pension Plans -- AT&T -- John
Hancock -- Private Placement revising Note Purchase
Agreement dated December 21, 1987 (Amendment is
identical to Hancock amendment listed above except
as to the parties thereto and the amounts thereof)
|
PAGE NUMBER OR
EXHIBIT INCORPORATION BY
NUMBER DESCRIPTION REFERENCE TO
------- ----------- ----------------
10.1(e) Amendment to Note Purchase Agreement, dated Exhibit 4.3(e) to
December 20, 1994, by and between the Company and Registration Statement on
John Hancock Mutual Life Insurance Company revising Form S-3 filed April 20, 1998
Note Purchase Agreement dated December 21, 1987 (File No. 333-50477)
Amendment to Note Purchase Agreement, dated
December 20, 1994, by and between the Company and
Mellon Bank, N.A., Trustee under Master Trust
Agreement of AT&T Corporation, dated January 1,
1984, for Employee Pension Plans -- AT&T -- John
Hancock -- Private Placement revising Note Purchase
Agreement dated December 21, 1987 (Amendment is
identical to Hancock amendment listed above)
10.1(f) Amendment to Note Purchase Agreement, dated July Exhibit 4.3(f) to
29, 1997, by and between the Company and John Registration Statement on
Hancock Mutual Life Insurance Company revising Note Form S-3 filed April 20, 1998
Purchase Agreement dated December 21, 1987 (File No. 333-50477)
Amendment to Note Purchase Agreement, dated July
29, 1997, by and between the Company and Mellon
Bank, N.A., Trustee under Master Trust Agreement of
AT&T Corporation, dated January 1, 1984, for
Employee Pension Plans -- AT&T -- John
Hancock -- Private Placement revising Note Purchase
Agreement dated December 21, 1987 (Amendment is
identical to Hancock amendment listed above except
as to the parties thereto and the amounts thereof)
10.2(a) Note Purchase Agreement, dated as of October 11, Exhibit 10(c) of Form 10-K
1989, by and between the Company and John Hancock for fiscal year ended
Mutual Life Insurance Company September 30, 1989 (File No.
1-10042)
10.2(b) Amendment to Note Purchase Agreement, dated as of Exhibit 10(c)(ii) of Form
November 12, 1991, by and between the Company and 10-K for fiscal year ended
John Hancock Mutual Life Insurance Company revising September 30, 1991 (File No.
Note Purchase Agreement dated October 11, 1989 1-10042)
10.2(c) Amendment to Note Purchase Agreement, dated Exhibit 4.4(c) to
December 22, 1993, by and between the Company and Registration Statement on
John Hancock Mutual Life Insurance Company revising Form S-3 filed April 20, 1998
Note Purchase Agreement dated October 11, 1989 (File No. 333-50477)
10.2(d) Amendment to Note Purchase Agreement, dated Exhibit 4.4(d) to
December 20, 1994, by and between the Company and Registration Statement on
John Hancock Mutual Life Insurance Company revising Form S-3 filed April 20, 1998
Note Purchase Agreement dated October 11, 1989 (File No. 333-50477)
10.2(e) Amendment to Note Purchase Agreement, dated July Exhibit 4.4(e) to
29, 1997, by and between the Company and John Registration Statement on
Hancock Mutual Life Insurance Company revising Note Form S-3 filed April 20, 1998
Purchase Agreement dated October 11, 1989 (File No. 333-50477)
10.3(a) Note Purchase Agreement, dated as of August 29, Exhibit 10(f)(i) of Form 10-K
1991, by and between the Company and The Variable for fiscal year ended
Annuity Life Insurance Company September 30, 1991 (File No.
1-10042)
|
PAGE NUMBER OR
EXHIBIT INCORPORATION BY
NUMBER DESCRIPTION REFERENCE TO
------- ----------- ----------------
10.3(b) Amendment to Note Purchase Agreement, dated Exhibit 10(f)(ii) of Form
November 26, 1991, by and between the Company and 10-K for fiscal year ended
The Variable Annuity Life Insurance Company September 30, 1991 (File No.
revising Note Purchase Agreement dated August 29, 1-10042)
1991
10.3(c) Amendment to Note Purchase Agreement, dated Exhibit 4.5(c) to
December 22, 1993, by and between the Company and Registration Statement on
The Variable Annuity Life Insurance Company Form S-3 filed April 20, 1998
revising Note Purchase Agreement dated August 29, (File No. 333-50477)
1991
10.3(d) Amendment to Note Purchase Agreement, dated July Exhibit 4.5(d) to
29, 1997, by and between the Company and The Registration Statement on
Variable Annuity Life Insurance Company revising Form S-3 filed April 20, 1998
Note Purchase Agreement dated August 29, 1991 (File No. 333-50477)
10.4(a) Note Purchase Agreement, dated as of August 31, Exhibit (10)(f) of Form 10-K
1992, by and between the Company and The Variable for fiscal year ended
Annuity Life Insurance Company September 30, 1992 (File No.
1-10042)
10.4(b) Amendment to Note Purchase Agreement, dated Exhibit 4.6(b) to
December 22, 1993, by and between the Company and Registration Statement on
The Variable Annuity Life Insurance Company Form S-3 filed April 20, 1998
revising Note Purchase Agreement dated August 31, (File No. 333-50477)
1992
10.4(c) Amendment to Note Purchase Agreement, dated July Exhibit 4.6(c) to
29, 1997, by and between the Company and The Registration Statement on
Variable Annuity Life Insurance Company revising Form S-3 filed April 20, 1998
Note Purchase Agreement dated August 31, 1992 (File No. 333-50477)
10.5(a) Note Purchase Agreement, dated November 14, 1994, Exhibit 10.1 of Form 10-Q for
by and among the Company and New York Life quarter ended December 31,
Insurance Company, New York Life Insurance and 1994 (File No. 1-10042)
Annuity Corporation, The Variable Annuity Life
Insurance Company, American General Life Insurance
Company, and Merit Life Insurance Company
10.5(b) Amendment to Note Purchase Agreement, dated July Exhibit 4.7(b) to
29, 1997 by and among the Company and New York Life Registration Statement on
Insurance Company, New York Life Insurance and Form S-3 filed April 20, 1998
Annuity Corporation, The Variable Annuity Life (File No. 333-50477)
Insurance Company, American General Life Insurance
Company and Merit Life Insurance Company revising
Note Purchase Agreement dated November 14, 1994
10.6 Bond Purchase Agreement, dated as of April 1, 1991, Exhibit 10.3 of Form 10-Q for
between the Greeley Division and Central Bank quarter ended June 30, 1994
(File No. 1-10042)
10.7(a) Purchase Agreement for 6 3/4% Debentures due 2028 Exhibit 99.1 of Form 8-K
by and among Merrill Lynch Co., NationsBanc dated July 22, 1998 (File No.
Montgomery Securities LLC, Edward D. Jones & Co., 1-10042)
L.P. and Atmos Energy Corporation dated July 22,
1998
10.7(b) Purchase Agreement for 7 3/8% Senior Notes due 2011 Exhibit 99.1 of Form 8-K
by and among Banc of America Securities LLC, Banc dated May 15, 2001 (File No.
One Capital markets, Inc, First Union Securities, 1-10042)
Inc, Fleet Securities, Inc, SG Cowen Securities
Corporation and Atmos Energy Corporation dated May
15, 2001
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EXHIBIT INCORPORATION BY
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10.7(c) Purchase Agreement for 6,741,500 Shares of Common Exhibit 99.1 of Form 8-K
Stock (No Par Value) by and among Merrill Lynch, dated December 14, 2000 (File
Pierce, Fenner & Smith Incorporated, UBS Warburg No. 1-10042)
LLC, A.G. Edwards & Sons, Inc, Edward D. Jones &
Co., L.P. and Atmos Energy Corporation dated
December 14, 2000
10.8(a) Amended and Restated Revolving Credit Agreement,
dated as of August 2, 2001, among Atmos Energy
Corporation, Bank of America, N.A., Bank One, NA,
Societe Generale, First Union National Bank and
Fleet National Bank
10.8(b) Credit Agreement, dated to be effective as of Exhibit 10.2 to Registration
August 9, 2000, among Woodward Marketing, L.L.C., Statement on Form S-3/A filed
and Bank of America, N.A. November 6, 2000 (File No.
333-93705)
10.8(c) Guaranty, effective as of August 9, 2000, by Atmos Exhibit 10.3 to Registration
Energy Marketing, LLC, in favor of Bank of America, Statement on Form S-3/A filed
N.A. November 6, 2000 (File No.
333-93705)
10.8(d) First Amendment to Credit Agreement and Guaranty of Exhibit 10.4 to Registration
Atmos Energy Marketing, LLC, effective as of Statement on Form S-3/A filed
September 29, 2000, among Woodward Marketing, November 6, 2000 (File No.
L.L.C., Bank of America, N.A., Woodward Marketing, 333-93705)
Inc., Atmos Energy Marketing, LLC, J.D. Woodward
and James Kifer
10.8(e) Second Amended and Restated Guaranty of Atmos
Energy Marketing, LLC, effective as of December 22,
2000, among Bank of America, N.A. and Atmos Energy
Marketing, LLC
10.8(f) Second Amendment to Credit Agreement, effective as
of November 3, 2000, among Woodward Marketing,
L.L.C., Bank of America, N.A., Woodward Marketing,
Inc., Atmos Energy Marketing, LLC, J.D. Woodward
and James Kifer
10.8(g) Third Amendment to Credit Agreement, effective as
of December 7, 2000, among Woodward Marketing,
L.L.C., Bank of America, N.A., Woodward Marketing,
Inc., Atmos Energy Marketing, LLC, J.D. Woodward
and James Kifer
10.8(h) Fourth Amendment to Credit Agreement, effective as
of December 22, 2000, among Woodward Marketing,
L.L.C., Bank of America, N.A., BNP Paribas,
Woodward Marketing, Inc., Atmos Energy Marketing,
LLC, J.D. Woodward and James Kifer
10.8(i) Fifth Amendment to Credit Agreement, effective as
of December 31, 2000, among Woodward Marketing,
L.L.C., Bank of America, N.A., BNP Paribas and
Atmos Energy Marketing, LLC
10.8(j) Sixth Amendment to Credit Agreement, effective as
of June 29, 2001, among Woodward Marketing, L.L.C.,
Bank of America, N.A., BNP Paribas and Atmos Energy
Marketing, LLC
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EXHIBIT INCORPORATION BY
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Gas Supply Contracts
10.9(a) Firm Gas Transportation Agreement No. 123535 dated Exhibit 10.10(a) of Form 10-K
November 1, 1998 between Greeley Gas Company and for fiscal year ended
Public Service Company of Colorado September 30, 1999 (File No.
1-10042)
10.9(b) Transportation Storage Service Agreement No. Exhibit 10.6(b) of Form 10-K
TA-0544 between Greeley Gas Company and Williams for fiscal year ended
Natural Gas Company dated October 1, 1993, as September 30, 1994 (File No.
amended to extend to October 1, 2003 1-10042)
10.9(c) Firm Transportation Service Agreement No.
33182000C, Rate Schedule TF-1, between Colorado
Interstate Gas Company and Greeley Gas Company
dated October 1, 2001
10.9(d) No-Notice Storage and Transportation Delivery
Service Agreement No. 31044000, Rate Schedule
NNT-1, between Colorado Interstate Gas Company and
Greeley Gas Company dated October 1, 2001
10.9(e) Transportation-Storage Contract No. TA-0614 Exhibit 10.6 of Form 10-Q for
(Request 0180) between Greeley Gas Company quarter ended March 31, 1998
(transferred from United Cities Gas Company (File No. 1-10042)
effective January 1, 2000) and Williams Natural Gas
Company dated October 1, 1993, as amended to extend
to October 1, 2002
10.9(f) Transportation-Storage Contract No. TA-0611 Exhibit 10.7 of Form 10-Q for
(Request 0002) between Greeley Gas Company quarter ended March 31, 1998
(transferred from United Cities Gas Company (File No. 1-10042)
effective January 1, 2000) and Williams Natural Gas
Company dated October 1, 1993, as amended to extend
to October 1, 2003
10.10(a) Agreement for Firm Intrastate Transportation of Exhibit 10.1 of Form 10-Q for
Natural Gas in the State of Louisiana between Trans quarter ended March 31, 1998
La (now known as Atmos Energy Louisiana) and (File No. 1-10042)
Louisiana Intrastate Gas Company L.L.C. (LIG) dated
December 22, 1997 and effective July 1, 1997, as
amended to extend to December 1, 2004
10.10(b) Agreement for Firm 311(a)(2) Transportation of Exhibit 10.2 of Form 10-Q for
Natural Gas in the State of Louisiana between Trans quarter ended March 31, 1998
La (now known as Atmos Energy Louisiana) and (File No. 1-10042)
Louisiana Intrastate Gas Company L.L.C. (LIG) dated
December 22, 1997 and effective July 1, 1997
10.11(a) Gas Transportation Agreement between Texas Gas and Exhibit 10.3 of Form 10-Q for
Western Kentucky Gas dated November 1, 1993 quarter ended December 31,
(Contract no. T3355, zone 3), as amended to extend 1993 (File No. 1-10042)
to November 1, 2004
10.11(b) Gas Transportation Agreement between Texas Gas and Exhibit 10.4 of Form 10-Q for
Western Kentucky Gas dated November 1, 1993 quarter ended December 31,
(Contract no. T3819, zone 4), as amended to extend 1993 (File No. 1-10042)
to November 1, 2004
10.11(c) Gas Transportation Agreement between Texas Gas and Exhibit 10.5 of Form 10-Q for
Western Kentucky Gas dated November 1, 1993 quarter ended December 31,
(Contract no. N0210, zone 2, Contract no. N0340, 1993 (File No. 1-10042)
zone 3, Contract no. N0435, zone 4), as amended to
extend to November 1, 2004
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10.12(a) Gas Transportation Agreement, Contract No. 2550, Exhibit 10.17(a) of Form 10-K
dated September 1, 1993, between Tennessee Gas for fiscal year ended
Pipeline Company, a division of Tenneco, Inc. September 30, 1993 (File No.
("Tennessee Gas"), and Western Kentucky, 1-10042)
Campbellsville Service Area, as amended to extend
to November 1, 2002
10.12(b) Gas Transportation Agreement, Contract No. 2546, Exhibit 10.17(b) of Form 10-K
dated September 1, 1993, between Tennessee Gas and for fiscal year ended
Western Kentucky, Danville Service Area, as amended September 30, 1993 (File No.
to extend to November 1, 2002 1-10042)
10.12(c) Gas Transportation Agreement, Contract No. 2385, Exhibit 10.17(c) of Form 10-K
dated September 1, 1993, between Tennessee Gas and for fiscal year ended
Western Kentucky, Greensburg et al Service Area, as September 30, 1993 (File No.
amended to extend to November 1, 2002 1-10042)
10.12(d) Gas Transportation Agreement, Contract No. 2551, Exhibit 10.17(d) of Form 10-K
dated September 1, 1993, between Tennessee Gas and for fiscal year ended
Western Kentucky, Harrodsburg Service Area, as September 30, 1993 (File No.
amended to extend to November 1, 2002 1-10042)
10.12(e) Gas Transportation Agreement, Contract No. 2548, Exhibit 10.17(e) of Form 10-K
dated September 1, 1993, between Tennessee Gas and for fiscal year ended
Western Kentucky, Lebanon Service Area, as amended September 30, 1993 (File No.
to extend to November 1, 2002 1-10042)
10.13 Gas Service Agreement (Service for Firm Exhibit 10.5 of Form 10-Q for
Transportation) between Energas and Oneok Gas quarter ended December 31,
Transmission, Inc., (now known as Oneok WesTex 1996 (File No. 1-10042)
Transmission, Inc.) dated January 1, 1996, as
assigned by KN to Oneok effective April 6, 2000
10.14 Gas Service Agreement (Service for Firm Exhibit 10.7 of Form 10-Q for
Transportation) between Oneok Gas Transmission, quarter ended December 31,
Inc. (now known as Oneok WesTex Transmission, Inc.) 1996 (File No. 1-10042)
and EnerMart Trust (now known as EnerMart Energy
Services Trust) dated January 1, 1996, as assigned
by KN to Oneok effective April 6, 2000 (Irrigation)
10.15 Amarillo Supply Agreement dated January 2, 1993 Exhibit 10.7(a) of Form 10-K
between Energas and Pioneer Natural Resources, USA, for fiscal year ended
Inc. (formerly Mesa Operating Company) September 30, 1994 (File No.
1-10042)
10.16 Gas Sales Agreement (Swing) between Energas and Exhibit 10.13 of Form 10-Q
Oneok Energy Trading & Marketing Company, formerly for quarter ended December
KN Marketing, dated January 1, 1996, as assigned by 31, 1996 (File No. 1-10042)
KN to Oneok effective April 6, 2000
10.17 Operating Agreement between Energas and Oneok Gas Exhibit 10.16 of Form 10-Q
Transmission, Inc. (now known as Oneok WesTex for quarter ended December
Transmission, Inc.), effective December 1, 1996, as 31, 1996 (File No. 1-10042)
assigned by KN to Oneok effective April 6, 2000
10.18(a) Gas Transportation Agreement No. 30774, Rate Exhibit 10.1 of Form 10-Q for
Schedules FT-A and FT-GS, between United Cities Gas quarter ended December 31,
Company and East Tennessee Natural Gas Company 1999 (File No. 1-10042)
dated October 1, 1999
10.18(b) Gas Transportation Agreement No. 27311 between Exhibit 10.20(c) of Form 10-K
United Cities Gas Company and Tennessee Gas for fiscal year ended
Pipeline Company dated November 1, 2000 September 30, 2000 (File No.
1-10042)
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EXHIBIT INCORPORATION BY
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10.18(c) Service Agreement No. 867760, under Rate Schedule Exhibit 10.8 of Form 10-Q for
FT, between United Cities Gas Company and Southern quarter ended March 31, 1998
Natural Gas Company dated November 1, 1993, as (File No. 1-10042)
amended to extend to November 1, 2005
10.18(d) Service Agreement No. 867761 under Rate Schedule Exhibit 10.9 of Form 10-Q for
FT-NN between United Cities Gas Company and quarter ended March 31, 1998
Southern Natural Gas Company dated November 1, (File No. 1-10042)
1993, as amended to extend to November 1, 2005
10.18(e) FTS-1 Service Agreement No. 59572 between United Exhibit 10.20(f) of Form 10-K
Cities Gas Company and Columbia Gulf Transmission for fiscal year ended
Company dated November 1, 1998 September 30, 2000 (File No.
1-10042)
10.18(f) Gas Transportation Agreement No. 34538 (Rocky Top Exhibit 10.20(g) of Form 10-K
Expansion) between United Cities Gas Company and for fiscal year ended
East Tennessee Natural Gas Company dated November September 30, 2000 (File No.
1, 2000 1-10042)
Asset Purchase Agreements
10.19 Asset Sale and Purchase Agreement by and among Exhibit 99.2 of Form 8-K
Southwestern Energy Company, Arkansas Western Gas dated May 31, 2000 (File No.
Company and Atmos Energy Corporation dated as of 1-10042)
October 15, 1999
10.20 Asset Purchase Agreement by and among Atmos Energy Exhibit 10.1 to Registration
Corporation, Atmos Energy Marketing, LLC, Woodward Statement on Form S-3/A filed
Marketing, Inc., J.D. and Linda Woodward and James November 6, 2000 (File No.
and Rita B. Kifer dated as of August 7, 2000 333-93705)
Executive Compensation Plans and Arrangements
10.21(a)* Form of Atmos Energy Corporation Change in Control Exhibit 10.21(b) of Form 10-K
Severance Agreement -- Tier I for fiscal year ended
September 30, 1998 (File No.
1-10042)
10.21(b)* Form of Atmos Energy Corporation Change in Control Exhibit 10.21(c) of Form 10-K
Severance Agreement -- Tier II for fiscal year ended
September 30, 1998 (File No.
1-10042)
10.22* Atmos Energy Corporation Long Term Stock Plan for Exhibit 99.1 of Form S-8
the United Cities Gas Company Division filed July 29, 1997 (File No.
333-32343)
10.23(a)* Atmos Energy Corporation Executive Retiree Life Exhibit 10.31 of Form 10-K
Plan for fiscal year ended
September 30, 1997 (File No.
1-10042)
10.23(b)* Amendment No. 1 to The Atmos Energy Corporation Exhibit 10.31(a) of Form 10-K
Executive Retiree Life Plan for fiscal year ended
September 30, 1997 (File No.
1-10042)
10.24(a)* Description of Financial and Estate Planning Exhibit 10.25(b) of Form 10-K
Program for fiscal year ended
September 30, 1997 (File No.
1-10042)
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10.24(b)* Description of Sporting Events Program Exhibit 10.26(c) of Form 10-K
for fiscal year ended
September 30, 1993 (File No.
1-10042)
10.25(a)* Atmos Energy Corporation Supplemental Executive Exhibit 10.26 of Form 10-K
Benefits Plan, Amended and Restated in its Entirety for fiscal year ended
August 12, 1998 September 30, 1998 (File No.
1-10042)
10.25(b)* Atmos Energy Corporation Performance-Based Exhibit 10.32 of Form 10-K
Supplemental Executive Benefits Plan, Effective for fiscal year ended
Date August 12, 1998 September 30, 1998 (File No.
1-10042)
10.25(c)* Amendment Number One to the Atmos Energy Exhibit 10.2 of Form 10-Q for
Corporation Performance-Based Supplemental quarter ended December 31,
Executive Benefits Plan, Effective Date January 1, 2000 (File No. 1-10042)
1999
10.25(d)* Atmos Energy Corporation Performance-Based Exhibit 10.1 of Form 10-Q for
Supplemental Executive Benefits Plan Trust quarter ended December 31,
Agreement, Effective Date December 1, 2000 2000 (File No. 1-10042)
10.25(e)* Form of Individual Trust Agreement for the Exhibit 10.3 of Form 10-Q for
Supplemental Executive Benefits Plan quarter ended December 31,
2000 (File No. 1-10042)
10.26* Atmos Energy Corporation Restricted Stock Grant Exhibit 99.1 of Form S-8
Plan (Amended and Restated as of February 12, 1998) filed February 13, 1998 (File
No. 333-46337)
10.27* Atmos Energy Corporation Executive Nonqualified Exhibit 10.33 of Form 10-K
Deferred Compensation Plan for fiscal year ended
September 30, 1998 (File No.
1-10042)
10.28(a)* Consulting Agreement between the Company and Exhibit 10.2 of Form 10-Q for
Charles K. Vaughan, effective October 1, 1994 quarter ended June 30, 1997
(File No. 1-10042)
10.28(b)* Amendment No. 1 to Consulting Agreement between the Exhibit 10.3 of Form 10-Q for
Company and Charles K. Vaughan, dated May 14, 1997 quarter ended June 30, 1997
(File No. 1-10042)
10.28(c)* Amendment No. 2 to Consulting Agreement between the Exhibit 10.30(c) of Form 10-K
Company and Charles K. Vaughan, dated August 12, for fiscal year ended
1998 September 30, 1998 (File No.
1-10042)
10.28(d)* Amendment No. 3 to Consulting Agreement between the Exhibit 10.30(d) of Form 10-K
Company and Charles K. Vaughan, dated November 10, for fiscal year ended
1999 September 30, 1999 (File No.
1-10042)
10.28(e)* Amendment No. 4 to Consulting Agreement between the Exhibit 10.32(e) of Form 10-K
Company and Charles K. Vaughan, dated November 9, for fiscal year ended
2000 September 30, 2000 (File No.
1-10042)
10.28(f)* Mini-Med/Dental Benefit Extension Agreement dated
October 1, 1994
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EXHIBIT INCORPORATION BY
NUMBER DESCRIPTION REFERENCE TO
------- ----------- ----------------
10.28(g)* Amendment No. 1 to Mini-Med/Dental Benefit
Extension Agreement dated August 14, 2001
10.29* Atmos Energy Corporation Equity Incentive and Exhibit C of Definitive Proxy
Deferred Compensation Plan for Non-Employee Statement on Schedule 14A
Directors filed December 30, 1998 (File
No. 1-10042)
10.30(a)* Atmos Energy Corporation Retirement Plan for Exhibit 10(y) of Form 10-K
Outside Directors for fiscal year ended
September 30, 1992 (File No.
1-10042)
10.30(b)* Amendment No. 1 to the Atmos Energy Corporation Exhibit 10.2 of Form 10-Q for
Retirement Plan for Outside Directors quarter ended December 31,
1996 (File No. 1-10042)
10.31* Atmos Energy Corporation Outside Directors Exhibit 10.28 of Form 10-K
Stock-for-Fee Plan (Amended and Restated as of for fiscal year ended
November 12, 1997) September 30, 1997 (File No.
1-10042)
10.32(a)* Atmos Energy Corporation 1998 Long-Term Incentive Exhibit A of Definitive Proxy
Plan Statement on Schedule 14A
filed December 30, 1998 (File
No. 1-10042)
10.32(b)* Atmos Energy Corporation Annual Incentive Plan for Exhibit B of Definitive Proxy
Management Statement on Schedule 14A
filed December 30, 1998 (File
No. 1-10042)
11 Not applicable
12 Computation of ratio of earnings to fixed charges
13 Not applicable
16 Not applicable
18 Not applicable
Other Exhibits, as indicated
21 Subsidiaries of the registrant
22 Not applicable
23 Consent of independent auditor, Ernst & Young LLP
24 Power of Attorney Signature page of Form 10-K
for fiscal year ended
September 30, 2001
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* This exhibit constitutes a "management contract or compensatory plan, contract, or arrangement."
EXHIBIT 2.2
AGREEMENT AND PLAN OF MERGER
AND REORGANIZATION
dated as of September 21, 2001
by and among
ATMOS ENERGY CORPORATION,
MISSISSIPPI VALLEY GAS COMPANY
and
THE SHAREHOLDERS NAMED ON THE SIGNATURE PAGES HERETO
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is attached but is inserted for convenience only.
Page
No.
----
ARTICLE I MERGER AND CLOSING......................................................................................1
1.01 The Merger..................................................................................1
1.02 Closing.....................................................................................2
1.03 Articles of Merger; Effective Time..........................................................2
1.04 Articles of Incorporation and Bylaws of the Surviving Corporation...........................3
1.05 Directors and Officers of the Surviving Corporation.........................................3
1.06 Effects of the Merger.......................................................................3
1.07 No Appraisal Rights.........................................................................3
1.08 Further Assurances..........................................................................3
ARTICLE II EFFECT ON CAPITAL STOCK; EXCHANGE OF CERTIFICATES......................................................3
2.01 Effect on Capital Stock.....................................................................3
2.02 Adjustments to Merger Consideration.........................................................4
2.03 Exchange of Certificates....................................................................5
2.04 Withholding Rights..........................................................................5
2.05 Share Adjustment............................................................................5
ARTICLE III CLOSING DELIVERIES....................................................................................6
3.01 Deliveries at Closing.......................................................................6
3.02 Bank Accounts...............................................................................7
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS.........................................................7
4.01 Power and Authority.........................................................................7
4.02 Company's Power and Authority...............................................................8
4.03 Corporate Existence of the Company..........................................................8
4.04 Capital Stock...............................................................................8
4.05 Subsidiaries................................................................................8
4.06 No Conflicts................................................................................9
4.07 Governmental Approvals and Filings.........................................................10
4.08 Books and Records..........................................................................10
4.09 Financial Statements and Condition.........................................................10
4.10 Taxes......................................................................................13
4.11 Legal Proceedings; Orders..................................................................15
4.12 Compliance With Laws and Orders; Regulatory Filings........................................15
4.13 Benefit Plans; ERISA.......................................................................16
4.14 Real Property..............................................................................19
4.15 Tangible Personal Property; Sufficiency....................................................20
4.16 Intellectual Property Rights...............................................................21
4.17 Contracts..................................................................................21
4.18 Licenses...................................................................................23
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4.19 Insurance..................................................................................23
4.20 Affiliate Transactions.....................................................................24
4.21 Labor Relations............................................................................24
4.22 Environmental Matters......................................................................25
4.23 Information Supplied.......................................................................26
4.24 Brokers....................................................................................26
4.25 Certain Securities Matters.................................................................27
ARTICLE V REPRESENTATIONS AND WARRANTIES OF ATMOS................................................................28
5.01 Corporate Existence........................................................................28
5.02 Authority..................................................................................28
5.03 No Conflicts...............................................................................28
5.04 Governmental Approvals and Filings.........................................................29
5.05 Capitalization.............................................................................29
5.06 Atmos Shares...............................................................................29
5.07 SEC Filings; Financial Statements; No Adverse Change.......................................29
5.08 Legal Proceedings..........................................................................30
5.09 Financing..................................................................................30
5.10 Information Supplied.......................................................................30
5.11 Brokers....................................................................................30
ARTICLE VI COVENANTS OF SHAREHOLDERS AND THE COMPANY.............................................................31
6.01 Regulatory and Other Approvals.............................................................31
6.02 HSR Filings................................................................................31
6.03 Investigation by Atmos.....................................................................31
6.04 No Solicitations; Permitted Transfer of Company Shares.....................................32
6.05 Conduct of Business........................................................................33
6.06 Financial Statements and Reports...........................................................33
6.07 Certain Restrictions.......................................................................34
6.08 Employee Matters...........................................................................36
6.09 Notification of Certain Matters............................................................37
6.10 Certain Prohibited Sales...................................................................37
6.11 Certain Tax Matters........................................................................38
6.12 Note Purchase Agreements...................................................................38
6.13 Fulfillment of Conditions..................................................................38
ARTICLE VII COVENANTS OF ATMOS...................................................................................38
7.01 Regulatory and Other Approvals.............................................................38
7.02 HSR Filings................................................................................39
7.03 Investigation by Shareholders..............................................................39
7.04 Employees, Compensation and Benefits.......................................................39
7.05 Severance Policy and Other Agreements......................................................40
7.06 Directors' and Officers' Indemnification and Insurance.....................................40
7.07 Listing of Stock...........................................................................41
7.08 Certain Tax Matters........................................................................41
7.09 Fulfillment of Conditions..................................................................41
7.10 Environmental Due Diligence................................................................42
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7.11 Note Purchase Agreements...................................................................43
ARTICLE VIII CONDITIONS TO OBLIGATIONS OF ATMOS..................................................................44
8.01 Representations and Warranties.............................................................44
8.02 Performance................................................................................44
8.03 Bring-Down Certificates....................................................................44
8.04 Orders and Laws............................................................................44
8.05 Regulatory Consents and Approvals..........................................................44
8.06 Third Party Consents.......................................................................45
8.07 Certificates...............................................................................45
8.08 Resignations of Directors..................................................................45
8.09 Escrow Agreement...........................................................................45
8.10 Standstill Agreement.......................................................................45
8.11 Releases...................................................................................45
8.12 Closing Opinions...........................................................................45
ARTICLE IX CONDITIONS TO OBLIGATIONS OF SHAREHOLDERS AND THE COMPANY.............................................45
9.01 Representations and Warranties.............................................................45
9.02 Performance................................................................................46
9.03 Bring-Down Certificate.....................................................................46
9.04 Orders and Laws............................................................................46
9.05 Regulatory Consents and Approvals..........................................................46
9.06 Third Party Consents.......................................................................46
9.07 Escrow Agreement...........................................................................46
9.08 Registration Rights Agreement..............................................................46
9.09 Closing Opinions...........................................................................46
9.10 Listing....................................................................................47
ARTICLE X SURVIVAL; NO OTHER REPRESENTATIONS.....................................................................47
10.01 Survival of Representations, Warranties, Covenants and Agreements..........................47
10.02 No Other Representations...................................................................47
ARTICLE XI INDEMNIFICATION.......................................................................................48
11.01 Indemnification............................................................................48
11.02 Method of Asserting Claims.................................................................49
11.03 Method of Calculating Losses...............................................................51
11.04 Exclusivity................................................................................51
11.05 No Punitive Damages........................................................................52
11.06 INDEMNIFICATION IN CASE OF STRICT LIABILITY OR INDEMNITEE NEGLIGENCE.......................52
ARTICLE XII TERMINATION..........................................................................................52
12.01 Termination................................................................................52
12.02 Effect of Termination......................................................................54
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ARTICLE XIII DEFINITIONS.........................................................................................54
13.01 Definitions................................................................................54
ARTICLE XIV MISCELLANEOUS........................................................................................64
14.01 Notices....................................................................................64
14.02 Entire Agreement...........................................................................66
14.03 Expenses...................................................................................66
14.04 Public Announcements.......................................................................66
14.05 Waiver.....................................................................................66
14.06 Amendment..................................................................................67
14.07 No Third Party Beneficiary.................................................................67
14.08 No Assignment; Binding Effect..............................................................67
14.09 Headings...................................................................................67
14.10 Consent to Jurisdiction....................................................................67
14.11 Invalid Provisions.........................................................................67
14.12 Governing Law..............................................................................68
14.13 Counterparts...............................................................................68
14.14 Limitation on Trustee and Executor Liability...............................................68
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SCHEDULES
SCHEDULE I Pro Rata Shares
EXHIBITS
EXHIBIT A Form of Escrow Agreement EXHIBIT B Form of Standstill Agreement EXHIBIT C Form of Release EXHIBIT D-1 Closing Opinion of Milbank, Tweed, Hadley & McCloy LLP EXHIBIT D-2 Closing Opinion of Forman Perry Watkins Krutz & Tardy, PLLC EXHIBIT D-3 Closing Opinion of Counsel to the Shareholders (Hess) EXHIBIT D-4 Closing Opinion of Counsel to the Shareholders (Hearin) EXHIBIT E Registration Rights Agreement EXHIBIT F-1 Closing Opinion of Gibson, Dunn & Crutcher LLP EXHIBIT F-2 Closing Opinion of Hunton & Williams EXHIBIT G Company Tax Matters Certificate EXHIBIT H Atmos Tax Matters Certificate EXHIBIT I Substitute Agreement |
This AGREEMENT AND PLAN OF MERGER AND REORGANIZATION dated as of September 21, 2001, is made and entered into by and among Atmos Energy Corporation, a Texas and Virginia corporation ("Atmos"), Mississippi Valley Gas Company, a Mississippi corporation (the "Company"), and the shareholders of the Company named on the signature pages hereto (each a "Shareholder" and collectively, the "Shareholders"). Capitalized terms not otherwise defined herein have the meanings set forth in Section 13.01.
WHEREAS, the Shareholders collectively own One Thousand (1,000) shares of common stock, par value $5.00 per share, of the Company, constituting all issued and outstanding shares of capital stock of the Company (such shares being referred to herein as the "Company Shares"); and
WHEREAS, the Boards of Directors of Atmos and the Company have each determined that it is advisable and in the best interests of their respective shareholders to consummate, and have approved, the business combination transaction provided for herein in which the Company would merge with and into Atmos and Atmos would be the surviving corporation (the "Merger"); and the Shareholders, as the sole shareholders of the Company, have unanimously approved the Merger.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
MERGER AND CLOSING
1.01 The Merger.
(a) Upon the terms and subject to the conditions of this Agreement, at the Effective Time, the Company shall be merged with and into Atmos in accordance with the Mississippi Business Corporation Act (the "MBCA"), the Texas Business Corporation Act (the "TBCA") and the Virginia Stock Corporation Act (the "VSCA"), whereupon the separate existence of the Company shall cease and Atmos shall continue as the surviving corporation (the "Surviving Corporation"). The Merger is intended to qualify as a reorganization within the meaning of Section 368 of the Code. Atmos and the Company are sometimes referred to herein as the "Constituent Corporations".
(b) If any of the following conditions is not satisfied, the transactions contemplated by this Agreement shall be restructured as a sale of all of the Company Shares and Atmos, the Company and the Shareholders shall enter into a substitute agreement providing for such sale in the form attached hereto as Exhibit I:
(i) Atmos shall have received the opinion of Gibson, Dunn & Crutcher LLP, dated the Closing Date, to the effect that the Merger will qualify as a reorganization within the meaning of Section 368 of the Code;
(ii) the Shareholders shall have received the opinion of Milbank, Tweed, Hadley & McCloy LLP, dated the Closing Date, to the effect that the Merger will qualify as a reorganization within the meaning of Section 368 of the Code; or
(iii) (A) the product of (1) the regular trading day closing price of Atmos Common Stock on the New York Stock Exchange on the trading day completed on the Closing Date and (2) the aggregate number of shares of Atmos Common Stock to be issued by Atmos to the Shareholders and any Permitted Transferees pursuant to the terms of this Agreement (the "Total Issuable Shares"), including the Share Amount and any shares that Atmos elects to include as Additional Consideration pursuant to Section 12.01(g) (the "Total Stock Value"), shall exceed (B) 45% of the sum of (1) the aggregate amount of cash to be paid by Atmos to the Shareholders and any Permitted Transferees pursuant to the terms of this Agreement (the "Total Payable Cash"), including the Cash Amount and any cash that Atmos elects to include as Additional Consideration pursuant to Section 12.01(g), and (2) the Total Stock Value.
1.02 Closing. Unless this Agreement shall have been terminated
and the transactions herein contemplated shall have been abandoned pursuant to
Section 12.01, and subject to the satisfaction or waiver (where applicable) of
the conditions set forth in Articles VIII and IX, the closing of the Merger (the
"Closing") will take place on the Closing Date at the offices of Gibson, Dunn &
Crutcher LLP, 2100 McKinney Avenue, Dallas, Texas 75201, or at such other place
as Atmos and the Company mutually agree upon in writing.
1.03 Articles of Merger; Effective Time.
(a) At the Closing, the Constituent Corporations shall duly execute and deliver for filing after the completion of the trading day commenced on the Closing Date:
(i) to the Secretary of State of the State of Mississippi (the "Mississippi Secretary of State"), articles of merger as provided in Section 79-4-11.05 of the MBCA (the "Mississippi Articles of Merger");
(ii) to the Secretary of State of the State of Texas (the "Texas Secretary of State"), articles of merger as provided in Article 5.04 of the TBCA (the "Texas Articles of Merger"); and
(iii) to the State Corporation Commission of Virginia (the "Virginia Commission", and together with the Mississippi Secretary of State and the Texas Secretary of State, the "State Agencies"), articles of merger as provided in Section 13.1-720 of the VSCA (the "Virginia Articles of Merger", and together with the Mississippi Articles of Merger and the Texas Articles of Merger, the "Articles of Merger").
(b) The Merger shall become effective upon the last to occur of the following (the "Effective Time"): (i) the proper filing of the Mississippi Articles of Merger with the Mississippi Secretary of State, (ii) the issuance of a certificate of merger by the Texas Secretary of State, and (iii) the issuance of a certificate of merger by the Virginia Commission. The Constituent Corporations shall take all commercially reasonable actions to cause the Effective Time to occur on the Closing Date.
1.04 Articles of Incorporation and Bylaws of the Surviving Corporation. At the Effective Time, (i) the Articles of Incorporation of Atmos as in effect immediately prior to the Effective Time shall be the Articles of Incorporation of the Surviving Corporation until thereafter amended as provided by Law and such Articles of Incorporation, and (ii) the Bylaws of Atmos as in effect immediately prior to the Effective Time shall be the Bylaws of the Surviving Corporation until thereafter amended as provided by Law, the Articles of Incorporation of the Surviving Corporation and such Bylaws.
1.05 Directors and Officers of the Surviving Corporation. The directors of Atmos and the officers of Atmos immediately prior to the Effective Time shall, from and after the Effective Time, be the directors and officers, respectively, of the Surviving Corporation until their successors shall have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation's Articles of Incorporation and Bylaws.
1.06 Effects of the Merger. Subject to the foregoing, the effects of the Merger shall be as provided in the applicable provisions of the MBCA, the TBCA and the VSCA.
1.07 No Appraisal Rights. The Shareholders hereby waive all appraisal, dissenter's and similar rights under the MBCA, TBCA and VSCA in respect of the Merger.
1.08 Further Assurances. Each party hereto will, either prior to or after the Effective Time, execute such further documents, instruments, deeds, bills of sale, assignments and assurances and take such further actions as may reasonably be requested by one or more of the others to consummate the Merger, to vest the Surviving Corporation with full title to all assets, properties, rights, approvals, immunities and franchises of either of the Constituent Corporations or to effect the other purposes of this Agreement.
ARTICLE II
EFFECT ON CAPITAL STOCK; EXCHANGE OF CERTIFICATES
2.01 Effect on Capital Stock. As of the Effective Time, by virtue of the Merger and without any action on the part of Atmos, the Company or any holder of any of the following securities:
(a) No Conversion of Atmos Common Stock. Each share of the common stock, no par value, of Atmos ("Atmos Common Stock") issued and outstanding immediately prior to the Effective Time shall continue to be issued and outstanding Atmos Common Stock.
Any Atmos Common Stock held in the treasury of Atmos immediately prior to the Effective Time shall continue to be held in the treasury of the Surviving Corporation at the Effective Time.
(b) Cancellation of Certain Shares of Company Common Stock. All shares of Company Common Stock that are owned by the Company as treasury stock shall be canceled and retired and shall cease to exist, and no stock of Atmos or other consideration shall be delivered in exchange therefor.
(c) Conversion of Company Common Stock. All of the issued and outstanding shares of Company Common Stock (other than shares to be canceled in accordance with Section 2.01(b)) shall be converted into the right to receive $150,000,000, less the adjustments, if any, provided in Section 2.02 (as so adjusted, the "Merger Consideration"). Subject to Section 12.01(g), the Merger Consideration shall be payable 50% in cash (the "Cash Amount") and 50% in a number of shares (the "Share Amount") of Atmos Common Stock, determined by dividing 50% of the Merger Consideration by the Stock Value, rounded up to the nearest whole number (the "Atmos Shares"). The Merger Consideration shall be allocated among the Shareholders and any Permitted Transferees in the manner provided in Section 2.03. For the purpose of the foregoing, the "Stock Value" means the average of the closing prices per share of the Atmos Common Stock as reported for New York Stock Exchange Composite Transactions for the 20 trading days ending on the date that is five trading days prior to the Closing Date (the "Average Price"); provided that if the Average Price is less than $17.65, the Stock Value shall be $17.65. Atmos shall promptly deliver notice of the Average Price to the Shareholders. All shares of Company Common Stock converted in accordance with this Section 2.01(c) shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate representing any such shares shall cease to have any rights with respect thereto, except the right to receive the shares of Atmos Common Stock and cash to be issued or paid in consideration therefor, upon the surrender of such certificate in accordance with Section 3.01, without interest.
2.02 Adjustments to Merger Consideration. The Merger Consideration shall be decreased by the following adjustments (the "Adjustments"):
(a) the amount, if any, by which the aggregate amount of dividends or other distributions made on the Company Shares after September 30, 2000 through the Closing Date (which dividends are payable in arrears following the end of each fiscal quarter) exceeds the rate of $500,000 with respect to each fiscal quarter (or with respect to the Company's first fiscal quarter, $700,000) (with the dividend payable in respect of any portion of the fiscal quarter that includes the Closing Date being appropriately prorated);
(b) the amount, if any, by which the aggregate amount paid in satisfaction of claims with respect to the pending lawsuit between the Company and the City of Clarksdale Public Utility Commission described in Section 4.11 of the Disclosure Schedule (the "Clarksdale Lawsuit") exceeds the Clarksdale Settlement Amount, if such claims are settled prior to the Closing Date; and
(c) the amount, if any, by which the amount paid by the Company prior to the Closing Date in satisfaction of any claim in any of the Actions and Proceedings described in Section 4.11 of the Disclosure Schedule as "Flash Fire / Explosion Claims" or any claim in respect of occurrences (within the meaning of the Company's insurance policies listed in the Disclosure Schedule) of injury to persons or property prior to the Closing Date arising from an occurrence similar to those in such Actions and Proceedings (the "Flash Fire / Explosion Claims") exceeds $250,000 per occurrence (exclusive of any amount funded with proceeds from the Company's insurance policies listed in the Disclosure Schedule or any Replacement Policy).
2.03 Exchange of Certificates. At the Effective Time, each
Shareholder and Permitted Transferee shall be entitled to receive (i) a
certificate or certificates representing such Shareholder's or Permitted
Transferee's pro rata share of the Total Issuable Shares as set forth on
Schedule I hereto (as the same may be amended from time to time to reflect the
transfer of Company Shares to one or more Permitted Transferees) plus (ii) cash
representing such Shareholder's or Permitted Transferee's pro rata share of the
Total Payable Cash as set forth on Schedule I hereto, reduced, in the case of
each Shareholder or Permitted Transferee, by such Shareholder's or Permitted
Transferee's pro rata share of the Escrow Funds (as defined below) as set forth
on Schedule I hereto, to be deposited in escrow as set forth below. As soon as
practicable on the Closing Date after the last to occur of (i) the proper filing
of the Mississippi Articles of Merger with the Mississippi Secretary of State,
(ii) the proper filing of the Texas Articles of Merger with the Texas Secretary
of State, and (iii) the proper filing of the Virginia Articles of Merger with
the Virginia Commission (the "Delivery Time"), cash included in the Total
Payable Cash in an amount equal to $10,000,000 (the "Escrow Funds") shall be
delivered by Atmos to an escrow agent selected by Atmos and approved by the
Shareholders (which approval shall not be unreasonably withheld or delayed) (the
"Escrow Agent"). The Escrow Funds shall be held and administered by the Escrow
Agent in accordance with the terms and conditions of an Escrow Agreement to be
entered into on the Closing Date by the Shareholders, any Permitted Transferee,
Atmos and the Escrow Agent substantially in the form of Exhibit A hereto (the
"Escrow Agreement"), and the Escrow Funds shall be treated for all purposes of
this Agreement as having been paid to the Shareholders and any Permitted
Transferees.
2.04 Withholding Rights. Atmos shall be entitled to deduct and withhold from the Total Payable Cash otherwise payable pursuant to this Agreement to the Shareholders and any Permitted Transferees such amounts as Atmos is required to deduct and withhold with respect to the making of such payment under the Code, or any provision of state or local Tax Law. To the extent that amounts are so withheld by Atmos, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Shareholders and any Permitted Transferees.
2.05 Share Adjustment. The number and kind of the Total Issuable Shares, and determinations of prices associated therewith, shall be subject to such customary 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.
ARTICLE III
CLOSING DELIVERIES
3.01 Deliveries at Closing.
(a) On the Closing Date, the Company and the Shareholders shall deliver to Atmos:
(i) certified copies of the Company's Articles of Incorporation, Bylaws and all corporate resolutions of the Company with respect to the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby (together with an incumbency and signature certificate regarding the officer(s) signing on behalf of the Company);
(ii) a certificate of good standing for the Company from the State of Mississippi;
(iii) certified copies of all resolutions of the Robert M. Hearin Support Foundation with respect to the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby;
(iv) a certified copy of Letters Testamentary issued by the local probate court with respect to the Estate of Leon Hess;
(v) a certificate of the trustee(s) of the Twenty-Five Year Charitable Lead Annuity Trust under the Will of Leon Hess (the "CLAT") with respect to the existence and irrevocability of the trust, the identity of the trustor(s) and trustee(s), and the authority of the trustee(s) to bind the trust;
(vi) certificates representing the Company Shares, together with letters of transmittal with respect thereto; and
(vii) such other items as are specified in Article VIII.
(b) Atmos shall deliver:
(i) to the Shareholders on the Closing Date, certified copies of its Articles of Incorporation, Bylaws and corporate resolutions with respect to the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby (together with an incumbency and signature certificate regarding the officer(s) signing on behalf of Atmos);
(ii) to the Shareholders on the Closing Date, certificates of good standing for Atmos from the State of Texas and the Commonwealth of Virginia;
(iii) to each Shareholder and Permitted Transferee, as soon as practicable on the Closing Date after the Delivery Time, a certificate for shares of Atmos
Common Stock in the name of such Shareholder (or its designee) or Permitted Transferee (or its designee) representing such Shareholder's or Permitted Transferee's pro rata share of the Total Issuable Shares and an amount of cash representing such Shareholder's or Permitted Transferee's pro rata share of the Total Payable Cash (less such Shareholder's or Permitted Transferee's pro rata share of the Escrow Funds) payable by delivery of immediately available funds to the account as such Shareholder or Permitted Transferee may reasonably direct by written notice delivered to Atmos by each such Shareholder or Permitted Transferee at least three Business Days before the Closing Date, in each case to which such Shareholder or Permitted Transferee is entitled pursuant to Section 2.03;
(iv) to the Escrow Agent, as soon as practicable on the Closing Date after the Delivery Time, an amount of cash representing the Escrow Funds payable by delivery of immediately available funds in the manner contemplated by the Escrow Agreement; and
(v) such other items as are specified in Article IX.
3.02 Bank Accounts. In order to facilitate the transfer of the Total Payable Cash (less the Escrow Funds) to the Shareholders as soon as practicable on the Closing Date after the Delivery Time, Atmos and the Shareholders shall use commercially reasonable efforts to open separate accounts at a bank approved by Atmos and the Shareholders (which approvals shall not be unreasonably withheld or delayed) so as to permit an intra-bank transfer of such cash.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
The Shareholders hereby jointly and severally represent and warrant to Atmos as follows; provided that any representation or warranty as to any Shareholder shall be deemed made only by that Shareholder.
4.01 Power and Authority. The Robert M. Hearin Support Foundation is duly organized, validly existing and in good standing under the Laws of the State of Mississippi. John B. Hess, Nicholas F. Brady, Thomas H. Kean, Burton T. Lefkowitz and John Y. Schreyer have been duly and validly appointed and are presently acting as the executors of the Estate of Leon Hess and as trustees of the CLAT, which is a validly existing trust. The Robert M. Hearin Support Foundation has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder and to consummate the transactions contemplated hereby. The executors of the Estate of Leon Hess have full power and authority to execute and deliver this Agreement and to perform the obligations of the Estate of Leon Hess hereunder and to consummate the transactions contemplated hereby without the special authorization of the probate or other court. The trustees of the CLAT have full trust power and authority to execute and deliver this Agreement and to perform the obligations of the CLAT hereunder and to consummate the transactions contemplated hereby without the special authorization of any probate or other court. The execution and delivery by each Shareholder of this Agreement and the performance by each Shareholder of its obligations hereunder have been duly and validly
authorized by or on behalf of such Shareholder, no other action on the part of such Shareholder or any beneficiary thereof being necessary. This Agreement has been duly and validly executed and delivered by each Shareholder and constitutes a legal, valid and binding obligation of such Shareholder enforceable against such Shareholder in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting the enforcement of creditors' rights generally and by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law).
4.02 Company's Power and Authority. The Company has full corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery by the Company of this Agreement, and the performance by the Company of its obligations hereunder, have been duly and validly authorized by the Board of Directors of the Company and by the Shareholders as the sole shareholders of the Company, no other corporate action on the part of the Company or its shareholders being necessary. This Agreement has been duly and validly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting the enforcement of creditors' rights generally and by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law).
4.03 Corporate Existence of the Company. The Company is a corporation, duly organized, validly existing and in good standing under the Laws of the State of Mississippi, and has full corporate power and authority to conduct its business as and to the extent now conducted and to own, use and lease its Assets and Properties. The Company is duly qualified, licensed or admitted to do business and is in good standing in the State of Mississippi, which is the only jurisdiction in which the ownership, use or leasing of its Assets and Properties, or the conduct or nature of its business, makes such qualification, licensing or admission necessary, except for those jurisdictions in which the adverse effects of all such failures by the Company to be qualified, licensed or admitted and in good standing could not in the aggregate reasonably be expected to have a material adverse effect on the Business or Condition of the Company.
4.04 Capital Stock. The authorized capital stock of the Company consists solely of Three Million (3,000,000) shares of Company Common Stock, of which only the Company Shares have been issued and are outstanding. The Company Shares are duly authorized, validly issued, outstanding, fully paid and nonassessable and have been issued free of any pre-emptive rights. Each Shareholder or its Permitted Transferee owns its respective Company Shares, beneficially and of record, free and clear of all Liens. Except for this Agreement, there are no outstanding Options with respect to the Company.
4.05 Subsidiaries. Each Subsidiary is a corporation validly existing and in good standing under the Laws of its jurisdiction of incorporation identified in the Disclosure Schedule, and has full corporate power and authority to conduct its business as and to the extent now conducted and to own, use and lease its Assets and Properties. Each Subsidiary is duly qualified, licensed or admitted to do business and is in good standing in those jurisdictions
specified in the Disclosure Schedule, which are the only jurisdictions in which the ownership, use or leasing of such Subsidiary's Assets and Properties, or the conduct or nature of its business, makes such qualification, licensing or admission necessary, except for those jurisdictions in which the adverse effects of all such failures by the Company and the Subsidiaries to be qualified, licensed or admitted and in good standing could not in the aggregate reasonably be expected to have a material adverse effect on the Business or Condition of the Company. The Disclosure Schedule lists for each Subsidiary the amount of its authorized capital stock, the amount of its outstanding capital stock and the record owners of such outstanding capital stock. Except as disclosed in the Disclosure Schedule, all of the outstanding shares of capital stock of each Subsidiary have been duly authorized and validly issued free of any pre-emptive rights, are fully paid and nonassessable, and are owned, beneficially and of record, by the Company or Subsidiaries wholly owned by the Company free and clear of all Liens, other than restrictions on the payment of dividends arising under applicable Law and restrictions on transferability arising under applicable securities Laws. There are no outstanding Options with respect to any Subsidiary. Neither the Company nor any Subsidiary owns, or has any Contract to acquire, any Investment Assets, except as disclosed in the Disclosure Schedule.
4.06 No Conflicts.
(a) The execution and delivery by each Shareholder and the Company of this Agreement do not, and the performance by such Shareholder and the Company of their respective obligations under this Agreement and the consummation of the transactions contemplated hereby will not:
(i) conflict with or result in a violation or breach of any of the terms, conditions or provisions of the instruments of organization or formation of such Shareholder, the Company or any Subsidiary;
(ii) subject to obtaining the consents, approvals and actions, making the filings and giving the notices disclosed in the Disclosure Schedule, conflict with or result in a violation or breach of, in any material respect, any term or provision of any Law or Order applicable to such Shareholder, the Company or any Subsidiary or any of their respective Assets and Properties; or
(iii) except as disclosed in the Disclosure Schedule,
(i) conflict with or result in a violation or breach of, in any
material respect, (ii) constitute (with or without notice or lapse of
time or both) a default under, in any material respect, (iii) require
such Shareholder, the Company or any Subsidiary to obtain any consent,
approval or action of, make any filing with or give any notice to any
Person as a result or under the terms of, (iv) result in or give to any
Person (with or without notice or lapse of time or both) any right of
termination, cancellation, acceleration or modification in or with
respect to, or (v) result in the creation or imposition of any Lien
upon such Shareholder, the Company or any Subsidiary or any of their
respective Assets and Properties under, any Contract or License to
which such Shareholder, the Company or any Subsidiary is a party or by
which any of their respective Assets and Properties is bound.
(b) The execution and delivery by the CLAT of this Agreement
does not, and the performance by the CLAT of its obligations under this
Agreement and the consummation of the transactions contemplated hereby will not,
involve a transaction with a "disqualified person", as such term is defined in
Section 4946 of the Code.
4.07 Governmental Approvals and Filings. Except (i) for the filing of the Articles of Merger with the State Agencies, (ii) for the filing of a premerger notification report by the Company under the HSR Act, (iii) for the approval of the MPSC in accordance with the 1956 Mississippi Public Utility Act, as amended (77-3-1 et seq.), and (iv) as disclosed in the Disclosure Schedule, no consent, approval or action of, filing with or notice to any Governmental or Regulatory Authority on the part of any Shareholder, the Company or any Subsidiary is required in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby, except those as would be required solely as a result of the identity or the legal or regulatory status of Atmos or any of its Affiliates.
4.08 Books and Records. The minute books and other similar records of the Company and the Subsidiaries as made available to Atmos prior to the execution of this Agreement contain a true and complete record, in all material respects, of all action taken at all meetings and by all written consents in lieu of meetings of the shareholders, the boards of directors and committees of the boards of directors of the Company and the Subsidiaries. The stock transfer ledgers of the Company and the Subsidiaries as made available to Atmos prior to the execution of this Agreement accurately reflect all record transfers in the capital stock of the Company and the Subsidiaries. The books of account of the Company and the Subsidiaries are complete and correct, in all material respects, and have been maintained, in all material respects, in accordance with sound business practice and the requirements of Section 13(b)(2) of the Exchange Act (regardless of whether or not the Company and the Subsidiaries are subject to such section), including the maintenance of an adequate system of internal controls.
4.09 Financial Statements and Condition.
(a) Prior to the execution of this Agreement, the Shareholders have caused the Company to deliver to Atmos true and complete copies of the following: (i) the audited balance sheets of the Company and its consolidated subsidiaries as of September 30, 1998, 1999 and 2000, and the related audited consolidated statements of operations, shareholders' equity and cash flows for each of the fiscal years then ended, including the notes thereto and together with a true and correct copy of the report on such audited information by Deloitte & Touche LLP, and all letters from such accountants with respect to the results of such audits; and (ii) the unaudited balance sheet of the Company and its consolidated subsidiaries as of June 30, 2001 (the "June 30, 2001 Balance Sheet"), and the related unaudited consolidated statements of operations, shareholders' equity and cash flows for the nine-month period then ended, including the notes thereto, copies of which are also included in the Disclosure Schedule. Except as set forth in the notes thereto and as disclosed in the Disclosure Schedule, all such Financial Statements were prepared in accordance with GAAP and fairly present in all material respects the consolidated financial condition, results of operations, changes in shareholders' equity and cash flows of the Company and its consolidated subsidiaries as of the respective dates thereof and for the
respective periods covered thereby, subject, in the case of the interim Financial Statements, to normal recurring year-end adjustments (the effect of which will not, individually or in the aggregate, be materially adverse) and the absence of notes (that, if presented, would not differ materially from those included in the latest audited Financial Statements). Except for those Subsidiaries listed in the Disclosure Schedule, the financial condition and results of operations of each Subsidiary are, and for all periods referred to in this Section 4.09 have been, consolidated with those of the Company.
(b) Except as set forth in the Disclosure Schedule, the Company and the Subsidiaries have no material Liabilities other than (i) the liabilities reflected in the June 30, 2001 Balance Sheet, (ii) liabilities incurred since the date thereof in the ordinary course of business consistent with past practices (none of which is materially adverse), and (iii) liabilities specifically delineated as to nature and amount in the Disclosure Schedule.
(c) Except for the execution and delivery of this Agreement and the transactions to take place pursuant hereto on or prior to the Closing Date and as disclosed in the Disclosure Schedule, since September 30, 2000, (i) the business of the Company and the Subsidiaries has been operated in all material respects in the ordinary course consistent with past practice, (ii) there has not been any material adverse change in the Business or Condition of the Company, other than those occurring as a result of general economic or financial conditions affecting the United States as a whole or the region in which the Company and the Subsidiaries conduct their business or other developments which are not unique to the Company and the Subsidiaries but also affect other Persons who participate or are engaged in the lines of business in which the Company and the Subsidiaries participate or are engaged and (iii) the Company and the Subsidiaries have used their commercially reasonable efforts to preserve their business and goodwill, including the goodwill of their customers, employees, subcontractors, suppliers, insurers, regulators and other Persons having business relations with them, and maintained their assets and property in at least as good an order and condition as existed on such date, reasonable wear and tear excepted, which is sufficient to continue to conduct their business as heretofore conducted.
(d) Except as disclosed in the Disclosure Schedule, since September 30, 2000, there has not been, occurred or arisen, whether or not in the ordinary course of business:
(i) any change in or event affecting the Company or any of the Subsidiaries that has had or is reasonably expected to have a material adverse effect on the Business or Condition of the Company other than those occurring as a result of general economic or financial conditions affecting the United States as a whole or the region in which the Company and the Subsidiaries conduct their business or other developments which are not unique to the Company and the Subsidiaries but also affect other Persons who participate or are engaged in the lines of business in which the Company and the Subsidiaries participate or are engaged;
(ii) any casualty, loss, damage or destruction (whether or not covered by insurance) of any of the Assets and Properties of the Company or any of the Subsidiaries that has involved or may involve a material loss to any of the Company and
the Subsidiaries in excess of all applicable insurance coverage (excepting deductible amounts);
(iii) any amendment of the Company's Articles of Incorporation or Bylaws or any charter or bylaws of the Subsidiaries;
(iv) any transaction between the Company or any Subsidiary and any of the Shareholders;
(v) any declaration or payment of any dividend or distribution with respect to capital stock of the Company or any Subsidiary (whether in cash or in kind), other than dividends to the Company, or redemption, purchase or other acquisition of any of its capital stock;
(vi) any capital expenditure (or series of related capital expenditures) by the Company or any Subsidiary outside the ordinary course of business or inconsistent with past practice;
(vii) any increase in the bonus, salaries or other compensation or benefits of any of the directors, officers, employees, agents or consultants of the Company or any Subsidiary outside the ordinary course of business or inconsistent with past practice or any other change in the employment terms (including severance provisions) for any of its officers or employees outside the ordinary course of business or inconsistent with past practice;
(viii) any delay or postponement by the Company or any Subsidiary of the payment of any accounts payable or other liabilities in a manner inconsistent with the ordinary course of business or past practice;
(ix) any assumption, creation, guarantee or incurrence by the Company or any Subsidiary of any Indebtedness, whether absolute or contingent (other than for working capital in the ordinary course of business consistent with past practice);
(x) any settlement of any lawsuit by the Company or any Subsidiary, other than settlements that have an immaterial effect upon them;
(xi) any adverse change, in any material respect, in the Company's rate base, its rate agreement with the MPSC (including its allowed rate of return, purchased gas adjustments or weather normalization adjustments), or in rate adjustments;
(xii) any adverse change in the customer satisfaction surveys or comparison of rates versus other Southeastern United States gas companies that might affect the Company's performance adjustment in any material respect; or
(xiii) any other action by the Company or any Subsidiary which, if taken after the date hereof, would violate Section 6.07.
4.10 Taxes. Except as disclosed in the Disclosure Schedule:
(a) Each of the Company and the Subsidiaries has filed (or there has been filed on their behalf) all Tax Returns required to be filed by or on behalf of each of them, or requests for extensions to file such returns have been timely filed or granted and have not expired, and all such Tax Returns are complete and accurate in all respects. The Company and each of the Subsidiaries has paid (or there has been paid on their behalf) all Taxes required to be paid by them. The Company and each Subsidiary has withheld and paid over all Taxes required to have been withheld and paid over, and complied with all information reporting and back-up withholding requirements, including maintenance of required records with respect thereto, in connection with amounts paid or owing to any employee, creditor, independent contractor or other third party. The accrual for Taxes in the most recent Financial Statements equals or exceeds the liability of the Company and the Subsidiaries for all Taxes payable by the Company and the Subsidiaries for all taxable periods and portions thereof accrued through the date of such Financial Statements. All Taxes of the Company and the Subsidiaries accrued following the end of the most recent period covered by the Financial Statements have been accrued in the ordinary course of business and do not exceed comparable amounts incurred in similar periods in prior years (taking into account any changes in operating results). Neither the Company nor any of the Subsidiaries has taken any action not in accordance with past practice that would have the effect of deferring a measure of Tax (including income, sales, gross receipts or payroll) from a period (or portion thereof) ending on or prior to the Effective Time to a period (or portion thereof) beginning after the Effective Time. No requests for waivers of the time to assess any Taxes against the Company or any of the Subsidiaries have been granted or are pending. The Company and the Subsidiaries have complied with all applicable Laws pertaining to Taxes.
(b) Neither the Company nor any of the Subsidiaries is a party to, is bound by, or has any obligation under, any agreement relating to the allocation or sharing of Taxes or has any liability for the Taxes of any Person other than the Company or the Subsidiaries, as a transferee or successor or otherwise (including any liability under Treasury Regulations Section 1.1502-6 or any similar provision of state, local or foreign Law). Neither the Company nor any of its Subsidiaries has entered into any closing agreement or any other agreement with any Tax Authority that remains in effect. Neither the Company or any of the Subsidiaries has been a "distributing corporation" or a "controlled corporation" in connection with a distribution described in Section 355 of the Code.
(c) Neither the Company nor any of the Subsidiaries has ever
been a member of an affiliated group of corporations (within the meaning of Code
Section 1504(a)) filing consolidated Tax Returns, other than the affiliated
group of which the Company is the common parent.
(d) None of the assets of the Company or any Subsidiary are treated as "tax-exempt use property" within the meaning of Section 168(h) of the Code.
(e) Neither the Company nor any Subsidiary is a party to any agreement, contract, arrangement or plan that has resulted or would result, separately or in the aggregate, in the payment of (i) any "excess parachute payments" within the meaning of Section 280G of the Code (without regard to the exception set forth in Section 280G(b)(4) of the Code) or (ii) any
amount of compensation for which a deduction would be disallowed under Section 162 of the Code. The Shareholders have approved, in accordance with the requirements of Section 280G of the Code, the payments under the following agreements, so that the payments under such agreements will not be treated as "parachute payments" under said Section 280G: (i) the Change in Control Termination Benefits Agreements dated September 11, 2000, by and between the Company and Messrs. Hardwick, Anderson, Wise, Langley, Novick and Aven, as amended; (ii) the Special Retirement Benefit and Severance Agreement dated as of January 1, 1996, by and between the Company and Matthew L. Holleman, III, as amended; and (iii) the Supplemental Pension Benefit Letter Agreement dated February 23, 1994, between the Company and Matthew L. Holleman, III, as amended.
(f) Neither the Company nor any Subsidiary has filed any consent agreement under Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of the Code) owned by the Company or any Subsidiary.
(g) No outstanding material adjustment relating to any Tax Return filed by the Company or any Subsidiary has been proposed by any Tax authority to the Company or any Subsidiary.
(h) Neither the Company nor any Subsidiary has agreed to make any adjustment under Section 481(a) of the Code (or any corresponding provision of state, local or foreign Tax Law) by reason of a change in accounting method or otherwise. The Company and the Subsidiaries use the accrual method of accounting for federal income Tax purposes.
(i) No claim has been made by an applicable Tax authority in a jurisdiction where the Company and the Subsidiaries do not file Tax Returns that the Company or any Subsidiary is or may be subject to Tax in that jurisdiction. The Disclosure Schedule contains a list of all jurisdictions, whether foreign or domestic, to which a Tax is properly payable by the Company or any Subsidiary.
(j) Neither the Company nor any Subsidiary has, nor has had, a permanent establishment in any foreign country, as defined in any applicable Tax treaty or convention between the United States and such foreign country.
(k) None of the Tax Returns filed by the Company or any Subsidiary was required to contain (in order to avoid the imposition of a penalty and determined without regard to the ability to file an amended Tax Return at any time after the filing of the original Tax Return) a disclosure statement under former Section 6661 of the Code or current Section 6662 of the Code (or any similar provision of state, local or foreign Tax law).
(l) Neither the Company nor any Subsidiary has ever been a party to a plan or agreement that could be treated as a partnership for U.S. federal income Tax purposes.
(m) The Company has made available to Atmos true and complete copies of all income Tax audit reports, statements of deficiency, closing or other agreements received by the Company or the Subsidiaries relating to Taxes, and all federal and state income or franchise
Tax Returns for the Company and the Subsidiaries for all open years. No material election with respect to Taxes has been made in any Tax Return not made available to Atmos.
(n) Neither the Company nor any Shareholder has taken any action that could prevent the Merger from qualifying as a "reorganization" within the meaning of Section 368 of the Code.
4.11 Legal Proceedings; Orders.
(a) Except as disclosed in the Disclosure Schedule, there are no Actions or Proceedings pending or, to the Knowledge of Shareholders and the Company, threatened against, relating to or affecting the Company or any Subsidiary or any of their respective Assets and Properties. There are no Actions or Proceedings pending or, to the knowledge of the Shareholders, threatened against, relating to or affecting any Shareholder that could reasonably be expected to prevent or delay the consummation of the Merger or otherwise prevent or delay such Shareholder from performing its obligations under this Agreement. None of the Actions or Proceedings disclosed in the Disclosure Schedule has had or could reasonably be expected to have, individually or in the aggregate with other such Actions or Proceedings, a material adverse effect on the Business or Condition of the Company or to result in the issuance of an Order restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement. Except as disclosed in the Disclosure Schedule, to the Knowledge of the Shareholders and the Company, no event has occurred or circumstance exists that may give rise to or serve as the basis for any such Action or Proceeding that could reasonably be expected, individually or in the aggregate with other such Actions or Proceedings, to have a material adverse effect on the Business or Condition of the Company. The Company has delivered to Atmos all material pleadings, correspondence and other documents in the Actions listed in the Disclosure Schedule except for those pleadings, correspondence and other documents that, in the opinion of counsel to the Company, if delivered to Atmos would cause a waiver by the Company of an attorney/client privilege.
(b) Except as disclosed in the Disclosure Schedule, none of such Orders has materially adversely affected or could reasonably be expected, individually or in the aggregate with other such Orders, to materially adversely affect the Business or Condition of the Company.
4.12 Compliance With Laws and Orders; Regulatory Filings.
(a) Except as disclosed in the Disclosure Schedule, neither the Company nor any Subsidiary is, or since September 30, 1997 has been, in any material respect, in violation of or in default under any Law or Order applicable to the Company or any Subsidiary or any of their respective Assets and Properties. Except as disclosed in the Disclosure Schedule, since September 30, 1997, neither the Company nor any Subsidiary has received any notice or other communication from any Governmental or Regulatory Authority regarding any violation of, or failure to comply with, any Law or Order, in any material respect, or to undertake, or to bear all or any portion of the cost of, any remedial action or correct any unsafe condition or practice of any nature with respect thereto or effect a refund to customers or a recall of appliances or other goods sold to customers.
(b) Neither the Company nor any of its Subsidiaries is a
"public utility company", a "holding company", a "subsidiary company" or an
"affiliate" of any holding company within the meaning of Section 2(a)(5),
2(a)(7), 2(a)(8) or 2(a)(11) of PUHCA, respectively.
(c) The Company and the Subsidiaries (other than Mississippi Energies, Inc.) are subject to regulation by the MPSC. Neither the Company nor any Subsidiary is subject to regulation by FERC as a "natural-gas company" under the Natural Gas Act pursuant to a Hinshaw exemption.
(d) All material filings required to be made by the Company or any of the Subsidiaries since December 31, 1996 under applicable federal and state Laws have been filed with the appropriate federal or state Government or Regulatory Authority (including the MPSC), as the case may be, including all material written forms, statements, reports and agreements and all material documents, exhibits, amendments and supplements appertaining thereto, including all material rates, tariffs, franchises, service agreements and related documents, all of which filings complied, as of their respective dates, with all applicable requirements of the appropriate statute and the rules and regulations thereunder in all material respects.
(e) Neither the Company, nor any Subsidiary, nor, to the Knowledge of the Shareholders and the Company, any officer, employee or agent thereof, has directly or indirectly given or agreed to give any gift or similar benefit to any customer, supplier, government employee, or other Person who was or is in a possible position to help or hinder the Company or any of the Subsidiaries, which gift or benefit (a) could reasonably be expected to subject the Company or any of the Subsidiaries to any damages or penalties in any civil or criminal Action or Proceeding, or (b) could reasonably be expected to have, individually or in the aggregate, a material adverse effect on the Business or Condition of the Company if not given or continued.
4.13 Benefit Plans; ERISA.
(a) The Disclosure Schedule contains a true and complete list of each of the Benefit Plans.
(b) Except as disclosed in the Disclosure Schedule, neither the Company nor any Subsidiary maintains or is obligated to provide benefits under any life, medical or health plan (other than as an incidental benefit under a Qualified Plan) which provides benefits to retirees or other terminated employees other than benefit continuation rights under the Consolidated Omnibus Budget Reconciliation of 1985, as amended. The Disclosure Schedule contains a true and complete list of all retirees and other terminated employees who are receiving pension or retiree medical benefits as of August 1, 2001.
(c) Except as disclosed in the Disclosure Schedule, neither the Company, any Subsidiary, any ERISA Affiliate nor any other corporation or organization controlled by or under common control with any of the foregoing within the meaning of Section 4001 of ERISA has at any time contributed to or has any obligation to contribute to or has any liability (contingent or otherwise) to any "multiemployer plan", as that term is defined in Section 4001 of ERISA.
(d) Each of the Benefit Plans and its administration is currently in compliance with ERISA and the Code and all other applicable Laws and with any applicable collective bargaining agreement in all material respects, and no statement, either written or oral, has been made by the Company or any director or officer of the Company or, to the Knowledge of the Shareholders and the Company, any other Person with regard to any Benefit Plan that is not in accordance with the terms of such Plan.
(e) The Company and its Subsidiaries have performed, in all material respects, all of their obligations under all Benefit Plans, and all contributions and other payments required to be made by the Company or any Subsidiary to any Benefit Plan with respect to any period ending before or at or including the Closing Date have been made or reserves adequate for such contributions or other payments have been or will be set aside therefor and have been or will be reflected in the Financial Statements in accordance with GAAP.
(f) To the Knowledge of Shareholders and the Company, no transaction contemplated by this Agreement will result in material liability to the PBGC or otherwise under Section 302(c)(11), 4062, 4063, 4064 or 4069 of ERISA, or otherwise, with respect to the Company, any Subsidiary, any ERISA Affiliate or any other corporation or organization controlled by or under common control with any of the foregoing within the meaning of Section 4001 of ERISA.
(g) There are no pending, or to the Knowledge of Shareholders and the Company, threatened claims by or on behalf of any Benefit Plan, or by any Person covered thereby, other than ordinary claims for benefits submitted by participants or beneficiaries, which, individually or in the aggregate, could result in material liability on the part of Atmos, the Company, any Subsidiary or any fiduciary of any such Benefit Plan.
(h) Except as disclosed in the Disclosure Schedule, no employer securities, employer real property or other employer property is included in the assets of any Benefit Plan.
(i) The Disclosure Schedule correctly sets forth, for each Subject Defined Benefit Plan, as of the last day of the plan year of such plan which coincides with or first precedes the date of this Agreement, the fair market value of the assets of such plan and the actuarial present value of the benefit liabilities (as defined in Section 4001(a)(16) of ERISA) under such plan at such date as established on the basis of the actuarial assumptions to be used to calculate present values under Section 417(e)(3)(A) of the Code.
(j) The Company has delivered to Atmos:
(i) all documents that set forth the terms of each Benefit Plan and of any related trust, including (A) all plan descriptions and summary plan descriptions of Benefit Plans for which Shareholders, the Company or any Subsidiary is required to prepare, file, and distribute plan descriptions and summary plan descriptions, and (B) all summaries and descriptions furnished to participants and beneficiaries regarding Benefit Plans for which a plan description or summary plan description is not required;
(ii) all personnel, payroll, and employment manuals and policies;
(iii) all collective bargaining agreements pursuant to which contributions have been made or obligations incurred (including both pension and welfare benefits) by the Company, any Subsidiary and the ERISA Affiliates, and all collective bargaining agreements pursuant to which contributions are being made or obligations are owed by such entities;
(iv) a written description of any Benefit Plan that is not otherwise in writing;
(v) all insurance policies which were purchased by or to provide benefits under any Benefit Plan currently in force or for which the Company or any Subsidiary currently has any liability (contingent or otherwise);
(vi) all Contracts with third party administrators, actuaries, investment managers, consultants, and other independent contractors that relate to any Benefit Plan currently in force or for which the Company or any Subsidiary currently has any liability (contingent or otherwise);
(vii) all reports, including all discrimination testing reports and actuarial reports, submitted within the four years preceding the date hereof by third party administrators, actuaries, investment managers, consultants, or other independent contractors with respect to any Benefit Plan currently in force or for which the Company or any Subsidiary currently has any liability (contingent or otherwise);
(viii) all notifications given within the four years
preceding the date hereof to employees of their rights under Section
601 et seq. of ERISA, Section 4980B of the Code, Section 9801 et seq.
of the Code, and under all other applicable federal and state laws
regulating the notice requirements of Group Health Plans (as defined in
Section 607(1) of ERISA);
(ix) the Form 5500 filed in each of the most recent three plan years with respect to each Benefit Plan, including all schedules thereto and the opinions of independent accountants;
(x) all notices or reports that were given by the Company, any Subsidiary or any ERISA Affiliate, or any Benefit Plan to the IRS, the PBGC or the DOL, pursuant to statute, within the four years preceding the date hereof, including notices that are expressly mentioned elsewhere in this Section 4.13;
(xi) all notices that were given by the IRS, the PBGC, or the DOL to the Company, any Subsidiary, any ERISA Affiliate, or any Benefit Plan within the four years preceding the date hereof; and
(xii) with respect to Benefit Plans that are Qualified Plans, the most recent determination letter for each such Plan.
(k) Except as disclosed in the Disclosure Schedule, neither the Company, any Subsidiary, any ERISA Affiliate nor any Shareholder has engaged in or knowingly permitted to occur and, to the Knowledge of Shareholders and the Company, no other party has engaged in or permitted to occur any transaction prohibited by Section 406 of ERISA or "prohibited transaction" under Section 4975(c) of the Code with respect to any Company Plan, except for any transactions which are exempt under Section 408 of ERISA or Section 4975 of the Code.
(l) Except for any formal written qualification requirement
with respect to which the remedial amendment period set forth in Section 401(b)
of the Code, and any regulations, rulings or other IRS releases thereunder, has
not expired, (i) each Benefit Plan that is intended to be a Qualified Plan has
received a favorable determination letter from the IRS and is qualified in form
and operation under Section 401(a) of the Code, and each trust for each such
Plan is exempt from federal income tax under Section 501(a) of the Code, and
(ii) no event has occurred or circumstance exists that gives rise to
disqualification or loss of tax-exempt status of any such Plan or trust.
(m) Except as disclosed in the Disclosure Schedule, each Benefit Plan can be terminated without payment of any additional contribution or amount and, except for any vesting of benefits of a Qualified Plan, without the vesting or acceleration of any benefits promised by such Plan.
(n) Except as disclosed in the Disclosure Schedule, no event has occurred or circumstance exists that could result in a material increase in premium costs of Benefit Plans that are insured, or a material increase in benefit costs of such Plans that are self-insured.
(o) Except as disclosed in the Disclosure Schedule, the Company and the Subsidiaries have the right to modify and terminate benefits as to retirees (other than pensions) with respect to both retired and active employees.
(p) Except as disclosed in the Disclosure Schedule, the consummation of the transactions contemplated by this Agreement will not result in the payment, vesting, or acceleration of any benefit, assuming that no Benefit Plan is terminated, in connection with the transactions contemplated by this Agreement.
4.14 Real Property.
(a) Except as disclosed in the Disclosure Schedule, the Company or a Subsidiary has good and valid title to or a valid and subsisting leasehold estate in all the real property, easements, rights of way and other interests in real property constituting its transmission, distribution, storage and service systems (the "System Property") other than imperfections in title or interest that are immaterial to the System Property as a whole and have not adversely affected the operation of the System Property in the ordinary course of business in any material respect. The System Property is free and clear of all Liens except for Permitted Liens and other Liens disclosed in the Disclosure Schedule. There are no Actions or Proceedings
or other claims pending or, to the Knowledge of the Shareholders and the Company, threatened against the Company or a Subsidiary asserting that the Company or such Subsidiary does not have good and valid title to or a valid and subsisting leasehold estate in, as the case may be, any of the System Property. Except for real property leased to others as disclosed in the Disclosure Schedule, the Company or a Subsidiary is in possession of each parcel of real property owned by it, together with all buildings, structures, facilities, fixtures and other improvements owned by Company or a Subsidiary and located thereon. All improvements on such real property lie wholly within the boundaries of such real property and do not encroach upon the property of, or otherwise conflict with the property rights of, any other Person in any material respect.
(b) The Company or a Subsidiary has a valid and subsisting leasehold estate in and the right to quiet enjoyment of the real property interests purported to be leased by it as lessee for the full term of the lease thereof. The Disclosure Schedule contains a true and complete list of all such leases. Each such lease is a legal, valid and binding agreement, enforceable in accordance with its terms, of the Company or a Subsidiary and, to the Knowledge of Shareholders and the Company, of each other Person that is a party thereto, and except as set forth in the Disclosure Schedule, there is no default (or any condition or event which, after notice or lapse of time or both, would constitute a default) thereunder by the Company or any Subsidiary or, to the Knowledge of the Shareholders and the Company, any other Person that is a party thereto. To the Knowledge of Shareholders and the Company, the underground gas storage horizons of the gas storage facilities leased by the Company and any Subsidiary have not been impaired by directional drilling by the lessors thereof or any unauthorized third parties.
(c) Except as disclosed in the Disclosure Schedule, the improvements on the System Property or the other real property interests owned or leased by the Company and the Subsidiaries are in all material respects structurally sound, in good operating condition and in a state of good maintenance and repair consistent with past custom and practice, ordinary wear and tear excepted, are adequate and suitable for the purposes for which they are presently being used and there are no condemnation or appropriation proceedings pending or, to the Knowledge of the Shareholders and the Company, threatened against any of the System Property or such other real property interests or the improvements thereon.
4.15 Tangible Personal Property; Sufficiency.
(a) The Company or a Subsidiary is in possession of and has good and valid title to, or has valid leasehold interests in or valid rights under Contract to use, all material tangible personal property used in or necessary to the conduct of the business of the Company and the Subsidiaries as currently conducted, including the personal property reflected in the June 30, 2001 Balance Sheet other than those disposed of since June 30, 2001, in the ordinary course of business consistent with past practice. All such tangible personal property is free and clear of all Liens, other than Permitted Liens or Liens disclosed in the Disclosure Schedule, and is in all material respects in good order and condition, ordinary wear and tear excepted, in safe operating condition and adequate and suitable for the purposes for which they are presently being used. Since September 30, 1997, the safety or operating condition has not been the subject of any Action or Proceeding or been the basis for any citation, fine or notice from any Governmental or Regulatory Authority, except as set forth in the Disclosure Schedule. The Disclosure Schedule correctly discloses, by type, the composition of the Company's transmission, distribution and
service lines. The Company has made available to Atmos all MPSC inspection records or reports, leak history reports and unaccounted for gas records, in each case for the last five years, regarding its transmission, distribution and service lines.
(b) The Assets and Properties of the Company and the Subsidiaries are sufficient in all material respects for the continued conduct of the business of the Company and the Subsidiaries as currently conducted. The cast iron and steel pipe included in the System Property have sufficient capacity and other features required for the operation of the System Property in accordance with Good Utility Practice.
(c) Except as set forth in the Disclosure Schedule, to the Knowledge of the Shareholders and the Company, the costs to replace the Company's remaining cast iron pipe included in the System Property will not exceed in any material respect the amount therefor set forth in the Disclosure Schedule.
4.16 Intellectual Property Rights. The Disclosure Schedule discloses all material Intellectual Property used in the business of the Company and the Subsidiaries, each of which the Company or a Subsidiary either has all right, title and interest in or a valid and binding rights under Contract to use. Such Intellectual Property is sufficient for the continued conduct of the business of the Company and the Subsidiaries as currently conducted. Except as disclosed in the Disclosure Schedule, (i) all registrations with and applications to Governmental or Regulatory Authorities in respect of Intellectual Property owned by the Company or a Subsidiary as disclosed in the Disclosure Schedule are valid and in full force and effect, (ii) there are no material restrictions on the direct or indirect transfer of any Contract, or any interest therein, held by the Company or any Subsidiary in respect of Intellectual Property disclosed in the Disclosure Schedule, (iii) neither the Company nor any Subsidiary is in default (or with the giving of notice or lapse of time or both, would be in default) under any Contract to use the Intellectual Property disclosed in the Disclosure Schedule in any material respect, (iv) to the Knowledge of Shareholders and the Company, the Intellectual Property disclosed in the Disclosure Schedule is not being infringed by any other Person in any material respect, and (v) the use of such Intellectual Property by and the conduct of the business of the Company and the Subsidiaries do not infringe on the Intellectual Property rights of any other Person in any material respect. None of the Shareholders, the Company nor any Subsidiary has received any notice or other communication that the Company or any Subsidiary is infringing any Intellectual Property of any other Person, and no claim is pending or has been made to such effect that has not been resolved.
4.17 Contracts.
(a) The Disclosure Schedule contains a true and complete list of each of the following Contracts, to which the Company or any Subsidiary is a party or by which any of their respective Assets and Properties is bound:
(i) all Contracts (excluding Benefit Plans) providing for a commitment of employment or consultation services for a specified or unspecified term or otherwise relating to employment or the termination of employment, the name, position and rate of compensation of each party to each such Contract and the expiration date of each such Contract;
(ii) all Contracts with any Person containing any provision or covenant prohibiting or materially limiting the ability of the Company or any Subsidiary to engage in any business activity or compete with any Person or prohibiting or limiting the ability of any Person to compete with the Company or any Subsidiary;
(iii) all partnership, joint venture, shareholders' or other similar Contracts with any Person;
(iv) all Contracts relating to Indebtedness of the Company or any Subsidiary in excess of $100,000 (other than Indebtedness owing to the Company or any wholly-owned Subsidiary);
(v) all Contracts with distributors, dealers, manufacturer's representatives, sales agencies or franchisees which in any case involve a binding payment or obligation, pursuant to the terms of any such Contract, by or to the Company or any Subsidiary of more than $100,000 annually;
(vi) all Contracts for gas supply, transportation or storage (and commodity, hedge or similar arrangements in respect thereof) or to provide or receive services from or to any other local distribution company which in any case involve a binding payment or obligation, pursuant to the terms of any such Contract, by or to the Company or any Subsidiary of more than $100,000 annually;
(vii) all Contracts involving take-or-pay obligations with respect to gas purchases or gas marketing; and all Contracts involving weather hedges;
(viii) all Contracts relating to (A) the future disposition or acquisition of any Assets and Properties individually or in the aggregate material to the Business or Condition of the Company, other than dispositions or acquisitions in the ordinary course of business consistent with past practice, (B) any merger or other business combination (other than this Agreement), (C) the construction of any plant, pipeline, facility or other material capital improvement or (D) the acquisition of all or substantially all of the Assets and Properties of any Person or division or line of business of any Person;
(ix) all collective bargaining or similar labor Contracts;
(x) all Contracts (other than this Agreement) that (A) limit or contain restrictions on the ability of the Company or any Subsidiary to declare or pay dividends on, to make any other distribution in respect of or to issue or purchase, redeem or otherwise acquire its capital stock, to incur Indebtedness, to incur or suffer to exist any Lien, to change the lines of business in which it participates or engages or to engage in any merger or other business combination or (B) require the Company or any Subsidiary to maintain specified financial ratios or levels of net worth or other indicia of financial condition;
(xi) all other Contracts (other than Benefit Plans, leases listed in the Disclosure Schedule and insurance policies listed in the Disclosure Schedule) that (A) involve a binding payment or obligation, pursuant to the terms of any such Contract, by or to the Company or any Subsidiary of more than $100,000 annually and (B) cannot be terminated within 60 days after giving notice of termination without resulting in any material cost or penalty to the Company or any Subsidiary; and
(xii) all other Contracts the loss of which would have a material adverse effect on the Business or Condition of the Company.
(b) Each Contract required to be disclosed in the Disclosure Schedule is in full force and effect and constitutes a legal, valid and binding agreement, enforceable in accordance with its terms in all material respects, of the Company or a Subsidiary and, to the Knowledge of Shareholders and the Company, of each other party thereto; and except as disclosed in the Disclosure Schedule, neither the Company, any Subsidiary nor, to the Knowledge of Shareholders and the Company, any other party to such Contract is in violation or breach of or default under any such Contract (or with notice or lapse of time or both, would be in violation or breach of or default under any such Contract) in any material respect. Complete and correct copies of all such Contracts have been delivered to Atmos.
4.18 Licenses. The Company and the Subsidiaries have all material Licenses required for the conduct of their business, and the ownership and operation of their Assets and Properties as currently conducted, owned and operated. The Disclosure Schedule contains a true and complete list of all such Licenses (and all pending applications for any such Licenses), setting forth the grantor, the grantee, the function and the expiration and renewal date of each. Except as disclosed in the Disclosure Schedule:
(a) the Company or a Subsidiary owns or validly holds all such Licenses;
(b) each such License is valid, binding and in full force and effect; and
(c) neither the Company nor any Subsidiary is, or since September 30, 1997 has been, in default (or with the giving of notice or lapse of time or both, would be in default) under any such License in any material respect.
Except as disclosed in the Disclosure Schedule, neither the Company nor any Subsidiary has received any notice or other communication from any Governmental or Regulatory Authority regarding any material violation or failure to comply with any term or requirement of any License or any actual proposed, possible or potential revocation, withdrawal, suspension, cancellation, termination of or modification to any License.
4.19 Insurance. The Disclosure Schedule contains a true and complete list of all material insurance policies in effect, currently or since September 30, 1997 (or in the case of the Company's liability policies, since June 1, 1989), that insure the business, operations or employees of the Company or any Subsidiary or affect or relate to the ownership, use or operation of any of the Assets and Properties of the Company or any Subsidiary and that have
been issued to the Company or any Subsidiary. True and correct copies of all
such policies, and all pending applications for policies of insurance, have been
delivered to Atmos. Each such policy is valid and binding and in full force and
effect, no premiums due thereunder have not been paid, all claims thereunder
have been timely made in accordance with the terms thereof, and neither the
Company nor any Subsidiary has received notice or other communication of any (i)
cancellation or termination in respect of any such policy, (ii) default by the
Company or any Subsidiary in respect of any such policy, (iii) refusal of
coverage, (iv) claim that defense under any such policy will be afforded with
reservation of rights or (v) claim that any such policy will not be renewed.
None of such policies provide for any retrospective premium adjustment or other
experience-based liability on the part of the Company or any Subsidiary. Other
than the deductibles provided in such policies, neither the Company nor any
Subsidiary has any self-insurance arrangement or any Contract, other than a
policy of insurance, for the transfer or sharing of risk by or with the Company
or any Subsidiary. The Disclosure Schedule sets forth for each liability policy
(i) by year, for the current policy year and each of the preceding policy years
beginning on or after June 1, 1989, a summary of the loss experience, a list of
claims reported to the Company or any Subsidiary and claims reported to the
insurance carriers, and (ii) as of the date hereof, a list of open claims.
4.20 Affiliate Transactions. Except as disclosed in the Disclosure Schedule, (i) there is no Indebtedness between the Company or any Subsidiary, on the one hand, and any Shareholder or any Affiliate (other than the Company or any Subsidiary) of such Shareholder, on the other, (ii) none of the Shareholders nor any such Affiliate provides or causes to be provided any assets, services or facilities to the Company or any Subsidiary, and (iii) neither the Company nor any Subsidiary provides or causes to be provided any assets, services or facilities to any Shareholder or any such Affiliate. Except as disclosed in the Disclosure Schedule, each of the Liabilities and transactions listed in the Disclosure Schedule was incurred or engaged in, as the case may be, on an arm's-length basis and in the ordinary course of business.
4.21 Labor Relations. Except as disclosed in the Disclosure Schedule:
(a) No employee of the Company or any Subsidiary is presently a member of a collective bargaining unit and, to the Knowledge of Shareholders and the Company, there are no overtly threatened attempts to organize for collective bargaining purposes any additional employees of the Company or any Subsidiary. Since September 30, 1997, there has been no work stoppage, strike, slow down or other concerted action by employees of the Company or any Subsidiary which materially adversely affected the Company or any Subsidiary.
(b) There is no controversy pending or, to the Knowledge of Shareholders and the Company, threatened between the Company or any Subsidiary and any of their respective employees. There is no basis for any claim, grievance, arbitration, negotiation, suit, action or charge of or by any employee of the Company or any Subsidiary, and no complaint is pending against the Company or any Subsidiary before the National Labor Relations Board or any other Governmental or Regulatory Authority. The Company and the Subsidiaries have complied, in respect of their employees, in all material respects with all applicable Laws, including those related to equal employment opportunity, non-discrimination, immigration, wages, hours, benefits, collective bargaining, the payment of social security and similar Taxes, occupational health and safety, and plant closing.
(c) The Company has furnished Atmos with copies of all claims, complaints, reports or other documents in the Company's files concerning the Company or any of the Subsidiaries or their employees made by or against the Company or any Subsidiary during the past five years pursuant to workers' compensation laws, Title VII of the Civil Rights Act of 1964, the Occupational Safety and Health Act of 1970, the National Labor Relations Act of 1935 or any other Laws relating to employment of labor.
4.22 Environmental Matters. Except as described in the Disclosure Schedule:
(a) Each of the Company and the Subsidiaries has obtained all material Licenses which are required under applicable Environmental Laws in connection with the conduct of the business or operations of the Company or such Subsidiary. Each of such Licenses is in full force and effect and each of the Company and the Subsidiaries is in compliance, in all material respects, with the terms and conditions of all such Licenses and with any applicable Environmental Law.
(b) No oral or written notification of a Release of a Hazardous Material has been filed by or on behalf of the Company or any Subsidiary; nor, to the Knowledge of the Shareholders and the Company, have any events occurred that would have required such a notice. To the Knowledge of Shareholders and the Company, no site or facility now or previously owned, operated or leased by the Company or any Subsidiary is listed or proposed for listing on the NPL, CERCLIS or any similar state or local list of sites requiring investigation or clean-up. Neither the Company nor any Subsidiary has transported wastes to or arranged for disposal of wastes at any such listed site.
(c) To the Knowledge of the Shareholders and the Company, there have been no material environmental investigations, studies, audits, tests, reviews other analyses conducted by, or that are in the possession of, the Company or any Subsidiary in relation to any site or facility now or previously owned, operated or leased by the Company or any Subsidiary which have not been delivered to Atmos prior to the date hereof.
(d) Neither the Company, the Subsidiaries, nor, to the Knowledge of Shareholders or the Company, any previous occupant, owner, tenant, or user of the real property owned by the Company and the Subsidiaries, has received any written notice, demand, letter, claim or request for information alleging that it may be in violation of or liable under any Environmental Law or License.
(e) Neither the Company nor any Subsidiary has entered into or agreed to any Order, and is not subject to any outstanding Order, relating to compliance with or liability under any Environmental Law. Neither the Company nor any Subsidiary is subject to any indemnity or other agreement with any third party relating to liability under any Environmental Law.
(f) The real property owned or leased by the Company and the Subsidiaries (including soils, groundwater, surface water, buildings and other structures) is not contaminated with any Hazardous Materials, in any material respect; and, to the Knowledge of the Shareholders and the Company, no event has occurred or circumstance exists that presents an imminent threat of a future Release of any Hazardous Materials on such real property.
(g) To the Knowledge of the Shareholders and the Company, there are no circumstances or conditions involving the Company or any Subsidiary that could reasonably be expected to constitute a violation of the Environmental Laws or result in claims, liability, investigations or costs under the Environmental Laws, or which could reasonably be expected to result in restrictions on the ownership, use or transfer of any of its Assets and Properties, pursuant to any Environmental Law.
(h) Neither the Company nor any Subsidiary has disposed or arranged for disposal of Hazardous Materials on any third party property that, to the Knowledge of the Shareholders and the Company, could be reasonably expected to subject the Company or any Subsidiary to material liability under any Environmental Law.
(i) To the Knowledge of the Shareholders and the Company, no underground storage tanks, asbestos-containing material or polychlorinated biphenyls have ever been located on real property owned, leased or used by the Company or any Subsidiary.
(j) To the Knowledge of the Shareholders and the Company, the representations and warranties in this Section 4.22 are also correct and complete with respect to all real property that the Company and the Subsidiaries previously owned, leased or used through the time that the Company's or respective Subsidiary's ownership, lease, or use ceased.
(k) Neither the Shareholders, the Company nor any Subsidiary is required to make any filings under any Environmental Law in connection with the transactions contemplated hereby.
(l) The representations and warranties set forth in this
Section 4.22 constitute the exclusive representations and warranties of the
Shareholders under this Agreement with respect to any License issued under, or
violation of, or liability arising under, any Environmental Law.
4.23 Information Supplied. Neither the Disclosure Schedule nor the information supplied or to be supplied in writing by or on behalf of Shareholders or the Company and the Subsidiaries for inclusion in any documents to be filed by the Company, Shareholders or Atmos with any Governmental or Regulatory Authority in connection with this Agreement and the transactions contemplated hereby contain or will, on the date of its filing, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading
4.24 Brokers. Except for Goldman, Sachs & Co., whose fees, commissions and expenses are the sole responsibility of Shareholders, all negotiations relative to this Agreement and the transactions contemplated hereby have been carried out by the Shareholders directly with Atmos without the intervention of any Person on behalf of the Shareholders in such manner as to give rise to any valid claim by any Person against Atmos, the Company or any Subsidiary for a finder's fee, brokerage commission or similar payment.
4.25 Certain Securities Matters.
(a) The Shareholders understand that the Atmos 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. The Shareholders understand that such exemptions depend in part upon, and such shares will be issued in reliance on, the representations and warranties made by the Shareholders in this Section 4.25.
(b) Each of the Shareholders will acquire the Atmos Shares for its own respective account for investment purposes only and not with a view to resale or other distribution thereof, in whole or in part, except as contemplated by the Registration Rights Agreement; provided, however, that, subject to the terms hereof, the disposition of its property shall at all times be within their control; and the Shareholders will not assign, sell, hypothecate or otherwise transfer the Atmos 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, and (ii) they have complied with all applicable holding periods imposed by the Securities Act (and the regulations thereunder). The Shareholders acknowledge that a restrictive legend to such effect will be placed on the certificates representing the Atmos Shares and a notation will be made in the appropriate records of Atmos indicating that the Atmos Shares are subject to such restrictions on transfer.
(c) Each of the Shareholders qualifies as an "accredited investor" within the meaning of Rule 501 under the Securities Act, because it has total assets exceeding $5,000,000.
(d) Each of the Shareholders acknowledges that it:
(i) has been furnished with the articles of incorporation and bylaws of Atmos and the Atmos SEC Reports and is capable of understanding and evaluating the risks of acquiring the Atmos Shares;
(ii) has 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 Atmos Shares and other matters pertaining to an investment in the Atmos Shares, has been given the opportunity to obtain such additional information necessary to evaluate the merits and risks of acquiring the Atmos Shares to the extent Atmos possesses such information;
(iii) has not relied upon any representations or warranties or other information (whether oral or written) from Atmos or its directors, officers or Affiliates, or from any other Persons, other than the representations and warranties of Atmos made in this Agreement;
(iv) is familiar with the nature of and risks attendant to investments in the business of Atmos and securities in general and has carefully considered and has, to the extent it believes such discussion necessary, discussed with its professional legal, financial and tax advisers the suitability of an investment in the Atmos Shares for its
financial and tax situations, consistent with the fiduciary duties applicable to the management and conduct of its affairs, and has determined that the Atmos Shares are a suitable investment for it.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ATMOS
Atmos hereby represents and warrants to the Shareholders, any Permitted Transferees and the Company as follows:
5.01 Corporate Existence. Atmos is a corporation validly existing and in good standing under the Laws of the State of Texas and the Commonwealth of Virginia.
5.02 Authority. Atmos has full corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery by Atmos of this Agreement, and the performance by Atmos of its obligations hereunder, have been duly and validly authorized by the Board of Directors of Atmos, no other corporate action on the part of Atmos or its shareholders being necessary. This Agreement has been duly and validly executed and delivered by Atmos and constitutes a legal, valid and binding obligation of Atmos enforceable against Atmos in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting the enforcement of creditors' rights generally and by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law).
5.03 No Conflicts. The execution and delivery by Atmos of this Agreement do not, and the performance by Atmos of its obligations under this Agreement and the consummation of the transactions contemplated hereby will not:
(a) conflict with or result in a violation or breach of any of the terms, conditions or provisions of the Articles of Incorporation or Bylaws of Atmos;
(b) subject to obtaining the consents, approvals and actions, making the filings and giving the notices disclosed in Schedule 5.04 hereto, conflict with or result in a violation or breach of, in any material respect, any term or provision of any Law or Order applicable to Atmos or any of its Assets and Properties; or
(c) except as disclosed in Schedule 5.03 hereto, (i) conflict with or result in a violation or breach of, in any material respect, (ii) constitute (with or without notice or lapse of time or both) a default under, in any material respect, (iii) require Atmos to obtain any consent, approval or action of, make any filing with or give any notice to any Person as a result or under the terms of, (iv) result in or give to any Person (with or without notice or lapse of time or both) any right of termination, cancellation, acceleration or modification in or with respect to, or (v) result in the creation or imposition of any Lien upon Atmos or any of its Assets or Properties under, any Contract or License to which Atmos is a party or by which any of its Assets and Properties is bound.
5.04 Governmental Approvals and Filings. Except (i) for the
filing of the Articles of Merger with the State Agencies, (ii) for the filing of
a premerger notification report by Atmos under the HSR Act, (iii) for the
approval of the MPSC in accordance with the 1956 Mississippi Public Utility Act,
as amended (77-3-1 et seq.), (iv) for the approvals of the issuance of the Atmos
Shares by Governmental or Regulatory Authorities in the States of Colorado,
Georgia, Illinois, Kentucky and Virginia, (v) for a waiver in respect of the
Merger by the Governmental or Regulatory Authorities in the State of Iowa, and
(vi) as disclosed in Schedule 5.04 hereto, no consent, approval or action of,
filing with or notice to any Governmental or Regulatory Authority on the part of
Atmos is required in connection with the execution, delivery and performance of
this Agreement or the consummation of the transactions contemplated hereby,
except those as would be required solely as a result of the identity or the
legal or regulatory status of Shareholders or their respective Affiliates (other
than the Company or the Subsidiaries).
5.05 Capitalization. The entire authorized capital stock of Atmos consists of 100,000,000 shares of Atmos Common Stock. As of September 20, 2001, (i) 40,774,510 shares of Atmos Common Stock are issued and outstanding, all of which are duly authorized, validly issued, fully paid and nonassessable and free of statutory pre-emptive rights, and (ii) no shares of Atmos Common Stock are held in the treasury of Atmos. 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 with respect to Atmos. There are no obligations, contingent or otherwise, of Atmos to repurchase, redeem or otherwise acquire any shares of Atmos Common Stock.
5.06 Atmos Shares. The Atmos Shares have been duly authorized and, when issued in accordance with this Agreement, will be (a) validly issued, fully paid and nonassessable, free of pre-emptive rights, and (b) listed on the New York Stock Exchange.
5.07 SEC Filings; Financial Statements; No Adverse Change.
(a) Atmos has filed all forms, reports and documents required
to be filed with the SEC since September 30, 1999, and has heretofore delivered
to the Shareholders, in the form filed with the SEC, (i) its Annual Reports on
Form 10-K for the fiscal years ended September 30, 1999 and 2000, (ii) its
Quarterly Reports on Form 10-Q for the periods ended December 31, 2000, March
31, 2001, and June 30, 2001, (iii) all proxy statements relating to Atmos'
meetings of shareholders (whether annual or special) held since September 30,
2000, (iv) all Forms 8-K filed by Atmos with the SEC since September 30, 2000,
(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 are all
the documents (other than preliminary material) that Atmos and its subsidiaries
were required to file with the SEC since September 30, 1999. 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 to the Shareholders its audited consolidated financial statements of Atmos and its subsidiaries (together with the notes thereto) for its fiscal years ended September 30, 1999 and 2000 and its unaudited consolidated financial statements for the period ended June 30, 2001. All such financial statements and all other financial statements included in the Atmos SEC Reports (the "Atmos Financial Statements") have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods covered thereby and complied as to form, in all material respects, with the published rules and regulations of the SEC with respect thereto. The Atmos 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 (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).
(c) Except as disclosed in the Atmos SEC Reports, since September 30, 2000, there has not occurred or arisen, whether or not in the ordinary course of business, any change in or event affecting Atmos or any of its subsidiaries that has had or is reasonably expected to have a material adverse effect on the business, assets, liabilities, financial condition or results of operations of Atmos and its subsidiaries taken as a whole, other than those occurring as a result of general economic or financial conditions affecting the United States as a whole or the region in which Atmos and its subsidiaries conduct their business or other developments which are not unique to Atmos and its subsidiaries but also affect other Persons who participate or are engaged in the lines of business in which Atmos and its subsidiaries participate or are engaged.
5.08 Legal Proceedings. There are no Actions or Proceedings pending or, to the Knowledge of Atmos, threatened against, relating to or affecting Atmos or any of its Assets and Properties which could reasonably be expected to result in the issuance of an Order restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement.
5.09 Financing. Atmos has sufficient cash and/or available credit facilities to pay the Total Payable Cash and to make all other necessary payments of fees and expenses in connection with the transactions contemplated by this Agreement.
5.10 Information Supplied. The information supplied or to be supplied in writing by or on behalf of Atmos for inclusion in any documents to be filed by the Company, Atmos, or Shareholders with any Governmental or Regulatory Authority in connection with this Agreement and the transactions contemplated hereby will not, on the date of its filing, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading.
5.11 Brokers. Except for Merrill Lynch & Co., whose fees, commissions and expenses are the sole responsibility of Atmos, all negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Atmos directly with Shareholders and the Company without the intervention of any Person on behalf of Atmos in such manner as to give rise to any valid claim by any Person against Shareholders, the Company or any Subsidiary for a finder's fee, brokerage commission or similar payment.
ARTICLE VI
COVENANTS OF SHAREHOLDERS AND THE COMPANY
Each of the Shareholders and the Company covenants and agrees with Atmos that, at all times from and after the date hereof, it will comply with all covenants and provisions of this Article VI, except to the extent Atmos may otherwise consent in writing.
6.01 Regulatory and Other Approvals. The Shareholders and the
Company will, and will cause the Subsidiaries to, as promptly as practicable (a)
take all commercially reasonable steps necessary or desirable to obtain all
consents, approvals or actions of, make all filings with and give all notices to
Governmental or Regulatory Authorities or any other Person required of any such
Shareholder, the Company or any Subsidiary to consummate the transactions
contemplated hereby, including those described in the Disclosure Schedule, (b)
provide such other information and communications to such Governmental or
Regulatory Authorities or other Persons as such Governmental or Regulatory
Authorities or other Persons may reasonably request in connection therewith and
(c) provide reasonable cooperation to Atmos in connection with the performance
of its obligations under Sections 7.01 and 7.02. Shareholders will provide
prompt notification to Atmos when any such consent, approval, action, filing or
notice referred to in clause (a) above is obtained, taken, made or given, as
applicable, and will advise Atmos of any communications (and, unless precluded
by Law, provide copies of any such communications that are in writing) with any
Governmental or Regulatory Authority or other Person regarding any of the
transactions contemplated by this Agreement.
6.02 HSR Filings. In addition to and not in limitation of the covenants contained in Section 6.01, the Shareholders and the Company will, and will cause the Subsidiaries to, (a) take promptly all actions necessary to make the filings required of any Shareholder, the Company or their Affiliates under the HSR Act, (b) comply at the earliest practicable date with any request for additional information received by any such Shareholder, the Company or their Affiliates from the Federal Trade Commission or the Antitrust Division of the Department of Justice pursuant to the HSR Act and (c) cooperate with Atmos in connection with Atmos's filing under the HSR Act and in connection with resolving any investigation or other inquiry concerning the transactions contemplated by this Agreement commenced by either the Federal Trade Commission or the Antitrust Division of the Department of Justice or state attorneys general.
6.03 Investigation by Atmos. The Shareholders and the Company will, and will cause the Subsidiaries to, (a) provide Atmos and its officers, employees, counsel, accountants, financial advisors, consultants and other representatives (together, "Representatives") with full access, upon reasonable prior notice and during normal business hours, to all officers, employees, agents and accountants of the Company and the Subsidiaries and their Assets and Properties and Books and Records, but only to the extent that such access
does not unreasonably interfere with the business and operations of the Company and the Subsidiaries, (b) in connection with and during the preparation of the audited financial statements of the Company and its consolidated subsidiaries, permit Atmos, its independent accounting firm and its representatives to examine and (unless prohibited by applicable accounting standards, in the case of work papers and other documents prepared by the Company's independent accountants) make copies of the work papers and other documents that are generated or reviewed, and to consult with the Company's independent accounting firm after signing a reasonable nondisclosure and indemnification letter, (c) furnish Atmos with all material pleadings, correspondence and other documents in the Actions or Proceedings listed in the Disclosure Schedule, except for those pleadings, correspondence and other documents that, in the opinion of counsel of the Company, if delivered to Atmos would cause a waiver by the Company of an attorney/client privilege, and (d) furnish Atmos and such other Persons with all such other information and data (including copies of Contracts, Benefit Plans and other Books and Records) concerning the business and operations of the Company and the Subsidiaries as Atmos or any of such other Persons reasonably may request in connection with such investigation, except to the extent that furnishing any such information or data would violate any Law, Order, Contract or License applicable to the Company or any Subsidiary or by which any of their respective Assets and Properties is bound.
6.04 No Solicitations; Permitted Transfer of Company Shares.
Except as set forth in the following sentence, the Shareholders and the Company
will not take, nor will they permit the Subsidiaries or any of their Affiliates
(or authorize or permit any investment banker, financial advisor, attorney,
accountant or other Person retained by or acting for or on behalf of such
Shareholder, the Company, the Subsidiaries or any such Affiliate) to (i) take,
directly or indirectly, any action to solicit, encourage, receive, negotiate,
assist or otherwise facilitate (including by furnishing information with respect
to the Company or any Subsidiary or permitting access to the Assets and
Properties and Books and Records of the Company or any Subsidiary) any offer or
inquiry from any Person concerning an Acquisition Proposal, (ii) enter into any
agreement with respect to an Acquisition Proposal, (iii) take, directly or
indirectly, any action to solicit, encourage, receive, negotiate, assist or
otherwise facilitate any offer or inquiry from any Person concerning an
acquisition of any Company Shares, or (iv) transfer, or enter into any agreement
to transfer any Company Shares. Notwithstanding anything in this Section 6.04 to
the contrary, the Estate of Leon Hess shall be entitled to transfer any portion
of the Company Shares owned by it in accordance with the provisions of the Last
Will and Testament of Leon Hess if such transfer does not prevent or delay the
consummation of the transactions contemplated hereby; provided that no such
transfer shall relieve the Estate of Leon Hess of its obligations under this
Agreement; provided further that prior to any such transfer, each transferee
(each a "Permitted Transferee") shall deliver an instrument reasonably
acceptable to Atmos, pursuant to which such Permitted Transferee shall (i) waive
all appraisal, dissenter's and similar rights under the MBCA, TBCA and VSCA in
respect of the Merger, (ii) agree, either prior to or after the Effective Time,
to execute such further documents and take such further actions as may
reasonably be requested by Atmos to effect the other purposes of this Agreement,
(iii) provide to Atmos those representations and warranties set forth in
Sections 4.01, 4.04 (the third sentence thereof), 4.06, 4.07, 4.10(e) (the last
sentence thereof, if necessary for the representation and warranty in the first
sentence thereof to be true and correct as of the Closing Date), 4.11, and 4.25,
to the same extent as if it were named as a Shareholder herein, (iv) covenant
and agree with
Atmos to comply with the covenants and provisions set forth in Sections 6.02,
6.10 and 6.11, (v) covenant and agree with Atmos to deliver to Atmos on the
Closing Date the certificate(s) representing the Company Shares owned by such
Permitted Transferee in accordance with Section 3.01(a)(vi), (vi) covenant and
agree to deliver to Atmos on the Closing Date the items set forth in Sections
8.03, 8.09, 8.10, 8.11 and 8.12 (substantially to the effect set forth on
Exhibit D-3), (vii) agree to indemnify Atmos and its directors, officers,
employees, stockholders and Affiliates in accordance with the provisions of
Article 11 to the extent of the Merger Consideration received by such Permitted
Transferee, and (viii) consent to jurisdiction in the manner set forth in
Section 14.10.
6.05 Conduct of Business. The Company will, and will cause the Subsidiaries to, conduct business only in the ordinary course. Without limiting the generality of the foregoing, the Company will, and will cause the Subsidiaries to, use commercially reasonable efforts, to (a) preserve intact the present business organization and reputation of the Company and the Subsidiaries in all material respects, (b) keep available (subject to dismissals and retirements in the ordinary course of business) the services of the key officers and employees of the Company and the Subsidiaries, (c) maintain the Assets and Properties of the Company and the Subsidiaries in working order and condition consistent with past custom and practice, ordinary wear and tear excepted, (d) maintain the good will of key customers, suppliers, insurers, regulators and lenders and other Persons with whom the Company or any Subsidiary otherwise has significant business relationships, (e) maintain in full force and effect insurance coverage from insurers, in amounts and on other terms no less favorable to the Company and the Subsidiaries than the insurance coverage in effect on the date hereof and timely provide all notices, make all claims and otherwise administer such insurance coverage so as to provide the Company and the Subsidiaries the full benefits of such insurance coverage in accordance with the terms thereof; and (f) vigorously and diligently prosecute and defend all Actions and Proceedings, and all claims that might give use to any Action or Proceeding. In addition, the Company will, and will cause the Subsidiaries to, advise, and upon the reasonable request by Atmos, confer with, Atmos concerning operational matters of a material nature, including risk management matters. Conferences shall be held during normal business hours, and only to the extent that they do not unreasonably interfere with the business and operations of the Company and the Subsidiaries.
6.06 Financial Statements and Reports.
(a) As promptly as practicable and in any event no later than 45 days after the end of each fiscal quarter ending after the date hereof and before the Closing Date (other than the fourth quarter) or 90 days after the end of each fiscal year ending after the date hereof and before the Closing Date, as the case may be, the Company will deliver to Atmos true and complete copies of (in the case of any such fiscal year) the audited and (in the case of any such fiscal quarter) the unaudited consolidated balance sheet, and the related audited or unaudited consolidated statements of operations, shareholders' equity and cash flows, of the Company and its consolidated subsidiaries, in each case as of and for the fiscal year then ended or as of and for each such fiscal quarter and the portion of the fiscal year then ended, as the case may be, together with the notes, if any, relating thereto, which financial statements shall be prepared on a basis consistent with the audited financial statements referred to in Section 4.09.
(b) As promptly as practicable, the Company will deliver to Atmos true and complete copies of such regularly-prepared operating statements as may be prepared by Shareholders, the Company or any Subsidiary consistent with prior custom and practice relating to the business or operations of the Company or any Subsidiary.
(c) The Company shall furnish to Atmos such additional consolidated financial statements of the Company and the Subsidiaries as may be required or, in the judgment of Atmos, are advisable to be filed by Atmos in accordance with Regulation S-X under the Securities Act prior to the Closing Date.
(d) All Financial Statements shall meet the requirements for the Financial Statements delivered pursuant to Section 4.09 as represented and warranted in such Section.
6.07 Certain Restrictions. Unless otherwise consented to in writing by Atmos or expressly permitted in the Disclosure Schedule, the Shareholders will cause the Company and the Subsidiaries to refrain from:
(a) amending the certificates or articles of incorporation or bylaws (or other comparable corporate charter documents) of the Company and the Subsidiaries or taking any action with respect to any such amendment or any recapitalization, reorganization, liquidation or dissolution of the Company and the Subsidiaries;
(b) authorizing, issuing, selling or otherwise disposing of any shares of capital stock of or any Option with respect to the Company or any Subsidiary, or modifying or amending any right of any holder of outstanding shares of capital stock of or Option with respect to the Company or any Subsidiary;
(c) (i) declaring, setting aside or paying any dividend or other distribution in respect of the capital stock of the Company or any Subsidiary not wholly owned, directly or indirectly, by the Company, or (ii) directly or indirectly redeeming, purchasing or otherwise acquiring any capital stock of or any Option with respect to the Company or any Subsidiary not wholly owned, directly or indirectly, by the Company; provided that the Company may continue to pay quarterly cash dividends (which dividends are payable in arrears following the end of each fiscal quarter) consistent with past practice at the rate of $500,000 with respect to each fiscal quarter (or with respect to the Company's first fiscal quarter, $700,000);
(d) acquiring or disposing of, or incurring any Lien (other than a Permitted Lien) on, any material Assets and Properties, other than (i) as contemplated by the Budget or (ii) in the ordinary course of business consistent with past practices provided Atmos has consented thereto in writing, which consent shall not be unreasonably withheld or delayed; provided that the Company may continue to conduct negotiations in connection with, enter into agreements with respect to, and proceed with construction of, a pipeline intended to expand the Company's supply capabilities into the Tupelo, Mississippi market, so long as all expenditures in connection with such pipeline do not exceed $20,000,000 in the aggregate for the life of the project (the "Tupelo Pipeline") and are consistent with the Company's original estimates of
capital expenditures for the project previously provided to Atmos; and provided further that the Company may dispose of its one-third interest in a King Air twin-engine turboprop C90 airplane, whether in the form of a dividend to shareholders or any other means, on terms customary therefor that are not adverse to the Company in any material respect, and regardless of the consideration received therefor;
(e) other than in the ordinary course of business consistent with past practice, entering into, amending, modifying, terminating (partially or completely), granting any waiver under or giving any consent with respect to any material Contract or License; provided (i) that the Company and the Subsidiaries may enter into, modify, amend or terminate any material Contract or License relating to gas supply, pipeline transportation and storage as long as (A) such Contract or License (1) with respect to gas supply, ensures a reasonably adequate supply of gas for ongoing operations on commercially reasonable terms, (2) with respect to transportation, ensures that the Company will have a reasonably proper amount of transportation capacity on commercially reasonable terms, and (3) with respect to storage, provides that the Company's gas storage facilities are supplied with a reasonable amount of gas on commercially reasonable terms, considering the time of year such facilities are to be utilized, and (B) such Contract or License does not result in the Company having outstanding hedge positions at any time that are speculative or inconsistent with (1) any applicable MPSC order in effect or (2) any existing Company policy, and (ii) the Company may enter into Contracts with blanket contractors and construction contractors to the extent required to effect the capital expenditures contemplated by the Budget consistent with past practice; provided further that the Company and the Subsidiaries may not enter into any such Contract or License for a term greater than one year or extend the term of any such Contract or License for more than one year;
(f) (i) voluntarily incurring Indebtedness; provided that the Company and the Subsidiaries may incur Indebtedness that does not provide for any prepayment penalty and which is incurred (A) in the ordinary course of business consistent with past practice to finance working capital, or (B) as reasonably required to finance the expenditures contemplated by the Budget, including all expenditures in connection with the Tupelo Pipeline or (ii) other than in the ordinary course of business consistent with past practice, purchasing, canceling, prepaying or otherwise providing for a complete or partial discharge in advance of a scheduled payment date with respect to, or waiving any right under, any Indebtedness in an aggregate principal amount exceeding $100,000 (in either case other than Indebtedness of the Company or a Subsidiary owing to the Company or a wholly-owned Subsidiary);
(g) engaging with any Person in any merger or other business combination;
(h) other than as contemplated by the Budget, making capital expenditures or commitments for additions to property, plant or equipment constituting capital assets in an aggregate amount exceeding $1,000,000, except as may be required by Law or deemed necessary in the exercise of Good Utility Practice;
(i) except to the extent required by applicable Law or GAAP, making any material change in (A) any pricing, investment, accounting, financial reporting, inventory, credit,
allowance or Tax practice or policy, or (B) any method of calculating any bad debt, contingency or other reserve for accounting, financial reporting or Tax purposes;
(j) making any change in its fiscal year;
(k) engaging in any activities which would cause a change in its status, or that of its Subsidiaries, under PUHCA, including any action or inaction that would cause the prior approval of the SEC under PUHCA to be required for the consummation of the transactions contemplated hereby;
(l) enter into any new line of business or expand any immaterial line of business as of the date hereof beyond the activities required by Contracts in existence as of the date hereof;
(m) agreeing or consenting to any material agreements or modifications of material existing agreements with any Government or Regulatory Authority, including its rate agreement with the MPSC (including its allowed rate of return, purchased gas adjustments or weather normalization adjustments), in respect of the operations of their businesses, it being acknowledged and agreed that the Company's allowed rate of return, which is determined using an agreed-upon formula, may fluctuate as a result of the application of such formula;
(n) other than a settlement with respect to the Clarksdale Lawsuit in an amount not to exceed the Clarksdale Settlement Amount and on non-monetary terms that could not be reasonably expected to be materially adverse to the Company, settling any Action or Proceeding, or any claim that might give rise to any Action or Proceeding, except to the extent such settlements are covered by insurance (less a deductible not exceeding $250,000 as to any occurrence (within the meaning of the applicable insurance policy)) and on terms that could not be reasonably expected to be materially adverse to the continuing insurance coverage and risk management strategy of the Company and the Subsidiaries;
(o) taking any action that is reasonably expected to cause the representations and warranties of the Shareholders in Article IV not to be true and correct on and as of the Closing Date, except as expressly contemplated by any of the foregoing; or
(p) entering into any Contract to do or engage in any of the foregoing.
6.08 Employee Matters.
(a) Except as may be required by Law or as expressly permitted in the Disclosure Schedule, the Shareholders will cause the Company and the Subsidiaries to refrain from:
(i) making any increase in the salary, wages or other compensation of any officer or employee of the Company or any Subsidiary, other than increases which are consistent with the prior practice and policy of the Company;
(ii) adopting, entering into or becoming bound by any Benefit Plan, employment-related Contract or collective bargaining agreement, or amending or modifying (in any material respect) or terminating (partially or completely) any Benefit Plan, employment-related Contract or collective bargaining agreement; provided that the foregoing is not intended to restrict the Company's ability to hire and terminate employees in the ordinary course of business consistent with past practice; or
(iii) except as consistent with the prior practices and policies of the Company, establishing or modifying any (A) targets, goals, pools or similar provisions in respect of any fiscal year under any Benefit Plan, employment-related Contract or other employee compensation arrangement or (B) salary ranges, increase guidelines or similar provisions in respect of any Benefit Plan, employment-related Contract or other employee compensation arrangement, except for published salary information.
(b) The Shareholders and the Company will, and will cause the Subsidiaries to, administer each Benefit Plan, or cause the same to be so administered, in all material respects in accordance with the applicable provisions of the Code, ERISA and all other applicable Laws. Shareholders will promptly notify Atmos in writing of any receipt by Shareholders, the Company or any Subsidiary (and furnish Atmos with copies) of any notice of investigation or administrative proceeding by the IRS, DOL, PBGC or other Person involving any Benefit Plan, or any notice by the Company or any Subsidiary to the IRS or the DOL regarding any voluntary compliance procedures with respect to any Benefit Plan.
(c) The Shareholders and the Company will cause the Company's Gratuitous Pay Plan to be terminated prior to Closing and shall pay to or for the benefit of those employees with 10 or more years of continuous service with the Company at termination of the Plan, an amount equal to the severance benefits those employees would have been entitled to receive if they had terminated employment at the termination of such Plan.
6.09 Notification of Certain Matters. The Shareholders and the Company shall give prompt notice to Atmos of (i) the occurrence or nonoccurrence of any event the occurrence or nonoccurrence of which would be likely to cause any representation or warranty contained in this Agreement to be untrue or inaccurate in any material respect, or (ii) any failure of the Shareholders or the Company materially to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied hereunder; provided, however, that the delivery of any notice pursuant to this Section 6.09 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice.
6.10 Certain Prohibited Sales. Prior to the Closing Date, neither the Shareholders nor the Company, or any Person acting on their behalf or for their benefit, shall offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any Atmos Common Stock or securities convertible into or exchangeable or exercisable for any Atmos Common Stock, enter into a transaction which would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of the Atmos Common Stock, whether any such aforementioned transaction is to be settled by delivery of the Atmos Common Stock or such other securities, in
cash or otherwise, or publicly disclose the intention to make any such offer, sale, pledge or disposition, or to enter into any such transaction, swap, hedge or other arrangement.
6.11 Certain Tax Matters. The Shareholders and the Company shall not take or fail to take any action that would cause the Merger to fail to qualify as a reorganization under Section 368 of the Code. The Company shall use its best efforts to execute and deliver at Closing the certificate substantially in the form attached hereto as Exhibit G, and such other representations as reasonably requested by counsel to the Company or Atmos, at such time or times as reasonably requested by such legal counsel in connection with their delivery of the opinions referred to in Sections 1.01(b)(i) and (ii). Prior to the Effective Time, none of Company, the Subsidiaries, nor the Shareholders shall take or cause to be taken any action that would cause to be untrue (or fail to take or cause not to be taken any action that would cause to be untrue) any of the representations in Exhibits G or H and such other representations as so requested.
6.12 Note Purchase Agreements. For each Contract set forth in
Section 4.17(a)(iv)(1) of the Disclosure Schedule, the Shareholders and the
Company will use commercially reasonable efforts to cooperate with Atmos in
obtaining an irrevocable waiver of the debt limitation restrictions provided
therein on terms reasonably acceptable to Atmos.
6.13 Fulfillment of Conditions. The Shareholders and the Company will take all commercially reasonable steps necessary or desirable and proceed diligently and in good faith to satisfy each condition to the obligations of Atmos contained in this Agreement and will not, and will not permit any Subsidiary to, take or fail to take any action that could reasonably be expected to result in the nonfulfillment of any such condition. Nothing contained in this Section 6.13 shall require the Shareholders or the Company to institute or defend any Action or Proceeding, make any material payment or incur any economic burden, dispose of any material asset or business or suffer any material detriment, including any change in the applicable rates or tariffs of the business of the Company or the imposition of any other materially adverse term or condition on the business or the Assets and Properties of the Company and the Subsidiaries.
ARTICLE VII
COVENANTS OF ATMOS
Atmos covenants and agrees with the Shareholders and any Permitted Transferees that, at all times from and after the date hereof, Atmos will comply with all covenants and provisions of this Article VII, except to the extent the Shareholders and the Company may otherwise consent in writing.
7.01 Regulatory and Other Approvals. Atmos will as promptly as practicable (a) take all commercially reasonable steps necessary or desirable to obtain all consents, approvals or actions of, make all filings with and give all notices to Governmental or Regulatory Authorities or any other Person required of Atmos to consummate the transactions contemplated hereby, including those described in Schedules 5.03 and 5.04 hereto, (b) provide such other information and communications to such Governmental or Regulatory Authorities or other Persons as such Governmental or Regulatory Authorities or other Persons may reasonably
request in connection therewith and (c) provide reasonable cooperation to Shareholders, the Company and the Subsidiaries in connection with the performance of their obligations under Sections 6.01 and 6.02. Atmos will provide prompt notification to the Shareholders when any such consent, approval, action, filing or notice referred to in clause (a) above is obtained, taken, made or given, as applicable, and will advise the Shareholders of any communications (and, unless precluded by Law, provide copies of any such communications that are in writing) with any Governmental or Regulatory Authority or other Person regarding any of the transactions contemplated by this Agreement.
7.02 HSR Filings. In addition to and without limiting Atmos's covenants contained in Section 7.01, Atmos will (i) take promptly all actions necessary to make the filings required of Atmos or its Affiliates under the HSR Act, (ii) comply at the earliest practicable date with any request for additional information received by Atmos or its Affiliates from the Federal Trade Commission or the Antitrust Division of the Department of Justice pursuant to the HSR Act and (iii) cooperate with the Shareholders in connection with the Shareholders' or the Company's filing under the HSR Act and in connection with resolving any investigation or other inquiry concerning the transactions contemplated by this Agreement commenced by either the Federal Trade Commission or the Antitrust Division of the Department of Justice or state attorneys general.
7.03 Investigation by Shareholders. Atmos will (a) provide the
Shareholders and their Representatives with full access, upon reasonable prior
notice and during normal business hours, to all officers, employees, agents and
accountants of Atmos and its subsidiaries and their Assets and Properties and
Books and Records, but only to the extent that such access does not unreasonably
interfere with the business and operations of Atmos and its subsidiaries, and
(b) furnish the Shareholders and such other Persons with all such information
and data concerning the business operations of Atmos and its subsidiaries as the
Shareholders or any of such other Persons reasonably may request in connection
with such investigation, except to the extent that furnishing any such
information or data would violate any Law, Order, Contract or License applicable
to Atmos or any of its subsidiaries or by which any of their respective Assets
and Properties is bound.
7.04 Employees, Compensation and Benefits.
(a) Atmos, in its sole discretion, shall determine the job titles and duties of all of the employees of the Company and its Subsidiaries immediately prior to the Effective Time (the "Assumed Employees") and, except as otherwise required by any collective bargaining agreement, shall provide compensation and employee benefits to such Assumed Employees which are comparable to the compensation and employee benefits provided to all other non-union employees of Atmos.
(b) Any Assumed Employee who continues his or her employment with Atmos and who was a participant in a Benefit Plan and any former employee of the Company or any Subsidiary and who was a participant in a Benefit Plan may continue to participate in such Benefit Plan so long as such Plan is maintained by Atmos or one of its subsidiaries; provided, however, that Atmos, in its sole discretion, shall have the right, subject to the terms of any applicable collective bargaining agreement, to merge or terminate any such Benefit Plan and to
transfer such Assumed Employees or former employees to another employee plan or program which is maintained by Atmos or one of its subsidiaries.
(c) Atmos shall credit all Assumed Employees (i) with their period of employment with the Company or any of the Subsidiaries for eligibility, participation and vesting (but not benefit accrual) purposes in any employee plan or program maintained by Atmos or one of its subsidiaries and for which such employees are eligible and (ii) for any co-payments and deductibles paid during the current plan year and prior to the Closing Date in satisfying any applicable deductible or out-of-pocket requirements under any welfare plans in which such employees are eligible to participate after the Closing Date and during the current plan year of such welfare plans (it being understood that Assumed Employees who continue to be covered under any Benefit Plan shall not, during the period of such coverage, be eligible to participate in any other employee plan or program which provides the same or similar benefits and which is maintained by Atmos or one of its subsidiaries).
(d) Except as otherwise provided in this Section 7.04 and
Section 7.05, it is expressly understood by the parties hereto that Atmos makes
no commitment for the maintenance and continuation after the Closing of any
Benefit Plan or the provisions of any particular benefits for any Assumed
Employee or former employee of the Company or any of its Subsidiaries.
7.05 Severance Policy and Other Agreements.
(a) Except as otherwise provided in Section 7.05(b), Atmos may, in its sole discretion, terminate any standard severance policy covering any Assumed Employees or former employees of the Company or any of the Subsidiaries; provided that Atmos shall make available severance benefits to such employees on a basis which is consistent with the past practice of Atmos in connection with acquisitions.
(b) Following the Closing Date, Atmos shall honor or cause to be honored all severance agreements and employment-related Contracts between the Company and its directors, officers or employees that are listed in Section 7.05 of the Disclosure Schedule.
7.06 Directors' and Officers' Indemnification and Insurance.
(a) From and after the Closing Date and until the sixth anniversary of the Closing Date and for so long thereafter as any claim for indemnification asserted on or prior to such date has not been fully adjudicated, Atmos shall, to the fullest extent permitted by Law and the Articles of Incorporation and Bylaws of Atmos as of the date hereof (but not in excess of the extent permitted by the certificates or articles of incorporation and the bylaws (or other comparable charter documents) of the Company and the Subsidiaries as of the date hereof), indemnify, defend and hold harmless each Person who is now, or has been at any time prior to the date hereof or who becomes prior to the Closing Date, a director or officer of the Company or any of the Subsidiaries (the "Indemnified Agents") against all losses, claims, damages, costs and expenses (including reasonable attorneys' fees), liabilities, judgments and settlement amounts that are paid or incurred in connection with any claim, action, suit, proceeding or
investigation (whether civil, criminal, administrative or investigative and whether asserted or claimed prior to, at or after the Closing Date) that is based on, or arises out of, the fact that such Indemnified Agent is or was a director or officer of the Company or any of its Subsidiaries and relates to or arises out of any action or omission occurring on or prior to the Closing Date ("Indemnified Liabilities"); provided that Atmos shall not be liable for any settlement of any claim effected without its written consent. Any Indemnified Agent wishing to claim indemnification under this Section 7.06, upon learning of any such claim, action, suit, proceeding or investigation, shall notify Atmos, but the failure so to notify Atmos shall not relieve Atmos from any liability which it may have under this paragraph except to the extent such failure prejudices Atmos. The Indemnified Agents as a group may retain only one law firm to represent them with respect to each such matter unless there is, under applicable standards of professional conduct, a conflict on any significant issue between the positions of any two or more Indemnified Agents, in which case the Indemnified Agents may retain more than one law firm.
(b) Atmos shall, until the sixth anniversary of the Closing Date and (if required for coverage thereof) for so long thereafter as any claim for insurance coverage asserted on or prior to such date has not been fully adjudicated, cause to be maintained in effect, to the extent available, the policies of directors' and officers' liability insurance maintained by the Company and the Subsidiaries as of the date hereof ($25,000,000 in coverage with a $100,000 deductible), or policies of at least the same coverage and amounts containing terms that are no less advantageous to the insured parties, with respect to claims arising from facts or events that occurred on or prior to the Closing Date; provided that in no event shall Atmos be obligated to expend in order to maintain or procure insurance coverage pursuant to this Section 7.06(b) any amount per annum in excess of 150% of the aggregate premiums payable by the Company and the Subsidiaries in 2000 (on an annualized basis) for such purpose.
7.07 Listing of Stock. Atmos shall use commercially reasonably efforts to cause the Atmos Shares to be listed, upon official notice of issuance, on each national securities exchange on which the Atmos Common Stock is traded, on or prior to the Closing Date.
7.08 Certain Tax Matters. Atmos shall not take or fail to take any action that would cause the Merger to fail to qualify as a reorganization under Section 368 of the Code. Atmos shall use its best efforts to execute and deliver at Closing the certificate substantially in the form attached hereto as Exhibit H, and such other representations as reasonably requested by counsel to the Company or Atmos, at such time or times as reasonably requested by such legal counsel in connection with their delivery of the opinions referred to in Sections 1.01(b)(i) and (ii). Prior to the Effective Time, Atmos shall not take or cause to be taken any action that would cause to be untrue (or fail to take or cause not to be taken any action that would cause to be untrue) any of the representations in Exhibits G or H and such other representations as so requested.
7.09 Fulfillment of Conditions. Atmos will take all commercially reasonable steps necessary or desirable and proceed diligently and in good faith to satisfy each condition to the obligations of Shareholders contained in this Agreement and will not take or fail to take any action that could reasonably be expected to result in the nonfulfillment of any such condition. Nothing contained in Section 7.01 or 7.02 or in this Section 7.09 shall require Atmos or any of
its subsidiaries to institute or defend any Action or Proceeding, make any material payment or incur any economic burden, dispose of any material asset or business or suffer any material detriment, including any change in the applicable rates or tariffs of its business or the business of the Company and the Subsidiaries or the imposition of any other materially adverse term or condition on the business or the Assets or Properties of Atmos or its subsidiaries or the Company or the Subsidiaries.
7.10 Environmental Due Diligence.
(a) All environmental due diligence (including employee interviews and sampling of any media or wastewater) conducted by Atmos shall be conducted in accordance with this Section 7.10. All activities of Atmos regarding environmental due diligence shall be conducted to minimize any inconvenience or interruption of the business of the Company and the Subsidiaries.
(b) Atmos shall provide to the Shareholders or to the
Shareholders' counsel, copies of all reports, assessments and other information
composed or compiled by Atmos or Atmos's environmental consultant(s) promptly
following Atmos's receipt thereof. Atmos shall treat all such information
delivered to, or composed or compiled by, Atmos or Atmos's environmental
consultant(s) as Environmental Data in accordance with the procedures of this
Section 7.10.
(c) Prior to the Closing, neither Atmos nor its environmental consultant(s) shall disclose or release any audits, reports and studies delivered to or prepared by Atmos and any other information collected and generated as a result of Atmos's environmental due diligence ("Environmental Data") without the prior written consent of the Shareholders and all such information shall be kept strictly confidential. Atmos expressly agrees that until the Closing, it will not distribute the Environmental Data to any third party without the Shareholders' prior written consent.
(d) Atmos may retain one or more outside environmental consultants to assist in its environmental due diligence concerning the Assets and Properties of the Company and the Subsidiaries and shall notify the Shareholders of the environmental consultant or consultants Atmos intends to retain. Thereafter, the Shareholders shall have five Business Days after receipt of such notification to notify Atmos in writing of the Shareholders' objection (which must be based upon reasonable grounds) and substantiate the basis for that objection. If Shareholders do not so object within such five Business Day period, the Shareholders shall be deemed to have consented to Atmos's selection.
(e) Atmos may conduct, at its sole expense, Phase I "environmental assessment activities" (within the meaning of the applicable ASTM standards) with respect to the Assets and Properties of the Company and the Subsidiaries, and upon reasonable advance notice shall be afforded access to existing environmental reports in the possession of the Shareholders, the Company or any Subsidiary, relevant correspondence, permits issued under Environmental Laws and related materials regarding the Assets and Properties of the Company and the Subsidiaries and all other Phase I activities as set forth in the ASTM protocol regarding Phase I
assessments. Any permitted Phase I environmental assessment activities shall not include any sampling or intrusive testing. All Phase I environmental assessment activities shall be conducted in accordance with ASTM standards regarding Phase I assessments. Upon completion of such Phase I assessment activities, Atmos's environmental consultant(s) may prepare and deliver to Atmos a written report with respect thereto (consistent with the procedures and standards set forth in this Section 7.10.
(f) Prior to Closing, Atmos may not conduct any Phase II environmental assessment activities with respect to the Assets and Properties of the Company and the Subsidiaries (including the taking and analysis of soil, surface water and groundwater samples, testing of buildings, drilling wells, taking soil borings and excavating) without the prior written consent of the Shareholders, which consent may be withheld, conditioned or delayed by the Shareholders in their sole discretion.
(g) Atmos may conduct, at its sole expense, asbestos survey activities with respect to the Assets and Properties of the Company and the Subsidiaries, including reviewing existing reports, correspondence and other related documents, inspecting individual sites and collecting samples of suspected asbestos-containing materials; provided that such sampling activities do not adversely affect property value, appearance or integrity and such sampling locations are repaired and restored to substantially their original condition. These asbestos survey activities shall be conducted in accordance with the provisions of Section 7.10(e).
(h) Notwithstanding the foregoing, if prior to Closing the Shareholders, the Company or any Subsidiary receives notice of any Action or Proceeding, pending or threatened, arising under Environmental Laws or if any of the Shareholders or the Company otherwise acquires knowledge that is reasonably likely to require a change to the Disclosure Schedule, the Shareholders promptly shall notify Atmos of the same and Atmos may request that the Shareholders authorize Atmos to conduct specific additional environmental due diligence measures if and to the extent that such measures are required to determine the extent of any potential environmental liability relating thereto. Such authorization shall not be unreasonably withheld, conditioned or delayed by the Shareholders. Any such additional environmental due diligence shall be conducted at Atmos's sole expense.
(i) Atmos hereby agrees to indemnify and hold harmless the Shareholders, the Shareholders' Affiliates and their respective officers, directors, employees, agents, successors and assigns from and against any and all Losses with respect to personal injury or property damage arising out of or in connection with any site visit by Atmos or its environmental consultant(s) and resulting from an act or omission of Atmos or its environmental consultant(s), including any breach of this Agreement, in the course of its environmental inspections.
7.11 Note Purchase Agreements. In the event that the
Shareholders and the Company are unable to obtain, for any Contract set forth in
Section 4.17(a)(iv)(1) of the Disclosure Schedule, an irrevocable waiver of the
debt limitation restrictions provided therein on terms reasonably acceptable to
Atmos, then Atmos shall, on the Closing Date, repay in full the indebtedness
issued pursuant thereto in accordance with the terms thereof.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF ATMOS
The obligation of Atmos under this Agreement to effect the Merger is subject to the fulfillment, at or before the Closing, of each of the following conditions (all or any of which may be waived in whole or in part by Atmos in its sole discretion):
8.01 Representations and Warranties. (a) The representations and warranties made by Shareholders in this Agreement shall be true and correct in all material respects as of the date hereof; (b) the representations and warranties made by Shareholders in Sections 4.10 and 4.13 shall be true and correct in all material respects on and as of the Closing Date as though made on and as of the Closing Date; and (c) the representations and warranties made by Shareholders in this Agreement (other than Sections 4.10 and 4.13) shall be true and correct (without regard to any materiality limitations or qualifications set forth therein) on and as of the Closing Date as though made on and as of the Closing Date, except to the extent that any failure of such representations and warranties to be true and correct on account of actions, events or conditions arising after the date hereof, individually or in the aggregate, could not reasonably be expected to be materially adverse to the Business or Condition of the Company or to the Shareholders' ability to consummate the transactions contemplated hereby; provided that the truth and correctness of representations and warranties made as of a specified date earlier than the date hereof shall be determined only on and as of such earlier date; provided further that the condition provided in clause (a) above with respect to any representation and warranty shall be deemed satisfied if such representation and warranty is true and correct in all material respects as of the Closing Date.
8.02 Performance. Shareholders and the Company shall have performed and complied with, in all material respects, the agreements, covenants and obligations required by this Agreement to be so performed or complied with by Shareholders and the Company at or before the Closing.
8.03 Bring-Down Certificates. Each Shareholder and the Company shall have delivered to Atmos a certificate, dated the Closing Date and executed in its name and on its behalf by a duly authorized representative, certifying as to the compliance by it with Sections 8.01 and 8.02.
8.04 Orders and Laws. There shall not be in effect on the Closing Date any Order or Law restraining, enjoining or otherwise prohibiting or making illegal or providing for damages or other relief in respect of the consummation of any of the transactions contemplated by this Agreement, and there shall not be pending or threatened in writing any Action or Proceeding by any Governmental or Regulatory Authority seeking any such Order.
8.05 Regulatory Consents and Approvals. The MPSC shall have issued an Order approving the transactions contemplated hereby; such Order shall not contain any restrictions, conditions or other provisions (other than those in effect on the date hereof or requiring that the regulatory treatment with respect to the business of the Company and the Subsidiaries in existence as of the date hereof be continued following the Closing) that are
materially adverse to the conduct of the business of the Company and the Subsidiaries as operated on the date hereof; the other terms and conditions of such Order shall not be materially adverse to Atmos; and such Order shall have become final. In addition, all consents, approvals and actions of, filings with and notices to any other Governmental or Regulatory Authority necessary to permit Atmos, the Company and Shareholders to perform their obligations under this Agreement and to consummate the transactions contemplated hereby shall have been duly obtained, made or given on terms not materially adverse to Atmos and shall be in full force and effect, and all terminations or expirations of waiting periods imposed by any Governmental or Regulatory Authority necessary for the consummation of the transactions contemplated by this Agreement, including under the HSR Act, shall have occurred.
8.06 Third Party Consents. The consents (or in lieu thereof waivers) listed in Schedule 8.06 hereto shall have been obtained and shall be in full force and effect.
8.07 Certificates. Shareholders shall have delivered the certificates representing the Company Shares as contemplated in Section 3.01.
8.08 Resignations of Directors. The members of the boards of directors of the Subsidiaries shall have tendered, effective at the Closing, their resignations as such directors.
8.09 Escrow Agreement. Each of the Shareholders and the Escrow Agent shall have executed and delivered the Escrow Agreement.
8.10 Standstill Agreement. Each of the Shareholders shall have executed and delivered the Standstill Agreement substantially in the form of Exhibit B hereto.
8.11 Releases. The Shareholders shall have delivered the Releases of the Company and the Subsidiaries substantially in the form of Exhibit C hereto.
8.12 Closing Opinions. The Shareholders shall have delivered to Atmos the opinions of Milbank, Tweed, Hadley & McCloy LLP, Forman Perry Watkins Krutz & Tardy, PLLC, and their respective counsel substantially to the effect set forth on Exhibits D-1, D-2, D-3 and D-4, respectively.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF SHAREHOLDERs AND THE COMPANY
The obligation of each of the Shareholders and the Company under this Agreement to effect the Merger is subject to the fulfillment, at or before the Closing, of each of the following conditions (all or any of which may be waived in whole or in part by Shareholders and the Company in their sole discretion):
9.01 Representations and Warranties. The representations and warranties made by Atmos in this Agreement (a) shall be true and correct in all material respects as of the date hereof and (b) shall be true and correct (without regard to any materiality limitations or qualifications set forth herein) on and as of the Closing Date as though made on and as of the
Closing Date, except to the extent that any failure of such representations and warranties to be true and correct on account of actions, events, or conditions arising after the date hereof, individually or in the aggregate, could not reasonably be expected to be materially adverse to the business, assets, liabilities, financial condition, results of operations or prospects of Atmos and its subsidiaries taken as a whole or to Atmos's ability to consummate the transactions contemplated hereby; provided that the truth and correctness of representations and warranties made as of a specified date earlier than the date hereof shall be determined only on and as of such earlier date; provided further that the condition provided in clause (a) above with respect to any representation and warranty shall be deemed satisfied if such representation and warranty is true and correct in all material respects as of the Closing Date.
9.02 Performance. Atmos shall have performed and complied with, in all material respects, the agreements, covenants and obligations required by this Agreement to be so performed or complied with by Atmos at or before the Closing.
9.03 Bring-Down Certificate. Atmos shall have delivered to Shareholders a certificate, dated the Closing Date and executed in the name and on behalf of Atmos by a duly authorized officer, certifying as to the compliance by it with Sections 9.01 and 9.02.
9.04 Orders and Laws. There shall not be in effect on the Closing Date any Order or Law restraining, enjoining or otherwise prohibiting or making illegal or providing for damages or other relief in respect of the consummation of any of the transactions contemplated by this Agreement, and there shall not be pending or threatened in writing any Action or Proceeding by any governmental or Regulatory Authority seeking any such Order.
9.05 Regulatory Consents and Approvals. All consents, approvals and actions of, filings with and notices to any other Governmental or Regulatory Authority necessary to permit Shareholders, the Company and Atmos to perform their obligations under this Agreement and to consummate the transactions contemplated hereby shall have been duly obtained, made or given and shall be in full force and effect, and all terminations or expirations of waiting periods imposed by any Governmental or Regulatory Authority necessary for the consummation of the transactions contemplated by this Agreement, including under the HSR Act, shall have occurred.
9.06 Third Party Consents. The consents (or in lieu thereof waivers) listed in Schedule 9.06 shall have been obtained and shall be in full force and effect.
9.07 Escrow Agreement. Atmos and the Escrow Agent shall each have executed and delivered the Escrow Agreement.
9.08 Registration Rights Agreement. Atmos shall have executed and delivered the Registration Rights Agreement substantially in the form of Exhibit E hereto.
9.09 Closing Opinions. Atmos shall have delivered to the Shareholders the opinions of Gibson, Dunn & Crutcher LLP and Hunton & Williams substantially to the effect set forth on Exhibits F-1 and F-2, respectively.
9.10 Listing. The Atmos Shares shall have been duly authorized for listing on the New York Stock Exchange (and any other national securities exchange on which the Atmos Common Stock is then listed), subject to official notice of issuance.
ARTICLE X
SURVIVAL; NO OTHER REPRESENTATIONS
10.01 Survival of Representations, Warranties, Covenants and Agreements. The representations and warranties contained in this Agreement will survive the Closing and any investigation by the parties hereto for a period of one year from the Closing Date. Except as provided in the following sentence, the covenants and agreements of the parties hereto contained in this Agreement will survive the Closing and any investigation of the parties hereto without time limit. The covenants and agreements of the Shareholders and the Company contained in Article VI (other than Section 6.11) and of Atmos contained in Article VII (other than Sections 7.04, 7.05, 7.06, 7.08 and 7.10(i)) will survive the Closing for a period of one year from the Closing Date. Notwithstanding anything in this Section 10.01 to the contrary, any representation, warranty, covenant or agreement that would otherwise terminate in accordance with this Section 10.01 will continue to survive if a Claim Notice or Indemnity Notice (as applicable) shall have been timely given in good faith based on facts reasonably expected to establish a valid claim under Article XI on or prior to such termination date (but only with respect to the claim that is the subject of such Claim Notice or Indemnity Notice), until the related claim for indemnification has been satisfied or otherwise resolved as provided in Article XI.
10.02 No Other Representations. Notwithstanding anything to the contrary contained in this Agreement, it is the explicit intent of each party hereto that neither the Shareholders nor Atmos is making any representation or warranty whatsoever, express or implied, at law or in equity, whether under contract, tort or other applicable Law, (a) in respect of the Company, the Subsidiaries, or any of their respective Assets and Properties, liabilities or operations, in the case of Shareholders, or (b) in respect of Atmos and its subsidiaries, or any of their respective Assets and Properties, liabilities, or operations, in the case of Atmos, except those representations and warranties contained in this Agreement. Atmos acknowledges that to the extent the transactions contemplated herein are construed as the transfer of Assets and Properties of the Company and its Subsidiaries, such transfer of Assets and Properties is with no warranty whatsoever, whether express or implied, other than as expressed in Article IV, the Disclosure Schedule or in any certificate or agreement delivered pursuant to this Agreement, including those pertaining to habitability, merchantability or fitness for a particular purpose, as well as any warranty against apparent or latent defects of any type. In addition, neither the Shareholders nor Atmos make any representation or warranty with respect to (i) the information set forth in the confidential offering memorandum dated October, 2000, or (ii) any financial projection or forecast.
ARTICLE XI
INDEMNIFICATION
11.01 Indemnification.
(a) Subject to Section 11.01(c) and the other Sections of this Article XI, the Shareholders shall, jointly and severally, indemnify Atmos and its directors, officers, employees, stockholders and Affiliates in respect of, and hold each of them harmless from and against, any and all Losses suffered, incurred or sustained by any of them or to which any of them becomes subject, resulting from, arising out of or relating to the following:
(i) any breach or inaccuracy of any representation or warranty or any nonfulfillment of or failure to perform any covenant or agreement on the part of Shareholders or the Company contained in this Agreement;
(ii) the Clarksdale Lawsuit to the extent that such
Losses exceed the sum of the Clarksdale Settlement Amount plus any
adjustment in the Merger Consideration in respect thereof pursuant to
Section 2.02; and
(iii) the Flash Fire / Explosion Claims for occurrences (within the meaning of the Company's insurance policies listed in the Disclosure Schedule) of injury to persons or property prior to the Closing Date to the extent the Losses therefrom are not funded with proceeds from the Company's insurance policies listed in the Disclosure Schedule or any Replacement Policy and which exceed $250,000 per occurrence plus any adjustment in the Merger Consideration in respect thereof pursuant to Section 2.02.
(b) Subject to Section 11.01(c) and the other Sections of this Article XI, Atmos shall indemnify each of the Shareholders and Permitted Transferees and their respective directors, officers, employees, fiduciaries, stockholders and Affiliates in respect of, and hold each of them harmless from and against, any and all Losses suffered, incurred or sustained by any of them or to which any of them becomes subject, resulting from, arising out of or relating to any breach or inaccuracy of representation or warranty or nonfulfillment of or failure to perform any covenant or agreement on the part of Atmos contained in this Agreement.
(c) Notwithstanding anything to the contrary contained in this Agreement, no amounts of indemnity shall be payable as a result of any claim in respect of a Loss arising under Section 11.01 (a)(i) or (b):
(i) in the case of any claim for a Loss in respect of a breach or inaccuracy of any representation or warranty (other than a representation or warranty contained in Section 4.10), unless, until and then only to the extent that the Indemnified Party has suffered, incurred, sustained or become subject to aggregate Losses in respect of all breaches or inaccuracies of such representations and warranties in excess of $1,000,000; or
(ii) unless the Indemnified Party has given the Indemnifying Party a Claim Notice or Indemnity Notice, as applicable, with respect to such claim, setting forth
in reasonable detail the specific facts and circumstances pertaining thereto, prior to the applicable Cut-off Date, if any.
11.02 Method of Asserting Claims. All claims for indemnification by any Indemnified Party under Section 11.01 will be asserted and resolved as follows:
(a) In the event any claim or demand in respect of which an Indemnified Party might seek indemnity under Section 11.01 is asserted against or sought to be collected from such Indemnified Party by a Person other than any of the Shareholders or Atmos or any of their respective Affiliates (a "Third Party Claim"), the Indemnified Party shall deliver a Claim Notice with reasonable promptness to the Indemnifying Party and the failure to do so shall not relieve the Indemnifying Party of its obligations in respect thereof except to the extent it is materially harmed thereby. The Indemnifying Party will notify the Indemnified Party as soon as practicable within the Dispute Period whether the Indemnifying Party disputes its liability to the Indemnified Party under Section 11.01 and whether the Indemnifying Party desires, at its sole cost and expense, to defend the Indemnified Party against such Third Party Claim.
(i) If the Indemnifying Party notifies the Indemnified Party within the Dispute Period that the Indemnifying Party desires to defend the Indemnified Party with respect to the Third Party Claim pursuant to this Section 11.02(a), then the Indemnifying Party will have the right to defend, at the sole cost and expense of the Indemnifying Party, such Third Party Claim by all appropriate proceedings, which proceedings will be vigorously and diligently prosecuted by the Indemnifying Party to a final conclusion or will be settled at the discretion of the Indemnifying Party (without the consent of the Indemnified Party if a full release is obtained by the Indemnified Party and all amounts payable in the settlement are paid by the Indemnifying Party, but only with the consent of the Indemnified Party in any other case, including the case of any settlement that provides for any relief other than the payment of monetary damages). The Indemnifying Party will have full control of such defense and proceedings, including (except as provided in the immediately preceding sentence) any settlement thereof; provided, however, that the Indemnified Party may, at the sole cost and expense of the Indemnified Party, at any time prior to the Indemnifying Party's delivery of the notice referred to in the first sentence of this clause (i), file any motion, answer or other pleadings or take any other action that the Indemnified Party reasonably believes to be necessary or appropriate to protect its interests and not prejudicial to the Indemnifying Party; and provided further, that if requested by the Indemnifying Party, the Indemnified Party will, at the sole cost and expense of the Indemnifying Party, cooperate with the Indemnifying Party and its counsel in contesting any Third Party Claim that the Indemnifying Party elects to contest, or, if appropriate and related to the Third Party Claim in question, in making any counterclaim against the Person asserting the Third Party Claim, or any cross-complaint against any Person (other than the Indemnified Party or any of its Affiliates). The Indemnified Party may retain separate counsel to represent it in, but not control, any defense or settlement of any Third Party Claim controlled by the Indemnifying Party pursuant to this clause (i), and the Indemnified Party will bear its own costs and expenses with respect to such separate counsel except as provided in the preceding sentence. Notwithstanding the foregoing, the Indemnified Party may retain or take over the control
of the defense or settlement of any Third Party Claim the defense of which the Indemnifying Party has elected to control if the Indemnified Party irrevocably waives its right to indemnity under Section 11.01 with respect to such Third Party Claim or the proceedings are not being diligently prosecuted by the Indemnifying Party.
(ii) If the Indemnifying Party fails to notify the
Indemnified Party within the Dispute Period that the Indemnifying Party
desires to defend the Third Party Claim pursuant to Section 11.02(a),
then the Indemnified Party will have the right to defend, at the sole
cost and expense of the Indemnifying Party, the Third Party Claim by
all appropriate proceedings, which proceedings will be vigorously and
diligently prosecuted by the Indemnified Party to a final conclusion or
will be settled at the discretion of the Indemnified Party (without the
consent of the Indemnifying Party, unless the Indemnifying Party
confirms in writing its obligation to indemnify the Indemnified Parties
for such Claim, in which case the consent of the Indemnifying Party
shall be required but shall not be unreasonably withheld or delayed).
The Indemnified Party will have full control of such defense and
proceedings, including any settlement thereof; provided, however, that
if requested by the Indemnified Party, the Indemnifying Party will, at
the sole cost and expense of the Indemnifying Party, cooperate with the
Indemnified Party and its counsel in contesting any Third Party Claim
which the Indemnified Party is contesting, or, if appropriate and
related to the Third Party Claim in question, in making any
counterclaim against the Person asserting the Third Party Claim, or any
cross-complaint against any Person (other than the Indemnifying Party
or any of its Affiliates). Notwithstanding the foregoing provisions of
this clause (ii), if the Indemnifying Party has notified the
Indemnified Party within the Dispute Period that the Indemnifying Party
disputes its liability hereunder to the Indemnified Party with respect
to such Third Party Claim and if such dispute is resolved in favor of
the Indemnifying Party in the manner provided in clause (iii) below,
the Indemnifying Party will not be required to bear the costs and
expenses of the Indemnified Party's defense pursuant to this clause
(ii) or of the Indemnifying Party's participation therein at the
Indemnified Party's request, and the Indemnified Party will reimburse
the Indemnifying Party in full for all reasonable costs and expenses
incurred by the Indemnifying Party in connection with such litigation.
The Indemnifying Party may retain separate counsel to represent it in,
but not control, any defense or settlement controlled by the
Indemnified Party pursuant to this clause (ii), and the Indemnifying
Party will bear its own costs and expenses with respect to such
participation.
(iii) If the Indemnifying Party notifies the Indemnified Party that it does not dispute its liability to the Indemnified Party with respect to the Third Party Claim under Section 11.01 or fails to notify the Indemnified Party within the Dispute Period whether the Indemnifying Party disputes its liability to the Indemnified Party with respect to such Third Party Claim, the Loss arising from such Third Party Claim will be conclusively deemed a liability of the Indemnifying Party under Section 11.01 and the Indemnifying Party shall pay the amount of such Loss to the Indemnified Party on demand following the final determination thereof. If the Indemnifying Party has timely disputed its liability with respect to such claim, the Indemnifying Party and the Indemnified Party will proceed in good faith to negotiate a resolution of such dispute, and
if not resolved through negotiations, either party may seek a resolution of such dispute by litigation in a court of competent jurisdiction.
(iv) Notwithstanding the foregoing, the Shareholders shall not have the right to defend any Flash Fire / Explosion Claim, except as to any issue of any extent of the Company's insurance coverage in respect thereof.
(b) In the event any Indemnified Party should have a claim under Section 11.01 against any Indemnifying Party that does not involve a Third Party Claim, the Indemnified Party shall deliver an Indemnity Notice with reasonable promptness to the Indemnifying Party, and the failure to do so shall not relieve the Indemnifying Party of its obligations in respect thereof except to the extent it is materially harmed thereby. If the Indemnifying Party notifies the Indemnified Party that it does not dispute the claim described in such Indemnity Notice or fails to notify the Indemnified Party within the Dispute Period whether the Indemnifying Party disputes the claim described in such Indemnity Notice, the Loss arising from the claim specified in such Indemnity Notice will be conclusively deemed a liability of the Indemnifying Party under Section 11.01 and the Indemnifying Party shall pay the amount of such Loss to the Indemnified Party on demand following the final determination thereof. If the Indemnifying Party has timely disputed its liability with respect to such claim, the Indemnifying Party and the Indemnified Party will proceed in good faith to negotiate a resolution of such dispute, and if not resolved through negotiations, either party may seek a resolution of such dispute by litigation in a court of competent jurisdiction.
(c) In the event of any claim for indemnity under Section 11.01(a), Atmos agrees to give each Shareholder and their respective Representatives reasonable access to the Books and Records and employees of the Company and the Subsidiaries in connection with the matters for which indemnification is sought to the extent such Shareholder and its Representatives reasonably deem necessary in connection with its rights and obligations under this Article XI.
11.03 Method of Calculating Losses. 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 Losses 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. All indemnification payments under this Article XI shall be deemed adjustments to the Merger Consideration.
11.04 Exclusivity. After the Closing, the indemnities set forth in this Article XI shall be the exclusive remedies of Atmos, the Shareholders, any Permitted Transferees and their respective officers, directors, employees, agents and Affiliates for any misrepresentation, breach of warranty or nonfulfillment or failure to be performed of any covenant or agreement contained in this Agreement, except in the case of fraud. Notwithstanding anything to the contrary in this Agreement, after the Closing:
(a) any liability of the Shareholders to indemnify any
Indemnified Party pursuant to Section 11.01(a)(i) in respect of any
representation or warranty other than a representation and warranty contained in
Section 4.04 or 4.10 (or in any certificate to the extent such representation
and warranty is repeated as of the Closing Date) or any covenant or agreement to
be performed prior to the Closing Date shall be limited to $20,000,000 in the
aggregate; and
(b) any liability of Atmos to indemnify the Indemnified Parties pursuant to Section 11.01(b) in respect of any representation and warranty other than a representation and warranty contained in Section 5.06 (or in any certificate to the extent such representation and warranty is repeated as the Closing Date) or any covenant or agreement to be performed prior to the Closing Date shall be limited to $20,000,000 in the aggregate.
No Person who was an officer, director or stockholder of the Company prior to the Closing or of Atmos shall have any liability to make any payment in respect of any breach of any representation or warranty or non-performance of any covenant contained in this Article XI, except for the Shareholders' indemnification obligations under this Article XI.
11.05 No Punitive Damages. Anything herein to the contrary notwithstanding, no party shall be liable under this Agreement or with respect to the transactions contemplated hereby for any punitive or exemplary damages.
11.06 INDEMNIFICATION IN CASE OF STRICT LIABILITY OR INDEMNITEE NEGLIGENCE. THE INDEMNIFICATION PROVISIONS IN THIS ARTICLE XI SHALL BE ENFORCEABLE REGARDLESS OF WHETHER THE LIABILITY IS BASED ON PAST, PRESENT OR FUTURE ACTS, CLAIMS OR LEGAL REQUIREMENTS (INCLUDING ANY PAST, PRESENT OR FUTURE BULK SALES LAW, ENVIRONMENTAL LAW, FRAUDULENT TRANSFER ACT, OCCUPATIONAL SAFETY AND HEALTH LAW, OR PRODUCTS LIABILITY, SECURITIES OR OTHER LEGAL REQUIREMENT), AND REGARDLESS OF WHETHER ANY PERSON (INCLUDING THE PERSON FROM WHOM INDEMNIFICATION IS SOUGHT) ALLEGES OR PROVES THE SOLE, CONCURRENT, CONTRIBUTORY OR COMPARATIVE NEGLIGENCE OF THE PERSON SEEKING INDEMNIFICATION, OR THE SOLE OR CONCURRENT STRICT LIABILITY IMPOSED ON THE PERSON SEEKING INDEMNIFICATION.
ARTICLE XII
TERMINATION
12.01 Termination. This Agreement may be terminated, and the Merger and the other transactions contemplated hereby may be abandoned:
(a) at any time before the Effective Time, by mutual written agreement of the Shareholders, the Company and Atmos;
(b) at any time before the Effective Time, by the Shareholders or Atmos, in the event that any Law or any final, nonappealable Order becomes effective restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement, upon notification of the non-terminating party by the terminating party;
(c) by Atmos, upon and during the continuation of a breach in any material respect of any of the representations and warranties of the Shareholders contained in this Agreement or in the failure by the Shareholders to perform and comply in any material respect with any of the covenants and agreements required by this Agreement to be performed or complied with by the Shareholders, provided that such breach or failure is not cured by the Shareholders in a manner reasonably acceptable to Atmos within 60 days of the Shareholders' receipt of a written notice from Atmos that such a breach or failure has occurred;
(d) by the Shareholders, upon and during the continuation of a breach in any material respect of any of the representations and warranties of Atmos contained in this Agreement or the failure by Atmos to perform and comply in any material respect with any of the agreements and obligations required by this Agreement to be performed or complied with by Atmos, provided that such breach or failure is not cured by Atmos in a manner reasonably acceptable to the Shareholders within 60 days of Atmos's receipt of a written notice from the Shareholders that such a breach or failure has occurred;
(e) by the Shareholders or Atmos, as appropriate, if any Governmental or Regulatory Authority or other Person whose approval or consent is required to fulfill a condition precedent to Closing set forth in Sections 8.05 or 8.06 (with respect to Atmos) or in Sections 9.05 or 9.06 (with respect to the Shareholders) has issued any final, nonappealable Order denying such approval or consent or containing terms or conditions (or, if such approval or consent has been obtained, containing terms or conditions) that, in the reasonable business judgment of Atmos or the Shareholders, as appropriate, will result in a condition precedent to Closing set forth in Section 8.05 or 8.06 (with respect to Atmos) or in Section 9.05 or 9.06 (with respect to the Shareholders) not being satisfied;
(f) at any time after September 30, 2002 by the Shareholders or Atmos upon notification of the non-terminating party by the terminating party if the Closing shall not have occurred on or before such date and such failure to consummate is not caused by a breach of this Agreement by the terminating party; provided that if the Closing has not occurred by such date because the conditions provided in Sections 8.05 and 9.05 have not been fulfilled, such date shall be automatically extended to December 31, 2002; or
(g) by the Shareholders, if the Average Price is less than the
Stock Value; provided that the Shareholders deliver to Atmos written notice of
the Shareholders' election to terminate this Agreement pursuant to this Section
12.01(g) at least three trading days prior to the Closing Date, and Atmos does
not elect, by delivering written notice to the Shareholders prior to the Closing
Date, to include in the Merger Consideration additional consideration
("Additional Consideration"), payable at the sole discretion of Atmos in cash or
shares of Atmos Common Stock, or any combination thereof, such that the sum of
(i) the aggregate amount of cash paid by
Atmos pursuant to Section 2.01(c) and this Section 12.01(g) and (ii) the product of (A) the aggregate number of shares of Atmos Common Stock to be issued to the Shareholders pursuant to Section 2.01(c) and this Section 12.01(g) and (B) the Average Price shall be equal to the Merger Consideration.
12.02 Effect of Termination. If this Agreement is validly
terminated pursuant to Section 12.01, this Agreement will forthwith become null
and void, and there will be no liability or obligation on the part of the
Shareholders or Atmos (or any of their respective officers, directors,
employees, agents or other representatives or Affiliates) under this Agreement
or in connection with the transactions contemplated hereby, except that the
provision with respect to expenses in Section 14.03 will continue to apply
following any such termination. Notwithstanding any other provision in this
Agreement to the contrary, upon termination of this Agreement pursuant to
Section 12.01(c) or (d), the parties will remain liable for any willful breach
of this Agreement existing at the time of such termination, and any party
damaged thereby may seek such remedies, including damages and reasonable fees of
attorneys, against the other with respect to any such breach as are provided in
this Agreement or as are otherwise available at law or in equity.
ARTICLE XIII
DEFINITIONS
13.01 Definitions.
(a) Defined Terms. As used in this Agreement, the following defined terms have the meanings indicated below:
"Acquisition Proposal" means any proposal for a merger or other business combination to which the Company or any Subsidiary is a party or the direct or indirect acquisition of any equity interest in, or a substantial portion of the assets of, the Company or any Subsidiary, other than the transactions contemplated by this Agreement.
"Actions or Proceedings" means any action, suit, proceeding, arbitration or Governmental or Regulatory Authority investigation.
"Additional Consideration" has the meaning ascribed to it in
Section 12.01(g).
"Adjustments" has the meaning ascribed to it in Section 2.02.
"Affiliate" means any Person that directly, or indirectly through one of more intermediaries, controls or is controlled by or is under common control with the Person specified. For purposes of this definition, control of a Person means the power, direct or indirect, to direct or cause the direction of the management and policies of such Person whether by Contract or otherwise and, in any event and without limitation of the previous sentence, any Person owning 10% or more of the equity securities of another Person shall be deemed to control that Person.
"Agreement" means this Agreement and Plan of Merger and Reorganization and the Exhibits, the Disclosure Schedule and the Schedules hereto and the certificates delivered in accordance with Sections 8.03 and 9.03, as the same shall be amended from time to time.
"Articles of Merger" has the meaning ascribed to it in Section 1.03(a)(iii).
"Assets and Properties" of any Person means all assets and properties of every kind, nature, character and description (whether real, personal or mixed, whether tangible or intangible, and wherever situated), including the goodwill related thereto, operated, owned or leased by such Person.
"Assumed Employees" has the meaning ascribed to it in Section 7.04(a).
"Atmos" has the meaning ascribed to it in the forepart of this Agreement.
"Atmos Common Stock" has the meaning ascribed to it in Section 2.01(c).
"Atmos Financial Statements" has the meaning ascribed to it in
Section 5.07(b).
"Atmos SEC Reports" has the meaning ascribed to it in Section 5.07(a).
"Atmos Shares" has the meaning ascribed to it in Section 2.01(c).
"Average Price" has the meaning ascribed to it in Section 2.01(c).
"Benefit Plan" means any Plan established by the Company or any Subsidiary, or any predecessor or ERISA Affiliate of any of the foregoing, existing at the Closing Date or at any time within the five year period prior thereto, to which the Company or any Subsidiary contributes, has contributed, is obligated to contribute or otherwise has any liability, or under which any employee, former employee or director of the Company or any Subsidiary or any beneficiary thereof is covered, is eligible for coverage or has benefit rights.
"Books and Records" means all files, documents, instruments, papers, books and records relating to the Business or Condition of the Company, including financial statements, Tax Returns and related work papers and letters from accountants, budgets, pricing guidelines, ledgers, journals, deeds, title policies, minute books, stock certificates and books, stock transfer ledgers, Contracts, Licenses, operating data and plans and environmental studies and plans.
"Budget" means, for the fiscal year ending September 30, 2001, the Capital Expenditure Budget of the Company (a copy of which has been provided to Atmos), and for any fiscal year thereafter, the Capital Expenditure Budget of the Company for that year as approved by its Board of Directors; provided, that if such budget exceeds $21,000,000 (exclusive of costs relating to the Tupelo Pipeline), or contains any category of material expenditures not in the Budget as of the date hereof the Company shall first obtain the consent of Atmos with respect to such budget, which consent shall not be unreasonably withheld or delayed.
"Business Day" means a day other than Saturday, Sunday or any day on which banks located in the State of Mississippi, New York or Texas are authorized or obligated to close.
"Business or Condition of the Company" means the business, assets, liabilities, financial condition or results of operations of the Company and the Subsidiaries taken as a whole.
"Cash Amount" has the meaning ascribed to it in Section 2.01(c).
"CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, and the rules and regulations promulgated thereunder.
"CERCLIS" means the Comprehensive Environmental Response and Liability Information System, as provided by 40 C.F.R. Section 300.5.
"Claim Notice" means written notification pursuant to Section 11.02(a) of a Third Party Claim as to which indemnity under Section 11.01 is sought by an Indemnified Party, enclosing a copy of all papers served, if any, and specifying the nature of and basis for such Third Party Claim and for the Indemnified Party's claim against the Indemnifying Party under Section 11.01, together with the amount or, if not then reasonably determinable, the estimated amount, determined in good faith, of the Loss arising from such Third Party Claim.
"Clarksdale Lawsuit" has the meaning ascribed to it in Section 2.02(b).
"Clarksdale Settlement Amount" means that amount designated as the Maximum Settlement Amount in the Letter Agreement, entered into as of the date hereof by and among Atmos, the Company and the Shareholders, with respect to the Clarksdale Lawsuit.
"CLAT" has the meaning ascribed to it in Section 3.01(a)(v).
"Closing" has the meaning ascribed to it in Section 1.02.
"Closing Date" means (a) the last Business Day of the month in which the last of the consents, approvals, actions, filings, notices or waiting periods described in or related to the filings described in Sections 8.05 and 8.06 and Sections 9.05 and 9.06 has been obtained, made or given or has expired, as applicable, or (b) such other date as Atmos and the Shareholders mutually agree upon in writing.
"Code" means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.
"Company" has the meaning ascribed to it in the forepart of this Agreement.
"Company Common Stock" means the common stock, par value $5.00 per share, of the Company.
"Company Shares" has the meaning ascribed to it in the forepart of this Agreement.
"Constituent Corporations" has the meaning ascribed to it in
Section 1.01(a).
"Contract" means any agreement, contract, obligation, promise, undertaking, lease, License, evidence of Indebtedness, mortgage, indenture, security agreement or other agreement, whether written or oral, that is legally binding.
"Cut-off Date" means, with respect to any representation, warranty, covenant or agreement contained in this Agreement, the date, if any, on which such representation, warranty, covenant or agreement ceases to survive as provided in Section 10.01.
"Defined Benefit Plan" means each Benefit Plan which is subject to Part 3 of Title I of ERISA, Section 412 of the Code or Title IV of ERISA.
"Delivery Time" has the meaning ascribed to it in Section 2.03.
"Disclosure Schedule" means the schedule of disclosures delivered to Atmos by the Shareholders herewith and dated as of the date hereof, containing exceptions to, and other disclosures called for by, the representations and warranties set forth in Article IV. The statements contained in the Disclosure Schedule shall be arranged to correspond to the sections to which they relate and shall themselves be deemed the joint and several representations and warranties of the Shareholders.
"Dispute Period" means the period ending 60 days following receipt by an Indemnifying Party of either a Claim Notice or an Indemnity Notice.
"DOL" means the United States Department of Labor.
"Effective Time" has the meaning ascribed to it in Section 1.03.
"Environmental Data" has the meaning ascribed to it in Section 7.10(c).
"Environmental Law" means any Law or Order relating to the regulation or protection of the environment, natural resources or human health and safety, including CERCLA and laws relating to the Release or threatened Releases of Hazardous Materials (including into ambient air, soil, surface water, ground water, wetlands, land or subsurface strata), or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, Release, transport or handling of Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" means any Person who is in the same controlled group of corporations or who is under common control with any of the Shareholders or, before the Closing, the Company or any Subsidiary (within the meaning of Section 414 of the Code).
"Escrow Agent" has the meaning ascribed to it in Section 2.03.
"Escrow Agreement" has the meaning ascribed to it in Section 2.03.
"Escrow Funds" has the meaning ascribed to it in Section 2.03.
"Exchange Act" means the Securities and Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
"FERC" means the Federal Energy Regulatory Commission.
"Financial Statements" means the consolidated financial statements of the Company and its consolidated subsidiaries delivered to Atmos pursuant to Section 4.09 or 6.06.
"Flash Fire / Explosion Claims" has the meaning ascribed to it in Section 2.02(c).
"GAAP" means generally accepted accounting principles, consistently applied throughout the specified period and in the immediately prior comparable period.
"Good Utility Practice" means any of the applicable practices, methods and acts engaged in or approved by a Governmental or Regulatory Authority or by a significant portion of the industry within the Company's general geographic region and in which the Company and its Subsidiaries conduct their business and operations during the relevant time period which, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost to the party being expected to apply Good Utility Practice, consistent with Law, good business practices and transmission and distribution reliability, safety and expedition. Good Utility Practice is intended to include practices, methods or acts generally accepted in the region in which the Company and its Subsidiaries conduct their business and operations, and is not intended to be limited to optimum practices, methods or acts to the exclusion of all others. Good Utility Practice does not include intentional disregard of contractual commitments, even if those commitments are uneconomic under current market conditions.
"Governmental or Regulatory Authority" means any court, tribunal, arbitrator, authority, agency, commission, official or other instrumentality of the United States or any state, county, city or other political subdivision.
"Hazardous Material" means (i) any petrochemical or petroleum products, oil, natural gas liquids, coal ash, flammable explosives, radioactive materials, radon gas, asbestos in any form that is or could become friable, urea formaldehyde foam insulation and transformers or other equipment that contain dielectric fluid containing levels of polychlorinated biphenyls (PCBs); (ii) any chemicals or other materials or substances which are now or hereafter become
defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous substances," "restricted hazardous materials," "toxic substances," "contaminants," "pollutants," "toxic pollutants" or words of similar import under any Environmental Law; and (iii) any other chemical or other material or substance, exposure to which is now or hereafter prohibited, limited or regulated by any Environmental Law. Notwithstanding the foregoing, Hazardous Material shall not include natural gas or propane.
"HSR Act" means Section 7A of the Clayton Act (Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) and the rules and regulations promulgated thereunder.
"Indebtedness" of any Person means all obligations of such Person (i) for borrowed money, (ii) evidenced by notes, bonds, debentures or similar instruments, (iii) for the deferred purchase price of goods or services (other than trade payables or accruals incurred in the ordinary course of business), (iv) under capital leases, (v) under interest rate swaps, and (vi) in the nature of guarantees of the obligations described in clauses (i) through (v) above of any other Person.
"Indemnified Agents" has the meaning ascribed to it in Section 7.06(a).
"Indemnified Liabilities" has the meaning ascribed to it in
Section 7.06(a).
"Indemnified Party" means any Person claiming indemnification under any provision of Article XI.
"Indemnifying Party" means any Person against whom a claim for indemnification is being asserted under any provision of Article XI.
"Indemnity Notice" means written notification pursuant to
Section 11.02(b) of a claim for indemnity under Article XI, specifying the
nature of and basis for such claim, together with the amount or, if not then
reasonably determinable, the estimated amount, determined in good faith, of the
Loss arising from such claim.
"Intellectual Property" means all patents and patent rights, trademarks and trademark rights, trade names and trade name rights, service marks and service mark rights, service names and service name rights, brand names, inventions, copyrights and copyright rights, know-how, trade secrets, confidential information, technical information, data, process technology, plans, drawings and blueprints, and all pending applications for and registrations of patents, trademarks, service marks and copyrights.
"Investment Assets" means all debentures, notes and other evidences of Indebtedness, stocks, securities (including rights to purchase and securities convertible into or exchangeable for other securities), interests in joint ventures and general and limited partnerships, mortgage loans and other investment or portfolio assets owned of record or beneficially by the Company or any Subsidiary and issued by any Person other than the
Company or any Subsidiary (other than trade receivables generated in the ordinary course of business of the Company and the Subsidiaries).
"IRS" means the United States Internal Revenue Service.
"June 30, 2001 Balance Sheet" has the meaning ascribed to it in Section 4.09(a).
"Knowledge of Atmos" means the actual knowledge, after reasonable investigation, of the following individuals: John P. Reddy; Laurie M. Sherwood and Louis P. Gregory.
"Knowledge of Shareholders and the Company" means the actual knowledge, after reasonable investigation, of the following individuals: Matthew L. Holleman, III, Sanford B. Novick, Hugh F. Langley and Richard W. Wise.
"Laws" means all laws, statutes, rules, regulations, ordinances, codes, common law and other pronouncements having the effect of law of the United States or any state, county, city or other political subdivision or of any Governmental or Regulatory Authority.
"Liabilities" means all Indebtedness, obligations and other liabilities of a Person (whether absolute, accrued, contingent, fixed or otherwise, or whether due or to become due).
"Licenses" means all licenses, permits, variances, certificates of authority, grants, authorizations, approvals, exceptions, registrations, franchises, tariffs, orders (including any rate, rate relief and rate adjustment orders) and similar consents granted or issued by any Governmental or Regulatory Authority.
"Liens" means any mortgage, pledge, assessment, security interest, lease, lien, adverse claim, levy, charge, restriction, imperfection of title or other encumbrance of any kind, or any conditional sale Contract, title retention Contract or other Contract to give any of the foregoing.
"Loss" means any and all claims, damages, fines, penalties, deficiencies, liabilities, losses and expenses (including claims, interest, court costs, reasonable fees of attorneys, accountants and other experts or other reasonable expenses of litigation or other proceedings or of any claim, default or assessment) and diminution in value, whether or not involving a third party claim.
"MBCA" has the meaning ascribed to it in Section 1.01(a).
"Merger" has the meaning ascribed to it in the forepart of this Agreement.
"Merger Consideration" has the meaning ascribed to it in
Section 2.01(c).
"Mississippi Articles of Merger" has the meaning ascribed to it in Section 1.03(a)(i).
"Mississippi Secretary of State" has the meaning ascribed to it in Section 1.03(a)(i).
"MPSC" means the Public Service Commission of the State of Mississippi.
"NPL" means the National Priorities List under CERCLA.
"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract that
gives the right to (i) purchase or otherwise receive or be issued any shares of
capital stock of such Person or any security of any kind convertible into or
exchangeable or exercisable for any shares of capital stock of such Person or
(ii) receive or exercise any benefits or rights similar to any rights enjoyed by
or accruing to the holder of shares of capital stock of such Person, including
any rights to participate in the equity or income of such Person or to
participate in or direct the election of any directors or officers of such
Person or the manner in which any shares of capital stock of such Person are
voted.
"Order" means any writ, judgment, decree, injunction or similar order of any Governmental or Regulatory Authority (in each such case whether preliminary or final).
"PBGC" means the Pension Benefit Guaranty Corporation established under ERISA.
"Permitted Lien" means (i) any Lien for Taxes not yet due or delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (ii) any statutory Lien (other than any ERISA Lien) arising in the ordinary course of business by operation of Law with respect to a Liability that is not yet due or delinquent and (iii) any minor imperfection of title or similar Lien which individually or in the aggregate with other such Liens are immaterial in amount, do not impair materially the value or the use of the Asset or Property subject thereto, and will not result in any absence, loss or reversion of, or inability to transfer title or any termination of the right of use thereof.
"Permitted Transferee" has the meaning ascribed to it in
Section 6.04.
"Person" means any natural person, corporation, limited liability company, general partnership, limited partnership, proprietorship, other business organization, trust, union, association or Governmental or Regulatory Authority.
"Plan" means any bonus, incentive compensation, deferred compensation, pension, profit sharing, retirement, stock purchase, stock option, stock ownership, stock appreciation rights, phantom stock, leave of absence, layoff, vacation, day or dependent care, legal services, cafeteria, life, health, accident, disability, workmen's compensation or other insurance, severance, separation or other employee benefit plan, practice, policy or arrangement
of any kind, whether written or oral, including, but not limited to, any "employee benefit plan" within the meaning of Section 3(3) of ERISA.
"PUHCA" means the Public Utility Holding Company Act of 1935, as amended, and the rules and regulations promulgated thereto.
"Qualified Plan" means each Benefit Plan which is intended to qualify under Section 401 of the Code.
"Release" means any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration into the indoor or outdoor environment, including, without limitation, the movement of Hazardous Materials through ambient air, soil, surface water, ground water, wetlands, land or subsurface strata.
"Replacement Policy" means an insurance policy of the Company that replaces one or more insurance policies of the Company listed on the Disclosure Schedule; provided that such insurance policy shall satisfy the representations and warranties set forth in Section 4.19 and the covenants set forth in Section 6.05(e).
"Representatives" has the meaning ascribed to it in Section 6.03.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
"Share Amount" has the meaning ascribed to it in Section 2.01(c).
"Shareholder" has the meaning ascribed to it in the forepart of this Agreement.
"State Agencies" has the meaning ascribed to it in Section 1.03(a)(iii).
"Stock Value" has the meaning ascribed to it in Section 2.01(c).
"Subject Defined Benefit Plan" means each Defined Benefit Plan listed and described in the Disclosure Schedule.
"Subsidiary" means any Person in which the Company, directly or indirectly through Subsidiaries or otherwise, beneficially owns more than 50% of either the equity interests in, or the voting control of, such Person.
"Surviving Corporation" has the meaning ascribed to it in
Section 1.01(a).
"System Property" has the meaning ascribed to it in Section 4.14(a).
"Tax" or "Taxes" means any federal, state, local, foreign, or other jurisdiction ad valorem, asset, capital, customs, documentary, duty, employment, estimated, excise, franchise, gross income, gross receipts, lease, license, net income, payroll, premium, profits, property, occupation, sales, service, service use, social security, stamp, severance, transaction privilege, transfer, unemployment, use, withholding or workers compensation tax, or other assessments, charges, fees, imposts, levies, taxes imposed as a result of "self-dealing," "interested-party" or other prohibited transactions, or taxes of any kind whatever, together, in each instance, with any interest and penalties thereon and any additions to tax with respect thereto, including penalties for the failure to file any Tax Return, and any expenses incurred in connection with the determination, settlement or litigation of any Tax liabilities.
"Tax Return" means any return, declaration, report, claim for refund, information return, statement and other forms required to be filed with respect to any Taxes, including any schedule or attachment thereto, and including any amendments or supplements thereof.
"TBCA" has the meaning ascribed to it in Section 1.01(a).
"Texas Articles of Merger" has the meaning ascribed to it in
Section 1.03(a)(ii).
"Texas Secretary of State" has the meaning ascribed to it in
Section 1.03(a)(ii).
"Third Party Claim" has the meaning ascribed to it in Section 11.02(a).
"Total Issuable Shares" has the meaning ascribed to it in
Section 1.01(b)(iii).
"Total Payable Cash" has the meaning ascribed to it in Section 1.01(b)(iii).
"Total Stock Value" has the meaning ascribed to it in Section 1.01(b)(iii).
"Transfer Taxes" means all sales, use, transfer, real property transfer, reporting, gains, stock transfer and other similar taxes and fees arising out of or in connection with the transactions effected pursuant to this Agreement.
"Tupelo Pipeline" has the meaning ascribed to it in Section 6.07(d).
"Virginia Articles of Merger" has the meaning ascribed to it in Section 1.03(a)(iii).
"Virginia Commission" has the meaning ascribed to it in
Section 1.03(a)(iii).
"VSCA" has the meaning ascribed to it in Section 1.01(a).
(b) Construction of Certain Terms and Phrases. Unless the context of this Agreement otherwise requires, (i) words of any gender include each other gender; (ii) words using the singular or plural number also include the plural or singular number, respectively; (iii) the terms "hereof," "herein," "hereby" and derivative or similar words refer to this entire
Agreement; (iv) the terms "Article" or "Section" refer to the specified Article or Section of this Agreement; and (v) the word "including" and its derivatives means "including without limitation" and corresponding expressions. Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days or trading days are specified. All accounting terms used herein and not expressly defined herein shall have the meanings given to them under GAAP. Any representation or warranty contained herein as to the enforceability of a Contract shall be subject to the effect of any bankruptcy, insolvency, reorganization, moratorium or other similar Law affecting the enforcement of creditors' rights generally and to general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law). Time is of the essence with respect to this Agreement.
ARTICLE XIV
MISCELLANEOUS
14.01 Notices. All notices, requests and other communications hereunder must be in writing and will be deemed to have been duly given only if delivered personally or by facsimile transmission or mailed (first class postage prepaid) to the parties at the following addresses or facsimile numbers:
If to Atmos, to:
Atmos Energy Corporation
1800 Three Lincoln Centre
5430 LBJ Freeway
Dallas, TX 75240
Attn: Louis P. Gregory
Facsimile No.: (972) 855-3080
with a copy to:
Gibson, Dunn & Crutcher LLP
2100 McKinney Avenue, Suite 1100
Dallas, TX 75201
Attn: Irwin F. Sentilles, III
Facsimile No.: (214) 698-3400
If to the Company, to:
Mississippi Valley Gas Company
P.O. Box 3348
Jackson, MS 39207
Attn: Matthew L. Holleman, III Facsimile No.: (601) 961-6876
If to the Shareholders, to:
Robert M. Hearin Support Foundation
P.O. Box 2540
Jackson, MS 39207
Attn: Daisy Blackwell
Facsimile No.: (601) 961-6876
Estate of Leon Hess
c/o Hess Group LLC
1185 Avenue of the Americas
40th Floor
New York, NY 10036
Attn: Robert Connor
Facsimile No.: (212) 536 8488
Twenty-Five Year Charitable Lead Annuity Trust under the
Will of Leon Hess
c/o Hess Group LLC
1185 Avenue of the Americas
40th Floor
New York, NY 10036
Attn: Robert Connor
Facsimile No.: (212) 536 8488
with a copy to:
Milbank, Tweed, Hadley & McCloy LLP
One Chase Manhattan Plaza
New York, NY 10005
Attn: Robert S. Reder, Esq.
Facsimile No.: 212-530-5219
Baker, Donelson, Bearman & Caldwell
P.O. Box 14167
Jackson, MS 39236
Attn: James K. Dossett, Jr.
Facsimile No.: (601) 592-7482
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section 14.01, be deemed given
upon delivery, (ii) if delivered by facsimile transmission to the facsimile
number as provided in this Section 14.01, be deemed given upon receipt, and
(iii) if delivered by mail in the manner described above to the address as
provided in this Section 14.01, be deemed given upon receipt. Any party from
time to time may change its address, facsimile number or other information for
the purpose of notices to that party by giving notice specifying such change to
the other party hereto.
14.02 Entire Agreement. This Agreement supersedes all prior discussions and agreements between the parties with respect to the subject matter hereof and contains the sole and entire agreement between the parties hereto with respect to the subject matter hereof, other than that certain confidentiality agreement between the parties dated October 13, 2000, which shall survive the execution and delivery of this Agreement in accordance with its terms and shall terminate at the Closing.
14.03 Expenses. Except as otherwise expressly provided in this Agreement (including as provided in Section 12.02), whether or not the transactions contemplated hereby are consummated, each party will pay its own costs and expenses incurred in connection with the negotiation, execution and closing of this Agreement and the Escrow Agreement and the transactions contemplated hereby and thereby; provided that the Shareholders shall (i) pay the fees and expenses of all investment banking firms (including Goldman, Sachs & Co.), legal counsel (including Milbank, Tweed, Hadley & McCloy LLP and Forman Perry Watkins Krutz & Tardy, PLLC), accountants (including Deloitte & Touche LLP), and other professional service providers retained on behalf of the Shareholders or the Company in connection with such transactions, and (ii) pay or reimburse the Company for any other out-of-pocket expenses required for the performance by the Company of its obligations under this Agreement. Notwithstanding the foregoing, all Transfer Taxes incurred in connection with the transactions contemplated by this Agreement shall be the responsibility of the Shareholders; and the Shareholders, on the one hand, and Atmos, on the other hand, shall each pay one-half of all filing fees under the HSR Act.
14.04 Public Announcements. At all times at or before the Closing, the Shareholders and Atmos will not issue or make any reports, statements or releases to the public with respect to this Agreement or the transactions contemplated hereby without the consent of the other, which consent shall not be unreasonably withheld or delayed. If either party is unable to obtain the approval of its public report, statement or release from the other party and such report, statement or release is required by Law in order to discharge such party's disclosure obligations, then such party may make or issue the legally required report, statement or release and promptly furnish the other party with a copy thereof. The Shareholders and Atmos will also obtain the other party's prior approval of any press release to be issued immediately following the Closing announcing the consummation of the transactions contemplated by this Agreement, which approval shall not be unreasonably withheld or delayed.
14.05 Waiver. Any term or condition of this Agreement may be waived at any time by the party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the party waiving such term or condition. No waiver by any party of any term or condition of this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion. All remedies, either under this Agreement or by Law or otherwise afforded, will be cumulative and not alternative, except as otherwise expressly provided herein.
14.06 Amendment. This Agreement may be amended, supplemented or modified only by a written instrument duly executed by or on behalf of each party hereto.
14.07 No Third Party Beneficiary. The terms and provisions of this Agreement are intended solely for the benefit of each party hereto and their respective successors or permitted assigns, and it is not the intention of the parties to confer third-party beneficiary rights upon any other Person; provided that the Shareholders may enforce the provisions of Section 7.06 for the benefit of the Indemnified Agents.
14.08 No Assignment; Binding Effect. Neither this Agreement nor any right, interest or obligation hereunder may be assigned by any party hereto without the prior written consent of the other party hereto and any attempt to do so will be void, except (a) for assignments and transfers by operation of Law and (b) that Atmos may assign any or all of its rights, interests and obligations hereunder to a wholly-owned subsidiary; provided that any such subsidiary agrees in writing to be bound by all of the terms, conditions and provisions contained herein, but no such assignment referred to in clause (b) shall relieve Atmos of its obligations hereunder. Subject to the preceding sentence, this Agreement is binding upon, inures to the benefit of and is enforceable by the parties hereto and their respective successors and assigns.
14.09 Headings. The headings used in this Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof.
14.10 Consent to Jurisdiction. Each party hereby irrevocably consents to, and agrees to accept and acknowledge, service of any and all process against such party in any action, suit or proceeding arising out of or relating to the transactions contemplated by this Agreement by registered or certified mail to the address for such party as set forth in Section 14.01. Each party hereby irrevocably submits to the exclusive jurisdiction of the United States District Court for the District of Delaware or any court of the State of Delaware in any such action, suit or proceeding arising out of or relating to this Agreement or any of the transactions contemplated hereby, and agrees that any such action, suit or proceeding shall be brought only in such court, provided, however, that such consent to jurisdiction is solely for the purpose referred to in this Section 14.10 and shall not be deemed to be a general submission to the jurisdiction of said courts or in the State of Delaware other than for such purpose. Each party hereby irrevocably waives, to the fullest extent permitted by Law, any objection that it may now or hereafter have to the laying of the venue of any such action, suit or proceeding brought in such a court and any claim that any such action, suit or proceeding brought in such a court has been brought in an inconvenient forum.
14.11 Invalid Provisions. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future Law, and if the rights or obligations of any party hereto under this Agreement will not be materially and adversely affected thereby, (a) such provision will be fully severable, (b) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, and (c) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom.
14.12 Governing Law. This Agreement shall be governed by and construed in accordance with the Laws of the State of Delaware applicable to a Contract executed and performed in such State, without giving effect to the conflicts of Laws principles thereof that would apply any other Law, except that the Merger shall be governed by the MBCA, the TBCA and the VSCA.
14.13 Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.
14.14 Limitation on Trustee and Executor Liability. Notwithstanding anything contained in this Agreement to the contrary, Atmos acknowledges and agrees that the trustees of the Robert M. Hearin Support Foundation, the executors of the Estate of Leon Hess and the trustees of the CLAT have executed and delivered this Agreement, and any and all documents in connection herewith, solely as fiduciaries of such Foundation, Estate and CLAT, respectively, and not in their personal or individual capacities. Atmos agrees that it shall have no recourse against such trustees and executors in their individual or personal capacities under this Agreement, or under any certificate, representation, warranty, indemnification or other instrument delivered in connection herewith.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officer of each party hereto as of the date first above written.
ATMOS ENERGY CORPORATION
By: /s/ JOHN P. REDDY
-----------------------------------
Name: John P. Reddy
Title: Senior Vice President and
Chief Financial Officer
|
MISSISSIPPI VALLEY GAS COMPANY
By: /s/ MATTHEW L. HOLLEMAN, III
-----------------------------------
Name: Matthew L. Holleman, III
Title: President & CEO
|
ROBERT M. HEARIN SUPPORT FOUNDATION
By: /s/ DAISY S. BLACKWELL
-----------------------------------
Name: Daisy S. Blackwell
Title: Trustee
By: /s/ MATTHEW L. HOLLEMAN, III
-----------------------------------
Name: Matthew L. Holleman, III
Title: Trustee
By: /s/ ROBERT M. HEARIN, JR.
-----------------------------------
Name: Robert M. Hearin, Jr.
Title: Trustee
By: /s/ LAURIE MCREE
-----------------------------------
Name: Laurie McRee
Title: Trustee
By: /s/ E. E. LAIRD, JR.
-----------------------------------
Name: E. E. Laird, Jr.
Title: Trustee
By: /s/ ALAN W. PERRY
-----------------------------------
Name: Alan W. Perry
Title: Trustee
|
ESTATE OF LEON HESS
By: /s/ NICHOLAS F. BRADY
-----------------------------------
Name: Nicholas F. Brady
Title: Executor
By: /s/ JOHN B. HESS
-----------------------------------
Name: John B. Hess
Title: Executor
By: /s/ THOMAS H. KEAN
-----------------------------------
Name: Thomas H. Kean
Title: Executor
By: /s/ BURTON T. LEFKOWITZ
-----------------------------------
Name: Burton T. Lefkowitz
Title: Executor
By: /s/ JOHN Y. SCHREYER
-----------------------------------
Name: John Y. Schreyer
Title: Executor
|
TWENTY-FIVE YEAR CHARITABLE LEAD ANNUITY
TRUST UNDER THE WILL OF LEON HESS
/s/ NICHOLAS F. BRADY
---------------------------------------------------------------------
Nicholas F. Brady, as Trustee of the Leon Hess 25 Year Charitable
Lead Annuity Trust under Article SIXTH of the Last Will and Testament
of Leon Hess
/s/ JOHN B. HESS
---------------------------------------------------------------------
John B. Hess, as Trustee of the Leon Hess 25 Year Charitable Lead
Annuity Trust under Article SIXTH of the Last Will and Testament of
Leon Hess
/s/ THOMAS H. KEAN
---------------------------------------------------------------------
Thomas H. Kean, as Trustee of the Leon Hess 25 Year Charitable Lead
Annuity Trust under Article SIXTH of the Last Will and Testament of
Leon Hess
/s/ BURTON T. LEFKOWITZ
---------------------------------------------------------------------
Burton T. Lefkowitz, as Trustee of the Leon Hess 25 Year Charitable
Lead Annuity Trust under Article SIXTH of the Last Will and Testament
of Leon Hess
/s/ JOHN Y. SCHREYER
---------------------------------------------------------------------
John Y. Schreyer, as Trustee of the Leon Hess 25 Year Charitable Lead
Annuity Trust under Article SIXTH of the Last Will and Testament of
Leon Hess
|
EXHIBIT 10.8(a)
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
among
ATMOS ENERGY CORPORATION
as Borrower,
THE LENDERS IDENTIFIED HEREIN,
AND
BANK OF AMERICA, N.A.,
as Administrative Agent,
AND
BANK ONE, NA
and
SOCIETE GENERALE,
as Co-Syndication Agents
AND
FIRST UNION NATIONAL BANK
and
FLEET NATIONAL BANK,
as Co-Documentation Agents
DATED AS OF AUGUST 2, 2001
BANC OF AMERICA SECURITIES LLC
as Sole Lead Arranger and Sole Book Manager
TABLE OF CONTENTS
SECTION 1. DEFINITIONS AND ACCOUNTING TERMS......................................................................1
1.1 Definitions.....................................................................................1
1.2 Computation of Time Periods....................................................................15
1.3 Accounting Terms...............................................................................15
1.4 Time...........................................................................................16
SECTION 2. LOANS................................................................................................16
2.1 Revolving Loan Commitment......................................................................16
2.2 Method of Borrowing for Revolving Loans........................................................18
2.3 Funding of Revolving Loans.....................................................................19
2.4 Continuations and Conversions..................................................................19
2.5 Minimum Amounts................................................................................20
2.6 Reductions of Revolving Loan Commitment........................................................20
2.7 Notes..........................................................................................20
SECTION 3. PAYMENTS.............................................................................................22
3.1 Interest.......................................................................................22
3.2 Prepayments....................................................................................22
3.3 Payment in full at Maturity....................................................................23
3.4 Fees...........................................................................................23
3.5 Place and Manner of Payments...................................................................24
3.6 Pro Rata Treatment.............................................................................24
3.7 Computations of Interest and Fees..............................................................24
3.8 Sharing of Payments............................................................................25
3.9 Evidence of Debt...............................................................................26
SECTION 4. ADDITIONAL PROVISIONS REGARDING LOANS................................................................27
4.1 Eurodollar Loan Provisions.....................................................................27
4.2 Capital Adequacy...............................................................................28
4.3 Compensation...................................................................................29
4.4 Taxes..........................................................................................29
SECTION 5. CONDITIONS PRECEDENT.................................................................................32
5.1 Closing Conditions.............................................................................32
5.2 Conditions to Loans............................................................................33
SECTION 6. REPRESENTATIONS AND WARRANTIES.......................................................................34
6.1 Organization and Good Standing.................................................................34
6.2 Due Authorization..............................................................................34
6.3 No Conflicts...................................................................................34
6.4 Consents.......................................................................................35
6.5 Enforceable Obligations........................................................................35
6.6 Financial Condition............................................................................35
6.7 No Material Change.............................................................................35
|
6.8 No Default.....................................................................................36
6.9 Litigation.....................................................................................36
6.10 Taxes..........................................................................................36
6.11 Compliance with Law............................................................................36
6.12 Material Agreements............................................................................36
6.13 ERISA..........................................................................................36
6.14 Use of Proceeds................................................................................38
6.15 Government Regulation..........................................................................38
6.16 Disclosure.....................................................................................38
6.17 Environmental Matters..........................................................................39
6.18 Insurance......................................................................................39
6.19 Franchises, Licenses, Etc......................................................................39
6.20 Secured Indebtedness...........................................................................39
6.21 Subsidiaries...................................................................................39
SECTION 7. AFFIRMATIVE COVENANTS................................................................................39
7.1 Information Covenants..........................................................................40
7.2 Debt to Capitalization Ratio...................................................................42
7.3 Preservation of Existence, Franchises and Assets...............................................42
7.4 Books and Records..............................................................................42
7.5 Compliance with Law............................................................................42
7.6 Payment of Taxes and Other Indebtedness........................................................42
7.7 Insurance......................................................................................43
7.8 Use of Proceeds................................................................................43
7.9 Audits/Inspections.............................................................................43
SECTION 8. NEGATIVE COVENANTS...................................................................................43
8.1 Nature of Business.............................................................................43
8.2 Consolidation and Merger.......................................................................43
8.3 Sale or Lease of Assets........................................................................44
8.4 Arm's-Length Transactions......................................................................44
8.5 Fiscal Year; Organizational Documents..........................................................44
8.6 Liens..........................................................................................44
SECTION 9. EVENTS OF DEFAULT....................................................................................45
9.1 Events of Default..............................................................................45
9.2 Acceleration; Remedies.........................................................................48
9.3 Allocation of Payments After Event of Default..................................................49
SECTION 10. AGENCY PROVISIONS....................................................................................50
10.1 Appointment....................................................................................50
10.2 Delegation of Duties...........................................................................50
10.3 Exculpatory Provisions.........................................................................50
10.4 Reliance on Communications.....................................................................51
10.5 Notice of Default..............................................................................51
10.6 Non-Reliance on Administrative Agent and Other Lenders.........................................52
10.7 Indemnification................................................................................52
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10.8 Administrative Agent in Its Individual Capacity................................................53
10.9 Successor Agent................................................................................53
SECTION 11. MISCELLANEOUS.......................................................................................53
11.1 Notices........................................................................................53
11.2 Right of Set-Off...............................................................................54
11.3 Benefit of Agreement...........................................................................54
11.4 No Waiver; Remedies Cumulative.................................................................57
11.5 Payment of Expenses, etc.......................................................................57
11.6 Amendments, Waivers and Consents...............................................................58
11.7 Counterparts/Telecopy..........................................................................59
11.8 Headings.......................................................................................59
11.9 Defaulting Lender..............................................................................59
11.10 Survival of Indemnification and Representations and Warranties.................................59
11.11 Governing Law; Venue...........................................................................59
11.12 Waiver of Jury Trial...........................................................................60
11.13 Severability...................................................................................60
11.14 Further Assurances.............................................................................60
11.15 Entirety.......................................................................................60
11.16 Binding Effect; Continuing Agreement...........................................................61
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SCHEDULES
Schedule 1.1 Commitment Percentages Schedule 6.20 Secured Indebtedness Schedule 6.21 Subsidiaries Schedule 11.1 Notices EXHIBITS Exhibit 2.1(b) Form of Competitive Bid Request Exhibit 2.2 Form of Notice of Borrowing Exhibit 2.4 Form of Notice of Continuation/Conversion Exhibit 2.7(a) Form of Revolving Loan Note Exhibit 2.7(b) Form of Competitive Bid Loan Note Exhibit 7.1(c) Form of Officer's Certificate Exhibit 11.3(b) Form of Assignment Agreement |
AMENDED AND RESTATED REVOLVING
CREDIT AGREEMENT
THIS AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT (this "Credit Agreement"), dated as of August 2, 2001, is entered into among ATMOS ENERGY CORPORATION, a Texas and Virginia corporation (the "Borrower"), the Lenders (as defined herein) and BANK OF AMERICA, N.A. as agent for the Lenders (in such capacity, the "Administrative Agent").
RECITALS
WHEREAS, the Borrower, the Administrative Agent and certain Lenders are party to the Existing Revolving Credit Agreement (as defined below); and
WHEREAS, the Borrower has requested, and the Lenders and the Administrative Agent have agreed, to amend and restate the terms of the Existing Revolving Credit Agreement as provided herein.
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
SECTION 1.
DEFINITIONS AND ACCOUNTING TERMS
1.1 DEFINITIONS.
As used herein, the following terms shall have the meanings herein specified unless the context otherwise requires. Defined terms herein shall include in the singular number the plural and in the plural the singular.
"Adjusted Eurodollar Rate" means the Eurodollar Rate plus the Applicable Percentage for Eurodollar Loans.
"Administrative Agent" means Bank of America, N.A. and any successors and assigns in such capacity.
"Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under direct or indirect common control with such Person. A Person shall be deemed to control another Person if such Person possesses, directly or indirectly, the power (a) to vote 10% or more of the securities having ordinary voting power for the election of directors of such other Person or (b) to direct or cause direction of the management and policies of such other Person, whether through the ownership of voting securities, by contract or otherwise.
"Agency Services Address" means 901 Main Street, Dallas, Texas 75201 or such other address as the Administrative Agent may designate in writing.
"Applicable Percentage" means with respect to Eurodollar Loans and Unused Fees (subject to the terms set forth below), the appropriate applicable percentage corresponding to the long term, senior, unsecured, non-credit enhanced debt rating of the Borrower in effect from time to time as described below:
Long Term, Senior, Unsecured, Non-Credit Applicable Percentage Applicable Percentage for
Enhanced Debt Rating of Borrower for Eurodollar Loans Unused Fees
---------------------------------------- --------------------- -------------------------
I. greater than or = to A from S&P .400% .085%
or
greater than or equal to A2 from Moody's
II. less than A but greater than or equal to A- from S&P .500% .100%
or
less than A2 but greater than or equal to A3 from Moody's
III. less than A- but greater than or equal to BBB+ from S&P .625% .125%
or
less than A3 but greater than or equal to Baa1 from Moody's
IV. less than BBB+ but greater than or equal to BBB from S&P .750% .150%
or
less than Baa1 but greater than or equal to Baa2 from Moody's
V. less than BBB but greater than or equal to BBB- from S&P 1.000% .200%
or
less than Baa2 but greater than or equal to Baa3 from Moody's
VI. less than BBB- from S&P 1.375% .300%
Or
less than Baa3 from Moody's
or
unrated by S&P and Moody's
|
Notwithstanding the above, (a) the Applicable Percentage on the Effective Date shall be based on Pricing Level II set forth above and shall remain at Pricing Level II until S&P or Moody's has changed its rating with respect to the Borrower and (b) if at any time there is a split in ratings between S&P and Moody's of one level, the applicable percentage shall be determined by the higher of the two ratings and if at any time there is a split between S&P and Moody's of two or more levels, the applicable level shall be one level below (i.e., one level higher pricing than) the higher of the S&P or Moody's rating.
The Borrower shall notify the Administrative Agent in writing at the Agency Services Address immediately upon any change in the long term, senior, unsecured non-credit enhanced debt rating of the Borrower.
"Bankruptcy Code" means the Bankruptcy Code in Title 11 of the United States Code, as amended, modified, succeeded or replaced from time to time.
"Base Rate" means, for any day, the rate per annum equal to the greater of (a) the Federal Funds Rate in effect on such day plus 1/2 of 1% (.50%) or (b) the Prime Rate in effect on such day. If for any reason the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable after due inquiry to ascertain the Federal Funds Rate for any reason, including the inability or failure of the Administrative Agent to obtain sufficient quotations in accordance with the terms hereof, the Base Rate shall be determined without regard to clause (a) of the first sentence of this definition until the circumstances giving rise to such inability no longer exist. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Rate shall be effective on the effective date of such change in the Prime Rate or the Federal Funds Rate, respectively.
"Base Rate Loan" means a Loan which bears interest based on the Base Rate.
"Borrower" means Atmos Energy Corporation, a Texas and Virginia corporation.
"Borrower Obligations" means, without duplication, all of the obligations of the Borrower to the Lenders and the Administrative Agent, whenever arising, under this Credit Agreement, the Notes or any of the other Credit Documents.
"Business Day" means any day other than a Saturday, a Sunday, a legal holiday or a day on which banking institutions are authorized or required by law or other governmental action to close in Dallas, Texas; provided that in the case of Eurodollar Loans, such day is also a day on which dealings between banks are carried on in U.S. dollar deposits in the London interbank market.
"Capital Stock" means (a) in the case of a corporation, all classes of capital stock of such corporation, (b) in the case of a partnership, partnership interests (whether general or limited), (c) in the case of a limited liability company, membership interests and (d) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.
"Change of Control" means either of the following events:
(a) any "person" or "group" (within the meaning of
Section 13(d) or 14(d) of the Exchange Act) has become,
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 the Borrower
on a fully-diluted basis, after giving effect to the
conversion and exercise of all outstanding warrants, options
and other securities of the Borrower convertible into or
exercisable for voting stock of the Borrower (whether or not
such securities are then currently convertible or
exercisable); or
(b) during any period of two consecutive calendar years, individuals who at the beginning of such period constituted the board of directors of the
Borrower together with any new members of such board of directors whose elections by such board or board of directors or whose nomination for election by the stockholders of the Borrower was approved by a vote of a majority of the members of such board of directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved cease for any reason to constitute a majority of the directors of the Borrower then in office.
"Closing Date" means the date hereof.
"Code" means the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations promulgated thereunder.
"Commitment Percentage" means, for each Lender, the percentage identified as its Commitment Percentage opposite such Lender's name on Schedule 1.1, as such percentage may be modified by assignment in accordance with the terms of this Credit Agreement.
"Commitments" means, collectively, each Lender's share of the Revolving Loan Commitment based upon such Lender's Commitment Percentage, as reflected on Schedule 1.1.
"Competitive Bid" means an offer by a Lender to make a Competitive Bid Loan pursuant to the terms of Section 2.1(b).
"Competitive Bid Fee" means a fee of $1,000 payable by the Borrower to the Administrative Agent in connection with a Competitive Bid Request pursuant to Section 2.1(b).
"Competitive Bid Loan" means a loan made by a Lender in its discretion pursuant to the provisions of Section 2.1(b).
"Competitive Bid Loan Notes" means the promissory notes of the Borrower in favor of each Lender evidencing the Competitive Bid Loans and substantially in the form of Exhibit 2.7(b), as such promissory notes may be amended, modified, supplemented or replaced from time to time.
"Competitive Bid Rate" means, as to any Competitive Bid made by a Lender in accordance with the provisions of Section 2.1(b), the rate of interest offered by the Lender making the Competitive Bid.
"Competitive Bid Request" means a request by the Borrower for Competitive Bids in the form of Exhibit 2.1(b).
"Consolidated Capitalization" means, without duplication, the sum of (a) all of the shareholders' equity or net worth of the Borrower and its Subsidiaries on a consolidated
basis, as determined in accordance with GAAP plus (b) the aggregate principal amount of Preferred Securities plus (c) the aggregate Minority Interests in Subsidiaries plus (d) Consolidated Funded Debt.
"Consolidated Funded Debt" means, without duplication, the sum of (a) all indebtedness of the Borrower and its Subsidiaries for borrowed money, (b) all purchase money indebtedness of the Borrower and its Subsidiaries, (c) the principal portion of all obligations of the Borrower and its Subsidiaries under capital leases, (d) all commercial letters of credit and the maximum amount of all performance and standby letters of credit issued or bankers' acceptance facilities created for the account of the Borrower or one of its Subsidiaries, including, without duplication, all unreimbursed draws thereunder, (e) all Guaranty Obligations of the Borrower and its Subsidiaries with respect to funded indebtedness of another Person; provided that neither the indebtedness of Woodward Marketing, LLC ("Woodward") incurred in connection with the purchase of gas by Woodward for resale to the Borrower nor the guaranty by the Borrower or one of its Subsidiaries of such indebtedness shall be included in this definition if such indebtedness has been outstanding for less than two months from the date of its incurrence by Woodward, (f) all indebtedness of another entity secured by a Lien on any property of the Borrower or any of its Subsidiaries whether or not such indebtedness has been assumed by the Borrower or any of its Subsidiaries, (g) all indebtedness of any partnership or unincorporated joint venture to the extent the Borrower or one of its Subsidiaries is legally obligated with respect thereto, net of any assets of such partnership or joint venture, (h) all obligations of the Borrower and its Subsidiaries to advance or provide funds or other support for the payment or purchase of funded indebtedness (including, without limitation, maintenance agreements, comfort letters or similar agreements or arrangements) (other than as may be given in respect of Woodward) and (i) the principal balance outstanding under any synthetic lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing product of the Borrower or one of its Material Subsidiaries where such transaction is considered borrowed money indebtedness for tax purposes but is classified as an operating lease in accordance with GAAP.
"Consolidated Net Property" means the Fixed Assets less, without duplication, the amount of accumulated depreciation and amortization attributable thereto.
"Credit Documents" means this Credit Agreement, the Notes, any Notice of Borrowing and all other related agreements and documents issued or delivered hereunder or thereunder or pursuant hereto or thereto.
"Debt to Capitalization Ratio" means the ratio of (a) Consolidated Funded Debt to (b) Consolidated Capitalization.
"Default" means any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default.
"Defaulting Lender" means, at any time, any Lender that, at such time (a) has failed
to make a Loan required pursuant to the term of this Credit Agreement,
(b) has failed to pay to the Administrative Agent or any Lender an
amount owed by such Lender pursuant to the terms of this Credit
Agreement or (c) has been deemed insolvent or has become subject to a
bankruptcy or insolvency proceeding or to a receiver, trustee or
similar official.
"Dollars" and "$" means dollars in lawful currency of the United States of America.
"Effective Date" means the date on which all of the conditions set forth in Section 5.1 shall have been fulfilled (or waived in the sole discretion of the Lenders).
"Eligible Assignee" means (a) a Lender; (b) an Affiliate of a Lender; and (c) any other Person approved by the Administrative Agent and the Borrower (such approval not to be unreasonably withheld or delayed); provided that (i) the Borrower's consent is not required during the existence and continuation of a Default or an Event of Default, (ii) approval by the Borrower shall be deemed given if no objection is received by the Administrative Agent from the Borrower within five Business Days after notice of such proposed assignment has been received by the Borrower; and (iii) neither the Borrower nor an Affiliate of the Borrower shall qualify as an Eligible Assignee.
"Environmental Laws" means any current or future legal
requirement of any Governmental Authority pertaining to (a) the
protection of health, safety, and the indoor or outdoor environment,
(b) the conservation, management, or use of natural resources and
wildlife, (c) the protection or use of surface water and groundwater or
(d) the management, manufacture, possession, presence, use, generation,
transportation, treatment, storage, disposal, release, threatened
release, abatement, removal, remediation or handling of, or exposure
to, any hazardous or toxic substance or material or (e) pollution
(including any release to land surface water and groundwater) and
includes, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986, 42 USC 9601 et seq., Solid
Waste Disposal Act, as amended by the Resource Conservation and
Recovery Act of 1976 and Hazardous and Solid Waste Amendment of 1984,
42 USC 6901 et seq., Federal Water Pollution Control Act, as amended by
the Clean Water Act of 1977, 33 USC 1251 et seq., Clean Air Act of
1966, as amended, 42 USC 7401 et seq., Toxic Substances Control Act of
1976, 15 USC 2601 et seq., Hazardous Materials Transportation Act, 49
USC App. 1801 et seq., Occupational Safety and Health Act of 1970, as
amended, 29 USC 651 et seq., Oil Pollution Act of 1990, 33 USC 2701 et
seq., Emergency Planning and Community Right-to-Know Act of 1986, 42
USC 11001 et seq., National Environmental Policy Act of 1969, 42 USC
4321 et seq., Safe Drinking Water Act of 1974, as amended, 42 USC
300(f) et seq., any analogous implementing or successor law, and any
amendment, rule, regulation, order, or directive issued thereunder.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto, as interpreted by the rules and regulations thereunder, all as the same may be in effect from time to time. References to sections of ERISA shall be construed also to refer to any successor sections.
"ERISA Affiliate" means an entity, whether or not
incorporated, which is under common control with the Borrower or any of
its Subsidiaries within the meaning of Section 4001(a)(14) of ERISA, or
is a member of a group which includes the Borrower or any of its
Subsidiaries and which is treated as a single employer under Sections
414(b), (c), (m), or (o) of the Code.
"Eurodollar Loan" means a Loan bearing interest at the Adjusted Eurodollar Rate.
"Eurodollar Rate" means with respect to any Eurodollar Loan, for the Interest Period applicable thereto, a rate per annum determined pursuant to the following formula:
"Eurodollar Reserve Percentage" means, for any day, that percentage (expressed as a decimal) which is in effect from time to time under Regulation D, as the maximum reserve requirement (including, without limitation, any basic, supplemental, emergency, special, or marginal reserves) applicable with respect to Eurocurrency liabilities, as that term is defined in Regulation D (or against any other category of liabilities that includes deposits by reference to which the interest rate of Eurodollar Loans is determined), whether or not a Lender has any Eurocurrency liabilities subject to such reserve requirement at that time. Eurodollar Loans shall be deemed to constitute Eurocurrency liabilities and as such shall be deemed subject to reserve requirements without benefits of credits for proration, exceptions or offsets that may be available from time to time to a Lender. The Eurodollar Rate shall be adjusted automatically on and as of the effective date of any change in the Eurodollar Reserve Percentage.
"Event of Default" has the meaning specified in Section 9.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
"Existing Revolving Credit Agreement" means that certain credit agreement, dated as of August 3, 2000, among the Borrower, the lenders identified therein and Bank of America, N.A., as administrative agent, as amended, modified, supplemented or replaced from time to time.
"Existing Term Credit Agreement" means that certain Term Credit Agreement, dated as of August 3, 2000, among the Borrower, the lenders identified therein and Bank of America, N.A., as administrative agent, as amended, modified, supplemented or replaced from time to time.
"Federal Funds Rate" means, for any day, the rate per annum (rounded upward to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate quoted to the Administrative Agent on such day on such transactions as determined by the Administrative Agent.
"Fee Letter" means that certain letter agreement, dated as of June 7, 2001, between the Administrative Agent and the Borrower, as amended, modified, supplemented or replaced from time to time.
"Financial Officer" means any one of the chief financial officer, the controller or the treasurer of the Borrower.
"Fixed Assets" means the assets of the Borrower and its Subsidiaries constituting "net property, plant and equipment" on the consolidated balance sheet of the Borrower and its Subsidiaries.
"GAAP" means generally accepted accounting principles in the United States applied on a consistent basis and subject to Section 1.3.
"Governmental Authority" means any Federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body.
"Guaranty Obligations" means, with respect to any Person, without duplication, any obligations (other than endorsements in the ordinary course of business of negotiable instruments for deposit or collection) guaranteeing any indebtedness for borrowed money of any other Person in any manner, whether direct or indirect, and including without limitation any obligation, whether or not contingent, (a) to purchase any such indebtedness or other obligation or any property constituting security therefor, (b) to lease or purchase property, securities or services primarily for the purpose of assuring the owner of such indebtedness or (c) to otherwise assure or hold harmless the owner of such indebtedness or obligation against loss in respect thereof. The amount of any Guaranty Obligation hereunder shall (subject to any limitations set forth therein) be deemed to be an amount equal to the outstanding principal amount of the indebtedness in respect of which such Guaranty Obligation is made.
"Interest Payment Date" means (a) as to Base Rate Loans, the
last day of each fiscal quarter of the Borrower and the Maturity Date,
(b) as to Eurodollar Loans, the last day of each applicable Interest
Period and the Maturity Date and, in addition, where the applicable
Interest Period for a Eurodollar Loan is greater than three months,
then also on the last day of each three-month period during such
Interest Period and (c) as to Competitive Bid Loans, the last day of
each applicable Interest Period and the Maturity Date.
"Interest Period" means (a) as to Eurodollar Loans, a period of one, two, three or six months' duration, as the Borrower may elect, commencing, in each case, on the date of the borrowing (including continuations and conversions of Eurodollar Loans) and (b) with respect to Competitive Bid Loans, a period beginning on the date the Competitive Bid Loan is made and ending on a date specified in the applicable Competitive Bid Request pursuant to which the offer to make such Competitive Bid Loan was extended, which shall not be less than 30 days nor more than 90 days in duration; provided, however, (a) if any Interest Period would end on a day which is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day (except that where the next succeeding Business Day falls in the next succeeding calendar month, then such Interest Period shall end on the next preceding Business Day), (b) no Interest Period shall extend beyond the Maturity Date and (c) with respect to Eurodollar Loans, where an Interest Period begins on a day for which there is no numerically corresponding day in the calendar month in which the Interest Period is to end, such Interest Period shall end on the last Business Day of such calendar month.
"Lender" means any of the Persons identified as a "Lender" on the signature pages hereto, and any Eligible Assignee which may become a Lender by way of assignment in accordance with the terms hereof, together with their successors and permitted assigns.
"LGS Acquisition" means the acquisition by the Borrower of certain assets pursuant to the Purchase and Sale Agreement.
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit arrangement, security interest, encumbrance, lien (statutory or otherwise), preference, priority or charge of any kind (including any agreement to give any of the foregoing).
"Loans" means the Revolving Loans and the Competitive Bid Loans.
"London Interbank Offered Rate" means, with respect to any Eurodollar Loan for the Interest Period applicable thereto, the rate of interest per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in Dollars at approximately 11:00 A.M. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, however, if more than one rate is specified on Telerate Page 3750, the applicable rate shall be the arithmetic mean of all such rates. If, for any reason, such rate is not available, the term "London Interbank Offered Rate" shall mean, with respect to any Eurodollar Loan for the Interest Period applicable thereto, the rate of interest per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London interbank offered rate for deposits in Dollars at approximately 11:00 A.M. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, however, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates.
"Material Adverse Effect" means a material adverse effect on
(a) the operations, business, assets, liabilities (actual or
contingent), financial condition or prospects of the Borrower and its
Subsidiaries, taken as a whole (taking into account the value of any
indemnifications in favor of the Borrower pursuant to the Purchase and
Sale Agreement), (b) the ability of the Borrower to perform its
obligations under this Credit Agreement or (c) the validity or
enforceability of this Credit Agreement, any of the other Credit
Documents, or the rights and remedies of the Lenders hereunder or
thereunder.
"Material Subsidiary" means, at any date, a Subsidiary of the Borrower whose aggregate assets properly included under the category "property, plant and equipment" on the balance sheet of such Subsidiary, less the amount of depreciation and amortization attributable thereto, constitutes at least 10% of Consolidated Net Property as of such date; provided that if at any time the Borrower has Subsidiaries that are not Material Subsidiaries whose total aggregate assets under the category "property, plant and equipment" on the balance sheet of such Subsidiaries, less the amount of depreciation and amortization attributable thereto, constitutes more than 20% of Consolidated Net Property as of such date the Borrower shall designate one or more of such Subsidiaries as Material Subsidiaries for the purposes of this Credit Agreement in order that all Subsidiaries of the Borrower, other than Material Subsidiaries, own not more than 20% of Consolidated Net Property.
"Maturity Date" means August 1, 2002.
"Minority Interests" means interests owned by Persons (other than the Borrower or a Subsidiary of the Borrower) in a Subsidiary of the Borrower in which less than 100% of all classes of the voting securities are owned by the Borrower or its Subsidiaries.
"Moody's" means Moody's Investors Service, Inc., or any successor or assignee of the business of such company in the business of rating securities.
"Multiemployer Plan" means a Plan covered by Title IV of ERISA which is a multiemployer plan as defined in Section 3(37) or 4001(a)(3) of ERISA.
"Multiple Employer Plan" means a Plan covered by Title IV of ERISA, other than a Multiemployer Plan, which the Borrower or any ERISA Affiliate and at least one employer other than the Borrower or any ERISA Affiliate are contributing sponsors.
"1957 Indenture" means, collectively, that certain Indenture of Mortgage, dated as of March 1, 1957, granted by Greeley Gas Company (predecessor in interest to the Borrower) to The Central Bank and Trust Company, as original Trustee, and all Supplemental Indentures thereto.
"1959 Indenture" means, collectively, that certain Indenture of Mortgage, dated as of July 15, 1959, granted by United Cities Gas Company (predecessor in interest to the Borrower) to City National Bank and Trust Company of Chicago and R. Emmett Hanley, as the original Trustees, and all Supplemental Indentures thereto, including, without limitation,
that certain First Supplemental Indenture, dated as of November 1, 1960; that certain Second Supplemental Indenture, dated as of June 1, 1962; that certain Third Supplemental Indenture, dated as of February 1, 1963; that certain Fourth Supplemental Indenture, dated as of June 15, 1963; that certain Fifth Supplemental Indenture, dated as of November 15, 1964; that certain Sixth Supplemental Indenture, dated as of March 15, 1968; that certain Seventh Supplemental Indenture, dated as of August 1, 1970; that certain Eighth Supplemental Indenture, dated as of September 1, 1972; that certain Ninth Supplemental Indenture, dated as of January 1, 1974; that certain Tenth Supplemental Indenture, dated as of July 1, 1976; that certain Eleventh Supplemental Indenture, dated as of December 1, 1976; that certain Twelfth Supplemental Indenture, dated as of April 1, 1981; that certain Thirteenth Supplemental Indenture, dated as of May 1, 1982; that certain Fourteenth Supplemental Indenture, dated as of March 1, 1987; that certain Fifteenth Supplemental Indenture, dated as of October 1, 1987; that certain Sixteenth Supplemental Indenture, dated as of December 1, 1989; that certain Seventeenth Supplemental Indenture, dated as of April 1, 1990; that certain Eighteenth Supplemental Indenture, dated as of June 1, 1991; that certain Nineteenth Supplemental Indenture, dated as of May 1, 1992; that certain Twentieth Supplemental Indenture, dated as of December 1, 1992; that certain Twenty-First Supplemental Indenture, dated as of February 5, 1997; and that certain Twenty-Second Supplemental Indenture, dated as of July 29, 1997.
"1987 Note Purchase Agreements" means, collectively, those
certain Note Purchase Agreements, dated as of December 21, 1987, by and
between Energas Company (predecessor in interest to the Borrower) and
(a) John Hancock Mutual Life Insurance Company, (b) John Hancock
Charitable Trust I and (c) Mellon Bank, N.A., Trustee under the Master
Trust of AT&T Corporation, and all Amendments thereto, including,
without limitation, that certain Amendment to Note Purchase Agreements,
amending each of the above-referenced Note Purchase Agreements, each
dated as of (i) October 11, 1989, (ii) November 12, 1991, (iii)
December 22, 1993, (iv) December 20, 1994 and July 29, 1997.
"1989 Note Purchase Agreement" means, collectively, that certain Note Purchase Agreement, dated as of October 11, 1989, by and between the Borrower and John Hancock Mutual Life Insurance Company, and all Amendments thereto, including, without limitation, those Amendments dated as of October 11, 1989, November 12, 1991, December 22, 1993, December 20, 1994, and July 29, 1997.
"1991 Note Purchase Agreement" means, collectively, that certain Note Purchase Agreement, dated as of August 29, 1991, by and between the Borrower and The Variable Annuity Life Insurance Company, and all Amendments thereto, including, without limitation, those Amendments dated as of November 26, 1991, December 22, 1993, and July 29, 1997.
"1992 Note Purchase Agreement" means, collectively, that certain Note Purchase Agreement, dated as of August 31, 1992, by and between the Borrower and The Variable
Annuity Life Insurance Company, and all Amendments thereto, including, without limitation, those Amendments dated as of December 22, 1993, and July 29, 1997.
"1994 Note Purchase Agreement" means, collectively, that certain Note Purchase Agreement dated November 14, 1994, by and among the Borrower and New York Life Insurance Company, New York Life Insurance and Annuity Corporation, The Variable Annuity Life Insurance Company, American General Life Insurance Company, and Merit Life Insurance Company, and all Amendments thereto; including, without limitation, that Amendment dated as of July 29, 1997.
"1998 Indenture" means, collectively, that certain Indenture, dated as of July 15, 1998, granted by the Borrower to US Bank Trust National Association, as Trustee, and all Supplemental Indentures thereto.
"Notes" means the Revolving Loan Notes and the Competitive Bid Loan Notes.
"Notice of Borrowing" means a request by the Borrower for a Revolving Loan in the form of Exhibit 2.2.
"Notice of Continuation/Conversion" means a request by the Borrower for the continuation or conversion of a Revolving Loan in the form of Exhibit 2.4.
"PBGC" means the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA and any successor thereto.
"Person" means any individual, partnership, joint venture, firm, corporation, association, trust, limited liability company or other enterprise (whether or not incorporated), or any government or political subdivision or any agency, department or instrumentality thereof.
"Plan" means any employee benefit plan (as defined in Section 3(3) of ERISA) which is covered by ERISA and with respect to which the Borrower or any ERISA Affiliate is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" within the meaning of Section 3(5) of ERISA.
"Preferred Securities" means, at any date, any equity
interests in the Borrower, in a Special Purpose Financing Subsidiary of
the Borrower or in any other Subsidiary of the Borrower (such as those
known as "TECONS", "MIPS" or "RHINOS"): (a) that are not (i) required
to be redeemed or redeemable at the option of the holder thereof prior
to the fifth anniversary of the Maturity Date or (ii) convertible into
or exchangeable for (unless solely at the option of the Borrower or
such Subsidiary of the Borrower) equity interests referred to in clause
(i) above or indebtedness having a scheduled maturity, or requiring any
repayments or prepayments of principal or any sinking fund or similar
payments in respect of principal or providing for any such repayment,
prepayment, sinking fund or other payment at the option of the holder
thereof prior to the fifth anniversary of the
Maturity Date and (b) as to which, at such date, the Borrower or such Subsidiary of the Borrower has the right to defer the payment of all dividends and other distributions in respect thereof for the period of at least 19 consecutive quarters beginning at such date.
"Prime Rate" means the per annum rate of interest established from time to time by Bank of America, N.A. at its principal office in Charlotte, North Carolina (or such other principal office as communicated by the Administrative Agent to the Borrower and the Lenders) as its Prime Rate. Any change in the interest rate resulting from a change in the Prime Rate shall become effective as of the opening of business on the Business Day specified in the public announcement of such change. The Prime Rate is a rate set by Bank of America, N.A. based upon factors including Bank of America, N.A.'s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above or below such announced rate.
"Purchase and Sale Agreement" means that certain Purchase and Sale Agreement, dated as of April 13, 2000, among Citizens Utilities Company, LGS Natural Gas Company and the Borrower.
"Register" has the meaning set forth in Section 11.3(c).
"Regulation A, D, O, T, U, or X" means Regulation A, D, O, T, U or X, respectively, of the Board of Governors of the Federal Reserve System (or any successor body) as from time to time in effect, any amendment thereto and any successor to all or a portion thereof.
"Reportable Event" means a "reportable event" as defined in
Section 4043 of ERISA with respect to which the notice requirements to
the PBGC have not been waived.
"Required Lenders" means Lenders whose aggregate Credit Exposure (as hereinafter defined) constitutes more than 51% of the aggregate Credit Exposure of all Lenders at such time; provided, however, that if any Lender shall be a Defaulting Lender at such time then there shall be excluded from the determination of Required Lenders the aggregate principal amount of Credit Exposure of such Lender at such time. For purposes of the preceding sentence, the term "Credit Exposure" as applied to each Lender shall mean (a) at any time prior to the termination of the Commitments, the Commitment Percentage of such Lender multiplied times the Revolving Loan Commitment and (b) at any time after the termination of the Commitments, the sum of the principal balance of the outstanding Revolving Loans of such Lender.
"Revolving Loan" means a loan made by a Lender to the Borrower pursuant to Section 2.1(a).
"Revolving Loan Commitment" means tHREE hundred Million Dollars ($300,000,000) as such amount may be otherwise reduced in accordance with Section 2.6 or increased in accordance with Section 2.8.
"Revolving Loan Notes" means the promissory notes of the Borrower in favor of each Lender evidencing the Loans and substantially in the form of Exhibit 2.7(a), as such promissory notes may be amended, modified, supplemented or replaced from time to time.
"S&P" means Standard & Poor's Ratings Services, a division of McGraw Hill, Inc., or any successor or assignee of the business of such division in the business of rating securities.
"Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
"Single Employer Plan" means any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan or a Multiple Employer Plan.
"Special Purpose Financing Subsidiary" means a Subsidiary of the Borrower that has no direct or indirect interest in the business of the Borrower and its other Subsidiaries and was formed solely for the purpose of issuing Preferred Securities.
"Subsidiary" means, as to any Person, (a) any corporation more
than 50% of whose stock of any class or classes having by the terms
thereof ordinary voting power to elect a majority of the directors of
such corporation (irrespective of whether or not, at the time, any
class or classes of such corporation shall have or might have voting
power by reason of the happening of any contingency) is at the time
owned by such Person directly or indirectly through Subsidiaries and
(b) any partnership, association, joint venture, limited liability
company or other entity in which such Person directly or indirectly
through Subsidiaries has more than 50% equity interest at any time.
"Termination Event" means (a) with respect to any Single
Employer Plan, the occurrence of a Reportable Event or the substantial
cessation of operations (within the meaning of Section 4062(e) of
ERISA), (b) the withdrawal of the Borrower or any ERISA Affiliate from
a Multiple Employer Plan during a plan year in which it was a
substantial employer (as such term is defined in Section 4001(a)(2) of
ERISA), or the termination of a Multiple Employer Plan, (c) the
distribution of a notice of intent to terminate or the actual
termination of a Plan pursuant to Section 4041(a)(2) or 4041A of ERISA,
(d) the institution of proceedings to terminate or the actual
termination of a Plan by the PBGC under Section 4042 of ERISA, (e) any
event or condition which might reasonably constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan, or (f) the complete or partial
withdrawal of the Borrower or any ERISA Affiliate from a Multiemployer
Plan.
"Total Assets" means all assets of the Borrower as shown on its most recent quarterly consolidated balance sheet, as determined in accordance with GAAP.
"2001 Indenture" means, collectively, that certain Indenture, dated as of May 22, 2001, granted by the Borrower to SunTrust Bank, Atlanta, as Trustee, and all Supplemental Indentures thereto.
"Unused Revolving Loan Commitment" means, for any period from the Effective Date to the Maturity Date, the amount by which (a) the then applicable Revolving Loan Commitment exceeds (b) the daily average sum for such period of the aggregate principal amount of all Revolving Loans outstanding.
"Unused Fees" has the meaning set forth in Section 3.4(a).
"Utilization Fees" has the meaning set forth in Section 3.4(b).
"Utilized Revolving Commitment" means, for any day that the Utilization Fees are required to be paid pursuant to Section 3.4(b), the amount equal to the principal amount of Loans outstanding on such day.
"Woodward Acquisition" means the acquisition by the Borrower on April 1, 2001, of the remaining 55% ownership interest in Woodward Marketing LLC theretofore not owned by the Borrower, pursuant to that certain Asset Purchase Agreement, dated as of August 7, 2000, by and among the Borrower, Atmos Energy Marketing, LLC, a wholly-owned Subsidiary of the Borrower, Woodward Marketing, Inc. and the shareholders of Woodward Marketing, Inc.
1.2 COMPUTATION OF TIME PERIODS.
For purposes of computation of periods of time hereunder, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding." References in this Credit Agreement to "Articles", "Sections", "Schedules" or "Exhibits" shall be to Articles, Sections, Schedules or Exhibits of or to this Credit Agreement unless otherwise specifically provided.
1.3 ACCOUNTING TERMS.
Except as otherwise expressly provided herein, all accounting terms used herein shall be interpreted, and all financial statements and certificates and reports as to financial matters required to be delivered to the Lenders hereunder shall be prepared, in accordance with GAAP applied on a consistent basis. All calculations made for the purposes of determining compliance with this Credit Agreement shall (except as otherwise expressly provided herein) be made by application of GAAP applied on a basis consistent with the most recent annual or quarterly financial statements delivered pursuant to Section 7.1 (or, prior to the delivery of the first financial statements pursuant to Section 7.1, consistent with the financial statements described in Section 5.1(d)); provided, however, if (a) the Borrower shall object to determining such compliance on such basis at the time of delivery of such financial statements due to any change in GAAP or the rules promulgated with respect thereto or (b) the Administrative Agent or the Required Lenders shall so object in writing within 30 days after delivery of such financial statements, then such calculations shall be made on a basis consistent with the most recent financial statements delivered by the Borrower to the Lenders as to which no such objection shall have been made.
1.4 TIME.
All references to time herein shall be references to Central Standard Time or Central Daylight time, as the case may be, unless specified otherwise.
SECTION 2.
LOANS
2.1 REVOLVING LOAN COMMITMENT.
(a) Revolving Loans. Subject to the terms and conditions set
forth herein, each Lender severally agrees to make revolving loans to
the Borrower in Dollars, at any time and from time to time, during the
period from the Effective Date to the Maturity Date (each a "Revolving
Loan" and collectively the "Revolving Loans"); provided, however, that
(i) the aggregate amount of Revolving Loans outstanding plus the
aggregate amount of Competitive Bid Loans outstanding shall not exceed
the Revolving Loan Commitment and (ii) with respect to each individual
Lender, the Lender's Commitment Percentage multiplied by the
outstanding Revolving Loans shall not exceed such Lender's Commitment.
Subject to the terms of this Credit Agreement, the Borrower may borrow,
repay and reborrow Revolving Loans.
(b) Competitive Bid Loans Subfacility.
(i) Competitive Bid Loans. Subject to the terms and conditions set forth herein, the Borrower may, from time to time, during the period from the Effective Date to the Maturity Date, request, in Dollars, and each Lender may, in its sole discretion, agree to make Competitive Bid Loans to the Borrower; provided, however, that (A) the sum of the aggregate amount of Revolving Loans outstanding plus the aggregate amount of Competitive Bid Loans outstanding shall not exceed the Revolving Loan Commitment and (B) if a Lender does make a Competitive Bid Loan it shall not reduce such Lender's obligation to make its pro rata share of any Revolving Loan.
(ii) Competitive Bid Requests. The Borrower may solicit Competitive Bids by delivery of a Competitive Bid Request to the Administrative Agent by 10:00 a.m. on a Business Day not less than one nor more than five Business Days prior to the date of the requested Competitive Bid Loan. A Competitive Bid Request must be substantially in the form of Exhibit 2.1(b) and shall specify (A) the date of the requested Competitive Bid Loan (which shall be a Business Day), (B) the amount of the requested Competitive Bid Loan and (C) the applicable Interest Period or Interest Periods requested and must be accompanied
by the Competitive Bid Fee. The Administrative Agent shall notify the Lenders of its receipt of a Competitive Bid Request and the contents thereof and invite the Lenders to submit Competitive Bids in response thereto. The Borrower may not request a Competitive Bid for more than three different Interest Periods per Competitive Bid Request and Competitive Bid Requests may be made no more frequently than four times every calendar month.
(iii) Competitive Bid Procedure. Each Lender may, in its sole discretion, make one or more Competitive Bids to the Borrower in response to a Competitive Bid Request. Each Competitive Bid must be received by the Administrative Agent not later than 10:00 a.m. on the proposed date of the requested Competitive Bid Loan; provided, however, that should the Administrative Agent, in its capacity as a Lender, desire to submit a Competitive Bid it shall notify the Borrower of its Competitive Bid and the terms thereof not later than 15 minutes prior to the time the other Lenders are required to submit their Competitive Bid. A Lender may offer to make all or part of the requested Competitive Bid Loan and may submit multiple Competitive Bids in response to a Competitive Bid Request. Any Competitive Bid must specify (A) the particular Competitive Bid Request as to which the Competitive Bid is submitted, (B) the minimum (which shall be not less than $5,000,000 and integral multiples of $1,000,000 in excess thereof) and maximum principal amounts of the requested Competitive Bid Loan or Loans that the Lender is willing to make and (C) the applicable interest rate or rates and Interest Period or Interest Periods therefor. A Competitive Bid submitted by a Lender in accordance with the provisions hereof shall be irrevocable. The Administrative Agent shall promptly notify the Borrower of all Competitive Bids made and the terms thereof.
(iv) Acceptance of Competitive Bids. The Borrower may, in its sole discretion, subject only to the provisions of this subsection (iv), accept or refuse any Competitive Bid offered to it. To accept a Competitive Bid, the Borrower shall give oral notification of its acceptance of any or all such Competitive Bids (which shall be promptly confirmed in writing) to the Administrative Agent by 11:00 a.m. on the proposed date of the Competitive Bid Loan; provided, however, (A) the failure by the Borrower to give timely notice of its acceptance of a Competitive Bid shall be deemed to be a refusal thereof, (B) to the extent Competitive Bids are for comparable Interest Periods, the Borrower may accept Competitive Bids only in ascending order of rates, (C) the aggregate amount of Competitive Bids accepted by the Borrower shall not exceed the principal amount specified in the Competitive Bid Request, (D) if the Borrower shall accept a bid or bids made at a particular Competitive Bid Rate, but the amount of such bid or bids shall cause the total amount of bids to be accepted by the Borrower to be in excess of the amount specified in the Competitive Bid Request, then the Borrower shall accept a portion of such bid or bids in an amount equal to the amount specified in the Competitive Bid Request less the amount of all other Competitive Bids accepted with respect to such Competitive Bid Request, which acceptance in
the case of multiple bids at such Competitive Bid Rate, shall
be made pro rata in accordance with the amount of each such
bid at such Competitive Bid Rate and (E) no bid shall be
accepted for a Competitive Bid Loan unless such Competitive
Bid Loan is in a minimum principal amount of $5,000,000 and
integral multiples of $1,000,000 in excess thereof, except
that where a portion of a Competitive Bid is accepted in
accordance with the provisions of clause (D) of this
subsection (iv), then in a minimum principal amount of
$500,000 and integral multiples of $100,000 (but not in any
event less than the minimum amount specified in the
Competitive Bid), and in calculating the pro rata allocation
of acceptances of portions of multiple bids at a particular
Competitive Bid Rate pursuant to clause (D) of this subsection
(iv), the amounts shall be rounded to integral multiples of
$100,000 in a manner which shall be in the discretion of the
Borrower. A notice of acceptance of a Competitive Bid given by
the Borrower in accordance with the provisions hereof shall be
irrevocable. The Administrative Agent shall, not later than
noon on the proposed date of such Competitive Bid Loan, notify
each bidding Lender whether or not its Competitive Bid has
been accepted (and, if so, in what amount and at what
Competitive Bid Rate), and each successful bidder will
thereupon become bound, subject to the other applicable
conditions hereof, to make the Competitive Bid Loan in respect
of which its bid has been accepted. The Administrative Agent
shall send a copy of each of the Competitive Bids to the
Borrower and each of the Lenders for its records as soon as
practicable.
(v) Funding of Competitive Bid Loans. Each Lender which is to make a Competitive Bid Loan shall make its Competitive Bid Loan available to the Administrative Agent by 2:00 p.m. on the date specified in the Competitive Bid Request by deposit of immediately available funds at the Agency Services Address. The Administrative Agent will, upon receipt, make the proceeds of such Competitive Bid Loans available to the Borrower.
(vi) Maturity of Competitive Bid Loans. Each Competitive Bid Loan shall mature and be due and payable in full on the last day of the Interest Period applicable thereto. Unless the Borrower shall give notice to the Administrative Agent otherwise (or repays such Competitive Bid Loan), or a Default or Event of Default exists and is continuing, the Borrower shall be deemed to have requested Revolving Loans from all of the Lenders (in the amount of the maturing Competitive Bid Loan and accruing interest at the Base Rate), the proceeds of which will be used to repay such Competitive Bid Loan.
2.2 METHOD OF BORROWING FOR REVOLVING LOANS.
By no later than 11:00 a.m. (a) on the date of the requested borrowing of Revolving Loans that will be Base Rate Loans or (b) three Business Days prior to the date of the requested borrowing of Revolving Loans that will be Eurodollar Loans, the Borrower shall telephone the Administrative Agent as well as submit a written Notice of Borrowing in the form of Exhibit 2.2 to the
Administrative Agent setting forth (i) the amount requested, (ii) whether such
Loans shall accrue interest at the Base Rate or the Adjusted Eurodollar Rate,
(iii) with respect to Loans that will be Eurodollar Loans, the Interest Period
applicable thereto and (iv) certification that the Borrower has complied in all
respects with Section 5.2.
2.3 FUNDING OF REVOLVING LOANS.
Upon receipt of a Notice of Borrowing, the Administrative Agent shall promptly inform the Lenders as to the terms thereof. Each such Lender shall make its Commitment Percentage of the requested Revolving Loans available to the Administrative Agent by 1:00 p.m. on the date specified in the Notice of Borrowing by deposit, in Dollars, of immediately available funds at the Agency Services Address. The amount of the requested Revolving Loans will then be made available to the Borrower by the Administrative Agent by crediting the account of the Borrower on the books of such office of the Administrative Agent, to the extent the amount of such Revolving Loans are made available to the Administrative Agent.
No Lender shall be responsible for the failure or delay by any other Lender in its obligation to make Revolving Loans hereunder; provided, however, that the failure of any Lender to fulfill its obligations hereunder shall not relieve any other Lender of its obligations hereunder. Unless the Administrative Agent shall have been notified by any Lender prior to the date of any such Revolving Loan that such Lender does not intend to make available to the Administrative Agent its portion of the Revolving Loans to be made on such date, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent on the date of such Revolving Loans, and the Administrative Agent in reliance upon such assumption, may (in its sole discretion but without any obligation to do so) make available to the Borrower a corresponding amount. If such corresponding amount is not in fact made available to the Administrative Agent, the Administrative Agent shall be able to recover such corresponding amount from such Lender. If such Lender does not pay such corresponding amount forthwith upon the Administrative Agent's demand therefor, the Administrative Agent will promptly notify the Borrower, and the Borrower shall immediately pay such corresponding amount to the Administrative Agent. The Administrative Agent shall also be entitled to recover from the Lender or the Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Administrative Agent to the Borrower to the date such corresponding amount is recovered by the Administrative Agent at a per annum rate equal to (a) from the Borrower at the applicable rate for such Revolving Loan pursuant to the Notice of Borrowing and (b) from a Lender at the Federal Funds Rate.
2.4 CONTINUATIONS AND CONVERSIONS.
The Borrower shall have the option, on any Business Day, to continue existing Eurodollar Loans for a subsequent Interest Period, to convert Base Rate Loans into Eurodollar Loans or to convert Eurodollar Loans into Base Rate Loans; provided, however, that (a) each such continuation or conversion must be requested by the Borrower pursuant to a written Notice of Continuation/Conversion, in the form of Exhibit 2.4, in compliance with the terms set forth below, (b) except as provided in Section 4.1, Eurodollar Loans may only be continued or
converted into Base Rate Loans on the last day of the Interest Period applicable
thereto, (c) Eurodollar Loans may not be continued nor may Base Rate Loans be
converted into Eurodollar Loans during the existence and continuation of a
Default or Event of Default and (d) any request to extend a Eurodollar Loan that
fails to comply with the terms hereof or any failure to request an extension of
a Eurodollar Loan at the end of an Interest Period shall constitute a conversion
to a Base Rate Loan on the last day of the applicable Interest Period. Each
continuation or conversion must be requested by the Borrower no later than 11:00
a.m. (i) on the date for a requested conversion of a Eurodollar Loan to a Base
Rate Loan or (ii) three Business Days prior to the date for a requested
continuation of a Eurodollar Loan or conversion of a Base Rate Loan to a
Eurodollar Loan, in each case pursuant to a written Notice of
Continuation/Conversion submitted to the Administrative Agent which shall set
forth (A) whether the Borrower wishes to continue or convert such Loans and (B)
if the request is to continue a Eurodollar Loan or convert a Base Rate Loan to a
Eurodollar Loan, the Interest Period applicable thereto.
2.5 MINIMUM AMOUNTS.
Each request for a Loan or a conversion or continuation hereunder shall
be subject to the following requirements: (a) each Eurodollar Loan shall be in a
minimum of $5,000,000 (and in integral multiples of $1,000,000 in excess
thereof), (b) each Base Rate Loan shall be in a minimum amount of the lesser of
$5,000,000 (and in integral multiples of $1,000,000 in excess thereof) or the
remaining amount of the Revolving Loan Commitment available to be borrowed and
(c) no more than five Eurodollar Loans shall be outstanding hereunder at any one
time. For the purposes of this Section 2.5, all Eurodollar Loans with the same
Interest Periods that begin and end on the same date shall be considered as one
Eurodollar Loan, but Eurodollar Loans with different Interest Periods, even if
they begin on the same date, shall be considered separate Eurodollar Loans.
2.6 REDUCTIONS OF REVOLVING LOAN COMMITMENT.
Upon at least three Business Days' prior written notice, the Borrower shall have the right to permanently terminate or reduce the aggregate unused amount of the Revolving Loan Commitment at any time or from time to time; provided that (a) each partial reduction shall be in an aggregate amount at least equal to $5,000,000 and in integral multiples of $1,000,000 above such amount and (b) no reduction shall be made which would reduce the Revolving Loan Commitment to an amount less than the sum of the then outstanding Revolving Loans plus the then outstanding Competitive Bid Loans. Any reduction in (or termination of) the Revolving Loan Commitment shall be permanent and may not be reinstated.
2.7 NOTES.
(a) Revolving Loan Notes. The Revolving Loans made by the Lenders shall be evidenced by a promissory note of the Borrower payable to each Lender in substantially the form of Exhibit 2.7(a) (the "Revolving Loan Notes").
(b) Competitive Bid Loan Notes. The Competitive Bid Loans made by the Lenders shall be evidenced by a promissory note of the Borrower payable to each Lender in substantially the form of Exhibit 2.7(b) (the "Competitive Bid Loan Notes").
The date, amount, type, interest rate and duration of Interest Period (if applicable) of each Loan made by each Lender to the Borrower, and each payment made on account of the principal thereof, shall be recorded by such Lender on its books; provided that the failure of such Lender to make any such recordation or endorsement shall not affect the obligations of the Borrower to make a payment when due of any amount owing hereunder or under any Note in respect of the Loans to be evidenced by such Note, and each such recordation or endorsement shall be conclusive and binding absent manifest error.
2.8 INCREASE IN COMMITMENTS.
Prior to the Maturity Date and upon at least 30 days' but no more than 45 days' prior written notice to the Administrative Agent (which notice shall be promptly transmitted by the Administrative Agent to each Lender), the Borrower shall have the one-time right, subject to the terms and conditions set forth below, to increase the Revolving Loan Commitment; provided that (a) the Revolving Loan Commitment may not be increased to an amount greater than Four Hundred Million Dollars ($400,000,000) without the prior written consent of the Required Lenders, (b) no Default or Event of Default shall exist and be continuing either prior to or after giving effect to such increase, (c) such increase must be in a minimum amount of $10,000,000 and in integral multiples of $1,000,000 above such amount, (d) no individual Lender's Commitment may be increased without such Lender's consent, (e) the Borrower shall execute and deliver such Note(s) as are necessary to reflect such increase in the Revolving Loan Commitment, (f) Schedule 1.1 shall be amended to reflect the revised Commitments of the Lenders and (g) if any Loans are outstanding at the time of such increase, the Borrower will prepay (provided that any such prepayment shall be subject to Section 4.3) one or more existing Loans in an amount necessary such that after giving effect to such increase in the Revolving Loan Commitment each Lender will hold its pro rata share (based on its share of the revised Revolving Loan Commitment) of outstanding Loans.
Any such increase in the Revolving Loan Commitment shall apply, at the option of the Borrower, to (i) the Commitment of one or more existing Lenders; provided that any Lender whose Commitment is being increased must consent in writing thereto (such consent to be in such existing Lender's sole discretion) and/or (ii) the creation of a new Commitment to one or more institutions that is not an existing Lender; provided that any such institution (A) must conform to the definition of Eligible Assignee and (B) must become a Lender under this Credit Agreement by execution and delivery of an appropriate joinder agreement or of counterparts to this Credit Agreement in a manner acceptable to the Borrower and the Administrative Agent.
SECTION 3.
PAYMENTS
3.1 INTEREST.
(a) Interest Rate.
(i) All Base Rate Loans shall accrue interest at the Base Rate.
(ii) All Eurodollar Loans shall accrue interest at the Adjusted Eurodollar Rate applicable to each Eurodollar Loan.
(iii) All Competitive Bid Loans shall accrue interest at the applicable Competitive Bid Rate with respect to each Competitive Bid Loan.
(b) Default Rate of Interest. Upon the occurrence, and during the continuation, of an Event of Default, the principal of and, to the extent permitted by law, interest on the Loans and any other amounts owing hereunder or under the other Credit Documents shall bear interest, payable on demand, at a per annum rate equal to two percent (2%) plus the rate which would otherwise be applicable (or if no rate is applicable, then the rate for Revolving Loans that are Base Rate Loans plus two percent (2%) per annum).
(c) Interest Payments. Interest on Loans shall be due and payable in arrears on each Interest Payment Date.
3.2 PREPAYMENTS.
(a) Voluntary Prepayments. The Borrower shall have the right to prepay Loans in whole or in part from time to time without premium or penalty; provided, however, that (i) Eurodollar Loans may only be prepaid on three Business Days' prior written notice to the Administrative Agent and any prepayment of Eurodollar Loans will be subject to Section 4.3; (ii) each such partial prepayment of Loans shall be in the minimum principal amount of $5,000,000 and in integral multiples of $1,000,000 above such amount; and (iii) Competitive Bid Loans may not be prepaid unless a breakage fee equal to the actual amount of damages suffered by the Lender whose Competitive Bid Loan is prepaid is paid to such Lender. Amounts prepaid hereunder shall be applied as the Borrower may elect; provided that if the Borrower fails to specify the application of a voluntary prepayment then such prepayment shall be applied first to Base Rate Loans, then to Eurodollar Loans in direct order of Interest Period maturities, and then to Competitive Bid Loans pro rata among all Lenders holding same.
(b) Mandatory Prepayments. If at any time the amount of Revolving Loans outstanding plus the amount of Competitive Bid Loans outstanding exceeds the Revolving Loan Commitment, the Borrower shall immediately make a principal payment to the
Administrative Agent in the manner and in an amount such that the amount of Revolving Loans outstanding plus the amount of Competitive Bid Loans outstanding is less than or equal to the Revolving Loan Commitment. Any payments made under this Section 3.2(b) shall be subject to Section 4.3 and shall be applied first to Base Rate Loans, then to Eurodollar Loans in direct order of Interest Period maturities and then to Competitive Bid Loans pro rata among all Lenders holding same.
3.3 PAYMENT IN FULL AT MATURITY.
On the Maturity Date, the entire outstanding principal balance of all Loans, together with accrued but unpaid interest and all other sums owing under this Credit Agreement and the other Credit Documents, shall be due and payable in full, unless accelerated sooner pursuant to Section 9.2.
3.4 FEES.
(a) Unused Fees.
(i) In consideration of the Revolving Loan Commitment being made available by the Lenders hereunder, the Borrower agrees to pay to the Administrative Agent, for the pro rata benefit of each Lender, a per annum fee equal to the Applicable Percentage for Unused Fees on the Unused Revolving Loan Commitment (the "Unused Fees").
(ii) The accrued Unused Fees shall be due and payable in arrears five Business Days after the end of each fiscal quarter of the Borrower (as well as on the Maturity Date) for the immediately preceding fiscal quarter (or portion thereof), beginning with the first of such dates to occur after the Effective Date.
(b) Utilization Fees. For each day that the principal amount of outstanding Loans hereunder shall exceed an amount equal to thirty three percent (33%) of the Revolving Loan Commitment, the Borrower shall pay to the Administrative Agent, for the pro rata benefit of the Lenders, a per annum fee equal to one-eighth of one percent (.125%) on the Utilized Revolving Commitment for such day (the "Utilization Fees"). The Utilization Fees, if any, shall be due and payable in arrears five Business Days after the end of each fiscal quarter of the Borrower (as well as on the Maturity Date) for the immediately preceding fiscal quarter (or portion thereof), beginning with the first of such dates to occur after the Effective Date.
(c) Administrative Fees. The Borrower agrees to pay to the Administrative Agent, for its own account, an annual fee as agreed to between the Borrower and the Administrative Agent in the Fee Letter.
3.5 PLACE AND MANNER OF PAYMENTS.
All payments of principal, interest, fees, expenses and other amounts to be made by the Borrower under this Credit Agreement shall be made unconditionally and without setoff, deduction, defense, recoupment or counterclaim and received not later than 2:00 p.m. on the date when due, in Dollars and in immediately available funds, by the Administrative Agent at the Agency Services Address. In the event any such payment shall be due on a day that is not a Business Day, the applicable payment date shall be the next succeeding Business Day, except, with respect to Eurodollar Loans, if the next succeeding Business Day shall fall in the next succeeding calendar month, then such payment shall be due on the next preceding Business Day. The Borrower shall, at the time it makes any payment under this Credit Agreement, specify to the Administrative Agent, the Loans, fees or other amounts payable by the Borrower hereunder to which such payment is to be applied (and in the event that it fails to specify, or if such application would be inconsistent with the terms hereof, the Administrative Agent shall distribute such payment to the Lenders in such manner as it reasonably determines in its sole discretion.)
3.6 PRO RATA TREATMENT.
Except to the extent otherwise provided herein, all Revolving Loans, each payment or prepayment of principal of any Revolving Loan, each payment of interest on the Revolving Loans, each payment of Unused Fees, each payment of Utilization Fees, each reduction of the Revolving Loan Commitment, and each conversion or continuation of any Revolving Loans, shall be allocated pro rata among the Lenders in accordance with the respective Commitment Percentages; provided that, if any Lender shall have failed to pay its applicable pro rata share of any Revolving Loan, then any amount to which such Lender would otherwise be entitled pursuant to this Section 3.6 shall instead be payable to the Administrative Agent until the share of such Revolving Loan not funded by such Lender has been repaid and any interest owed by such Lender as a result of such failure to fund has been paid; and provided further, that in the event any amount paid to any Lender pursuant to this Section 3.6 is rescinded or must otherwise be returned by the Administrative Agent, each Lender shall, upon the request of the Administrative Agent, repay to the Administrative Agent the amount so paid to such Lender, with interest for the period commencing on the date such payment is returned by the Administrative Agent until the date the Administrative Agent receives such repayment at a rate per annum equal to, during the period to but excluding the date two Business Days after such request, the Federal Funds Rate, and thereafter, the Base Rate plus two percent (2%) per annum.
3.7 COMPUTATIONS OF INTEREST AND FEES.
(a) Except for Base Rate Loans accruing interest at the Prime Rate, which interest shall be computed on the basis of a 365 or 366 day year as the case may be, all computations of interest and fees hereunder shall be made on the basis of the actual number of days elapsed over a year of 360 days. Interest shall accrue from the date a Loan is made until the date such Loan is repaid or continued or converted pursuant to Section 2.4.
(b) It is the intent of the Lenders and the Borrower to conform to and contract in
strict compliance with applicable usury law from time to time in effect. All agreements between the Lenders and the Borrower are hereby limited by the provisions of this paragraph which shall override and control all such agreements, whether now existing or hereafter arising and whether written or oral. In no way, nor in any event or contingency (including but not limited to prepayment or acceleration of the maturity of any obligation), shall the interest taken, reserved, contracted for, charged, or received under this Credit Agreement, under the Notes or otherwise, exceed the maximum nonusurious amount permissible under applicable law. If, from any possible construction of any of the Credit Documents or any other document, interest would otherwise be payable in excess of the maximum nonusurious amount, any such construction shall be subject to the provisions of this paragraph and interest owing pursuant to such documents shall be automatically reduced to the maximum nonusurious amount permitted under applicable law, without the necessity of execution of any amendment or new document. If any Lender shall ever receive anything of value which is characterized as interest on the Loans under applicable law and which would, apart from this provision, be in excess of the maximum lawful amount, an amount equal to the amount which would have been excessive interest shall, without penalty, be applied to the reduction of the principal amount owing on the Loans and not to the payment of interest, or refunded to the Borrower or the other payor thereof if and to the extent such amount which would have been excessive exceeds such unpaid principal amount of the Loans. The right to demand payment of the Loans or any other indebtedness evidenced by any of the Credit Documents does not include the right to receive any interest which has not otherwise accrued on the date of such demand, and the Lenders do not intend to charge or receive any unearned interest in the event of such demand. All interest paid or agreed to be paid to the Lenders with respect to the Loans shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term (including any renewal or extension) of the Loans so that the amount of interest on account of such indebtedness does not exceed the maximum nonusurious amount permitted by applicable law.
3.8 SHARING OF PAYMENTS.
Each Lender agrees that, in the event that any Lender shall obtain payment in respect of any Loan or any other obligation owing to such Lender under this Credit Agreement through the exercise of a right of set-off, banker's lien, counterclaim or otherwise (including, but not limited to, pursuant to the Bankruptcy Code) in excess of its pro rata share as provided for in this Credit Agreement, such Lender shall promptly purchase from the other Lenders a participation in such Loans and other obligations, in such amounts and with such other adjustments from time to time, as shall be equitable in order that all Lenders share such payment in accordance with their respective ratable shares as provided for in this Credit Agreement. Each Lender further agrees that if a payment to a Lender (which is obtained by such Lender through the exercise of a right of set-off, banker's lien, counterclaim or otherwise) shall be rescinded or must otherwise be restored, each Lender which shall have shared the benefit of such payment shall, by repurchase of a participation theretofore sold, return its share of that benefit to each Lender whose payment shall have been rescinded or otherwise restored. The Borrower agrees that any Lender so purchasing such a participation may, to the fullest extent permitted by law, exercise all rights of payment, including
set-off, banker's lien or counterclaim, with respect to such participation as fully as if such Lender were a holder of such Loan or other obligation in the amount of such participation. Except as otherwise expressly provided in this Credit Agreement, if any Lender shall fail to remit to the Administrative Agent or any other Lender an amount payable by such Lender to the Administrative Agent or such other Lender pursuant to this Credit Agreement on the date when such amount is due, such payments shall accrue interest thereon, for each day from the date such amount is due until the day such amount is paid to the Administrative Agent or such other Lender, at a rate per annum equal to the Federal Funds Rate. If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section 3.8 applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders under this Section 3.8 to share in the benefits of any recovery on such secured claim.
3.9 EVIDENCE OF DEBT.
(a) Each Lender shall maintain an account or accounts evidencing each Loan made by such Lender to the Borrower from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Credit Agreement. Each Lender will make reasonable efforts to maintain the accuracy of its account or accounts and to promptly update its account or accounts from time to time, as necessary.
(b) The Administrative Agent shall maintain the Register pursuant to Section 11.3(c), and a subaccount for each Lender, in which Register and subaccounts (taken together) shall be recorded (i) the amount, type and Interest Period of each such Loan hereunder, (ii) the amount of any principal or interest due and payable or to become due and payable to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder from or for the account of the Borrower and each Lender's share thereof. The Administrative Agent will make reasonable efforts to maintain the accuracy of the subaccounts referred to in the preceding sentence and to promptly update such subaccounts from time to time, as necessary.
(c) The entries made in the accounts, Register and subaccounts
maintained pursuant to subsection (b) of this Section 3.9 (and, if
consistent with the entries of the Administrative Agent, subsection
(a)) shall be prima facie evidence of the existence and amounts of the
obligations of the Borrower therein recorded; provided, however, that
the failure of any Lender or the Administrative Agent to maintain any
such account, such Register or such subaccount, as applicable, or any
error therein, shall not in any manner affect the obligation of the
Borrower to repay the Loans made by such Lender in accordance with the
terms hereof.
SECTION 4.
ADDITIONAL PROVISIONS REGARDING LOANS
4.1 EURODOLLAR LOAN PROVISIONS.
(a) Unavailability. In the event that the Administrative Agent
shall have determined in good faith (i) that U.S. dollar deposits in
the principal amounts requested with respect to a Eurodollar Loan are
not generally available in the London interbank Eurodollar market or
(ii) that reasonable means do not exist for ascertaining the Eurodollar
Rate, the Administrative Agent shall, as soon as practicable
thereafter, give notice of such determination to the Borrower and the
Lenders. In the event of any such determination under clauses (i) or
(ii) above, until the Administrative Agent shall have advised the
Borrower and the Lenders that the circumstances giving rise to such
notice no longer exist, (A) any request by the Borrower for Eurodollar
Loans shall be deemed to be a request for Base Rate Loans, (B) any
request by the Borrower for conversion into or continuation of
Eurodollar Loans shall be deemed to be a request for conversion into or
continuation of Base Rate Loans and (C) any Loans that were to be
converted or continued as Eurodollar Loans on the first day of an
Interest Period shall be converted to or continued as Base Rate Loans.
(b) Change in Legality.
(i) Notwithstanding any other provision herein, if any change, after the date hereof, in any law, governmental rule, regulation, guideline or order (including the introduction of any new law, governmental rule, regulation, guideline or order) or in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof shall make it unlawful for any Lender to make or maintain any Eurodollar Loan or to give effect to its obligations as contemplated hereby with respect to any Eurodollar Loan, then, by written notice to the Borrower and to the Administrative Agent, such Lender may:
(A) declare that Eurodollar Loans, and conversions to or continuations of Eurodollar Loans, will not thereafter be made by such Lender hereunder, whereupon any request by the Borrower for, or for conversion into or continuation of, Eurodollar Loans shall, as to such Lender only, be deemed a request for, or for conversion into or continuation of, Base Rate Loans, unless such declaration shall be subsequently withdrawn; and
(B) require that all outstanding Eurodollar Loans made by it be converted to Base Rate Loans in which event all such Eurodollar Loans shall be automatically converted to Base Rate Loans.
In the event any Lender shall exercise its rights under clause (A) or (B) above, all payments and prepayments of principal which would otherwise have been applied to repay
the Eurodollar Loans that would have been made by such Lender or the converted Eurodollar Loans of such Lender shall instead be applied to repay the Base Rate Loans made by such Lender in lieu of, or resulting from the conversion of, such Eurodollar Loans.
(c) Requirements of Law. If at any time a Lender shall incur increased costs or reductions in the amounts received or receivable hereunder with respect to the making, the commitment to make or the maintaining of any Eurodollar Loan because of (i) any change after the date hereof, in any law, governmental rule, regulation, guideline or order (including the introduction of any new law, governmental rule, regulation, guideline or order) or in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof, including, without limitation, the imposition, modification or deemed applicability of any reserves, deposits or similar requirements (such as, for example, but not limited to, a change in official reserve requirements, but, in all events, excluding reserves required under Regulation D to the extent included in the computation of the Adjusted Eurodollar Rate) or (ii) other circumstances affecting the London interbank Eurodollar market; then (A) the Lender shall promptly notify the Administrative Agent and the Borrower and shall designate a different lending office of such Lender if such designation will avoid or reduce the amount of such increased costs, or reductions in amounts receivable and such designation will not, in such Lender's sole discretion, be otherwise disadvantageous to such Lender and (B) the Borrower shall promptly pay to such Lender such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender may determine in its sole discretion) as may be required to compensate such Lender for such increased costs or reductions in amounts receivable hereunder.
Each determination and calculation made by a Lender under this Section 4.1 shall, absent manifest error, be binding and conclusive on the parties hereto. Any conversions of Eurodollar Loans made pursuant to this Section 4.1 shall subject the Borrower to the payments required by Section 4.3. This Section 4.1 shall survive termination of this Credit Agreement and the other Credit Documents and the payment of the Loans and all other amounts payable hereunder.
4.2 CAPITAL ADEQUACY.
If any Lender has determined in good faith that the adoption or effectiveness, after the date hereof, of any applicable law, rule or regulation regarding capital adequacy, or any change therein (after the date hereof), or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by such Lender (or its parent corporation) with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Lender's (or parent corporation's) capital or assets as a consequence of its commitments or obligations hereunder to a level below that which such Lender (or its parent corporation) could have achieved but for such adoption, effectiveness, change or compliance (taking into consideration such Lender's (or parent corporation's) policies with respect to capital adequacy), then, upon notice from such Lender, the Borrower shall promptly pay to such Lender such additional amount or amounts as
will compensate such Lender for such reduction. Each determination by any such Lender of amounts owing under this Section 4.2 shall, absent manifest error, be conclusive and binding on the parties hereto. This Section 4.2 shall survive termination of this Credit Agreement and the other Credit Documents and the payment of the Loans and all other amounts payable hereunder.
4.3 COMPENSATION.
The Borrower promises to indemnify each Lender and to hold each Lender
harmless from any loss or expense which such Lender may sustain or incur as a
consequence of (a) default by the Borrower in the making of a borrowing of a
Competitive Bid Loan or in the making of a borrowing of, conversion into or
continuation of a Eurodollar Loan after the Borrower has given a notice
requesting the same in accordance with the provisions of this Credit Agreement,
(b) default by the Borrower in making any prepayment of a Eurodollar Loan or a
Competitive Bid Loan after the Borrower has given a notice thereof in accordance
with the provisions of this Credit Agreement, (c) the making of a prepayment of
a Eurodollar Loan or a Competitive Bid Loan on a day which is not the last day
of an Interest Period with respect thereto and (d) the payment, continuation or
conversion of a Eurodollar Loan or a Competitive Bid Loan on a day which is not
the last day of the Interest Period applicable thereto or the failure to repay a
Eurodollar Loan when required by the terms of this Credit Agreement. Each
determination by any such Lender of amounts owing under this Section 4.3 shall,
absent manifest error, be conclusive and binding on the parties hereto. This
Section 4.3 shall survive the termination of this Credit Agreement and the other
Credit Documents and the payment of the Loans and all other amounts payable
hereunder.
4.4 TAXES.
(a) Except as provided below in this Section 4.4, all payments made by the Borrower under this Credit Agreement and any Notes shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any court, or governmental body, agency or other official, excluding taxes measured by or imposed upon the net income of any Lender or its applicable lending office, or any branch or affiliate thereof, and all franchise taxes, branch taxes, taxes on doing business or taxes on the capital or net worth of any Lender or its applicable lending office, or any branch or affiliate thereof, in each case imposed in lieu of net income taxes: (i) by the jurisdiction under the laws of which such Lender, applicable lending office, branch or affiliate is organized or is located, or in which its principal executive office is located, or any nation within which such jurisdiction is located or any political subdivision thereof; or (ii) by reason of any connection between the jurisdiction imposing such tax and such Lender, applicable lending office, branch or affiliate other than a connection arising solely from such Lender having executed, delivered or performed its obligations, or received payment under or enforced, this Credit Agreement or any Notes. If any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or withholdings ("Non-Excluded Taxes") are required to be withheld from any amounts payable to an Administrative
Agent or any Lender hereunder or under any Notes, (A) the amounts so payable to the Administrative Agent or such Lender shall be increased to the extent necessary to yield to the Administrative Agent or such Lender (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Credit Agreement and any Notes, provided, however, that the Borrower shall be entitled to deduct and withhold any Non- Excluded Taxes and shall not be required to increase any such amounts payable to any Lender that is not organized under the laws of the United States of America or a state thereof if such Lender fails to comply with the requirements of paragraph (b) of this Section 4.4 whenever any Non-Excluded Taxes are payable by the Borrower, and (B) as promptly as possible after requested, the Borrower shall send to the Administrative Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an original official receipt received by the Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent the required receipts or other required documentary evidence, the Borrower shall indemnify the Administrative Agent and any Lender for any incremental Non-Excluded Taxes, interest or penalties that may become payable by the Administrative Agent or any Lender as a result of any such failure. The agreements in this Section 4.4 shall survive the termination of this Credit Agreement and the payment of the Loans and all other amounts payable hereunder.
(b) Each Lender that is not incorporated under the laws of the United States of America or a state thereof shall:
(i) (A) on or before the date of any payment by the Borrower under this Credit Agreement or the Notes to such Lender, deliver to the Borrower and the Administrative Agent (x) two duly completed copies of United States Internal Revenue Service Form W8-BEN or W8-ECI, or successor applicable form, as the case may be, certifying that it is entitled to receive payments under this Credit Agreement and any Notes without deduction or withholding of any United States federal income taxes and (y) an Internal Revenue Service Form W-8 or W-9, or successor applicable form, as the case may be, certifying that it is entitled to an exemption from United States backup withholding tax;
(B) deliver to the Borrower and the Administrative Agent two further copies of any such form or certification on or before the date that any such form or certification expires or becomes obsolete and after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrower; and
(C) obtain such extensions of time for filing and complete such forms or certifications as may reasonably be requested by the Borrower or the Administrative Agent; or
(ii) in the case of any such Lender that is not a
"bank" within the meaning of Section 881(c)(3)(A) of the
Internal Revenue Code, (A) represent to the Borrower (for the
benefit of the Borrower and the Administrative Agent) that it
is not a bank within the meaning of Section 881 (c)(3)(A) of
the Internal Revenue Code, (B) agree to furnish to the
Borrower, on or before the date of any payment by the
Borrower, with a copy to the Administrative Agent, two
accurate and complete original signed copies of Internal
Revenue Service Form W-8, or successor applicable form
certifying to such Lender's legal entitlement at the date of
such certificate to an exemption from U.S. withholding tax
under the provisions of Section 881(c) of the Internal Revenue
Code with respect to payments to be made under this Credit
Agreement and any Notes (and to deliver to the Borrower and
the Administrative Agent two further copies of such form on or
before the date it expires or becomes obsolete and after the
occurrence of any event requiring a change in the most
recently provided form and, if necessary, obtain any
extensions of time reasonably requested by the Borrower or the
Administrative Agent for filing and completing such forms),
and (C) agree, to the extent legally entitled to do so, upon
reasonable request by the Borrower, to provide to the Borrower
(for the benefit of the Borrower and the Administrative Agent)
such other forms as may be reasonably required in order to
establish the legal entitlement of such Lender to an exemption
from withholding with respect to payments under this Credit
Agreement and any Notes.
Notwithstanding the above, if any change in treaty, law or regulation has occurred after the date such Person becomes a Lender hereunder which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender so advises the Borrower and the Administrative Agent, then such Lender shall be exempt from such requirements. Each Person that shall become a Lender or a participant of a Lender pursuant to Section 11.3 shall, upon the effectiveness of the related transfer, be required to provide all of the forms, certifications and statements required pursuant to this subsection (b); provided that in the case of a participant of a Lender, the obligations of such participant of a Lender pursuant to this subsection (b) shall be determined as if the participant of a Lender were a Lender except that such participant of a Lender shall furnish all such required forms, certifications and statements to the Lender from which the related participation shall have been purchased.
SECTION 5.
CONDITIONS PRECEDENT
5.1 CLOSING CONDITIONS.
The obligation of the Lenders to enter into this Credit Agreement is subject to satisfaction (or waiver) of the following conditions:
(a) Executed Credit Documents. Receipt by the Administrative Agent of duly executed copies of (i) this Credit Agreement, (ii) the Notes and (iii) all other Credit Documents, each in form and substance acceptable to the Lenders.
(b) Corporate Documents. Receipt by the Administrative Agent of the following:
(i) Charter Documents. Copies of the articles of incorporation or other charter documents of the Borrower certified to be true and complete as of a recent date by the appropriate Governmental Authorities of the states or other jurisdictions of its incorporation and certified by a secretary or assistant secretary of the Borrower to be true and correct as of the Closing Date.
(ii) Bylaws. A copy of the bylaws of the Borrower certified by a secretary or assistant secretary of the Borrower to be true and correct as of the Closing Date.
(iii) Resolutions. Copies of resolutions of the Board of Directors of the Borrower approving and adopting the Credit Documents to which it is a party, the transactions contemplated therein and authorizing execution and delivery thereof, certified by a secretary or assistant secretary of the Borrower to be true and correct and in full force and effect as of the Closing Date.
(iv) Good Standing. Copies of certificates of good standing, existence or its equivalent with respect to the Borrower certified as of a recent date by the appropriate Governmental Authorities of the states or other jurisdictions of incorporation and each other jurisdiction in which the failure to so qualify and be in good standing would have a Material Adverse Effect.
(v) Incumbency. An incumbency certificate of the Borrower certified by a secretary or assistant secretary of the Borrower to be true and correct as of the Closing Date.
(c) Opinion of Counsel. Receipt by the Administrative Agent of an opinion, or opinions, from legal counsel to the Borrower addressed to the Administrative Agent on behalf of the Lenders and dated as of the Effective Date, in each case satisfactory in form and substance to the Administrative Agent.
(d) Financial Statements. Receipt by the Lenders of the consolidated audited financial statements of the Borrower and its Subsidiaries dated as of September 30, 1999 and September 30, 2000, and the unaudited financial statements for the quarters ending December 31, 2000 and March 31, 2001, including balance sheets and income and cash flow statements, in each case audited (except for the quarterly financial statements) by
independent public accountants of recognized standing and prepared in accordance with GAAP.
(e) Fees and Expenses. Payment by the Borrower of all fees and expenses owed by it to the Lenders and the Administrative Agent, including, without limitation, payment to the Administrative Agent of the fees set forth in the Fee Letter.
(f) Material Adverse Effect. No event or condition shall have occurred since March 31, 2001 that has had or would be reasonably expected to have a Material Adverse Effect.
(g) Officer's Certificates. The Administrative Agent shall
have received a certificate or certificates executed by a Financial
Officer of the Borrower as of the Effective Date stating that (i) the
Borrower and its Subsidiaries are in compliance with all existing
material financial obligations, (ii) no action, suit, investigation or
legal, equitable, arbitration or administrative proceeding is pending
or, to such officer's knowledge, threatened in any court or before any
arbitrator or Governmental Authority that would have or be reasonably
expected to have a Material Adverse Effect, (iii) the financial
statements and information delivered to the Administrative Agent on or
before the Effective Date were prepared in good faith and in accordance
with GAAP and (iv) immediately after giving effect to this Credit
Agreement, the other Credit Documents and all the transactions
contemplated herein and therein to occur on such date, (A) no Default
or Event of Default exists, (B) all representations and warranties
contained herein and in the other Credit Documents are true and correct
in all material respects on and as of the date made and (C) the
Borrower is in compliance with the financial covenant set forth in
Section 7.2.
(h) Payment of Existing Debt. Receipt by the Administrative Agent of evidence that the Existing Term Credit Agreement has been terminated and all amounts owing thereunder have been paid in full.
(i) Other. Receipt by the Lenders of such other documents, instruments, agreements or information as reasonably requested by any Lender.
5.2 CONDITIONS TO LOANS.
In addition to the conditions precedent stated elsewhere herein, the Lenders shall not be obligated to make new Loans unless:
(a) Request. The Borrower shall have timely delivered a duly executed and completed Notice of Borrowing or Competitive Bid Request, as applicable, in conformance with all the terms and conditions of this Credit Agreement.
(b) Representations and Warranties. The representations and warranties made by the Borrower are true and correct in all material respects at and as if made as of the date of the funding of the requested Loans.
(c) No Default. No Default or Event of Default shall exist or be continuing either prior to or after giving effect thereto.
(d) Availability. Immediately after giving effect to the making of a Loan (and the application of the proceeds thereof) the sum of the amount of Revolving Loans outstanding plus the amount of Competitive Bid Loans outstanding shall not exceed the Revolving Loan Commitment.
The delivery of each Notice of Borrowing and each Competitive Bid Request shall constitute a representation and warranty by the Borrower of the correctness of the matters specified in subsections (b) through (d) above.
SECTION 6.
REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants to each Lender that:
6.1 ORGANIZATION AND GOOD STANDING.
The Borrower (a) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdictions of its incorporation, (b) is duly qualified and in good standing as a foreign corporation authorized to do business in every jurisdiction where the failure to so qualify would have or would reasonably be expected to have a Material Adverse Effect and (c) has the requisite corporate power and authority to own its properties and to carry on its business as now conducted and as proposed to be conducted.
6.2 DUE AUTHORIZATION.
The Borrower (a) has the requisite corporate power and authority to execute, deliver and perform this Credit Agreement and the other Credit Documents and to incur the obligations herein and therein provided for and (b) has been authorized by all necessary corporate action, to execute, deliver and perform this Credit Agreement and the other Credit Documents.
6.3 NO CONFLICTS.
Neither the execution and delivery of the Credit Documents, nor the consummation of the transactions contemplated therein, nor performance of and compliance with the terms and provisions thereof by the Borrower will in any material respect (a) violate or conflict with any provision of its articles of incorporation or bylaws, (b) violate, contravene or conflict with any law (including without limitation, the Public Utility Holding Company Act of 1935, as amended), regulation (including without limitation, Regulation U, Regulation X or any regulation promulgated
by the Federal Energy Regulatory Commission), order, writ, judgment, injunction, decree or permit applicable to it, (c) violate, contravene or conflict with contractual provisions of, or cause an event of default under, any indenture, loan agreement, mortgage, deed of trust, contract or other agreement or instrument to which it is a party or by which it or its properties may be bound, or (d) result in or require the creation of any Lien upon or with respect to its properties.
6.4 CONSENTS.
No consent, approval, authorization or order of, or filing, registration or qualification with, any court or Governmental Authority or third party is required in connection with the execution, delivery or performance of this Credit Agreement or any of the other Credit Documents.
6.5 ENFORCEABLE OBLIGATIONS.
This Credit Agreement and the other Credit Documents have been duly executed and delivered and constitute legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their respective terms, except as may be limited by bankruptcy or insolvency laws or similar laws affecting creditors' rights generally or by general equitable principles.
6.6 FINANCIAL CONDITION.
(a) The financial statements delivered to the Lenders pursuant to Section 5.1(d) and pursuant to Section 7.1(a) and (b): (i) have been prepared in accordance with GAAP (subject to the provisions of Section 1.3) and (ii) present fairly in all material respects the financial condition, results of operations, and cash flows of the Borrower and its Subsidiaries as of such date and for such periods.
(b) Other than the LGS Acquisition and the Woodward
Acquisition, since March 31, 2001, there has been no sale, transfer or
other disposition by the Borrower of any material part of the business
or property of the Borrower, and no purchase or other acquisition by
the Borrower of any business or property (including any Capital Stock
of any other Person) material in relation to the financial condition of
the Borrower, in each case, which, is not (i) reflected in the most
recent financial statements delivered to the Lenders pursuant to
Section 7.1 or in the notes thereto or (ii) otherwise permitted by the
terms of this Credit Agreement and communicated to the Administrative
Agent.
6.7 NO MATERIAL CHANGE.
Since March 31, 2001, there has been no development or event relating to or affecting the Borrower or any of its Subsidiaries that has had or would be reasonably expected to have a Material Adverse Effect, it being understood that the consummation of the Acquisition, in and of itself, does not constitute a Material Adverse Effect.
6.8 NO DEFAULT.
No Default or Event of Default presently exists and is continuing.
6.9 LITIGATION.
There are no actions, suits, investigations or legal, equitable, arbitration or administrative proceedings pending or, to the knowledge of the Borrower, threatened against the Borrower, any of its Subsidiaries or any of its properties which could have or be reasonably expected to have a Material Adverse Effect.
6.10 TAXES.
The Borrower and its Subsidiaries have filed, or caused to be filed, all tax returns (federal, state, local and foreign) required to be filed and paid all amounts of taxes shown thereon to be due (including interest and penalties) and has paid all other taxes, fees, assessments and other governmental charges (including mortgage recording taxes, documentary stamp taxes and intangibles taxes) owing by it, except for such taxes which are not yet delinquent or that are being contested in good faith and by proper proceedings, and against which adequate reserves are being maintained in accordance with GAAP.
6.11 COMPLIANCE WITH LAW.
The Borrower and each of its Subsidiaries is in compliance with all laws, rules, regulations, orders and decrees applicable to it or to its properties, except where the failure to be in compliance would not have or would not reasonably be expected to have a Material Adverse Effect.
6.12 MATERIAL AGREEMENTS.
Neither the Borrower nor any of its Subsidiaries is in default in any respect under any contract, lease, loan agreement, indenture, mortgage, security agreement or other agreement or obligation to which it is a party or by which any of its properties is bound which default has had or would be reasonably expected to have a Material Adverse Effect.
6.13 ERISA.
Except as would not result or be reasonably expected to result in a Material Adverse Effect:
(a) During the five-year period prior to the date on which this representation is made or deemed made: (i) no Termination Event has occurred, and, to the best knowledge of the Borrower, no event or condition has occurred or exists as a result of which any Termination Event is reasonably expected to occur, with respect to any Plan; (ii) no "accumulated funding deficiency," as such term is defined in Section 302 of ERISA and Section 412 of the Code, whether or not waived, has occurred with respect to any Plan;
(iii) each Plan has been maintained, operated, and funded in material compliance with its own terms and in material compliance with the provisions of ERISA, the Code, and any other applicable federal or state laws; and (iv) no Lien in favor or the PBGC or a Plan has arisen or is reasonably expected to arise on account of any Plan.
(b) No liability has been or is reasonably expected by the Borrower to be incurred under Sections 4062, 4063 or 4064 of ERISA with respect to any Single Employer Plan by the Borrower or any of its Subsidiaries which has or would reasonably be expected to have a Material Adverse Effect.
(c) The actuarial present value of all "benefit liabilities"
under each Single Employer Plan (determined within the meaning of
Section 401(a)(2) of the Code, utilizing the actuarial assumptions used
to fund such Plans), whether or not vested, did not, as of the last
annual valuation date prior to the date on which this representation is
made or deemed made, exceed the current value of the assets of such
Plan allocable to such accrued liabilities, except as disclosed in the
Borrower's financial statements.
(d) Neither the Borrower nor any ERISA Affiliate has incurred, or, to the best knowledge of the Borrower, is reasonably expected to incur, any withdrawal liability under ERISA to any Multiemployer Plan or Multiple Employer Plan. Neither the Borrower nor any ERISA Affiliate has received any notification that any Multiemployer Plan is in reorganization (within the meaning of Section 4241 of ERISA), is insolvent (within the meaning of Section 4245 of ERISA), or has been terminated (within the meaning of Title IV of ERISA), and no Multiemployer Plan is, to the best knowledge of the Borrower, reasonably expected to be in reorganization, insolvent, or terminated.
(e) No prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) or breach of fiduciary responsibility has occurred with respect to a Plan which has subjected or is reasonably likely to subject the Borrower or any ERISA Affiliate to any liability under Sections 406, 407, 409, 502(i), or 502(l) of ERISA or Section 4975 of the Code, or under any agreement or other instrument pursuant to which the Borrower or any ERISA Affiliate has agreed or is required to indemnify any person against any such liability.
(f) The present value (determined using actuarial and other assumptions which are reasonable with respect to the benefits provided and the employees participating) of the liability of the Borrower and each ERISA Affiliate for post-retirement welfare benefits to be provided to their current and former employees under Plans which are welfare benefit plans (as defined in Section 3(1) of ERISA), net of all assets under all such Plans allocable to such benefits, are reflected on the financial statements referenced in Section 7.1 in accordance with FASB 106.
(g) Each Plan which is a welfare plan (as defined in Section 3(1) of ERISA) to which Sections 601-609 of ERISA and Section 4980B of the Code apply has been administered in compliance in all material respects with such sections.
6.14 USE OF PROCEEDS.
The proceeds of the Loans hereunder will be used solely for the purposes specified in Section 7.8. None of such proceeds will be used for the acquisition of another Person unless the board of directors (or other comparable governing body) or stockholders, as appropriate, of such Person has approved such acquisition.
6.15 GOVERNMENT REGULATION.
(a) No proceeds of the Loans will be used, directly or
indirectly, for the purpose of purchasing or carrying any "margin
stock" within the meaning of Regulation U, or for the purpose of
purchasing or carrying or trading in any securities. If requested by
any Lender or the Administrative Agent, the Borrower will furnish to
the Administrative Agent and each Lender a statement to the foregoing
effect in conformity with the requirements of FR Form U-1 referred to
in Regulation U. No indebtedness being reduced or retired out of the
proceeds of the Loans was or will be incurred for the purpose of
purchasing or carrying any margin stock within the meaning of
Regulation U or any "margin security" within the meaning of Regulation
T. "Margin stock" within the meaning of Regulation U does not
constitute more than 25% of the value of the consolidated assets of the
Borrower and its Subsidiaries. None of the transactions contemplated by
the Credit Documents (including, without limitation, the direct or
indirect use of the proceeds of the Loans) will violate or result in a
violation of the Securities Act or the Exchange Act.
(b) Neither the Borrower nor any of its Subsidiaries is (i) an "investment company" registered or required to be registered under the Investment Company Act of 1940, as amended, and is not controlled by an "investment company", or (ii) a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended.
(c) No director, executive officer or principal shareholder of the Borrower or any of its Subsidiaries is a director, executive officer or principal shareholder of any Lender. For the purposes hereof the terms "director", "executive officer" and "principal shareholder" (when used with reference to any Lender) have the respective meanings assigned thereto in Regulation O.
6.16 DISCLOSURE.
Neither this Credit Agreement nor any financial statements delivered to the Lenders nor any other document, certificate or statement furnished to the Lenders by or on behalf of the Borrower in connection with the transactions contemplated hereby contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained therein or herein, taken as a whole, not misleading.
6.17 ENVIRONMENTAL MATTERS.
Except as would not result or be reasonably expected to result in a Material Adverse Effect: (a) each of the properties of the Borrower and its Subsidiaries (the "Properties") and all operations at the Properties are in compliance in all material respects with all applicable Environmental Laws, (b) there is no violation of any Environmental Law with respect to the Properties or the businesses operated by the Borrower or its Subsidiaries (the "Businesses"), and (c) there are no conditions relating to the Businesses or Properties that would reasonably be expected to give rise to a material liability under any applicable Environmental Laws.
6.18 INSURANCE.
The Borrower and its Subsidiaries maintain insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar business and owning similar properties in the same general areas in which the Borrower and its Subsidiaries operate.
6.19 FRANCHISES, LICENSES, ETC.
The Borrower and its Subsidiaries possess (a) good title to, or the legal right to use, all material properties and assets and (b) all material franchises, certificates, licenses, permits and other authorizations, in each case as are necessary for the operation of their respective businesses.
6.20 SECURED INDEBTEDNESS.
All of the secured indebtedness of the Borrower is set forth on Schedule 6.20 or permitted by Section 8.6.
6.21 SUBSIDIARIES.
All Subsidiaries of the Borrower and the designation as to which such Subsidiaries are Material Subsidiaries are set forth on Schedule 6.21. Schedule 6.21 may be updated from time to time by the Borrower.
SECTION 7.
AFFIRMATIVE COVENANTS
The Borrower hereby covenants and agrees that so long as this Credit Agreement is in effect and until the Loans, together with interest, fees and other obligations hereunder, have been paid in full and the Commitments shall have terminated:
7.1 INFORMATION COVENANTS.
The Borrower will furnish, or cause to be furnished, to the Administrative Agent:
(a) Annual Financial Statements. As soon as available, and in any event within 120 days after the close of each fiscal year of the Borrower, a consolidated balance sheet and income statement of the Borrower and its Subsidiaries, as of the end of such fiscal year, together with retained earnings and a consolidated statement of cash flows for such fiscal year setting forth in comparative form figures for the preceding fiscal year, all such financial information described above to be in reasonable form and detail and audited by independent certified public accountants of recognized national standing reasonably acceptable to the Administrative Agent and whose opinion shall be furnished to the Administrative Agent, shall be to the effect that such financial statements have been prepared in accordance with GAAP (except for changes with which such accountants concur) and shall not be limited as to the scope of the audit or qualified in any respect.
(b) Quarterly Financial Statements. As soon as available, and in any event within 65 days after the close of each fiscal quarter of the Borrower (other than the fourth fiscal quarter, in which case 120 days after the end thereof) a consolidated balance sheet and income statement of the Borrower and its Subsidiaries, as of the end of such fiscal quarter, together with a related consolidated statement of cash flows for such fiscal quarter in each case setting forth in comparative form figures for the corresponding period of the preceding fiscal year, all such financial information described above to be in reasonable form and detail and reasonably acceptable to the Administrative Agent, and accompanied by a certificate of a Financial Officer of the Borrower to the effect that such quarterly financial statements fairly present in all material respects the financial condition of the Borrower and have been prepared in accordance with GAAP, subject to changes resulting from audit and normal year-end audit adjustments.
(c) Officer's Certificate. At the time of delivery of the
financial statements provided for in Sections 7.1(a) and 7.1(b) above,
a certificate of a Financial Officer of the Borrower, substantially in
the form of Exhibit 7.1(c), (i) demonstrating compliance with Section
7.2 by calculation thereof as of the end of each such fiscal period and
(ii) stating that no Default or Event of Default exists, or if any
Default or Event of Default does exist, specifying the nature and
extent thereof and what action the Borrower proposes to take with
respect thereto.
(d) Reports. Promptly upon transmission or receipt thereof, copies of any filings and registrations with, and reports to or from, any Governmental Authority, including, without limitation, the Securities and Exchange Commission or any successor agency and any utility regulatory body.
(e) Notices. Upon the Borrower obtaining knowledge thereof, the Borrower will give written notice to the Administrative Agent immediately of (i) the occurrence of a Default or Event of Default, specifying the nature and existence thereof and what action the
Borrower proposes to take with respect thereto and (ii) the occurrence
of any of the following with respect to the Borrower or any Subsidiary:
(A) the pendency or commencement of any litigation, arbitration or
governmental proceeding against the Borrower or such Subsidiary which,
if adversely determined, would have or would be reasonably expected to
have a Material Adverse Effect or (B) the institution of any
proceedings against the Borrower or such Subsidiary with respect to, or
the receipt of notice by such Person of potential liability or
responsibility for violation or alleged violation of, any federal,
state or local law, rule or regulation (including, without limitation,
any Environmental Law), the violation of which would have or would be
reasonably expected to have a Material Adverse Effect.
(f) ERISA. Upon the Borrower or any ERISA Affiliate obtaining
knowledge thereof, the Borrower will give written notice to the
Administrative Agent and each of the Lenders promptly (and in any event
within five Business Days) of: (i) any event or condition, including,
but not limited to, any Reportable Event, that constitutes, or would be
reasonably expected to lead to, a Termination Event; (ii) any
communication from the PBGC stating its intention to terminate any Plan
or to have a trustee appointed to administer any Plan together with a
statement of the amount of liability, if any, incurred or expected to
be incurred by the Borrower or any Subsidiary in connection therewith;
(iii) with respect to any Multiemployer Plan, the receipt of notice as
prescribed in ERISA or otherwise of any withdrawal liability assessed
against the Borrower or any ERISA Affiliate, or of a determination that
any Multiemployer Plan is in reorganization or insolvent (both within
the meaning of Title IV of ERISA); (iv) the failure to make full
payment on or before the due date (including extensions) thereof of all
amounts which the Borrower or any of its Subsidiaries or ERISA
Affiliates is required to contribute to each Plan pursuant to its terms
and as required to meet the minimum funding standard set forth in ERISA
and the Code with respect thereto; or (v) any change in the funding
status of any Plan that would have or would be reasonably expected to
have a Material Adverse Effect; together, with a description of any
such event or condition or a copy of any such notice and a statement by
a officer of the Borrower briefly setting forth the details regarding
such event, condition, or notice, and the action, if any, which has
been or is being taken or is proposed to be taken by the Borrower with
respect thereto. Promptly upon request, the Borrower shall furnish the
Administrative Agent and each of the Lenders with such additional
information concerning any Plan as may be reasonably requested,
including, but not limited to, copies of each annual report/return
(Form 5500 series), as well as all schedules and attachments thereto
required to be filed with the Department of Labor and/or the Internal
Revenue Service pursuant to ERISA and the Code, respectively, for each
"plan year" (within the meaning of Section 3(39) of ERISA).
(g) Other Information. With reasonable promptness upon any such request, such other information regarding the business, properties or financial condition of the Borrower as the Administrative Agent or the Required Lenders may reasonably request.
7.2 DEBT TO CAPITALIZATION RATIO.
At all times, the Debt to Capitalization Ratio shall be less than or equal to 0.70 to 1.0.
7.3 PRESERVATION OF EXISTENCE, FRANCHISES AND ASSETS.
The Borrower will, and will cause its Subsidiaries to, do all things necessary to preserve and keep in full force and effect its existence, rights, franchises and authority, except where failure to do so would not or would not reasonably be expected to have a Material Adverse Effect. The Borrower will, and will cause its Subsidiaries to, generally maintain its properties, real and personal, in good condition, and the Borrower and its Subsidiaries shall not waste or otherwise permit such properties to deteriorate, reasonable wear and tear excepted, except where failure to do so would not or would not reasonably be expected to have a Material Adverse Effect.
7.4 BOOKS AND RECORDS.
The Borrower will, and will cause its Subsidiaries to, keep complete and accurate books and records of its transactions in accordance with good accounting practices on the basis of GAAP (including the establishment and maintenance of appropriate reserves).
7.5 COMPLIANCE WITH LAW.
The Borrower will, and will cause its Subsidiaries to, comply with, and obtain all permits and licenses required by, all laws (including, without limitation, all Environmental Laws and ERISA laws), rules, regulations and orders, and all applicable restrictions imposed by all Governmental Authorities, applicable to it and its property, if the failure to comply would have or would be reasonably expected to have a Material Adverse Effect.
7.6 PAYMENT OF TAXES AND OTHER INDEBTEDNESS.
The Borrower will, and will cause its Subsidiaries to, pay, settle or discharge (a) all taxes, assessments and governmental charges or levies imposed upon it, or upon its income or profits, or upon any of its properties, before they shall become delinquent, (b) all lawful claims (including claims for labor, materials and supplies) which, if unpaid, might give rise to a Lien upon any of its properties, and (c) all of its other indebtedness as it shall become due (to the extent such repayment is not otherwise prohibited by this Credit Agreement); provided, however, that the Borrower shall not be required to pay any such tax, assessment, charge, levy, claim or indebtedness which is being contested in good faith by appropriate action and as to which adequate reserves therefor, if required, have been established in accordance with GAAP, unless the failure to make any such payment (i) would give rise to an immediate right to foreclose or collect on a Lien securing such amounts or (ii) would have or would reasonably be expected to have a Material Adverse Effect.
7.7 INSURANCE.
The Borrower will, and will cause its Subsidiaries to, at all times maintain in full force and effect insurance (including worker's compensation insurance, liability insurance, casualty insurance and business interruption insurance) with responsible and reputable insurance companies in such amounts, covering such risks and liabilities and with such deductibles or self-insurance retentions as are in accordance with normal industry practice.
7.8 USE OF PROCEEDS.
The proceeds of the Loans may be used solely (a) to refinance the indebtedness under the Existing Revolving Credit Agreement and (b) for working capital, capital expenditures and other lawful corporate purposes of the Borrower.
7.9 AUDITS/INSPECTIONS.
Upon reasonable prior notice and during normal business hours, the Borrower will permit representatives appointed by the Administrative Agent, including, without limitation, independent accountants, agents, attorneys, and appraisers to visit and inspect the Borrower's and its Subsidiaries' property, including their books and records, their accounts receivable and inventory, the Borrower's and its Subsidiaries' facilities and their other business assets, and to make photocopies or photographs thereof and to write down and record any information such representative obtains and shall permit the Administrative Agent or its representatives to investigate and verify the accuracy of information provided to the Lenders and to discuss all such matters with the officers, employees and representatives of the Borrower and its Subsidiaries.
SECTION 8.
NEGATIVE COVENANTS
The Borrower hereby covenants and agrees that so long as this Credit Agreement is in effect and until the Loans, together with interest, fees and other obligations hereunder, have been paid in full and the Commitments shall have terminated:
8.1 NATURE OF BUSINESS.
The Borrower will not materially alter the character of its business from that conducted as of the Closing Date.
8.2 CONSOLIDATION AND MERGER.
The Borrower will not (a) enter into any transaction of merger, or (b) consolidate, liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution); provided that, so long as no Default or Event of Default shall exist or be caused thereby, a Person may be merged or
consolidated with or into the Borrower so long as the Borrower shall be the continuing or surviving corporation.
8.3 SALE OR LEASE OF ASSETS.
Within any twelve month period, the Borrower will not, nor will it permit any Subsidiary to, convey, sell, lease, transfer or otherwise dispose of assets, business or operations with a net book value in excess of 25% of Total Assets as calculated as of the end of the most recent fiscal quarter.
8.4 ARM'S-LENGTH TRANSACTIONS.
The Borrower will not, nor will it permits its Subsidiaries to, enter into any transaction or series of transactions, whether or not in the ordinary course of business, with any officer, director or Affiliate other than on terms and conditions substantially as favorable as would be obtainable in a comparable arm's-length transaction with a Person other than an officer, director or Affiliate.
8.5 FISCAL YEAR; ORGANIZATIONAL DOCUMENTS.
The Borrower will not (a) change its fiscal year or (b) in any manner that would reasonably be expected to materially adversely affect the rights of the Lenders, change its organizational documents or its bylaws; it being understood that the Borrower's shareholders may approve an amendment to the Borrower's Articles of Incorporation to permit the issuance of Preferred Securities.
8.6 LIENS.
The Borrower will not, nor will it permit any of its Material
Subsidiaries to, contract, create, incur, assume or permit to exist any Lien
with respect to any of its property or assets of any kind (whether real or
personal, tangible or intangible), whether now owned or after acquired, except
for the following: (a) Liens securing Borrower Obligations, (b) Liens for taxes
not yet due or Liens for taxes being contested in good faith by appropriate
action and for which adequate reserves, if required, determined in accordance
with GAAP have been established (and as to which the property subject to any
such Lien is not yet subject to foreclosure, sale or loss on account thereof),
(c) Liens in respect of property imposed by law arising in the ordinary course
of business such as materialmen's, mechanics', warehousemen's, carrier's,
landlords' and other nonconsensual statutory Liens which are not yet due and
payable, which have been in existence less than 90 days or which are being
contested in good faith by appropriate action and for which adequate reserves,
if required, determined in accordance with GAAP have been established (and as to
which the property subject to any such Lien is not yet subject to foreclosure,
sale or loss on account thereof), (d) pledges or deposits made in the ordinary
course of business to secure payment of worker's compensation insurance,
unemployment insurance, pensions or social security programs, (e) Liens arising
from good faith deposits in connection with or to secure performance of tenders,
bids, leases, government contracts, performance and return-of-money bonds and
other similar obligations incurred in the ordinary course of business (other
than obligations in respect of the payment of borrowed money),
(f) Liens arising from good faith deposits in connection with or to secure
performance of statutory obligations and surety and appeal bonds, (g) easements,
rights-of-way, restrictions (including zoning restrictions), minor defects or
irregularities in title and other similar charges or encumbrances not, in any
material respect, impairing the use of the encumbered property for its intended
purposes, (h) judgment Liens that would not constitute an Event of Default, (i)
Liens arising by virtue of any statutory or common law provision relating to
banker's liens, rights of setoff or similar rights as to deposit accounts or
other funds maintained with a creditor depository institution, (j) any Lien on
any assets securing indebtedness incurred or assumed for the purpose of
financing all or any part of the cost of acquiring such assets; provided that
such Lien attaches to such asset concurrently with or within 90 days after the
acquisition thereof, (k) any Lien on any asset of any Person existing at the
time such Person is merged or consolidated with or into the Borrower or one of
its Subsidiaries and not created in contemplation of such event, (l) any Lien
existing on any asset prior to the acquisition thereof by the Borrower or one of
its Subsidiaries and not created in contemplation of such acquisition, (m) any
Lien (whether such Lien applies to current assets or after-acquired property, or
both) on any assets of the Borrower or such Material Subsidiary created pursuant
to the 1957 Indenture or the 1959 Indenture; provided that any Lien on any
assets of the Borrower or such Material Subsidiary that are specifically
excluded as collateral under such Indentures shall not be deemed to be a
Permitted Lien hereunder, (n) any Lien (whether such Lien applies to current
assets or after-acquired property, or both) on any Fixed Assets of the Borrower
or such Material Subsidiaries created or arising at any time pursuant to or
under (i) Section 4.08 of each of the 1987 Note Purchase Agreements and the 1989
Note Purchase Agreement, (ii) Section 4.8 of each of the 1991 Note Purchase
Agreement, the 1992 Note Purchase Agreement and the 1994 Note Purchase Agreement
or (iii) any similar provision utilizing the same or a similar cash flow-to-debt
test, contained in any other loan agreement that the Borrower may enter into
after the Effective Date, which agreement grants a loan or extends credit to the
Borrower with a maturity date in excess of one year, (o) any Lien on the assets
of the Borrower pursuant to Section 803 of the 1998 Indenture or Section 803 of
the 2001 Indenture, if placed on the property of the Borrower on a pro rata
basis only with other Liens that may be placed on the properties of the Borrower
in the future, (p) Liens on Fixed Assets not otherwise permitted by this Credit
Agreement securing indebtedness in the aggregate (at the time such Liens are
created) not in excess of five percent (5%) of Consolidated Net Property, and
(q) any extension, renewal or replacement (or successive extensions, renewals or
replacements), as a whole or in part, of any Liens referred to in the foregoing
clauses (a) through (p) for amounts not exceeding the principal amount of the
indebtedness secured by the Lien so extended, renewed or replaced; provided that
such extension, renewal or replacement Lien is limited to all or a part of the
same property or assets that were covered by the Lien extended, renewed or
replaced (plus improvements on such property or assets).
SECTION 9.
EVENTS OF DEFAULT
9.1 EVENTS OF DEFAULT.
An Event of Default shall exist upon the occurrence of any of the following specified events (each an "Event of Default"):
(a) Payment. The Borrower shall default in the payment (i) when due of any principal of any of the Loans or (ii) within one Business Day of when due of any interest on the Loans or of any fees or other amounts owing hereunder, under any of the other Credit Documents or in connection herewith.
(b) Representations. Any representation, warranty or statement made or deemed to be made by the Borrower herein, in any of the other Credit Documents, or in any statement or certificate delivered or required to be delivered pursuant hereto or thereto shall prove untrue in any material respect on the date as of which it was deemed to have been made.
(c) Covenants. The Borrower shall:
(i) default in the due performance or observance of any term, covenant or agreement contained in Sections 7.2, 7.3, 7.4, 7.5, 7.9 or 8.1 through 8.6 inclusive; or
(ii) default in the due performance or observance by it of any term, covenant or agreement contained in Section 7.1 and such default shall continue unremedied for a period of five Business Days after the earlier of the Borrower becoming aware of such default or notice thereof given by the Administrative Agent; or
(iii) default in the due performance or observance by it of any term, covenant or agreement (other than those referred to in subsections (a), (b), (c)(i), or (c)(ii) of this Section 9.1) contained in this Credit Agreement or any other Credit Document and such default shall continue unremedied for a period of at least 30 days after the earlier of the Borrower becoming aware of such default or notice thereof given by the Administrative Agent.
(d) Credit Documents. The Borrower shall default in the due performance or observance of any term, covenant or agreement in any of the other Credit Documents and such default shall continue unremedied for a period of at least 30 days after the earlier of the Borrower becoming aware of such default or notice thereof given by the Administrative Agent or (ii) any Credit Document shall fail to be in full force and effect or the Borrower shall so assert or any Credit Document shall fail to give the Administrative Agent and/or the Lenders the rights, powers and privileges purported to be created thereby.
(e) Bankruptcy, etc. The occurrence of any of the following with respect to the Borrower or any of its Material Subsidiaries: (i) a court or governmental agency having jurisdiction in the premises shall enter a decree or order for relief in respect of the Borrower or any of its Material Subsidiaries in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appoint a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the Borrower or any of its Material Subsidiaries or for any substantial part of its property or order the winding up or liquidation of its affairs; or (ii) an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect is commenced against the Borrower or any of its Material Subsidiaries and such petition remains unstayed and in effect for a period of 60 consecutive days; or (iii) the Borrower or any of its Material Subsidiaries shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consent to the entry of an order for relief in an involuntary case under any such law, or consent to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of such Person or any substantial part of its property or make any general assignment for the benefit of creditors; or (iv) the Borrower or any of its Material Subsidiaries shall admit in writing its inability to pay its debts generally as they become due or any action shall be taken by such Person in furtherance of any of the aforesaid purposes.
(f) Defaults under Other Agreements. With respect to (x) any secured indebtedness of the Borrower or (y) any other indebtedness in excess of $20,000,000 (other than indebtedness outstanding under this Credit Agreement) of the Borrower (A) the Borrower shall (1) default in any payment (beyond the applicable grace period with respect thereto, if any) with respect to any such indebtedness, or (2) default (after giving effect to any applicable grace period) in the observance or performance of any covenant or agreement relating to such indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event or condition shall occur or condition exist, the effect of which default or other event or condition is to cause, or permit, the holder of the holders of such indebtedness (or trustee or agent on behalf of such holders) to cause (determined without regard to whether any notice or lapse of time is required) any such indebtedness to become due prior to its stated maturity; or (B) any such indebtedness shall be declared due and payable, or required to be prepaid other than by a regularly scheduled required prepayment prior to the stated maturity thereof; or (C) any such indebtedness shall mature and remain unpaid.
(g) Judgments. One or more judgments, orders, or decrees shall be entered against the Borrower involving a liability of $20,000,000 or more, in the aggregate, (to the extent not paid or covered by insurance provided by a carrier who has acknowledged coverage) and such judgments, orders or decrees shall continue unsatisfied, undischarged and unstayed for a period ending on the first to occur of (i) the last day on which such judgment, order or decree becomes final and unappealable and, where applicable, with the status of a judicial lien or (ii) 60 days; provided that if such judgment, order or decree provides for periodic payments over time then the Borrower shall have a grace period of 30 days with respect to each such periodic payment.
(h) ERISA. The occurrence of any of the following events or conditions if any of the same would be reasonably expected to result in a liability of an amount greater than or equal to $20,000,000: (A) any "accumulated funding deficiency," as such term is defined in Section 302 of ERISA and Section 412 of the Code, whether or not waived,
shall exist with respect to any Plan, or any lien shall arise on the
assets of the Borrower or any ERISA Affiliate in favor of the PBGC or a
Plan; (B) a Termination Event shall occur with respect to a Single
Employer Plan, which is, in the reasonable opinion of the
Administrative Agent, likely to result in the termination of such Plan
for purposes of Title IV of ERISA; (C) a Termination Event shall occur
with respect to a Multiemployer Plan or Multiple Employer Plan, which
is, in the reasonable opinion of the Administrative Agent, likely to
result in (i) the termination of such Plan for purposes of Title IV of
ERISA, or (ii) the Borrower or any ERISA Affiliate incurring any
liability in connection with a withdrawal from, reorganization of
(within the meaning of Section 4241 of ERISA), or insolvency (within
the meaning of Section 4245 of ERISA) of such Plan; or (D) any
prohibited transaction (within the meaning of Section 406 of ERISA or
Section 4975 of the Code) or breach of fiduciary responsibility shall
occur which would be reasonably expected to subject the Borrower or any
ERISA Affiliate to any liability under Sections 406, 409, 502(i), or
502(l) of ERISA or Section 4975 of the Code, or under any agreement or
other instrument pursuant to which the Borrower or any ERISA Affiliate
has agreed or is required to indemnify any person against any such
liability.
(i) Change of Control. The occurrence of any Change of Control.
9.2 ACCELERATION; REMEDIES.
Upon the occurrence and during the continuation of an Event of Default, the Administrative Agent may, with the consent of the Required Lenders, and shall, upon the request and direction of the Required Lenders, by written notice to the Borrower take any of the following actions without prejudice to the rights of the Administrative Agent or any Lender to enforce its claims against the Borrower, except as otherwise specifically provided for herein:
(i) Termination of Commitments. Declare the Commitments terminated whereupon the Commitments shall be immediately terminated.
(ii) Acceleration of Loans. Declare the unpaid amount of all Borrower Obligations to be due whereupon the same shall be immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower.
(iii) Enforcement of Rights. Enforce any and all rights and interests created and existing under the Credit Documents, including, without limitation, all rights of set-off.
Notwithstanding the foregoing, if an Event of Default specified in Section 9.1(e) shall occur, then the Commitments shall automatically terminate and all Loans, all accrued interest in respect thereof, all accrued and unpaid fees and other indebtedness or obligations owing to the Lenders and the Administrative Agent hereunder shall immediately become due and payable without the giving of any notice or other action by the Administrative Agent or the Lenders.
Notwithstanding the fact that enforcement powers reside primarily with the Administrative Agent, each Lender has, to the extent permitted by law, a separate right of payment and shall be considered a separate "creditor" holding a separate "claim" within the meaning of Section 101(5) of the Bankruptcy Code or any other insolvency statute.
9.3 ALLOCATION OF PAYMENTS AFTER EVENT OF DEFAULT.
Notwithstanding any other provisions of this Credit Agreement, after the occurrence of an Event of Default, all amounts collected or received by the Administrative Agent or any Lender on account of amounts outstanding under any of the Credit Documents shall be paid over or delivered as follows:
FIRST, to the payment of all reasonable out-of-pocket costs and expenses (including without limitation reasonable attorneys' fees) of the Administrative Agent or any of the Lenders in connection with enforcing the rights of the Lenders under the Credit Documents, pro rata as set forth below;
SECOND, to payment of any fees owed to the Administrative Agent, or any Lender, pro rata as set forth below;
THIRD, to the payment of all accrued interest payable to the Lenders hereunder, pro rata as set forth below;
FOURTH, to the payment of the outstanding principal amount of the Loans, pro rata as set forth below;
FIFTH, to all other obligations which shall have become due and payable under the Credit Documents and not repaid pursuant to clauses "FIRST" through "FOURTH" above; and
SIXTH, to the payment of the surplus, if any, to whoever may be lawfully entitled to receive such surplus.
In carrying out the foregoing, (a) amounts received shall be applied in the numerical order provided until exhausted prior to application to the next succeeding category and (b) each of the Lenders shall receive an amount equal to its pro rata share (based on the proportion that the then outstanding Loans held by such Lender bears to the aggregate then outstanding Loans) of amounts available to be applied.
SECTION 10
AGENCY PROVISIONS
10.1 APPOINTMENT.
Each Lender hereby designates and appoints Bank of America, N.A. as
agent of such Lender to act as specified herein and the other Credit Documents,
and each such Lender hereby authorizes the Administrative Agent, as the agent
for such Lender, to take such action on its behalf under the provisions of this
Credit Agreement and the other Credit Documents and to exercise such powers and
perform such duties as are expressly delegated by the terms hereof and of the
other Credit Documents, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere
herein and in the other Credit Documents, the Administrative Agent shall not
have any duties or responsibilities, except those expressly set forth herein and
therein, or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Credit Agreement or any of the other Credit Documents, or
shall otherwise exist against the Administrative Agent. The provisions of this
Section 10.1 are solely for the benefit of the Administrative Agent and the
Lenders and the Borrower shall not have any rights as a third party beneficiary
of the provisions hereof. In performing its functions and duties under this
Credit Agreement and the other Credit Documents, the Administrative Agent shall
act solely as agent of the Lenders and does not assume and shall not be deemed
to have assumed any obligation or relationship of agency or trust with or for
the Borrower. Any agent named herein (other than the Administrative Agent) shall
have no duties or obligations whatsoever under this Credit Agreement or the
other Credit Documents.
10.2 DELEGATION OF DUTIES.
The Administrative Agent may execute any of its duties hereunder or under the other Credit Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care.
10.3 EXCULPATORY PROVISIONS.
Neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates shall be liable to any Lender for any action lawfully taken or omitted to be taken by it or such Person under or in connection herewith or in connection with any of the other Credit Documents (except for its or such Person's own gross negligence or willful misconduct), or responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower contained herein or in any of the other Credit Documents or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection herewith or in connection with the other Credit Documents, or enforceability or sufficiency therefor of any of the other Credit Documents, or for any failure of the Borrower to perform its obligations hereunder or thereunder. The Administrative
Agent shall not be responsible to any Lender for the effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this Credit Agreement, or any of the other Credit Documents or for any representations, warranties, recitals or statements made herein or therein or made by the Borrower in any written or oral statement or in any financial or other statements, instruments, reports, certificates or any other documents in connection herewith or therewith furnished or made by the Administrative Agent to the Lenders or by or on behalf of the Borrower to the Administrative Agent or any Lender or be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained herein or therein or as to the use of the proceeds of the Loans or of the existence or possible existence of any Default or Event of Default or to inspect the properties, books or records of the Borrower. The Administrative Agent is not a trustee for the Lenders and owes no fiduciary duty to the Lenders.
10.4 RELIANCE ON COMMUNICATIONS.
The Administrative Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document or conversation believed by it in
good faith to be genuine and correct and to have been signed, sent or made by
the proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Borrower, independent accountants
and other experts selected by the Administrative Agent with reasonable care).
The Administrative Agent may deem and treat the Lenders as the owner of its
interests hereunder for all purposes unless a written notice of assignment,
negotiation or transfer thereof shall have been filed with the Administrative
Agent in accordance with Section 11.3(b). The Administrative Agent shall be
fully justified in failing or refusing to take any action under this Credit
Agreement or under any of the other Credit Documents unless it shall first
receive such advice or concurrence of the Required Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Administrative Agent shall
in all cases be fully protected in acting, or in refraining from acting,
hereunder or under any of the other Credit Documents in accordance with a
request of the Required Lenders (or to the extent specifically provided in
Section 11.6, all the Lenders) and such request and any action taken or failure
to act pursuant thereto shall be binding upon all the Lenders (including their
successors and assigns).
10.5 NOTICE OF DEFAULT.
The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Administrative Agent has received notice from a Lender or the Borrower referring to the Credit Document, describing such Default or Event of Default and stating that such notice is a "notice of default." In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give prompt notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders.
10.6 NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDERS.
Each Lender expressly acknowledges that neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates has made any representations or warranties to it and that no act by the Administrative Agent or any affiliate thereof hereinafter taken, including any review of the affairs of the Borrower, shall be deemed to constitute any representation or warranty by the Administrative Agent to any Lender. Each Lender represents to the Administrative Agent that it has, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, assets, operations, property, financial and other conditions, prospects and creditworthiness of the Borrower and made its own decision to make its Extensions of Credit hereunder and enter into this Credit Agreement. Each Lender also represents that it will, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Credit Agreement, and to make such investigation as it deems necessary to inform itself as to the business, assets, operations, property, financial and other conditions, prospects and creditworthiness of the Borrower. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, assets, property, financial or other conditions, prospects or creditworthiness of the Borrower which may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates.
10.7 INDEMNIFICATION.
Each Lender agrees to indemnify the Administrative Agent in its capacity as such (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to its Commitment Percentage, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including without limitation at any time following the payment in full of the Borrower Obligations) be imposed on, incurred by or asserted against the Administrative Agent in its capacity as such in any way relating to or arising out of this Credit Agreement or the other Credit Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Administrative Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the gross negligence or willful misconduct of the Administrative Agent. If any indemnity furnished to the Administrative Agent for any purpose shall, in the opinion of the Administrative Agent, be insufficient or become impaired, the Administrative Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. The agreements in this Section 10.7 shall survive the payment of the Borrower Obligations and all other amounts payable hereunder and under the other Credit Documents and the termination of the Commitments.
10.8 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY.
The Administrative Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower as though the Administrative Agent were not Administrative Agent hereunder. With respect to the Loans made and all Borrower Obligations owing to it, the Administrative Agent shall have the same rights and powers under this Credit Agreement as any Lender and may exercise the same as though it were not the Administrative Agent, and the terms "Lender" and "Lenders" shall include the Administrative Agent in its individual capacity.
10.9 SUCCESSOR AGENT.
The Administrative Agent may, at any time, resign upon 20 days written notice to the Lenders. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Administrative Agent, which successor shall be reasonably acceptable to the Borrower; provided that the Borrower shall have no right to approve such successor during the existence and continuation of a Default or Event of Default. If no successor Administrative Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the notice of resignation, then the retiring Administrative Agent shall select a successor Administrative Agent; provided such successor is an Eligible Assignee (or if no Eligible Assignee shall have been so appointed by the retiring Administrative Agent and shall have accepted such appointment, then the Lenders shall perform all obligations of the retiring Administrative Agent hereunder until such time, if any, as a successor Administrative Agent shall have been appointed and shall have accepted such appointment as provided for above). Upon the acceptance of any appointment as an Administrative Agent hereunder by a successor, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations as an Administrative Agent, as appropriate, under this Credit Agreement and the other Credit Documents and the provisions of this Section 10 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was an Administrative Agent under this Credit Agreement.
SECTION 11.
MISCELLANEOUS
11.1 NOTICES.
Except as otherwise expressly provided herein, all notices and other communications shall have been duly given and shall be effective (a) when delivered, (b) when transmitted via telecopy (or other facsimile device), (c) the Business Day following the day on which the same has been delivered to a reputable national overnight air courier service, or (d) the third Business Day
following the day on which the same is sent by certified or registered mail, postage prepaid, in each case to the respective parties at the address or telecopy numbers set forth on Schedule 11.1, or at such other address as such party may specify by written notice to the other parties hereto.
11.2 RIGHT OF SET-OFF.
In addition to any rights now or hereafter granted under applicable law
or otherwise, and not by way of limitation of any such rights, upon the
occurrence and during the continuation of an Event of Default and the
commencement of remedies described in Section 9.2, each Lender is authorized at
any time and from time to time, without presentment, demand, protest or other
notice of any kind (all of which rights being hereby expressly waived), to
set-off and to appropriate and apply any and all deposits (general or special)
and any other indebtedness at any time held or owing by such Lender (including,
without limitation branches, agencies or Affiliates of such Lender wherever
located) to or for the credit or the account of the Borrower against obligations
and liabilities of the Borrower to the Lenders hereunder, under the Notes or the
other Credit Documents, irrespective of whether the Administrative Agent or the
Lenders shall have made any demand hereunder and although such obligations,
liabilities or claims, or any of them, may be contingent or unmatured, and any
such set-off shall be deemed to have been made immediately upon the occurrence
of an Event of Default even though such charge is made or entered on the books
of such Lender subsequent thereto. The Borrower hereby agrees that any Person
purchasing a participation in the Loans and Commitments hereunder pursuant to
Section 11.3(c) may exercise all rights of set-off with respect to its
participation interest as fully as if such Person were a Lender hereunder.
11.3 BENEFIT OF AGREEMENT.
(a) Generally. This Credit Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors
and assigns of the parties hereto; provided that the Borrower may not
assign and transfer any of its interests without the prior written
consent of the Lenders; and provided further that the rights of each
Lender to transfer, assign or grant participations in its rights and/or
obligations hereunder shall be limited as set forth below in this
Section 11.3.
(b) Assignments. Each Lender may assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Credit Agreement (including, without limitation, all or a portion of its Loans, its Notes, and its Commitment); provided, however, that:
(i) each such assignment shall be to an Eligible Assignee;
(ii) except in the case of an assignment to another Lender or an assignment of all of a Lender's rights and obligations under this Credit Agreement, any such partial assignment shall be in an amount at least equal to $3,000,000 (or, if less, the remaining amount of the Commitment being assigned by such Lender) and an integral multiple of $1,000,000 in excess thereof;
(iii) each such assignment by a Lender shall be of a constant, and not varying, percentage of all of its rights and obligations under this Credit Agreement and the Notes; and
(iv) the parties to such assignment shall execute and deliver to the Administrative Agent for its acceptance an Assignment Agreement in substantially the form of Exhibit 11.3(b), together with a processing fee from the assignor of $5,000.
Upon execution, delivery, and acceptance of such Assignment Agreement, the assignee thereunder shall be a party hereto and, to the extent of such assignment, have the obligations, rights, and benefits of a Lender hereunder and the assigning Lender shall, to the extent of such assignment, relinquish its rights and be released from its obligations under this Credit Agreement. Upon the consummation of any assignment pursuant to this Section 11.3(b), the assignor, the Administrative Agent and the Borrower shall make appropriate arrangements so that, if required, new Notes are issued to the assignor and the assignee. If the assignee is not incorporated under the laws of the United States of America or a state thereof; it shall deliver to the Borrower and the Administrative Agent certification as to exemption from deduction or withholding of taxes in accordance with Section 4.4.
By executing and delivering an assignment agreement in accordance with this Section 11.3(b), the assigning Lender thereunder and the assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows: (A) such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim created by such assigning Lender and the assignee warrants that it is an Eligible Assignee; (B) except as set forth in clause (A) above, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Credit Agreement, any of the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Credit Agreement, any of the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto or the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under this Credit Agreement, any of the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto; (C) such assignee represents and warrants that it is legally authorized to enter into such assignment agreement; (D) such assignee confirms that it has received a copy of this Credit Agreement, the other Credit Documents and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such assignment agreement; (E) such assignee will independently and without reliance upon the Administrative Agent, such assigning Lender or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Credit Agreement and the other Credit
Documents; (F) such assignee appoints and authorizes the Administrative Agent to take such action on its behalf and to exercise such powers under this Credit Agreement or any other Credit Document as are delegated to the Administrative Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto; and (G) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Credit Agreement and the other Credit Documents are required to be performed by it as a Lender.
(c) Register. The Administrative Agent shall maintain a copy of each Assignment Agreement delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Loans owing to, each Lender from time to time (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Credit Agreement. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice.
(d) Acceptance. Upon its receipt of an Assignment Agreement executed by the parties thereto, together with any Note subject to such assignment and payment of the processing fee, the Administrative Agent shall, if such Assignment Agreement has been completed and is in substantially the form of Exhibit 11.3(b), (i) accept such Assignment Agreement, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the parties thereto.
(e) Participations. Each Lender may sell participations to one or more Persons in all or a portion of its rights, obligations or rights and obligations under this Credit Agreement (including all or a portion of its Commitment, its Notes and its Loans); provided, however, that (i) such Lender's obligations under this Credit Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the participant shall be entitled to the benefit of the yield protection provisions contained in Sections 4.1 through 4.4, inclusive, and the right of set-off contained in Section 11.2, and (iv) the Borrower shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Credit Agreement, and such Lender shall retain the sole right to enforce the obligations of the Borrower relating to its Loans and its Notes and to approve any amendment, modification, or waiver of any provision of this Credit Agreement (other than amendments, modifications, or waivers decreasing the amount of principal of or the rate at which interest is payable on such Loans or Notes, extending any scheduled principal payment date or date fixed for the payment of interest on such Loans or Notes, or extending its Commitment).
(f) Nonrestricted Assignments. Notwithstanding any other provision set forth in this Credit Agreement, any Lender may at any time assign and pledge all or any portion of its Loans and its Notes to any Federal Reserve Bank as collateral security
pursuant to Regulation A and any Operating Circular issued by such Federal Reserve Bank. No such assignment shall release the assigning Lender from its obligations hereunder.
(g) Information. Any Lender may furnish any information concerning the Borrower in the possession of such Lender from time to time to assignees and participants (including prospective assignees and participants).
11.4 NO WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of the Administrative Agent or any Lender in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between the Borrower and the Administrative Agent or any Lender shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights and remedies provided herein are cumulative and not exclusive of any rights or remedies which the Administrative Agent or any Lender would otherwise have. No notice to or demand on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Administrative Agent or the Lenders to any other or further action in any circumstances without notice or demand.
11.5 PAYMENT OF EXPENSES, ETC.
The Borrower agrees to: (i) pay all reasonable out-of-pocket costs and expenses of the Administrative Agent and Banc of America Securities LLC ("BAS") in connection with (A) the negotiation, preparation, execution and delivery and administration of this Credit Agreement and the other Credit Documents and the documents and instruments referred to therein (including, without limitation, the reasonable fees and expenses of Moore & Van Allen, PLLC, special counsel to the Administrative Agent) and (B) any amendment, waiver or consent relating hereto and thereto including, but not limited to, any such amendments, waivers or consents resulting from or related to any work-out, renegotiation or restructure relating to the performance by the Borrower under this Credit Agreement, (ii) pay all reasonable out-of-pocket costs and expenses of the Administrative Agent and the Lenders in connection with (A) enforcement of the Credit Documents and the documents and instruments referred to therein (including, without limitation, in connection with any such enforcement, the reasonable fees and disbursements of counsel for the Administrative Agent and each of the Lenders (including the allocated cost of internal counsel)) and (B) any bankruptcy or insolvency proceeding of the Borrower and (iii) indemnify the Administrative Agent, BAS and each Lender, its officers, directors, employees, representatives and agents from and hold each of them harmless against any and all losses, liabilities, claims, damages or expenses incurred by any of them as a result of, or arising out of, or in any way related to, or by reason of, any investigation, litigation or other proceeding (whether or not the Administrative Agent, BAS or any Lender is a party thereto) related to the entering into and/or performance of any Credit Document or the use of proceeds of any Loans (including other extensions of credit) hereunder or the consummation of any other transactions contemplated in any Credit Document, including, without limitation, the
reasonable fees and disbursements of counsel (including the allocated cost of internal counsel) incurred in connection with any such investigation, litigation or other proceeding (but excluding any such losses, liabilities, claims, damages or expenses to the extent incurred by reason of gross negligence or willful misconduct on the part of the Person to be indemnified).
11.6 AMENDMENTS, WAIVERS AND CONSENTS.
Neither this Credit Agreement, nor any other Credit Document nor any of the terms hereof or thereof may be amended, changed, waived, discharged or terminated unless such amendment, change, waiver, discharge or termination is in writing and signed by the Required Lenders and the Borrower; provided that no such amendment, change, waiver, discharge or termination shall without the consent of each Lender affected thereby:
(a) extend the Maturity Date, or postpone or extend the time for any payment or prepayment of principal;
(b) reduce the rate or extend the time of payment of interest (other than as a result of waiving the applicability of any post-default increase in interest rates) thereon or fees or other amounts payable hereunder;
(c) reduce or waive the principal amount of any Loan;
(d) increase or extend the Commitment of a Lender (it being understood and agreed that a waiver of any Default or Event of Default or a waiver of any mandatory reduction in the Commitments shall not constitute a change in the terms of any Commitment of any Lender);
(e) release the Borrower from its obligations under the Credit Documents;
(f) amend, modify or waive any provision of this Section 11.6 or Section 3.6, 3.8, 9.1(a), 11.2, 11.3 or 11.5.
(g) reduce any percentage specified in, or otherwise modify, the definition of Required Lenders; or
(h) consent to the assignment or transfer by the Borrower of any of its rights and obligations under (or in respect of) the Credit Documents.
No provision of Section 10 may be amended or modified without the consent of the Administrative Agent.
Notwithstanding the fact that the consent of all the Lenders is required in certain circumstances as set forth above, (x) each Lender is entitled to vote as such Lender sees fit on any reorganization plan that affects the Loans, and each Lender acknowledges that the provisions of Section 1126(c)
of the Bankruptcy Code supersedes the unanimous consent provisions set forth herein and (y) the Required Lenders may consent to allow the Borrower to use cash collateral in the context of a bankruptcy or insolvency proceeding.
11.7 COUNTERPARTS/TELECOPY.
This Credit Agreement may be executed in any number of counterparts, each of which where so executed and delivered shall be an original, but all of which shall constitute one and the same instrument. Delivery of executed counterparts by telecopy shall be as effective as an original and shall constitute a representation that an original will be delivered.
11.8 HEADINGS.
The headings of the sections and subsections hereof are provided for convenience only and shall not in any way affect the meaning or construction of any provision of this Credit Agreement.
11.9 DEFAULTING LENDER.
Each Lender understands and agrees that if such Lender is a Defaulting Lender then it shall not be entitled to vote on any matter requiring the consent of the Required Lenders or to object to any matter requiring the consent of all the Lenders; provided, however, that all other benefits and obligations under the Loan Documents shall apply to such Defaulting Lender.
11.10 SURVIVAL OF INDEMNIFICATION AND REPRESENTATIONS AND WARRANTIES.
All indemnities set forth herein and all representations and warranties made herein shall survive the execution and delivery of this Credit Agreement, the making of the Loans, and the repayment of the Loans and other obligations and the termination of the Commitments hereunder.
11.11 GOVERNING LAW; VENUE.
(a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(b) Any legal action or proceeding with respect to this Credit Agreement or any other Credit Document may be brought in the courts of the State of New York or of the United States for the Southern District of New York, and, by execution and delivery of this Credit Agreement, the Borrower hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of such courts. The Borrower further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to it at the address for notices pursuant to
Section 11.1, such service to become effective 10 days after such mailing. Nothing herein shall affect the right of a Lender to serve process in any other manner permitted by law or to commence legal proceedings or to otherwise proceed against the Borrower in any other jurisdiction. The Borrower agrees that a final judgment in any action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law; provided that nothing in this Section 11.11(b) is intended to impair the Borrower's right under applicable law to appeal or seek a stay of any judgment.
(c) The Borrower hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Credit Agreement or any other Credit Document in the courts referred to in subsection (a) hereof and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum.
11.12 WAIVER OF JURY TRIAL.
EACH OF THE PARTIES TO THIS CREDIT AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS CREDIT AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY.
11.13 SEVERABILITY.
If any provision of any of the Credit Documents is determined to be illegal, invalid or unenforceable, such provision shall be fully severable and the remaining provisions shall remain in full force and effect and shall be construed without giving effect to the illegal, invalid or unenforceable provisions.
11.14 FURTHER ASSURANCES.
The Borrower agrees, upon the request of the Administrative Agent, to promptly take such actions, as reasonably requested, as are necessary to carry out the intent of this Credit Agreement and the other Credit Documents.
11.15 ENTIRETY.
This Credit Agreement together with the other Credit Documents represent the entire agreement of the parties hereto and thereto, and supersede all prior agreements and understandings, oral or written, if any, including any commitment letters or correspondence relating to the Credit Documents or the transactions contemplated herein and therein.
11.16 BINDING EFFECT; CONTINUING AGREEMENT.
(a) This Credit Agreement shall become effective at such time when all of the conditions set forth in Section 5.1 have been satisfied or waived by the Lenders and it shall have been executed by the Borrower, the Administrative Agent and the Lenders, and thereafter this Credit Agreement shall be binding upon and inure to the benefit of the Borrower, the Administrative Agent and each Lender and their respective successors and assigns. The Borrower and the Lenders party to the Existing Revolving Credit Agreement each hereby agrees that, at such time as this Credit Agreement shall have become effective pursuant to the terms of the immediately preceding sentence, the Existing Revolving Credit Agreement automatically shall be deemed terminated and the Borrowers and the Lenders party to the Existing Revolving Credit Agreement shall no longer have any obligations thereunder (other than those obligations in the Existing Revolving Credit Agreement that expressly survive the termination thereof).
(b) This Credit Agreement shall be a continuing agreement and shall remain in full force and effect until all Loans, interest, fees and other Borrower Obligations have been paid in full and all Commitments have been terminated. Upon termination, the Borrower shall have no further obligations (other than the indemnification provisions that survive) under the Credit Documents; provided that should any payment, in whole or in part, of the Borrower Obligations be rescinded or otherwise required to be restored or returned by the Administrative Agent or any Lender, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, then the Credit Documents shall automatically be reinstated and all amounts required to be restored or returned and all costs and expenses incurred by the Administrative Agent or any Lender in connection therewith shall be deemed included as part of the Borrower Obligations.
[Remainder of Page Intentionally Left Blank]
Each of the parties hereto has caused a counterpart of this Credit Agreement to be duly executed and delivered as of the date first above written.
BORROWER: ATMOS ENERGY CORPORATION,
A Texas and Virginia corporation
By: /s/ LAURIE M. SHERWOOD
--------------------------------------
Name: Laurie M. Sherwood
------------------------------------
Title: V.P., Corporate Development and
Treasurer
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Signature Page to Atmos Energy Corporation Amended and Restated Revolving Credit Agreement
LENDERS: BANK OF AMERICA, N.A.
individually in its capacity as a
Lender and in its capacity as
Administrative Agent
By: /s/ MICHELLE A. SCHOENFELD
--------------------------------------
Name: Michelle A. Schoenfeld
------------------------------------
Title: Vice President
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Signature Page to Atmos Energy Corporation Amended and Restated Revolving Credit Agreement
BANK ONE, NA (MAIN OFFICE-CHICAGO)
By: /s/ WILLIAM N. BANKS
--------------------------------------
Name: William N. Banks
------------------------------------
Title: Director, Capital Markets
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Signature Page to Atmos Energy Corporation Amended and Restated Revolving Credit Agreement
FIRST UNION NATIONAL BANK
By: /s/ MICHAEL J. KOLOSOWSKY
--------------------------------------
Name: Michael J. Kolosowsky
------------------------------------
Title: Vice President
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Signature Page to Atmos Energy Corporation Amended and Restated Revolving Credit Agreement
FLEET NATIONAL BANK
By: /s/ ROBERT D. LANIGAN
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Name: Robert D. Lanigan
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Title: Managing Director
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Signature Page to Atmos Energy Corporation Amended and Restated Revolving Credit Agreement
SOCIETE GENERALE
By: /s/ DAVID BIRD
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Name: David Bird
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Title: Vice President
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Signature Page to Atmos Energy Corporation Amended and Restated Revolving Credit Agreement
BANK HAPOALIM B.M.
By: /s/ LAURA RAFFA
--------------------------------------
Name: Laura Raffa
------------------------------------
Title: Senior Vice President
-----------------------------------
By: /s/ SHAUN BREIDBART
--------------------------------------
Name: Shaun Breidbart
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Title: Vice President
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Signature Page to Atmos Energy Corporation Amended and Restated Revolving Credit Agreement
KBC BANK N.V.
By: /s/ JEAN-PIERRE DIELS
--------------------------------------
Name: Jean-Pierre Diels
------------------------------------
Title: First Vice President
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By: /s/ EDWARD J. EIJLERS
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Name: Edward J. Eijlers
------------------------------------
Title: Assistant Vice President
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Signature Page to Atmos Energy Corporation Amended and Restated Revolving Credit Agreement
SUNTRUST BANK
By: /s/ LINDA L. STANLEY
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Name: Linda L. Stanley
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Title: Director
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Signature Page to Atmos Energy Corporation Amended and Restated Revolving Credit Agreement
THE BANK OF TOKYO-MITSUBISHI, LTD.
By: /s/ JOHN W. MCGHEE
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Name: John W. McGhee
------------------------------------
Title: Vice President & Manager
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Signature Page to Atmos Energy Corporation Amended and Restated Revolving Credit Agreement
COBANK, ACB
By: /s/ CATHLEEN REED
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Name: Cathleen Reed
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Title: Assistant Vice President
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Signature Page to Atmos Energy Corporation Amended and Restated Revolving Credit Agreement
THE FUJI BANK, LIMITED
By: /s/ TORU MAEDA
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Name: Toru Maeda
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Title: General Manager
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Signature Page to Atmos Energy Corporation Amended and Restated Revolving Credit Agreement
FIRSTAR BANK, NATIONAL ASSOCIATION
By: /s/ WARD C. WILSON
--------------------------------------
Name: Ward C. Wilson
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Title: Senior Vice President
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EXHIBIT 10.8(e)
SECOND AMENDED AND RESTATED GUARANTY OF
ATMOS ENERGY MARKETING, LLC
This Second Amended and Restated Guaranty (this "Guaranty"), entered into
effective as of December 22, 2000, is made by ATMOS ENERGY MARKETING, LLC, a
Delaware limited liability company ("Guarantor"), in favor of BANK OF AMERICA,
N.A. ("Agent") as agent for the ratable benefit of the Banks (as hereinafter
defined) in amendment and restatement in its entirety of that certain GUARANTY
OF ATMOS ENERGY MARKETING, LLC dated as of August 9, 2000, as amended by that
certain FIRST AMENDMENT TO CREDIT AGREEMENT AND GUARANTY OF ATMOS ENERGY
MARKETING, LLC entered into effective as of September 29, 2000, among WOODWARD
MARKETING, L.L.C., BANK OF AMERICA, N. A., as a Bank, as an Issuing Bank, and as
Agent for the Banks, and WOODWARD MARKETING, INC., ATMOS ENERGY MARKETING LLC,
J. D. WOODWARD AND JAMES KIFER and that certain Amended and Restated Guaranty of
ATMOS ENERGY MARKETING, LLC entered into effective as of November 3, 2000.
WHEREAS, pursuant to that certain Credit Agreement, dated to be effective as of August 9, 2000, between WOODWARD MARKETING, L.L.C., a Delaware limited liability company (the "Borrower"), and Agent (Agent, in its capacity as a Bank, along with any other bank which may become a Bank pursuant to the terms of the Credit Agreement referred to collectively as the "Banks"), the Banks have agreed that, upon the conditions and in accordance with the provisions thereof, Banks will extend to the Borrower an uncommitted discretionary and demand line of credit facility in an amount outstanding at any one time of up to an aggregate of $100,000,000.00, which Credit Agreement , as amended by that certain First Amendment to Credit Agreement and Guaranty of Atmos Energy Marketing, LLC dated as of September 29, 2000, that certain Second Amendment to Credit Agreement dated as of November 3, 2000, which Second Amendment to Credit Agreement increased the uncommitted discretionary and demand line of credit facility to an amount outstanding at any one time of up to an aggregate of $115,000,000.00, that certain Third Amendment to Credit Agreement dated as of December 5, 2000 and that certain Fourth Amendment to Credit Agreement dated as of even date herewith which Fourth Amendment to Credit Agreement increased the uncommitted discretionary and demand line of credit facility to an amount outstanding at any one time of up to an aggregate of $140,000,000.00 (as amended and as further amended from time to time, the "Credit Agreement"); and
WHEREAS, Agent, in its capacity as a Bank has further agreed that, upon the conditions and in accordance with the provisions of the Credit Agreement, Agent will extend to the Borrower an uncommitted, discretionary demand line for overdraft advances; and
WHEREAS, Agent, in its capacity as a Bank has further agreed that, upon the conditions and in accordance with the provisions of the Credit Agreement, Agent in its capacity as a Bank may enter into Swap Contracts with the Borrower; and
SECOND AMENDED AND RESTATED GUARANTY - Page 1
(ATMOS ENERGY MARKETING, LLC)
WHEREAS, it is a condition precedent to the availability of such extensions of credit that the Guarantor shall have executed and delivered this Guaranty.
NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Guarantor hereby agrees as follows:
The Guarantor unconditionally guarantees the prompt payment to Banks, their affiliates and their successors and assigns, of all Obligations (as defined in the Credit Agreement). Nothing to the contrary contained herein or in any other Loan Document, Guarantor's liability under this Guaranty is limited to payment of the Guaranteed Payment Amount (as defined below).
"Guaranteed Payment Amount" as used in this Guaranty shall mean the sum of the following:
(1) an amount equal to forty-five percent (45%) of the Obligations, plus
(2) interest (including interest that accrues during any bankruptcy proceeding of Borrower), which (A) shall accrue on any unpaid portion of the amount described in clause (1) of this definition from the date demand is made therefor by Agent (the "Demand Date") until such amount is paid, (B) shall be calculated at the interest rate presently in effect pursuant to the terms of the Credit Agreement, plus
(3) all reasonable attorney's fees and other collection costs incurred by Agent and Banks in connection with the enforcement of and/or collection under this Guaranty, including any bankruptcy proceeding affecting Guarantor.
Notwithstanding anything to the contrary contained herein or in any other Loan Document, except for payments of the Guaranteed Payment Amount made by Guarantor from Guarantor's own funds and clearly identified as such in a written notice to Agent at the time such payment is made, the Guaranteed Payment Amount shall not be reduced by any payments made under the Note or any reductions in the Obligations which occur after the Demand Date, including, without limitation, any such payments or reductions by reason of (a) payments made by Borrower or with the Borrower's assets, (b) payments made by any other guarantor or with such guarantor's assets, (c) any offset by Banks, or (d) any foreclosure of, or other realization on (including without limitation collection of insurance proceeds) or in respect of, any of the liens, collateral assignments, security interests, letters of credit or other security devices now or hereafter securing payment of the Obligations (including without limitation payments or reductions resulting from the application of the proceeds of the foreclosure of or other realization on collateral pledged by Borrower or Guarantor to secure payment of the Obligations). Guarantor acknowledges and agrees that Agent has no duty to foreclose upon any collateral securing any of the Obligations, but, if Agent elects to foreclose, Agent may pursue collection under this Guaranty prior to, contemporaneously with, or after any foreclosure on such collateral.
Further notwithstanding anything to the contrary contained herein or in any other Loan Document, upon the closing of any transaction or transactions which results in Guarantor owning
SECOND AMENDED AND RESTATED GUARANTY - Page 2
(ATMOS ENERGY MARKETING, LLC)
100% of the membership interests of Borrower (the "Acquisition"), the percentage set forth in subpart (1) of the definition of Guaranteed Payment Amount above, shall automatically increase from forty-five percent (45%) to one hundred percent (100%), without notice to Guarantor or any other Person and without further action by Agent or the Banks.
At the time Guarantor pays any sum which may become due the Banks under the terms of this Guaranty, written notice of such payment shall be delivered to the Banks by Guarantor, and in the absence of such notice, any sum received by the Banks on account of any of the Obligations shall be conclusively deemed paid by the Borrower. All sums paid the Banks by Guarantor may be applied by the Banks at their discretion upon any of the Obligations.
1. The obligations of the Guarantor hereunder shall be payable and performable at Agent's Payment Office at Bank of America Plaza, 8th Floor, 901 Main St., Dallas, Texas 75202-3714, or any other office designated by the Agent.
2. This Guaranty is an absolute, complete and continuing one, and no notice of the Obligations or any rearrangement, modification or waiver thereof needs to be given to the Guarantor and in any such event the Guarantor will remain fully bound hereunder. The Guarantor hereby expressly waives presentment, demand, protest, and notice of protest and dishonor with respect to the Obligations, and also notice of acceptance of this Guaranty, acceptance on the part of Agent being conclusively presumed by its request for this Guaranty and delivery of same to it.
3. The Guarantor authorizes Agent, without notice or demand and without affecting its liability hereunder, to take and hold security from third Persons for the payment of the Obligations, and exchange, enforce, waive and release any such security; and to apply such security and direct the order or manner of sale thereof as the Banks in their discretion may determine; and to obtain a guaranty of the Obligations from any one or more other Persons whomsoever and at any time or times to enforce, waive, rearrange, modify, limit or release such other Persons from their obligations under such guaranties.
4. The Guarantor waives any right to require Agent to (a) proceed against the Borrower, (b) proceed against or exhaust any security held from the Borrower, or (c) pursue any other remedy in Agent's power whatsoever, including, without limitation, any right of Agent to pursue any remedy against any other guarantor. The Guarantor waives any defense of the Borrower or any other guarantor of the Obligations or any portion thereof, and shall remain liable hereon regardless of whether the Borrower or any other guarantor be found not liable thereon for any reason including, without limitation, bankruptcy, insolvency, or corporate dissolution and even though the Obligations, or any part thereof, may be rendered void or unenforceable or uncollectible as against the Borrower or any other guarantor. This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time payment of any portion of the Obligations by the Borrower is rescinded or must otherwise be returned by Agent upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, all as though such payment had not been made, and the Guarantor will, thereupon, guarantee payment of such amount as to which refund or restitution has been made, together with interest accruing thereon subsequent to the date of refund or restitution at the applicable rate under the Credit Agreement and reasonable collection costs and fees (including, without limitation, reasonable attorney's fees)
SECOND AMENDED AND RESTATED GUARANTY - Page 3
(ATMOS ENERGY MARKETING, LLC)
applicable thereon. The Guarantor shall (i) not exercise any right of subrogation and (ii) waives any right to exercise any remedy which Agent now has or may hereafter have against the Borrower and any right to participate in any security now or hereafter held by Agent.
5. The Guarantor agrees that if the maturity of the Obligations is accelerated for any reason, including, without limitation, by bankruptcy or otherwise, such maturity shall also be deemed accelerated for the purpose of this Guaranty without demand or notice to the Guarantor.
6. It is expressly agreed that the liability of the Guarantor for payment of the Obligations shall be primary and not secondary.
7. To induce the Banks and Agent to enter into the Credit Agreement with the Borrower, the Guarantor represents and warrants to Banks and Agent (which representations and warranties will survive the delivery of this Guaranty) that:
(a) The execution and delivery by the Guarantor of this Guaranty and the performance of obligations hereunder are within its power and do not (i) contravene or conflict with any provision of law, (ii) contravene or conflict with any indenture, instrument or other agreement to which the Guarantor is a party or by which its property may be presently bound or encumbered, or (iii) result in or require the creation or imposition of any Lien in, upon or against any of the respective property of the Guarantor under any such indenture, instrument or other agreement.
(b) This Guaranty when duly executed and delivered, will be the legal, valid and binding obligation of the Guarantor enforceable in accordance with its terms (subject to any applicable debtor relief laws and general principles of equity).
(c) No authorization, consent, approval, exemption, franchise, permit or license of, or filing with, any governmental or public authority or any third party is required to authorize, or is otherwise required in connection with the valid execution and delivery by the Guarantor of this Guaranty which has not been obtained.
(d) The Guarantor has duly and properly filed all United States Income Tax returns and all other tax returns (or permissible extensions thereof) which are required to be filed, and has paid all taxes prior to delinquency pursuant to all returns or pursuant to any assessment received, except such taxes, if any, as are being contested in good faith and as to which adequate provisions and disclosures to Agent have been made.
(e) Except as previously disclosed to Agent in writing, to the knowledge of the Guarantor, there is no litigation or other action pending before any court, governmental instrumentality, regulatory authority or arbitral body or threatened against or affecting the Guarantor which might reasonably be expected to result in a material adverse change in the financial condition of the Guarantor.
8. So long as any of the Obligations shall remain unpaid or unsatisfied, or any Letter of Credit (as defined in the Credit Agreement) shall remain outstanding, Guarantor covenants and agrees as follows:
SECOND AMENDED AND RESTATED GUARANTY - Page 4
(ATMOS ENERGY MARKETING, LLC)
(a) as soon as available, but not later than 120 days after the end of each fiscal year, a copy of the audited financial statements to include a balance sheet as at the end of such year for the Guarantor, with schedules and the related statements of income or operations, members' capital and cash flows for such year for the Guarantor, setting forth in each case in comparative form the figures for the previous fiscal year, and accompanied by the opinion of a nationally-recognized independent public accounting firm ("Independent Auditor") which report shall state that such financial statements present fairly the financial position for the periods indicated in conformity with GAAP applied on a basis consistent with prior years. Such opinion shall not be qualified or limited because of a restricted or limited examination by the Independent Auditor of any material portion of the Guarantor's or any subsidiary's records; and
(b) as soon as available, but not later than 45 days after the end of each month, the Guarantor prepared financial statements for the Guarantor in form acceptable to Banks.
9. In all instances herein, the singular shall be construed to include the plural and the masculine to include the feminine. In the event more than one party executes this Guaranty as a guarantor, then each party agrees to be jointly and severally liable for the Obligations.
10. This Guaranty is and shall be in every particular available to the successors and assigns of Banks and is and shall always be fully binding upon the successors and assigns of the Guarantor.
11. The Guarantor consents to the execution and delivery by the Borrower of the Credit Agreement and each of the other Loan Documents and the performance by the Borrower of their obligations thereunder.
12. No failure to exercise nor any delay in exercising on the part of Agent of any right, power or privilege hereunder or at law or in equity shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law or in equity.
13. THIS GUARANTY SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS (WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAWS) OF THE STATE OF CALIFORNIA.
14. ANY SUIT TO ENFORCE ANY RIGHT HEREUNDER OR TO OBTAIN A DECLARATION OF ANY RIGHT OR OBLIGATION HEREUNDER, MAY, AT THE SOLE OPTION OF THE BANKS, BE BROUGHT (I) IN THE COURTS OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES FOR THE CENTRAL DISTRICT OF CALIFORNIA, OR (II) IN ANY COURT OF COMPETENT JURISDICTION WHERE JURISDICTION MAY BE HAD OVER GUARANTOR. THE GUARANTOR HEREBY EXPRESSLY CONSENTS TO THE JURISDICTION OF THE COURTS OF CALIFORNIA FOR SUCH PURPOSES.
SECOND AMENDED AND RESTATED GUARANTY - Page 5
(ATMOS ENERGY MARKETING, LLC)
15. If any clause or portion of this Guaranty shall be declared unenforceable, invalid, or illegal, the remaining clauses and portions shall not be affected thereby.
16. The Guarantor warrants, represents and acknowledges that it is not relying on any representations or statements of Agent or any Bank, or any other party concerning the financial condition of the Borrower, the likelihood that the Guarantor will be required to pay or perform the Obligations or any other representations or statements other than as expressly set forth herein, and all other representations or agreements, if any, are merged into this Guaranty.
17. All notices, requests, demands and other communications required or permitted hereunder shall be in writing and may be personally served or sent by telex, telecopier, mail or the express mail service of the United States Postal Service, Federal Express or other equivalent overnight or expedited delivery service and shall be deemed to have been given upon receipt. For purposes hereof, the address of the Guarantor shall be the address written under Guarantor's name on the signature page hereof, the address of Agent shall be as follows:
Bank of America, N.A.
333 Clay Street, Suite 4550
Houston, Texas 77002
Attention: Leonard L. Russo
Telephone: (713) 651-4804
Facsimile: (713) 651-4801
and the addresses of the Banks shall be as follows:
Bank of America, N.A.
333 Clay Street, Suite 4550
Houston, Texas 77002
Attention: Irene C. Rummel
Telephone: (713) 651-4921
Facsimile: (713) 651-4801
BNP Paribas
787 Seventh Avenue
New York, New York 10019
Attention: Ed Chin
Telephone: (212) 841 2020
Facsimile: (212) 841 2537.
Any party may, by proper written notice hereunder to the other parties, change the address to which notices shall thereafter be sent to it.
18. Unless otherwise defined, all capitalized terms used herein have the meanings assigned to such terms in the Credit Agreement.
SECOND AMENDED AND RESTATED GUARANTY - Page 6
(ATMOS ENERGY MARKETING, LLC)
19. Guarantor hereby agrees that, immediately upon closing of the Acquisition, Guarantor will execute and deliver to Agent a Consent and Ratification in the form attached hereto as Exhibit A.
20. THIS WRITTEN AGREEMENT AND THE OTHER WRITTEN AGREEMENTS ENTERED INTO AMONG THE PARTIES REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
SECOND AMENDED AND RESTATED GUARANTY - Page 7
(ATMOS ENERGY MARKETING, LLC)
Executed as of the date first written above.
GUARANTOR:
ATMOS ENERGY MARKETING, LLC
Address:
1800 Three Lincoln Centre
5430 LBJ Freeway
Dallas, Texas 75240
EXECUTION PAGE TO SECOND AMENDED AND RESTATED GUARANTY
(ATMOS ENERGY MARKETING, LLC)
EXHIBIT A
FORM OF CONSENT AND RATIFICATION
The undersigned, ATMOS ENERGY MARKETING, LLC, has executed that certain
Second Amended and Restated Guaranty, dated as of December 22, 2000 (the
"Guaranty"), in favor of BANK OF AMERICA, N.A. ("Agent"), as Agent for the
ratable benefit of the Banks. The undersigned hereby (i) consents and agrees to
the release by Agent of those certain Guaranty agreements executed by J.D.
Woodward, James Kifer and Woodward Marketing, Inc., each dated the same date as
the Guaranty (the "Released Guaranties"), and (ii) agrees that the Guaranty
shall remain in full force and effect and shall continue to be the legal, valid
and binding obligation of the undersigned enforceable against it in accordance
with its terms. Furthermore, the undersigned hereby agrees and acknowledges that
(a) the Acquisition has occurred, (b) as a result of the Acquisition, the
undersigned owns 100% of the membership interests in Borrower, (c) pursuant to
the terms of the Guaranty, as of the date of the Acquisition, the percentage set
forth in subpart (1) of the definition of Guaranteed Payment Amount in the
Guaranty, automatically increased from forty-five percent (45%) to one hundred
percent (100%) (i.e. Guarantor has guaranteed one hundred percent (100%) of the
Obligations), and (d) the Guaranty is not subject to any claims, defenses or
offsets, (e) the release by the Agent of the Released Guaranties shall in no way
reduce, impair or discharge any obligations of the undersigned as guarantor
pursuant to the Guaranty and shall not constitute a waiver by Agent of any of
Agent's rights against the undersigned. Unless otherwise defined herein, all
capitalized terms used herein have the meanings assigned to such terms in the
Guaranty.
Executed as of the ___ day of ______, 2000.
ATMOS ENERGY MARKETING, LLC
EXHIBIT A
EXHIBIT 10.8(f)
SECOND AMENDMENT TO CREDIT AGREEMENT
This SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is entered into effective as of November 3 2000, among WOODWARD MARKETING, L.L.C., a Delaware limited liability company (the "Borrower"), BANK OF AMERICA, N. A. ("Bank of America"), as a Bank, as an Issuing Bank, and as Agent for the Banks, and Woodward Marketing, Inc., Atmos Energy Marketing LLC, J. D. Woodward and James Kifer (collectively the "Guarantors").
WHEREAS, Borrower and Banks entered into that certain Credit Agreement, dated to be effective as of August 9, 2000, as amended by that certain First Amendment to Credit Agreement and Guaranty of Atmos Energy Marketing, LLC dated as of September 29, 2000, (as amended the "Credit Agreement"); and
WHEREAS, the Obligations (as defined in the Credit Agreement) were guaranteed by the Guarantors pursuant to a Guaranty Agreement executed by each of the Guarantors, in favor of the Banks (the "Guaranty Agreements"), dated as of August 9, 2000; and
WHEREAS, the Obligations are secured by security interests in the Collateral (as defined in the Credit Agreement) granted to Bank pursuant to the Security Agreements (as defined in the Credit Agreement) and pursuant to the Nations Funds Security Agreement (as defined in the Credit Agreement), each executed by Borrower (collectively, the "Security Agreements"); and
WHEREAS, the parties hereto desire to amend the Credit Agreement as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, Borrower, Bank of America and the Guarantors agree as follows:
1. A definition "Collateralized L/C Line" is added to Section 1.01 of the Credit Agreement, Certain Defined Terms, to read as follows:
"Collateralized L/C Line" means that certain uncommitted line of credit in an amount of up to $15,000,000.00 for the purpose of providing Cash Collateralized Letters of Credit with tenors not exceed 90 days.
2. The definition of "Line" set forth in Section 1.01 of the Credit Agreement, Certain Defined Terms, is deleted in its entirety and replaced with the following:
"Line" means any of the Borrowing Base Line, the Collateralized Line or the Overdraft Line.
3. The definition of "Net Working Capital" set forth in Section 1.01 of the Credit Agreement, Certain Defined Terms, is deleted in its entirety and replaced with the following:
"Net Working Capital" means the excess of Current Assets (minus all amounts due from employees, owners, Subsidiaries and Affiliates other than Accounts of Atmos Energy Corporation and its Subsidiaries and Affiliates permitted to be included as Eligible Accounts in the calculation of the Borrowing Base Advance Cap and minus the amount of any Cash Collateral pledged by the Borrower to secure a Letter of Credit under the Collateralized L/C Line) over Current Liabilities (excluding the current portion of Subordinated Debt), less investments in Capital Stock. In calculating Net Working Capital, the amount of Subordinated Debt excluded from liabilities in such calculation shall not exceed an amount equal to (i) 50% of the resultant Net Working Capital, plus (ii) the amount of the portion of Subordinated Debt the proceeds of which at such time are being used as Cash Collateral pledged by the Borrower to secure a Letter of Credit under the Collateralized L/C Line.
4. The definition of "Tangible Net Worth" set forth in Section 1.01 of the Credit Agreement, Certain Defined Terms, is deleted in its entirety and replaced with the following:
"Tangible Net Worth" means (a) the sum of the Borrower's assets, as determined in accordance with GAAP, less (b) the sum of the Borrower's liabilities excluding Subordinated Debt, as determined in accordance with GAAP, less (c) all amounts due from employees, owners, Subsidiaries and Affiliates other than Accounts permitted to be included as Eligible Accounts in the calculation of the Borrowing Base Advance Cap, less (d) investments in Capital Stock, less (e) the intangible assets of the Borrower, as determined in accordance with GAAP, less (f) the amount of any Cash Collateral pledged by the Borrower to secure a Letter of Credit under the Collateralized L/C Line. In calculating Tangible Net Worth, the amount of Subordinated Debt excluded from liabilities in such calculation shall not exceed an amount equal to (i) 50% of the resultant Tangible Net Worth plus (ii) the amount of the portion of Subordinated Debt the proceeds of which at such time are being used as Cash Collateral pledged by the Borrower to secure a Letter of Credit under the Collateralized L/C Line.
5. Section 3.01 (a) of Section 3.01 of the Credit Agreement, The Letter of Credit Lines, is hereby deleted in its entirety and replaced with the following:
3.01 The Letter of Credit Lines.
(a) On an uncommitted basis and on the terms and conditions set forth herein and if the Issuance of such Letter of Credit has been consented to by the Banks in their sole discretion (i) Issuing Bank agrees, (A) from time to time on any Business Day during the period from the Closing Date to the Expiration Date, to consider the Issuance of Letters of Credit for the account of the Borrower under the Borrowing Base Line or the Collateralized L/C Line and to consider whether to amend or renew Letters of Credit previously Issued by it, in accordance with Subsections 3.02(c) and 3.02(d), and (B) to honor drafts under the Letters of Credit; and (ii) the Banks shall participate in Letters of Credit Issued for the account of the Borrower; provided, however, the Declining Bank shall not have any obligation to and shall not be deemed to have participated in any
SECOND AMENDMENT TO CREDIT AGREEMENT - PAGE 2
Letters of Credit which are Issued on or after the Conversion to Single Funding Bank Date. Within the foregoing limits, and subject to the other terms and conditions hereof including, without limitation, the approval of the Banks in their sole discretion, the Borrower's ability to request that Issuing Bank Issue Letters of Credit shall be fully revolving, and, accordingly, the Borrower may, during the foregoing period, request that Issuing Bank Issue Letters of Credit to replace Letters of Credit which have expired or which have been drawn upon and reimbursed. The Existing L/Cs shall be deemed to be Letters of Credit Issued under this Agreement and shall be entitled to the benefits of this Agreement.
6. Subsection 3.01 (b)(viii) of Section 3.01 of the Credit Agreement, The Letter of Credit Lines, is hereby deleted in its entirety and replaced with the following:
(viii) the amount of such requested Letter of Credit exceeds the Borrowing Base Advance Cap or Collateralized L/C Line limit.
7. Section 3.07 of the Credit Agreement, Cash Collateral Pledge, is hereby deleted in its entirety and replaced with the following:
3.07 Cash Collateral Pledge. Upon the request of the Agent, (i) if Issuing Bank has honored any full or partial drawing request on any Letter of Credit and such drawing has resulted in an L/C Borrowing hereunder, or (ii) if, as of the Expiration Date, any Letters of Credit may for any reason remain outstanding and partially or wholly undrawn, the Borrower shall immediately Cash Collateralize the L/C Obligations in an amount equal to such L/C Obligations. Upon the occurrence of the circumstances described in Section 2.06 requiring the Borrower to Cash Collateralize Letters of Credit, then, the Borrower shall immediately Cash Collateralize the L/C Obligations in an amount equal to the applicable excess. In addition, the Borrower shall Cash Collateralize any Letter of Credit to be Issued under the Collateralized L/C Line on or before such Letter of Credit is actually Issued in an amount equal to such Letter of Credit.
8. Schedule 2.01 of the Credit Agreement is deleted in its entirety and replaced with the Schedule 2.01 attached hereto.
9. The Form of Notice of Borrowing (Letters Of Credit) attached to the Credit Agreement is deleted in its entirety and replaced with Exhibit A, which is attached hereto.
10. Renewal; Continued Effect. Except as set forth above, the Credit Agreement shall continue in full force and effect.
11. Representations. To induce the Banks to enter into this Amendment, Borrower ratifies and confirms each representation and warranty set forth in the Credit Agreement as if such representations and warranties were made on even date herewith, and further represents and warrants (a) that no material adverse change has occurred in the financial condition or business prospects of Borrower since the date of the last financial statements delivered to the Banks, (b)
SECOND AMENDMENT TO CREDIT AGREEMENT - PAGE 3
that no Event of Default exists and no event or condition exists or has occurred which with passage of time, or notice, or both, would become an Event of Default (a "Default"), and (c) that Borrower is fully authorized to enter into this Amendment. BORROWER ACKNOWLEDGES THAT THE CREDIT AGREEMENT PROVIDES FOR A CREDIT FACILITY THAT IS COMPLETELY OPTIONAL ON THE PART OF THE BANK AND THAT THE BANK HAS ABSOLUTELY NO DUTY OR OBLIGATION TO ADVANCE ANY REVOLVING LOAN OR TO ISSUE ANY LETTER OF CREDIT. BORROWER REPRESENTS AND WARRANTS TO BANK THAT BORROWER IS AWARE OF THE RISKS ASSOCIATED WITH CONDUCTING BUSINESS UTILIZING AN UNCOMMITTED FACILITY.
12. Conditions Precedent. As a condition to Bank of America entering into this Amendment, no Default or Event of Default shall exist on the date hereof, and Bank of America must have received executed originals of each of the following documents and instruments, in form and substance satisfactory to Bank of America:
(a) this Amendment, duly executed by Borrower;
(b) a Renewal Promissory Note in the amount of $115,000,000.00, duly executed by Borrower;
(c) an Amended and Restated Guaranty of each of the Guarantors; and
(d) such other documents or certificates as Bank of America may reasonably request.
13. Ratification of Security Agreements. Borrower ratifies and confirms the Security Agreements, and acknowledges and agrees that references to the Credit Agreement in such Security Agreements are hereby amended to refer to the Credit Agreement as amended by this Amendment and that in all other respects such Security Agreements shall continue in full force and effect, and that pursuant to such Security Agreements Borrower has granted and hereby confirms and grants to Bank a continuing first and prior security interest in the Collateral to secure payment and performance of all Obligations.
14. Miscellaneous.
(a) Severability. In case any of the provisions of this Amendment shall for any reason be held to be invalid, illegal, or unenforceable, such invalidity, illegality, or unenforceability shall not affect any other provision hereof, and this Amendment shall be construed as if such invalid, illegal, or unenforceable provision had never been contained herein.
(b) Capitalized Terms. Except as otherwise defined herein, capitalized terms shall have the meanings specified in the Credit Agreement.
SECOND AMENDMENT TO CREDIT AGREEMENT - PAGE 4
(c) Execution in Counterparts. This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any party hereto may execute this Amendment by signing one or more counterparts.
(d) Governing Law. This Amendment shall be construed in accordance with and governed by the laws of the State of California (without reference to principles of conflicts of laws), provided, however, that Bank shall retain all rights under federal law.
(e) Rights of Third Parties. All provisions herein are imposed solely and exclusively for the benefit of Borrower and Bank, and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with this Amendment or any of the other Loan Documents.
(f) COMPLETE AGREEMENT. THIS WRITTEN AMENDMENT AND THE OTHER WRITTEN AGREEMENTS ENTERED INTO AMONG THE PARTIES REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
SECOND AMENDMENT TO CREDIT AGREEMENT - PAGE 5
Executed as of the day and year first above written
BORROWER:
WOODWARD MARKETING, L.L.C.,
a Delaware limited liability company
By: /s/ HENRY O. DRILLING
-----------------------------
Name: Henry O. Drilling
-----------------------------
Title: Sr. Vice President
-----------------------------
|
BANKS:
BANK OF AMERICA, N. A.,
as Agent
By: /s/ IRENE C. RUMMEL
-----------------------------
Name: Irene C. Rummel
-----------------------------
Title: Vice President
-----------------------------
|
BANK OF AMERICA, N. A.,
as a Bank and Issuing Bank
By: /s/ IRENE C. RUMMEL
-----------------------------
Name: Irene C. Rummel
-----------------------------
Title: Vice President
-----------------------------
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SIGNATURE PAGE - SECOND AMENDMENT TO CREDIT AGREEMENT
GUARANTORS:
WOODWARD MARKETING, INC.
By: /s/ HENRY O. DRILLING
------------------------------
Name: Henry O. Drilling
------------------------------
Title: Sr. Vice President
------------------------------
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ATMOS ENERGY MARKETING, LLC
By: /s/ LAURIE M. SHERWOOD
-----------------------------
Name: Laurie M. Sherwood
-----------------------------
Title: Vice President and Treasurer
-----------------------------
/s/ J. D. WOODWARD
------------------------------------
J. D. WOODWARD
/s/ JAMES KIFER
------------------------------------
JAMES KIFER
|
SIGNATURE PAGE - SECOND AMENDMENT TO CREDIT AGREEMENT
SCHEDULE 2.01
UNCOMMITTED LINE AND
UNCOMMITTED LINE PORTION
(EXCLUDING OVERDRAFT LINES AND
SWAP CONTRACTS)
Pro Rata
Line: Bank Dollar Amount Share
----- ---- ------------- --------
Borrowing Base Bank of America $100,000,000.00 100%
Line
Collateralized Bank of America $ 15,000,000.00 100%
L/C Line
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SCHEDULE
EXHIBIT A
FORM OF NOTICE OF BORROWING
(LETTERS OF CREDIT)
[DATE]
Bank of America, N. A.
333 Clay Street, Suite 4550
Houston, Texas 77002
Attention: Irene C. Rummel
Telephone: (713) 651-4921
Facsimile: (713) 651-4801
Re: Credit Agreement, dated to be effective as of August 9, 2000 (as amended or supplemented from time to time, the "Agreement"), by and among Woodward Marketing, L.L.C. (the "Borrower"), the banks that from time to time are parties thereto, and Bank of America, N. A., as Agent
Ladies and Gentlemen:
Reference is made to the Agreement (capitalized terms used herein that
are not defined shall have the respective meanings ascribed thereto in the
Agreement). The Borrower hereby gives notice of its intention to request the
[ISSUANCE, AMENDMENT, OR RENEWAL] of Letters of Credit as is further described
on the Letter of Credit Application attached hereto.
The Borrower represents and warrants, as of the date hereof and as of the date any Letter of Credit is Issued, amended or renewed, that (i) no Default or Event of Default has occurred and is continuing on the date hereof, nor will any thereof occur after giving effect to the Letters of Credit requested above; and (ii) that neither the Borrowing Base Advance Cap nor the limit under the Collateralized L/C Line will be exceeded after giving effect to the Letters of Credit requested above.
Very truly yours,
WOODWARD MARKETING, L.L.C.,
By: /s/ HENRY O. DRILLING
----------------------------------
Name: Henry O. Drilling
--------------------------------
Title: Responsible Officer
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EXHIBIT A
EXHIBIT 10.8(g)
THIRD AMENDMENT TO CREDIT AGREEMENT
This THIRD AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is entered into effective as of December 7, 2000, among WOODWARD MARKETING, L.L.C., a Delaware limited liability company (the "Borrower"), BANK OF AMERICA, N. A. ("Bank of America"), as a Bank, as an Issuing Bank, and as Agent for the Banks, and Woodward Marketing, Inc., Atmos Energy Marketing LLC, J. D. Woodward and James Kifer (collectively the "Guarantors").
WHEREAS, Borrower and Banks entered into that certain Credit Agreement, dated to be effective as of August 9, 2000, as amended by that certain First Amendment to Credit Agreement and Guaranty of Atmos Energy Marketing, LLC dated as of September 29, 2000, and that certain Second Amendment to Credit Agreement dated as of November 3, 2000 (as amended the "Credit Agreement"); and
WHEREAS, the Obligations (as defined in the Credit Agreement) were guaranteed by the Guarantors pursuant to a Guaranty Agreement executed by each of the Guarantors, in favor of the Banks, dated as of August 9, 2000 (the "Guaranty Agreements"); and
WHEREAS, the Obligations are secured by security interests in the Collateral (as defined in the Credit Agreement) granted to Bank pursuant to the Security Agreements (as defined in the Credit Agreement) and pursuant to the Nations Funds Security Agreement (as defined in the Credit Agreement), each executed by Borrower (collectively, the "Security Agreements"); and
WHEREAS, the parties hereto desire to amend the Credit Agreement as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, Borrower, Bank of America and the Guarantors agree as follows:
1. The definition of "Borrowing Base Sub-Cap" set forth in Section 1.01 of the Credit Agreement, Certain Defined Terms, is deleted in its entirety and replaced with the following:
"Borrowing Base Sub-Cap" means, initially, an amount equal to $50,000,000.00; provided, however, Borrower may elect from time to time any of $50,000,000.00, $60,000,000.00, $70,000,000.00, $75,000,000.00, $80,000,000.00, $90,000,000.00, $95,000,000.00 or $100,000,000.00, as the Borrowing Base Sub-cap provided that Borrower's Net Working Capital and Tangible Net Worth at the time of election are greater than, or equal to, the amounts specified below:
(a) If Borrower elects $100,000,000.00, Borrower's Net Working Capital must be at least $20,000,000.00 and Tangible Net Worth must be at least $21,000,000.00; or
(b) If Borrower elects $95,000,000.00, Borrower's Net Working Capital must be at least $19,000,000.00 and Tangible Net Worth must be at least $20,000,000.00; or
(c) If Borrower elects $90,000,000.00, Borrower's Net Working Capital must be at least $18,000,000.00 and Tangible Net Worth must be at least $19,000,000.00; or
(d) If Borrower elects $80,000,000.00, Borrower's Net Working Capital must be at least $16,000,000.00 and Tangible Net Worth must be at least $17,000,000.00; or
(e) If Borrower elects $75,000,000.00, Borrower's Net Working Capital must be at least $15,000,000.00 and Tangible Net Worth must be at least $16,000,000.00; or
(f) If Borrower elects $70,000,000.00, Borrower's Net Working Capital must be at least $14,000,000.00 and Tangible Net Worth must be at least $15,000,000.00; or
(g) If Borrower elects $60,000,000.00, Borrower's Net Working Capital must be at least $12,000,000.00 and Tangible Net Worth must be at least $13,000,000.00; or
(h) If Borrower elects $50,000,000.00, Borrower's Net Working Capital must be at least $10,000,000.00 and Tangible Net Worth must be at least $11,000,000.00.
Borrower shall elect which Borrowing Base Sub-Cap is in effect from time to time by delivering to Agent a written notice of such election, together with a Compliance Certificate in the form of Exhibit C which is attached hereto but modified to include a certification that upon the effectiveness of such election, no Default or Event of Default will exist. NOTWITHSTANDING THE FOREGOING, UNTIL THE EARLIER TO OCCUR OF JANUARY 31, 2001, OR SUCH TIME AS ADDITIONAL BANKS BECOME PARTIES TO THIS AGREEMENT WITH A BORROWING BASE LINE PORTION OF AT LEAST 25,000,000.00, THE BORROWING BASE SUB-CAP CANNOT EXCEED $95,000,000.00, AND PROVIDED FURTHER THAT NOTWITHSTANDING THE FOREGOING, IF NO BANKS ARE ADDED WITH A BORROWING BASE LINE PORTION OF AT LEAST 25,000,000.00 BY JANUARY 31, 2001, THEN FROM AND AFTER JANUARY 31, 2001, UNTIL SUCH TIME AS ADDITIONAL BANKS BECOME PARTIES TO THIS AGREEMENT WITH A BORROWING BASE LINE PORTION OF AT LEAST 25,000,000.00, THE BORROWING BASE SUB-CAP CANNOT EXCEED $75,000,000.00. FURTHERMORE, UNTIL SUCH TIME AS ADDITIONAL BANKS BECOME PARTIES TO THIS AGREEMENT WITH A BORROWING
THIRD AMENDMENT TO CREDIT AGREEMENT - PAGE 2
BASE LINE PORTION OF AT LEAST 25,000,000.00, UNDER NO CIRCUMSTANCES SHALL THE EFFECTIVE AMOUNT OF ALL OUTSTANDING REVOLVING LOANS, PLUS THE EFFECTIVE AMOUNT OF ALL L/C OBLIGATIONS UNDER THE BORROWING BASE LINE EXCEED $75,000,000.00 UNLESS THE FULL AMOUNT AVAILABLE UNDER THE COLLATERALIZED L/C LINE HAS BEEN FULLY UTILIZED.
2. The definition of "Dollar Advance Cap" set forth in Section 1.01 of the Credit Agreement, Certain Defined Terms, is deleted in its entirety and replaced with the following:
"Dollar Advance Cap" means a cap upon Revolving Loans under the Borrowing Base Line with the following limits:
(a) $40,000,000.00 at such times as the Borrowing Base Sub-Cap is $100,000,000.00; and
(b) $38,000,000.00 at such times as the Borrowing Base Sub-Cap is $95,000,000.00; and
(c) $36,000,000.00 at such times as the Borrowing Base Sub-Cap is $90,000,000.00; and
(d) $32,000,000.00 at such times as the Borrowing Base Sub-Cap is $80,000,000.00; and
(e) $30,000,000.00 at such times as the Borrowing Base Sub-Cap is $75,000,000.00; and
(f) $28,000,000.00 at such times as the Borrowing Base Sub-Cap is $70,000,000.00; and
(g) $24,000,000.00 at such times as the Borrowing Base Sub-Cap is $60,000,000.00; and
(h) $20,000,000.00 at such times as the Borrowing Base Sub-Cap is $50,000,000.00.
3. Renewal; Continued Effect. Except as set forth above, the Credit Agreement shall continue in full force and effect.
4. Representations. To induce the Banks to enter into this Amendment, Borrower ratifies and confirms each representation and warranty set forth in the Credit Agreement as if such representations and warranties were made on even date herewith, and further represents and warrants (a) that no material adverse change has occurred in the financial condition or business prospects of Borrower since the date of the last financial statements delivered to the Banks, (b) that no Event of Default exists and no event or condition exists or has occurred which with
THIRD AMENDMENT TO CREDIT AGREEMENT - PAGE 3
passage of time, or notice, or both, would become an Event of Default (a "Default"), and (c) that Borrower is fully authorized to enter into this Amendment. BORROWER ACKNOWLEDGES THAT THE CREDIT AGREEMENT PROVIDES FOR A CREDIT FACILITY THAT IS COMPLETELY OPTIONAL ON THE PART OF THE BANK AND THAT THE BANK HAS ABSOLUTELY NO DUTY OR OBLIGATION TO ADVANCE ANY REVOLVING LOAN OR TO ISSUE ANY LETTER OF CREDIT. BORROWER REPRESENTS AND WARRANTS TO BANK THAT BORROWER IS AWARE OF THE RISKS ASSOCIATED WITH CONDUCTING BUSINESS UTILIZING AN UNCOMMITTED FACILITY.
5. Conditions Precedent. As a condition to Bank of America entering into this Amendment, no Default or Event of Default shall exist on the date hereof, and Bank of America must have received executed originals of each of the following documents and instruments, in form and substance satisfactory to Bank of America:
(a) this Amendment, duly executed by Borrower; and
(b) such other documents or certificates as Bank of America may reasonably request.
6. Ratification of Security Agreements. Borrower ratifies and confirms the Security Agreements, and acknowledges and agrees that references to the Credit Agreement in such Security Agreements are hereby amended to refer to the Credit Agreement as amended by this Amendment and that in all other respects such Security Agreements shall continue in full force and effect, and that pursuant to such Security Agreements Borrower has granted and hereby confirms and grants to Bank a continuing first and prior security interest in the Collateral to secure payment and performance of all Obligations.
7. Ratification of Note. Borrower ratifies and confirms the Promissory Note dated as of November 3, 2000, delivered by Borrower to Bank of America and acknowledges and agrees that such note shall continue in full force and effect and shall be a "Note" as defined in the Credit Agreement.
8. Miscellaneous.
(a) Severability. In case any of the provisions of this Amendment shall for any reason be held to be invalid, illegal, or unenforceable, such invalidity, illegality, or unenforceability shall not affect any other provision hereof, and this Amendment shall be construed as if such invalid, illegal, or unenforceable provision had never been contained herein.
(b) Capitalized Terms. Except as otherwise defined herein,
capitalized terms shall have the meanings specified in the Credit Agreement.
(c) Execution in Counterparts. This Amendment may be executed
|
in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any party hereto may execute this Amendment by signing one or more counterparts.
THIRD AMENDMENT TO CREDIT AGREEMENT - PAGE 4
(d) Governing Law. This Amendment shall be construed in accordance with and governed by the laws of the State of California (without reference to principles of conflicts of laws), provided, however, that Bank shall retain all rights under federal law.
(e) Rights of Third Parties. All provisions herein are imposed solely and exclusively for the benefit of Borrower and Bank, and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with this Amendment or any of the other Loan Documents.
(f) COMPLETE AGREEMENT. THIS WRITTEN AMENDMENT AND THE OTHER WRITTEN AGREEMENTS ENTERED INTO AMONG THE PARTIES REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
THIRD AMENDMENT TO CREDIT AGREEMENT - PAGE 5
Executed as of the day and year first above written
BORROWER:
WOODWARD MARKETING, L.L.C.,
a Delaware limited liability company
By: /s/ HENRY O. DRILLING
---------------------------
Name: Henry O. Drilling
---------------------------
Title: Sr. Vice President
---------------------------
|
BANKS:
BANK OF AMERICA, N. A.,
as Agent
By: /s/ IRENE C. RUMMEL
---------------------------
Name: Irene C. Rummel
---------------------------
Title: Vice President
---------------------------
|
BANK OF AMERICA, N. A.,
as a Bank and Issuing Bank
By: /s/ IRENE C. RUMMEL
---------------------------
Name: Irene C. Rummel
---------------------------
Title: Vice President
---------------------------
|
GUARANTORS:
WOODWARD MARKETING, INC.
By: /s/ HENRY O. DRILLING
----------------------------
Name: Henry O. Drilling
----------------------------
Title: Sr. Vice President
----------------------------
|
ATMOS ENERGY MARKETING, LLC
By: /s/ LAURIE M. SHERWOOD
----------------------------
Name: Laurie M. Sherwood
----------------------------
Title: Vice President and Treasurer
----------------------------
/s/ J. D. WOODWARD
------------------------------------
J. D. WOODWARD
/s/ JAMES KIFER
------------------------------------
JAMES KIFER
|
EXHIBIT 10.8(h)
FOURTH AMENDMENT TO CREDIT AGREEMENT
This FOURTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is entered into effective as of December 22, 2000, among WOODWARD MARKETING, L.L.C., a Delaware limited liability company (the "Borrower"), BANK OF AMERICA, N. A. ("Bank of America"), as a Bank, as an Issuing Bank, and as Agent for the Banks, BNP PARIBAS, a bank organized under the laws of France ("BNP Paribas"), and Woodward Marketing, Inc., Atmos Energy Marketing LLC, J. D. Woodward and James Kifer (collectively the "Guarantors").
WHEREAS, Borrower and Banks entered into that certain Credit Agreement, dated to be effective as of August 9, 2000, as amended by that certain First Amendment to Credit Agreement and Guaranty of Atmos Energy Marketing, LLC dated as of September 29, 2000, that certain Second Amendment to Credit Agreement dated as of November 3, 2000, and that certain Third Amendment to Credit Agreement dated as of December 5, 2000 (as amended the "Credit Agreement"); and
WHEREAS, the Obligations (as defined in the Credit Agreement) were guaranteed by the Guarantors pursuant to a Guaranty Agreement executed by each of the Guarantors, in favor of the Banks, dated as of August 9, 2000 (the "Guaranty Agreements"); and
WHEREAS, the Obligations are secured by security interests in the Collateral (as defined in the Credit Agreement) granted to Bank pursuant to the Security Agreements (as defined in the Credit Agreement) and pursuant to the Nations Funds Security Agreement (as defined in the Credit Agreement), each executed by Borrower (collectively, the "Security Agreements"); and
WHEREAS, on even date herewith Bank of America has assigned a portion of its interest under the Credit Agreement to BNP Paribas; and
WHEREAS, the parties hereto desire to amend the Credit Agreement as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, Borrower, Bank of America and the Guarantors agree as follows:
1. The definition of "Adjusted Pro Rata Share" set forth in Section 1.01 of the Credit Agreement, Certain Defined Terms, is deleted in its entirety and replaced with the following:
"Adjusted Pro Rata Share" means, as to any Bank at any particular time, the percentage equivalent (expressed as a decimal, rounded to the ninth decimal place) at such time of (a) an amount equal to such Bank's Uncommitted Line Portion plus, in the case of Bank of America, the amount of advances made in excess of the Borrowing Base Advance Cap under the Overdraft Line or the Bankcard Line and/or to fund Obligations of the Borrower under Swap Contracts or the Bankcard Line, and/or to fund overdraft costs arising from of transfers of funds made through the automated clearinghouse
system, and in the case of BNP Paribas, the amount of advances made in excess of the Borrowing Base Advance Cap to fund Obligations of the Borrower under Swap Contracts, divided by (b) the combined total of the Uncommitted Line of all the Banks plus the amount of advances made in excess of the Borrowing Base Advance Cap under the Overdraft Line and the Bankcard Line and/or to fund the Obligations of the Borrower under the Overdraft Line, the Bankcard Line and/or Swap Contracts, and/or to fund overdraft costs arising from of transfers of funds made through the automated clearinghouse system, if any.
2. A new definition, "Bankcard Advance", is added to Section 1.01 of the Credit Agreement, Certain Defined Terms, to read as follows:
"Bankcard Advance" means any advance made hereunder by Bank of America under the Bankcard Line.
3. A new definition, "Bankcard Line", is added to Section 1.01 of the Credit Agreement, Certain Defined Terms, to read as follows:
"Bankcard Line" means that certain discretionary bankcard line the Borrower maintains with Bank of America in an amount not to exceed $50,000.00.
4. The definition of "Borrowing Base Advance Cap" set forth in Section 1.01 of the Credit Agreement, Certain Defined Terms, is deleted in its entirety and replaced with the following:
"Borrowing Base Advance Cap" means at any time an amount equal to the least of:
(a) $125,000,000.00;
(b) the Borrowing Base Sub-Cap; or
(c) the sum of:
(i) the amount of Cash Collateral and other liquid investments which are acceptable to the Banks in their sole discretion and which are subject to a first perfected security interest in favor of Agent, as collateral agent for the Banks, and which have not been used in determining availability for any other advance (other than advances made under the Borrowing Base Line) or Letter of Credit Issuance; plus
(ii) 90% of Borrower's equity in Banc of America Futures Incorporated accounts, to the extent such equity is not being used in determining availability for any other advance (other than advances made under the Borrowing Base Line) or Letter of Credit Issuance; plus
FOURTH AMENDMENT TO CREDIT AGREEMENT - PAGE 2
(iii) 90% of Borrower's equity in BNP Paribas Commodity Futures, Inc. accounts from and after the date that a tri-party agreement with respect to such accounts is entered into among Borrower, Agent and BNP Paribas Commodity Futures, Inc., to the extent such equity is not being used in determining availability for any other advance (other than advances made under the Borrowing Base Line) or Letter of Credit Issuance; plus
(iv) 90% of the amount of Tier I Accounts which are not being used in determining availability for any other advance (other than advances made under the Borrowing Base Line) or Letter of Credit Issuance, net of deductions, offsets and counterclaims; plus
(v) 85% of the amount of Tier II Accounts and which are not being used in determining availability for any other advance (other than advances made under the Borrowing Base Line) or Letter of Credit Issuance, net of deductions, offsets and counterclaims; plus
(vi) 85% of the amount of Tier I Unbilled Accounts which are not being used in determining availability for any other advance (other than advances made under the Borrowing Base Line) or Letter of Credit Issuance; plus
(vii) 80% of the amount of Tier II Unbilled Accounts which are not being used in determining availability for any other advance (other than advances made under the Borrowing Base Line) or Letter of Credit Issuance; plus
(viii) 80% of the amount of Eligible Inventory which are not being used in determining availability for any other advance (other than advances made under the Borrowing Base Line) or Letter of Credit Issuance; plus
(ix) 80% of the amount of Eligible Exchange Receivables which are not being used in determining availability for any other advance (other than advances made under the Borrowing Base Line) or Letter of Credit Issuance; plus
(x) 80% of the amount of Undelivered Product Value; less
(xi) the amounts which would be subject to a so-called "First Purchaser Lien" as defined in Texas Bus. & Com. Code Section 9.319, comparable laws of the states of Oklahoma, Kansas, Wyoming or New Mexico, or any other comparable law, unless a Letter of Credit secures payment of all amounts subject to such First Purchaser Lien; less
FOURTH AMENDMENT TO CREDIT AGREEMENT - PAGE 3
(xii) 125% of the mark-to-market amounts owed to Bank of America and/or its Affiliates under Swap Contracts;
(xiii) 125% of the mark-to-market amounts owed to BNP Paribas and/or its Affiliates under Swap Contracts; and
(xiv) 100% of Borrower's Unrealized Mark-to-Market Losses as of the date of determination of Borrowing Base Advance Cap.
In no event shall any amounts described in (b)(i) through
(b)(ix) above which may fall into more than one of such categories be
counted more than once when making the calculation under of this
definition.
5. The definition of "Borrowing Base Sub-Cap" set forth in Section 1.01 of the Credit Agreement, Certain Defined Terms, is deleted in its entirety and replaced with the following:
"Borrowing Base Sub-Cap" means, initially, an amount equal to $50,000,000.00; provided, however, Borrower may elect from time to time any of $50,000,000.00, $60,000,000.00, $70,000,000.00, $75,000,000.00, $80,000,000.00, $90,000,000.00, $100,000,000.00, $110,000,000.00, $120,000,000.00 or $125,000,000.00 as the Borrowing Base Sub-cap provided that Borrower's Net Working Capital and Tangible Net Worth at the time of election are greater than, or equal to, the amounts specified below:
(a) If Borrower elects $125,000,000.00, Borrower's Net Working Capital must be at least $25,000,000.00 and Tangible Net Worth must be at least $26,000,000.00; or
(b) If Borrower elects $120,000,000.00, Borrower's Net Working Capital must be at least $24,000,000.00 and Tangible Net Worth must be at least $25,000,000.00; or
(c) If Borrower elects $110,000,000.00, Borrower's Net Working Capital must be at least $22,000,000.00 and Tangible Net Worth must be at least $23,000,000.00; or
(d) If Borrower elects $100,000,000.00, Borrower's Net Working Capital must be at least $20,000,000.00 and Tangible Net Worth must be at least $21,000,000.00; or
(e) If Borrower elects $95,000,000.00, Borrower's Net Working Capital must be at least $19,000,000.00 and Tangible Net Worth must be at least $20,000,000.00; or
FOURTH AMENDMENT TO CREDIT AGREEMENT - PAGE 4
(f) If Borrower elects $90,000,000.00, Borrower's Net Working Capital must be at least $18,000,000.00 and Tangible Net Worth must be at least $19,000,000.00; or
(g) If Borrower elects $80,000,000.00, Borrower's Net Working Capital must be at least $16,000,000.00 and Tangible Net Worth must be at least $17,000,000.00; or
(h) If Borrower elects $75,000,000.00, Borrower's Net Working Capital must be at least $15,000,000.00 and Tangible Net Worth must be at least $16,000,000.00; or
(i) If Borrower elects $70,000,000.00, Borrower's Net Working Capital must be at least $14,000,000.00 and Tangible Net Worth must be at least $15,000,000.00; or
(j) If Borrower elects $60,000,000.00, Borrower's Net Working Capital must be at least $12,000,000.00 and Tangible Net Worth must be at least $13,000,000.00; or
(k) If Borrower elects $50,000,000.00, Borrower's Net Working Capital must be at least $10,000,000.00 and Tangible Net Worth must be at least $11,000,000.00.
Borrower shall elect which Borrowing Base Sub-Cap is in effect from time to time by delivering to Agent a written notice of such election, together with a Compliance Certificate in the form of Exhibit C which is attached hereto but modified to include a certification that upon the effectiveness of such election, no Default or Event of Default will exist.
6. The definition of "Dollar Advance Cap" set forth in Section 1.01 of the Credit Agreement, Certain Defined Terms, is deleted in its entirety and replaced with the following:
"Dollar Advance Cap" means a cap upon Revolving Loans under the Borrowing Base Line with the following limits:
(a) $50,000,000.00 at such times as the Borrowing Base Sub-Cap is $125,000,000.00;
(b) $48,000,000.00 at such times as the Borrowing Base Sub-Cap is $120,000,000.00;
(c) $44,000,000.00 at such times as the Borrowing Base Sub-Cap is $110,000,000.00; and
FOURTH AMENDMENT TO CREDIT AGREEMENT - PAGE 5
(d) $40,000,000.00 at such times as the Borrowing Base Sub-Cap is $100,000,000.00; and
(e) $38,000,000.00 at such times as the Borrowing Base Sub-Cap is $95,000,000.00; and
(f) $36,000,000.00 at such times as the Borrowing Base Sub-Cap is $90,000,000.00; and
(g) $32,000,000.00 at such times as the Borrowing Base Sub-Cap is $80,000,000.00; and
(h) $30,000,000.00 at such times as the Borrowing Base Sub-Cap is $75,000,000.00; and
(i) $28,000,000.00 at such times as the Borrowing Base Sub-Cap is $70,000,000.00; and
(j) $24,000,000.00 at such times as the Borrowing Base Sub-Cap is $60,000,000.00; and
(k) $20,000,000.00 at such times as the Borrowing Base Sub-Cap is $50,000,000.00.
7. The definition of "Loan" set forth in Section 1.01 of the Credit Agreement, Certain Defined Terms, is deleted in its entirety and replaced with the following:
"Loan" means (a) any extension of credit by a Bank to the Borrower under Article II or Article III in the form of a Revolving Loan or an L/C Advance and (b) any Overdraft Advance or Bankcard Advance.
8. The definition of "Obligations" set forth in Section 1.01 of the Credit Agreement, Certain Defined Terms, is deleted in its entirety and replaced with the following:
"Obligations" means all advances, debts, liabilities, obligations, covenants and duties arising under any Loan Document and any documents related to Bankcard transactions, owing by the Borrower to any Bank, or any affiliate of any Bank, the Agent, or any Indemnified Person, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising, including without limitation overdraft costs arising as a result of transfers of funds made through the automated clearinghouse system and all obligations of the Borrower under Revolving Loans, Letters of Credit, the Overdraft Line, the Bankcard Line and any Swap Contracts.
9. The definition of "Swap Contract" set forth in Section 1.01 of the Credit Agreement, Certain Defined Terms, is deleted in its entirety and replaced with the following:
FOURTH AMENDMENT TO CREDIT AGREEMENT - PAGE 6
"Swap Contract" means any agreement entered into with Bank of America or any Affiliate of Bank of America or BNP Paribas or any Affiliate of BNP Paribas, whether or not in writing, relating to any single transaction that is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap or option, bond, note or bill option, interest rate option, forward foreign exchange transaction, cap, collar or floor transaction, currency swap, cross-currency rate swap, currency option or any other similar transaction (including any option to enter into any of the foregoing) or any combination of the foregoing and, unless the context clearly requires, any master agreement relating to or governing any or all of the foregoing.
10. A definition of "Mark to Market" is added to Section 1.01 of the Credit Agreement, Certain Defined Terms, as follows:
"Mark-to-Market" means, the method of accounting used to account for derivative commodity instruments entered into for trading purposes, in accordance with EITF 98-10, "Accounting for Energy Trading and Risk Management Activities" and any future open obligation.
11. A definition of "Unrealized Mark-to-Market Losses" is added to
Section 1.01 of the Credit Agreement, Certain Defined Terms, as follows:
"Unrealized Mark-to-Market Losses" means, Borrower's unrealized Mark-to-Market losses as of the day of determination of Borrower's Borrowing Base Advance Cap to be reported on a Borrowing Base Collateral Position Report, calculated net of unrealized Mark-to-Market profits. If a loss, deduct the absolute value of that loss, if a profit the value equals zero.
12. Subsection (c) of Section 2.01 of the Credit Agreement, Procedure for Borrowing, is hereby deleted in its entirety and replaced with the following:
(c) Advances Related to the Overdraft Line and Swap Contracts.
In addition to advances requested from time to time by the Borrower, in the
event that either (i) any amounts owing to Bank of America or BNP Paribas or any
of their Affiliates under the Overdraft Line or any Swap Contract are not paid
within two (2) Business Days after such obligation arises; or (ii) Bank of
America or any of its Affiliates have made an Overdraft Advance in the amount of
a drawing under a Letter of Credit which has not been timely reimbursed by the
Borrower in accordance with Section 3.03(b) of this Agreement and such amount
has not been paid by the Borrower within one (1) Business Day after such
obligation arises, then Bank of America shall notify the Agent of such failure
to pay and the Agent (without the necessity of any instructions or request from
the Borrower) shall make a Revolving Loan in accordance with the provisions of
Section 2.03 of this Agreement under the Borrowing Base Line for any amounts due
by the Borrower to Bank of America or BNP Paribas or any of their Affiliates
under the Overdraft Line, or any Swap Contract, and then apply the proceeds of
such advance to pay to Bank of America, or BNP Paribas or any of their
Affiliates (as the case may be) all amounts owed to such Person under the
Overdraft Line or such Swap Contract. Upon making any such Revolving Loan, the
FOURTH AMENDMENT TO CREDIT AGREEMENT - PAGE 7
Agent shall send notice of such Revolving Loan to the Borrower and the Banks.
Any such advance shall initially be a Base Rate Loan. In the event that any such
advance made to fund Bank of America or its Affiliates, other than an advance to
reimburse Bank of America for an Overdraft Advance made to fund a drawing under
Letters of Credit or to fund Reducing L/C Borrowings, results in an advance in
excess of the Borrowing Base Advance Cap, the Banks shall have no duty to fund
their pro rata share of any excess resulting from such advance made to repay
amounts owing to Bank of America or BNP Paribas or any of their Affiliates under
the Overdraft Line or any Swap Contract, but Bank of America or BNP Paribas or
any of their Affiliates', as the case may be, outstandings hereunder shall be
deemed to be increased by the amount of such excess. Notwithstanding the
foregoing, the Banks other than Bank of America shall have the duty, however, to
fund their pro rata share of all Overdraft Advances made to fund drawings under
Letters of Credit or to fund Reducing L/C Borrowings. In the event any advance
described above does exceed the Borrowing Base Advance Cap, the Borrower shall
pay to Agent, for the benefit of Bank of America or its Affiliate (as the case
may be), the amount of such excess, together with interest thereon, within one
(1) Business Day after the date of such advance and, notwithstanding anything to
the contrary herein, the Banks other than Bank of America shall not share in
such payment.
THE BORROWER ACKNOWLEDGES AND AGREES THAT THE BANKS HAVE ABSOLUTELY NO DUTY TO FUND ANY REVOLVING LOAN REQUESTED BY THE BORROWER BUT WILL EVALUATE EACH LOAN REQUEST AND IN EACH BANK'S ABSOLUTE AND SOLE DISCRETION WILL DECIDE WHETHER TO FUND SUCH LOAN REQUEST. THE BORROWER FURTHER ACKNOWLEDGES AND AGREES THAT BANK OF AMERICA HAS ABSOLUTELY NO DUTY TO MAKE OR FUND ANY OVERDRAFT ADVANCE OR TO ENTER INTO ANY SWAP CONTRACT, AND ANY OVERDRAFT ADVANCE OR THE ENTERING INTO OF ANY SWAP CONTRACT SHALL BE AT BANK OF AMERICA'S ABSOLUTE AND SOLE DISCRETION AND THAT BNP PARIBAS HAS ABSOLUTELY NO DUTY TO ENTER INTO ANY SWAP CONTRACT, AND THE ENTERING INTO OF ANY SWAP CONTRACT SHALL BE AT BNP PARIBAS' ABSOLUTE AND SOLE DISCRETION.
13. Subsection (a) of Section 2.03 of the Credit Agreement, Procedure for Borrowing, is hereby deleted in its entirety and replaced with the following:
(a) Each Borrowing of Revolving Loans consisting only of Base Rate Loans, if approved by the Banks in their sole discretion, shall be made upon the Borrower's irrevocable written notice delivered to the Agent and the Banks in the form of a Notice of Borrowing (Revolving Loan), which notice must be received by the Agent and the Banks prior to 12:00 p.m. (Dallas time) on the Borrowing Date specifying the amount of the Borrowing. Each such Notice of Borrowing shall be by electronic transfer or facsimile, confirmed immediately in an original writing. Each Borrowing of Revolving Loans that includes any Offshore Rate Loans, if approved by the Banks in their sole discretion, shall be made upon the Borrower's irrevocable written notice delivered to the Agent and the Banks in the form of a Notice of Borrowing (which notice must be received by the Agent and the Banks prior to 12:00 p.m. Dallas time three (3) Business Days prior to the requested Borrowing Date), specifying the amount of the Borrowing. Each such Notice of Borrowing shall be by electronic transfer or facsimile, confirmed
FOURTH AMENDMENT TO CREDIT AGREEMENT - PAGE 8
immediately in an original writing. Each requested Offshore Rate Loan must have an Offshore Effective Amount of at least $15,000,000. A Bankcard Advance may be made by Bank of America in its sole discretion or, at Bank of America's discretion, upon written request from Borrower.
14. Section 2.07 of the Credit Agreement, Repayment, is hereby deleted in its entirety and replaced with the following:
2.07 Repayment. The Borrower shall repay the principal amount of each Revolving Loan to the Agent on behalf of the Banks, on the Advance Maturity Date for such Loan. The Borrower shall repay to the Agent for the benefit of Bank of America each Overdraft Advance made under the Overdraft Line and each Bankcard Line Advance made under the Bankcard Line on the next Business Day after such Overdraft Advance or Bankcard Line is made. Notwithstanding anything to the contrary contained herein, the Banks other than Bank of America shall not share in any payment made with respect to the Overdraft Line or the Bankcard Line. All amounts owing Bank of America under the Overdraft Line or the Bankcard Line and all amounts owing to Bank of America or BNP Paribas under any Swap Contract, to the extent such amounts have not been repaid from the proceeds of a Revolving Loan, shall be paid on demand, or if no demand is made, on the first (1st) Business Day after the Borrower receives notice that such amount was advanced by or becomes owing to Bank of America or BNP Paribas.
15. Subsection (a) and Subsection (b) of Section 2.08 of the Credit Agreement, Interest, are hereby deleted in their entirety and replaced with the following:
(a) Each Revolving Loan and Overdraft Advance and each Bankcard Advance (except for a Revolving Loan made as a result of a drawing under a Letter of Credit or a Reducing L/C Borrowing) shall bear interest on the outstanding principal amount thereof from the applicable Borrowing Date at a floating rate per annum equal to the Base Rate plus the Applicable Margin at all times such Loan is a Base Rate Loan or at the Offshore Rate plus the Applicable Margin at all times such Loan is an Offshore Rate Loan. Each Revolving Loan made as a result of a drawing under a Letter of Credit or a Reducing L/C Borrowing, all amounts owing to Bank of America or any Affiliate of Bank of America under the Overdraft Line or the Bankcard Line or owing to Bank of America or BNP Paribas with respect to any Swap Contract, shall bear interest on the outstanding principal amount thereof from the date funded at a floating rate per annum equal to the Base Rate plus the Applicable Margin until such Loan has been outstanding for more than two (2) Business Days and, thereafter, shall bear interest on the outstanding principal amount thereof at a floating rate per annum equal to the Base Rate, plus three percent (3.0%) per annum (the "Default Rate").
(b) Interest on each Revolving Loan shall be paid upon demand, or if no demand is made, shall be paid in arrears on each Interest Payment Date. Interest on each Overdraft Advance and each Bankcard Advance shall be paid upon demand, or if no
FOURTH AMENDMENT TO CREDIT AGREEMENT - PAGE 9
demand is made, on the earlier to occur of the date of repayment of such Overdraft Advance or Bankcard Advance or the date such Overdraft Advance is due and payable.
16. Section 2.13 of the Credit Agreement, Sharing of Payments, Etc., is hereby deleted in its entirety and replaced with the following:
2.13 Sharing of Payments, Etc. If, other than as expressly provided
elsewhere herein, any Bank shall obtain on account of the Loans made by it any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) in excess of its Pro Rata Share or Adjusted Pro Rata
Share, as the case may be at such time (other than payments to Bank of America
or BNP Paribas with respect to advances made in excess of the Borrowing Base
Advance Cap as a result of payment under a Swap Contract or advances under the
Overdraft Line or the Bankcard Line), such Bank shall immediately (a) notify the
Agent of such fact, and (b) purchase from the other Banks such participations in
the Loans made by them as shall be necessary to cause such purchasing Bank to
share the excess payment pro rata with each of them; provided, however, that if
all or any portion of such excess payment is thereafter recovered from the
purchasing Bank, such purchase shall to that extent be rescinded and each other
Bank shall repay to the purchasing Bank the purchase price paid therefor,
together with an amount equal to such paying Bank's ratable share (according to
the proportion of (i) the amount of such paying Bank's required repayment to
(ii) the total amount so recovered from the purchasing Bank) of any interest or
other amount paid or payable by the purchasing Bank in respect of the total
amount so recovered. The Borrower agrees that any Bank so purchasing a
participation from another Bank may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of set-off, but subject
to Section 11.09) with respect to such participation as fully as if such Bank
were the direct creditor of the Borrower in the amount of such participation.
The Agent will keep records (which shall be conclusive and binding in the
absence of manifest error) of participations purchased under this Section and
will in each case notify the Banks following any such purchases or repayments.
17. Section 2.14 of the Credit Agreement, The Election of One Bank to Continue Funding, is hereby deleted in its entirety and replaced with the following:
2.14 The Election of One Bank to Continue Funding. If one or more Banks (the "Declining Banks") do not approve a requested Revolving Loan or the issuance or amendment of a requested Letter of Credit for reasons other than a Default and the other Bank or Banks do approve such Revolving Loan or the issuance or amendment of such Letter of Credit, the Agent shall notify the Banks. If the Bank or Banks which are not the Declining Banks desire, they may (on a pro rata basis among the Banks that have elected to continue funding) make the full amount of such requested Revolving Loan or issue or amend the requested Letter of Credit irrespective of the Declining Banks' disapproval (in such case, the Banks that elect to continue funding shall be referred to as the "Approving Banks"). In such event, from such date (the "Conversion to Single Funding Bank Date") forward (a) all subsequent Revolving Loans and Issuances of Letters of Credit or Amendments to Letters of Credit that increase the face amount of a Letter of Credit or extend the term of a Letter of Credit shall be made unilaterally by the Approving Banks and no Letter of Credit thereafter Issued shall be
FOURTH AMENDMENT TO CREDIT AGREEMENT - PAGE 10
participated in by the Declining Banks, (b) all Banks' interests in the
Collateral and loan management decisions shall be pro-rata based on
each Bank's total Effective Amount of Revolving Loans, plus the
Effective Amounts of such Bank's L/C Obligations from time to time, and
(c) the Approving Banks' Uncommitted Line Portion shall be increased on
the basis of each such advance and Issuance of a Letter of Credit.
NOTWITHSTANDING THE FOREGOING, HOWEVER, FOR PURPOSES OF ALLOCATING REPAYMENTS PRIOR TO THE OCCURRENCE OF A DEFAULT HEREUNDER, THE ADJUSTED PRO RATA SHARE OF THE UNCOMMITTED LINE OF EACH BANK SHALL REMAIN FIXED AT THE PERCENTAGE HELD BY SUCH BANK THE DAY BEFORE THE CONVERSION TO SINGLE FUNDING BANK DATE, WITHOUT RESPECT TO ANY CHANGES WHICH MAY SUBSEQUENTLY OCCUR IN SUCH BANK'S PRO RATA SHARE OF THE UNCOMMITTED LINE EXCEPT THAT IN THE EVENT THAT OBLIGATIONS BECOME OWING TO BANK OF AMERICA OR BNP PARIBAS AND THEIR AFFILIATES AFTER SUCH DATE PURSUANT TO THE OVERDRAFT LINE OR THE BANKCARD LINE OR PURSUANT TO SWAP CONTRACTS AS A RESULT OF CONTRACTS OR TRANSACTIONS EXISTING ON THE CONVERSION TO SINGLE FUNDING BANK DATE, THE ADJUSTED PRO RATA SHARE OF EACH BANK SHALL BE RECALCULATED TO ACCOUNT FOR THE INCREASE IN OBLIGATIONS THAT HAVE BECOME OWING TO BANK OF AMERICA OR BNP PARIBAS OR THEIR AFFILIATES UNTIL SUCH TIME, IF ANY, THAT ONE BANK IS FULLY REPAID. UPON THE OCCURRENCE OF A DEFAULT AND THEREAFTER, REPAYMENTS SHALL BE ALLOCATED ACCORDING TO THE ADJUSTED PRO RATA SHARE OF THE OUTSTANDING BALANCES HELD BY THE BANKS ON THE DATE OF DEFAULT EXCEPT THAT IN THE EVENT THAT OBLIGATIONS BECOME OWING TO BANK OF AMERICA OR BNP PARIBAS OR THEIR AFFILIATES AFTER SUCH DATE PURSUANT TO THE OVERDRAFT LINE OR THE BANKCARD LINE OR PURSUANT TO SWAP CONTRACTS AS A RESULT OF CONTRACTS OR TRANSACTIONS EXISTING ON THE DATE OF SUCH DEFAULT, THE ADJUSTED PRO RATA SHARE OF EACH BANK SHALL BE RECALCULATED TO ACCOUNT FOR THE INCREASE IN OBLIGATIONS OWING TO BANK OF AMERICA OR BNP PARIBAS OR THEIR AFFILIATES.
18. Schedule 2.01 of the Credit Agreement is deleted in its entirety and replaced with the Schedule 2.01 attached hereto.
19. Schedule 11.02 of the Credit Agreement is deleted in its entirety and replaced with the Schedule 11.02 attached hereto.
20. Exhibit E to the Credit Agreement is deleted in its entirety and replaced with the Exhibit E attached hereto.
21. Renewal; Continued Effect. Except as set forth above, the Credit Agreement shall continue in full force and effect.
22. Representations. To induce the Banks to enter into this Amendment, Borrower ratifies and confirms each representation and warranty set forth in the Credit Agreement as if such representations and warranties were made on even date herewith, and further represents and warrants (a) that no material adverse change has occurred in the financial condition or business prospects of Borrower since the date of the last financial statements delivered to the Banks, (b) that no Event of Default exists and no event or condition exists or has occurred which with
FOURTH AMENDMENT TO CREDIT AGREEMENT - PAGE 11
passage of time, or notice, or both, would become an Event of Default (a "Default"), and (c) that Borrower is fully authorized to enter into this Amendment. BORROWER ACKNOWLEDGES THAT THE CREDIT AGREEMENT PROVIDES FOR A CREDIT FACILITY THAT IS COMPLETELY OPTIONAL ON THE PART OF THE BANK AND THAT THE BANK HAS ABSOLUTELY NO DUTY OR OBLIGATION TO ADVANCE ANY REVOLVING LOAN OR TO ISSUE ANY LETTER OF CREDIT. BORROWER REPRESENTS AND WARRANTS TO BANK THAT BORROWER IS AWARE OF THE RISKS ASSOCIATED WITH CONDUCTING BUSINESS UTILIZING AN UNCOMMITTED FACILITY.
23. Conditions Precedent. As a condition to Bank of America entering into this Amendment, no Default or Event of Default shall exist on the date hereof, and Bank of America must have received executed originals of each of the following documents and instruments, in form and substance satisfactory to Bank of America:
(a) this Amendment, duly executed by Borrower;
(b) a Promissory Note in the amount of $84,000,000.00, duly executed by Borrower and payable to the order of Bank of America;
(c) a Promissory Note in the amount of $56,000,000.00, duly executed by Borrower and payable to the order of BNP Paribas;
(d) a Second Amended and Restated Guaranty of each of the Guarantors, duly executed by each Guarantor;
(e) an Amended and Restated Security Agreement, duly executed by Borrower;
(f) an Amended and Restated Security Agreement (BNP Paribas Commodity Futures, Inc.), duly executed by Borrower;
(g) an Acknowledgement and Ratification of Subordination and Support Agreements, duly executed by Atmos Energy Corporation Atmos Energy Marketing, LLC; and
(g) such other documents or certificates as Bank of America may reasonably request.
24. Ratification of Security Agreements. Borrower ratifies and confirms the Security Agreements, and acknowledges and agrees that references to the Credit Agreement in such Security Agreements are hereby amended to refer to the Credit Agreement as amended by this Amendment and that in all other respects such Security Agreements shall continue in full force and effect, and that pursuant to such Security Agreements Borrower has granted and hereby confirms and grants to Bank a continuing first and prior security interest in the Collateral to secure payment and performance of all Obligations.
FOURTH AMENDMENT TO CREDIT AGREEMENT - PAGE 12
25. Acknowledgment of and Consent to Assignment. The Borrower and the Guarantors acknowledge and consent to the assignment by Bank of America of a portion of its interest under the Credit Agreement to BNP Paribas.
26. Miscellaneous.
(a) Severability. In case any of the provisions of this Amendment shall for any reason be held to be invalid, illegal, or unenforceable, such invalidity, illegality, or unenforceability shall not affect any other provision hereof, and this Amendment shall be construed as if such invalid, illegal, or unenforceable provision had never been contained herein.
(b) Capitalized Terms. Except as otherwise defined herein, capitalized terms shall have the meanings specified in the Credit Agreement.
(c) Execution in Counterparts. This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any party hereto may execute this Amendment by signing one or more counterparts.
(d) Governing Law. This Amendment shall be construed in accordance with and governed by the laws of the State of California (without reference to principles of conflicts of laws), provided, however, that Bank shall retain all rights under federal law.
(e) Rights of Third Parties. All provisions herein are imposed solely and exclusively for the benefit of Borrower and Bank, and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with this Amendment or any of the other Loan Documents.
(f) COMPLETE AGREEMENT. THIS WRITTEN AMENDMENT AND THE OTHER WRITTEN AGREEMENTS ENTERED INTO AMONG THE PARTIES REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
FOURTH AMENDMENT TO CREDIT AGREEMENT - PAGE 13
Executed as of the day and year first above written
BORROWER:
WOODWARD MARKETING, L.L.C.,
a Delaware limited liability company
By: /s/ HENRY O. DRILLING
------------------------------
Name: Henry O. Drilling
----------------------------
Title: Sr. Vice President
---------------------------
|
BANKS:
BANK OF AMERICA, N. A.,
as Agent
By: /s/ IRENE C. RUMMEL
------------------------------
Name: Irene C. Rummel
----------------------------
Title: Vice President
---------------------------
|
BANK OF AMERICA, N. A.,
as a Bank and Issuing Bank
By: /s/ IRENE C. RUMMEL
------------------------------
Name: Irene C. Rummel
----------------------------
Title: Vice President
---------------------------
|
BNP PARIBAS,
as a Bank
By: /s/ EDWARD K. CHIN
------------------------------
Name: Edward K. Chin
----------------------------
Title: Director
---------------------------
By: /s/ OLIVIER LE BIHAN
------------------------------
Name: Olivier Le Bihan
----------------------------
Title: Vice President
---------------------------
|
SIGNATURE PAGE - FOURTH AMENDMENT TO CREDIT AGREEMENT
GUARANTORS:
WOODWARD MARKETING, INC.
By: /s/ HENRY O. DRILLING
----------------------------------
Name: Henry O. Drilling
--------------------------------
Title: Sr. Vice President
-------------------------------
|
ATMOS ENERGY MARKETING, LLC
By: /s/ LAURIE M. SHERWOOD
-------------------------------
Name: Laurie M. Sherwood
--------------------------------
Title: Vice President and Treasurer
-------------------------------
|
/s/ J. D. WOODWARD
----------------------------------------
J. D. WOODWARD
/s/ JAMES KIFER
----------------------------------------
JAMES KIFER
|
SIGNATURE PAGE - FOURTH AMENDMENT TO CREDIT AGREEMENT
SCHEDULE 2.01
UNCOMMITTED LINE AND
UNCOMMITTED LINE PORTION
(EXCLUDING OVERDRAFT LINES AND
SWAP CONTRACTS)
I. Until such time as the Borrower first elects a Borrowing Base Sub-Cap of $110,000,000 or more:
Pro Rata
Line: Bank Dollar Amount Share
----- ---- ------------- -----
Borrowing Base Bank of America $75,000,000.00 75%
Line
BNP Paribas $25,000,000.00 25%
Collateralized Bank of America $11,250,000.00 75%
L/C Line
BNP Paribas $3,750,000.00 25%
|
II. Commencing with and at all times after the date the Borrower first elects a Borrowing Base Sub-Cap of $110,000,000 or more:
Line: Bank Dollar Amount Share
----- ---- ------------- -----
Borrowing Base Bank of America $75,000,000.00 60%
Line
BNP Paribas $50,000,000.00 40%
Collateralized Bank of America $ 9,000,000.00 60%
L/C Line
BNP Paribas $ 6,000,000.00 40%
|
SCHEDULE 11.02
LENDING OFFICES AND ADDRESSES FOR NOTICES
BANK OF AMERICA, N. A.,
as Agent
Bank of America, N. A.
333 Clay Street, Suite 4550
Houston, Texas 77002
Attention: Irene C. Rummel
Telephone: (713) 651-4921
Facsimile: (713) 651-4801
AGENT'S PAYMENT OFFICE:
Bank of America, N. A.
Bank of America Plaza, 8th Floor
901 Main Street
Dallas, Texas 75202-3714
BANK OF AMERICA, N. A.,
as Issuing Bank
Bank of America, N. A.
International Trade Operations Center
333 South Beaudry Avenue, 19th Floor
Los Angeles, California 90017
Attention: Sandra Leon
Telephone: (213) 345-5231
Facsimile: (213) 345-6694
BANK OF AMERICA, N. A.,
as a Bank
Bank of America, N. A.
333 Clay Street, Suite 4550
Houston, Texas 77002
Attention: Irene C. Rummel
Telephone: (713) 651-4921
Facsimile: (713) 651-4801
BNP PARIBAS,
as a Bank
BNP Paribas
787 Seventh Avenue
New York, New York 10019
Attention: Ed Chin
Telephone: (212) 841 2020
Facsimile: (212) 841 2537
EXHIBIT E
FORM OF
BORROWING BASE COLLATERAL POSITION REPORT
[Date]
Bank of America, N. A., as Agent
333 Clay Street, Suite 4550
Houston, Texas 77002
Attention: Irene C. Rummel
Telephone: (713) 651-4921
Facsimile: (713) 651-4801
Re: Credit Agreement, dated to be effective as of August 9, 2000 (as amended or supplemented from time to time, the "Agreement"), by and among Woodward Marketing, L.L.C. (the "Borrower"), the banks that from time to time are parties thereto, and Bank of America, N. A., as Agent
Ladies and Gentlemen:
The Borrower, acting through its duly authorized Responsible Officer (as that term is defined in the Agreement), deliver the attached report to the Banks and certify to each of the Banks that it is in compliance with the Agreement. Further, the undersigned hereby certifies that the Net Position has at no time exceeded the limitations set forth in Section 8.11 of the Agreement and that the undersigned has no knowledge of any Defaults or Events of Default under the Agreement which exist as of the date of this letter.
The undersigned also certifies that the amounts set forth on the attached report constitute all Collateral which has been or is being used in determining availability for an advance or letter of credit issued under the Borrowing Base Line as of the preceding date. This certificate and attached reports are submitted pursuant to Section 7.02(b) of the Agreement. Capitalized terms used herein and in the attached reports have the meanings specified in the Agreement.
Very truly yours,
WOODWARD MARKETING, L.L.C.
WOODWARD MARKETING, L.L.C.,
BORROWING BASE COLLATERAL POSITION REPORT
AS OF [DATE]
In my capacity as Responsible Officer for Woodward Marketing, L.L.C., I hereby certify that as of the date written above, the amounts indicated below were accurate and true as of the date of preparation. I also certify that the net long or short position has not exceeded the limitations set forth in Section 8.11 of the Credit Agreement.
I. COLLATERAL
A. Cash Collateral $_______ 100% $________
B. BA Futures equity $_______ 90% $________
C. BNP Paribas Futures equity $_______ 90% $________
D. Tier I Accounts $_______ 90% $________
E. Tier II Accounts $_______ 85% $________
F. Tier I Unbilled Accounts $_______ 85% $________
G. Tier II Unbilled Accounts $_______ 80% $________
H. Eligible Inventory $_______ 80% $________
I. Eligible Exchange Receivables $_______ 80% $________
J. Undelivered Product Value $_______ 80% $________
K. First purchaser liability $(______) 100% $(_______)
L. 125% of Net amounts due Bank of America
under commodity Swap Contracts $(______) 125% $(_______)
M. 125% of Net Amounts due BNP Paribas
under commodity Swap Contracts $(______) 125% $(_______)
N. 100% of Borrower's Unrealized Mark-to-Market Losses $(______) 100% $(_______)
--------- ---- ---------
========== ==== ==========
TOTAL COLLATERAL $_______ ____ $_________
BORROWING BASE SUB-CAP $_________
BORROWING BASE ADVANCE CAP (Least of
$125,000,000.00, Borrowing Base Sub-Cap or Total Collateral) $_________
II. BANK OUTSTANDINGS
A. Loans from the Banks $_________
B. L/Cs from the Banks $_________
TOTAL OUTSTANDINGS UNDER BORROWING BASE LINE $_________
III. EXCESS/(DEFICIT) (I-II) $_________
IV. NET SHORT OR LONG POSITION __________ MMBTUS
|
Attached hereto are (i) an aging report, (ii) a schedule of netted qualified exchange balances, (iii) a schedule of qualified inventory and (iv) a schedule of all contras applied against (i), (ii), and (iii).
EXHIBIT 10.8(i)
FIFTH AMENDMENT TO CREDIT AGREEMENT
This FIFTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is entered into effective as of December 31, 2000, among WOODWARD MARKETING, L.L.C., a Delaware limited liability company (the "Borrower"), BANK OF AMERICA, N. A. ("Bank of America"), as a Bank, as an Issuing Bank, and as Agent for the Banks, BNP PARIBAS, a bank organized under the laws of France ("BNP Paribas"), and Atmos Energy Marketing LLC (the "Guarantor").
WHEREAS, Borrower and Banks entered into that certain Credit Agreement, dated to be effective as of August 9, 2000, as amended by that certain First Amendment to Credit Agreement and Guaranty of Atmos Energy Marketing, LLC dated as of September 29, 2000, that certain Second Amendment to Credit Agreement dated as of November 3, 2000, that certain Third Amendment to Credit Agreement dated as of December 5, 2000, and that certain Fourth Amendment to Credit Agreement dated as of December 22, 2000 (as amended the "Credit Agreement"); and
WHEREAS, all Obligations (as defined in the Credit Agreement) are guaranteed by the Guarantor pursuant to a Second Amended And Restated Guaranty of Atmos Energy Marketing, LLC executed by the Guarantor, in favor of the Banks (the "Guaranty Agreement"); and
WHEREAS, the Obligations are secured by security interests in the Collateral (as defined in the Credit Agreement) granted to Agent for the benefit of the Banks pursuant to the Security Agreements (as defined in the Credit Agreement) and pursuant to the Nations Funds Security Agreement (as defined in the Credit Agreement), each executed by Borrower (collectively, the "Security Agreements"); and
WHEREAS, the parties hereto desire to amend the Credit Agreement as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, Borrower, Bank of America, BNP Paribas and the Guarantor agree as follows:
1. Subsection (c) of Section 7.15 of the Credit Agreement, Financial Covenants, is hereby deleted in its entirety and replaced with the following:
(c) at all times, a ratio of total liabilities (excluding the amount of Subordinated Debt that is included in the calculation of Tangible Net Worth) to Tangible Net Worth not to exceed 5.0:1.0; and
2. Renewal; Continued Effect. Except as set forth above, the Credit Agreement shall continue in full force and effect.
FIFTH AMENDMENT TO CREDIT AGREEMENT - Page 1
3. Representations. To induce the Agent and the Banks to enter
into this Amendment, Borrower ratifies and confirms each representation and
warranty set forth in the Credit Agreement as if such representations and
warranties were made on even date herewith, and further represents and warrants
(a) that no material adverse change has occurred in the financial condition or
business prospects of Borrower since the date of the last financial statements
delivered to the Banks, (b) that no Event of Default exists and no event or
condition exists or has occurred which with passage of time, or notice, or both,
would become an Event of Default (a "Default"), and (c) that Borrower is fully
authorized to enter into this Amendment. BORROWER ACKNOWLEDGES THAT THE CREDIT
AGREEMENT PROVIDES FOR A CREDIT FACILITY THAT IS COMPLETELY OPTIONAL ON THE PART
OF THE BANKS AND THAT THE BANKS HAVE ABSOLUTELY NO DUTY OR OBLIGATION TO ADVANCE
ANY REVOLVING LOAN OR TO ISSUE ANY LETTER OF CREDIT. BORROWER REPRESENTS AND
WARRANTS TO THE BANKS THAT BORROWER IS AWARE OF THE RISKS ASSOCIATED WITH
CONDUCTING BUSINESS UTILIZING AN UNCOMMITTED FACILITY.
4. Conditions Precedent. As a condition to Agent and the Banks entering into this Amendment, no Default or Event of Default shall exist on the date hereof, and Agent and the Banks must have received executed originals of each of the following documents and instruments, in form and substance satisfactory to Agent and the Banks:
(a) this Amendment, duly executed by Borrower; and
(b) such other documents or certificates as Agent may reasonably request.
5. Ratification of Security Agreements. Borrower ratifies and confirms the Security Agreements, and acknowledges and agrees that references to the Credit Agreement in such Security Agreements are hereby amended to refer to the Credit Agreement as amended by this Amendment and that in all other respects such Security Agreements shall continue in full force and effect, and that pursuant to such Security Agreements Borrower has granted and hereby confirms and grants to Agent for the benefit of the Banks a continuing first and prior security interest in the Collateral to secure payment and performance of all Obligations.
6. Guaranty Ratification. Atmos Energy Marketing, LLC ratifies and confirms the SECOND AMENDED AND RESTATED GUARANTY OF ATMOS ENERGY MARKETING, LLC and acknowledges and agrees that such that the Guaranty Agreement shall continue in full force and effect, and that pursuant to the Guaranty Agreement, the Guarantor has guaranteed and continues to guaranty the full payment and performance of all Obligations under the Credit Agreement, as amended from time to time.
7. Notes Ratification. The Borrower ratifies and confirms the Promissory Notes issued to Bank of America and BNP Paribas and acknowledges and agrees that such Promissory Notes shall continue in full force and effect, and shall be "Notes" as defined in the Credit Agreement, as amended hereby.
FIFTH AMENDMENT TO CREDIT AGREEMENT - Page 2
8. Miscellaneous.
(a) Severability. In case any of the provisions of this Amendment shall for any reason be held to be invalid, illegal, or unenforceable, such invalidity, illegality, or unenforceability shall not affect any other provision hereof, and this Amendment shall be construed as if such invalid, illegal, or unenforceable provision had never been contained herein.
(b) Capitalized Terms. Except as otherwise defined herein, capitalized terms shall have the meanings specified in the Credit Agreement.
(c) Execution in Counterparts. This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any party hereto may execute this Amendment by signing one or more counterparts.
(d) Governing Law. This Amendment shall be construed in accordance with and governed by the laws of the State of California (without reference to principles of conflicts of laws), provided, however, that Agent, Banks and all Agent-Related Persons shall retain all rights under federal law.
(e) Rights of Third Parties. All provisions herein are imposed solely and exclusively for the benefit of Borrower, Agent, Banks and all Agent-Related Persons, and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with this Amendment or any of the other Loan Documents.
(f) COMPLETE AGREEMENT. THIS WRITTEN AMENDMENT AND THE OTHER WRITTEN AGREEMENTS ENTERED INTO AMONG THE PARTIES REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
FIFTH AMENDMENT TO CREDIT AGREEMENT - Page 3
Executed as of the day and year first above written
BORROWER:
WOODWARD MARKETING, L.L.C.,
a Delaware limited liability company
By: /s/ HENRY O. DRILLING
---------------------------------
Name: Henry O. Drilling
-------------------------------
Title: Sr. Vice President
------------------------------
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BANKS:
BANK OF AMERICA, N. A.,
as Agent
By: /s/ IRENE C. RUMMEL
---------------------------------
Name: Irene C. Rummel
-------------------------------
Title: Principal
------------------------------
|
BANK OF AMERICA, N. A.,
as a Bank and Issuing Bank
By: /s/ IRENE C. RUMMEL
---------------------------------
Name: Irene C. Rummel
-------------------------------
Title: Principal
------------------------------
|
BNP PARIBAS,
as a Bank
By: /s/ EDWARD K. CHIN
---------------------------------
Name: Edward K. Chin
-------------------------------
Title: Director
------------------------------
By: /s/ KEITH COX
---------------------------------
Name: Keith Cox
-------------------------------
Title: Director
------------------------------
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FIFTH AMENDMENT TO CREDIT AGREEMENT - Page 4
GUARANTOR:
ATMOS ENERGY MARKETING, LLC
By: /s/ LAURIE M. SHERWOOD
---------------------------------
Name: Laurie M. Sherwood
-------------------------------
Title: Vice President and Treasurer
------------------------------
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FIFTH AMENDMENT TO CREDIT AGREEMENT - Page 5
EXHIBIT 10.8(j)
SIXTH AMENDMENT TO CREDIT AGREEMENT
This SIXTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is entered into effective as of June 29, 2001, among WOODWARD MARKETING, L.L.C., a Delaware limited liability company (the "Borrower"), BANK OF AMERICA, N. A. ("Bank of America"), as a Bank, as an Issuing Bank, and as Agent for the Banks, BNP PARIBAS, a bank organized under the laws of France ("BNP Paribas"), and Atmos Energy Marketing LLC (the "Guarantor").
WHEREAS, Borrower and Banks entered into that certain Credit Agreement, dated to be effective as of August 9, 2000, as amended by that certain First Amendment to Credit Agreement and Guaranty of Atmos Energy Marketing, LLC dated as of September 29, 2000, that certain Second Amendment to Credit Agreement dated as of November 3, 2000, that certain Third Amendment to Credit Agreement dated as of December 5, 2000, that certain Fourth Amendment to Credit Agreement dated as of December 22, 2000, and that certain Fifth Amendment to Credit Agreement dated as of December 31, 2000 (as amended the "Credit Agreement"); and
WHEREAS, all Obligations (as defined in the Credit Agreement) are guaranteed by the Guarantor pursuant to a Second Amended And Restated Guaranty of Atmos Energy Marketing, LLC executed by the Guarantor, in favor of the Banks (the "Guaranty Agreement"); and
WHEREAS, the Obligations are secured by security interests in the Collateral (as defined in the Credit Agreement) granted to Agent for the benefit of the Banks pursuant to the Security Agreements (as defined in the Credit Agreement) and pursuant to the Nations Funds Security Agreement (as defined in the Credit Agreement), each executed by Borrower (collectively, the "Security Agreements"); and
WHEREAS, the parties hereto desire to amend the Credit Agreement as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, Borrower, Bank of America, BNP Paribas and the Guarantor agree as follows:
1. The definition of "Expiration Date" set forth in Section 1.01 of the Credit Agreement is deleted in its entirety and replaced with the following definition:
"Expiration Date" means the earliest to occur of:
(a) September 30, 2001; or
(b) the date demand for payment is made by the Agents; or
(c) the date an Event of Default occurs.
SIXTH AMENDMENT TO CREDIT AGREEMENT - Page 1
2. The definition of "Maturity Date" set forth in Section 1.01 of the Credit Agreement is deleted in its entirety and replaced with the following definition:
"Maturity Date" means December 31, 2001.
3. Renewal; Continued Effect. Except as set forth above, the Credit Agreement shall continue in full force and effect.
4. Representations. To induce the Agent and the Banks to enter
into this Amendment, Borrower ratifies and confirms each representation and
warranty set forth in the Credit Agreement as if such representations and
warranties were made on even date herewith, and further represents and warrants
(a) that no material adverse change has occurred in the financial condition or
business prospects of Borrower since the date of the last financial statements
delivered to the Banks, (b) that no Event of Default exists and no event or
condition exists or has occurred which with passage of time, or notice, or both,
would become an Event of Default (a "Default"), and (c) that Borrower is fully
authorized to enter into this Amendment. BORROWER ACKNOWLEDGES THAT THE CREDIT
AGREEMENT PROVIDES FOR A CREDIT FACILITY THAT IS COMPLETELY OPTIONAL ON THE PART
OF THE BANKS AND THAT THE BANKS HAVE ABSOLUTELY NO DUTY OR OBLIGATION TO ADVANCE
ANY REVOLVING LOAN OR TO ISSUE ANY LETTER OF CREDIT. BORROWER REPRESENTS AND
WARRANTS TO THE BANKS THAT BORROWER IS AWARE OF THE RISKS ASSOCIATED WITH
CONDUCTING BUSINESS UTILIZING AN UNCOMMITTED FACILITY.
5. Conditions Precedent. As a condition to Agent and the Banks entering into this Amendment, no Default or Event of Default shall exist on the date hereof, and Agent and the Banks must have received executed originals of each of the following documents and instruments, in form and substance satisfactory to Agent and the Banks:
(a) this Amendment, duly executed by Borrower; and
(b) such other documents or certificates as Agent may reasonably request.
6. Ratification of Security Agreements. Borrower ratifies and confirms the Security Agreements, and acknowledges and agrees that references to the Credit Agreement in such Security Agreements are hereby amended to refer to the Credit Agreement as amended by this Amendment and that in all other respects such Security Agreements shall continue in full force and effect, and that pursuant to such Security Agreements Borrower has granted and hereby confirms and grants to Agent for the benefit of the Banks a continuing first and prior security interest in the Collateral to secure payment and performance of all Obligations.
7. Guaranty Ratification. Atmos Energy Marketing, LLC ratifies and confirms the SECOND AMENDED AND RESTATED GUARANTY OF ATMOS ENERGY MARKETING, LLC and acknowledges and agrees that such Guaranty Agreement shall continue in full force and
SIXTH AMENDMENT TO CREDIT AGREEMENT - Page 2
effect, and that pursuant to the Guaranty Agreement, the Guarantor has guaranteed and continues to guaranty the full payment and performance of all Obligations under the Credit Agreement, as amended from time to time.
8. Notes Amendment and Ratification. The Borrower ratifies and confirms the Promissory Notes issued to Bank of America and BNP Paribas and acknowledges and agrees that such Promissory Notes shall continue in full force and effect, and shall be "Notes" as defined in the Credit Agreement, as amended hereby.
9. Miscellaneous.
(a) Severability. In case any of the provisions of this Amendment shall for any reason be held to be invalid, illegal, or unenforceable, such invalidity, illegality, or unenforceability shall not affect any other provision hereof, and this Amendment shall be construed as if such invalid, illegal, or unenforceable provision had never been contained herein.
(b) Capitalized Terms. Except as otherwise defined herein, capitalized terms shall have the meanings specified in the Credit Agreement.
(c) Execution in Counterparts. This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any party hereto may execute this Amendment by signing one or more counterparts.
(d) Governing Law. This Amendment shall be construed in accordance with and governed by the laws of the State of California (without reference to principles of conflicts of laws), provided, however, that Agent, Banks and all Agent-Related Persons shall retain all rights under federal law.
(e) Rights of Third Parties. All provisions herein are imposed solely and exclusively for the benefit of Borrower, Agent, Banks and all Agent-Related Persons, and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with this Amendment or any of the other Loan Documents.
(f) COMPLETE AGREEMENT. THIS WRITTEN AMENDMENT AND THE OTHER WRITTEN AGREEMENTS ENTERED INTO AMONG THE PARTIES REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
SIXTH AMENDMENT TO CREDIT AGREEMENT - Page 3
Executed as of the day and year first above written
BORROWER:
WOODWARD MARKETING, L.L.C.,
a Delaware limited liability company
By: /s/ J. D. WOODWARD
---------------------------------
Name: J. D. Woodward
-------------------------------
Title: President
------------------------------
|
BANKS:
BANK OF AMERICA, N. A.,
as Agent
By: /s/ IRENE C. RUMMEL
---------------------------------
Name: Irene C. Rummel
-------------------------------
Title: Principal
------------------------------
|
SIXTH AMENDMENT TO CREDIT AGREEMENT - Page 4
BANK OF AMERICA, N. A.,
as a Bank and Issuing Bank
By: /s/ IRENE C. RUMMEL
---------------------------------
Name: Irene C. Rummel
-------------------------------
Title: Principal
------------------------------
|
BNP PARIBAS,
as a Bank
By: /s/ EDWARD K. CHIN
---------------------------------
Name: Edward K. Chin
-------------------------------
Title: Director
------------------------------
By: /s/ KEITH COX
---------------------------------
Name: Keith Cox
-------------------------------
Title: Director
------------------------------
|
SIXTH AMENDMENT TO CREDIT AGREEMENT - Page 5
GUARANTOR:
ATMOS ENERGY MARKETING, LLC
By: /s/ LAURIE M. SHERWOOD
---------------------------------
Name: Laurie M. Sherwood
-------------------------------
Title: Vice President and Treasurer
------------------------------
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SIXTH AMENDMENT TO CREDIT AGREEMENT - Page 6
EXHIBIT 10.9(c)
Contract No. 33182000C
FIRM TRANSPORTATION SERVICE AGREEMENT RATE SCHEDULE TF-1
BETWEEN
COLORADO INTERSTATE GAS COMPANY
AND
GREELEY GAS COMPANY,
A DIVISION OF ATMOS ENERGY CORPORATION
DATED: OCTOBER 1, 2001
Contract No. 33182000C
FIRM TRANSPORTATION SERVICE AGREEMENT
RATE SCHEDULE TF-1
The Parties identified below, in consideration of their mutual promises, agree as follows:
1. TRANSPORTER: COLORADO INTERSTATE GAS COMPANY
2. SHIPPER: GREELEY GAS COMPANY, A DIVISION OF ATMOS ENERGY CORPORATION
3. APPLICABLE TARIFF: Transporter's FERC Gas Tariff, First Revised Volume No. 1, as the same may be amended or superseded from time to time ("the Tariff").
4. CHANGES IN RATES AND TERMS: Transporter shall have the right to propose to the FERC changes in its rates and terms of service, and this Agreement shall be deemed to include any changes which are made effective pursuant to FERC Order or regulation or provisions of law, without prejudice to Shipper's right to protest the same.
5. TRANSPORTATION SERVICE: Transportation Service at and between Primary Point(s) of Receipt and Primary Point(s) of Delivery shall be on a firm basis. Receipt and Delivery of quantities at Secondary Point(s) of Receipt and/or Secondary Point(s) of Delivery shall be in accordance with the Tariff.
6. POINTS OF RECEIPT AND DELIVERY: Shipper agrees to Tender gas for Transportation Service, and Transporter agrees to accept Receipt Quantities at the Primary Point(s) of Receipt identified in Exhibit "A." Transporter agrees to provide Transportation Service and Deliver gas to Shipper (or for Shipper's account) at the Primary Point(s) of Delivery identified in Exhibit "A."
7. RATES AND SURCHARGES: As set forth in Exhibit "B." For example, Transporter and Shipper may agree that a specified discount rate will apply: (a) only to certain specified firm service entitlements under this Agreement; (b) only if specified quantity levels are actually achieved under this Agreement (with higher rates, charges, and fees applicable to all quantities above those levels, or to all quantities under the Agreement if the specified levels are not achieved); (c) only to production reserves committed by the Shipper; (d) only during specified time periods; (e) only to specified Point(s) of Receipt, Point(s) of Delivery, mainline area segments, supply areas, transportation routes, or defined geographical areas; or (f) in a specified relationship to the quantities actually Delivered (i.e., that the rates shall be adjusted in a specified relationship to quantities actually Delivered); provided, however, that any such discounted rates set forth above shall be between the minimum and maximum rates applicable to the service provided under this Agreement.
REDUCTION OF MDQ. Effective October 1, 2004, and October 1 of any year thereafter through the term of this Agreement and subject to six months' prior written notice, Shipper shall have the right to reduce the MDQ under this Agreement subject to, and in accordance with, the following conditions and limitations:
(a) The applicable regulatory or legislative body issues a final and nonappealable order allowing Shipper to permanently unbundle its merchant and transportation functions;
Contract No. 33182000C
(b) The following calculation shall be used to determine the amount of MDQ, if any, no longer needed by Shipper to provide service to the markets served by this Agreement resulting from sales volume losses due to unbundling ("Excess MDQ"):
EXCESS MDQ = (A X B) - C
where:
AS = The Shipper system served by Transporter under this Agreement, which is affected by unbundling.
A = The average peak day usage factor on the AS (in Dth per customer).
B = Sales customer losses by Shipper on the AS due to unbundling, excluding former Shipper sales customers being served by a Shipper affiliate.
C = Any incremental transportation, gathering, and storage volumes contracted for by Shipper for the AS after the execution of this Agreement.
The resulting value may not be negative and shall be rounded down to a whole number. However, should Shipper demonstrate the loss of an individual sales customer whose estimated peak day demand exceeds 10 Dth, excluding former Shipper sales customers being served by a Shipper affiliate, then that volume shall be added to the Excess MDQ, provided that the total Excess MDQ from such individual customers is less than 1,000 Dth.
(c) Despite Shipper's use of its best efforts to acquire state approvals for cost recovery to avoid incurring "stranded costs" (including amounts due Transporter under this Agreement related to Excess MDQ), the applicable regulatory or legislative body does not approve a mechanism which provides Shipper the opportunity to recover from its rate payers such stranded costs.
(d) Despite Shipper's use of its best efforts to assign and/or release the Excess MDQ to recover the costs (if any) which Shipper was not afforded an opportunity to recover from its ratepayers under an approved mechanism, Shipper is unable to either so assign and/or release the Excess MDQ; and
(e) Shipper has exercised all rights it has to reduce contract entitlements under all firm transportation, gathering, and storage agreements with parties other than Transporter under which agreements gas is provided to the AS; then
(f) If the conditions set forth above have been satisfied, Shipper shall have the right to reduce the MDQ by an amount up to the Excess MDQ for the period from the effective date of Shipper's notice through a date designated by Shipper (not to exceed the date of termination of this Agreement). Provided, however, Transporter shall have the option, by notice delivered to Shipper within 45 days of Transporter's receipt of Shipper's notice, to designate an equivalent volume of the firm contract capacity under Transporter's firm transportation and/or storage agreement(s) serving the AS other than this Agreement for reduction in lieu of a reduction of the MDQ under this Agreement.
10. Term of Agreement.- Beginning: OCTOBER 1, 2001 Extending through: SEPTEMBER 30, 2006
Contract No. 33182000C
11. NOTICES, STATEMENTS, AND BILLS:
TO SHIPPER:
INVOICES FOR TRANSPORTATION:
Greeley Gas Company, a division of Atmos Energy Corporation
160 Lincoln Centre Three 5430 LBJ Freeway
Dallas, Texas 75240
Attention: John W. Hack
ALL NOTICES:
Greeley Gas Company, a division of Atmos Energy Corporation
160 Lincoln Centre Three 5430 LBJ Freeway
Dallas, Texas 75240
Attention: John W. Hack
TO TRANSPORTER:
See Payments, Notices, Nominations and Points of Contact sheets in the Tariff.
12. SUPERSEDES AND CANCELS PRIOR AGREEMENT: When this Agreement becomes effective, it shall supersede and cancel the following agreement between the Parties: The Firm Transportation Service Agreement between Transporter and Shipper dated July 1, 2001, referred to as Transporter's Agreement No. 33182000B.
13. ADJUSTMENTS TO RATE SCHEDULE TF-1 AND/OR GENERAL TERMS AND CONDITIONS: N/A
14. INCORPORATION BY REFERENCE: This Agreement in all respects shall be subject to the provisions of Rate Schedule TF- 1 and to the applicable provisions of the General Terms and Conditions of the Tariff as filed with, and made effective by, the FERC as same may change from time to time (and as they may be amended pursuant to Section 13 of the Agreement).
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
TRANSPORTER: SHIPPER:
COLORADO INTERSTATE GAS COMPANY GREELEY GAS COMPANY
By: /s/ Donald J. Zinko, Vice President BY: /s/ Gordon J. Roy, Vice President
----------------------------------- ---------------------------------
Approved
For Execution
By
-----------
Legal Dept.
Accepted and agreed to this Accepted and agreed to this
|
Contract No. 33182000C
EXHIBIT "A"
Firm Transportation Service Agreement
Between
Colorado Interstate Gas Company
And
Greeley Gas Company,
a division of Atmos Energy Corporation
Dated: October 1, 2001
1. Shipper's Maximum Delivery Quantity ("MDQ"): 6,121 Dth per Day
PRIMARY POINT(S) OF MAXIMUM RECEIPT
PRIMARY POINT(S) OF RECEIPT RECEIPT QUANTITY PRESSURE
(NOTE 1) (DTH PER DAY) (NOTE 2) P.S.I.G.
--------------------------- ---------------------- ---------------
NORTHERN SYSTEM:
Echo Springs Master Meter......... 300 850
Lost Cabin........................ 1,200 1,100
Uintah............................ 593 300
TOTAL NORTHERN SYSTEM.... 2,093
CENTRAL SYSTEM:
Lakin Master Meter................ 2,277 220
SOUTHERN SYSTEM:
Big Canyon........................ 491 955(4)
Mocane............................ 1,260 65
TOTAL SOUTHERN SYSTEM.... 1,751
TOTAL.................... 6,121
|
PRIMARY POINT(S) OF MAXIMUM DELIVERY
PRIMARY POINT(S) OF DELIVERY DELIVERY QUANTITY PRESSURE
(NOTE 1) (DTH PER DAY) (NOTE 3) P.S.I.G.
---------------------------- ---------------------- ----------------
CANON CITY GROUP (NOTE 5):
Canon City....................... 4,231 (Note 6)
Colorado State Penitentiary...... 298 100
Engineering Station 476 + 78..... 5 Line Pressure
Florence City Gate............... 989 60
Fremont County Industrial Park... 9 Line Pressure
Penrose City Gate................ 135 60
Penrose PBS-2.................... 129 Line Pressure
Portland City Gate............... 35 100
Pritchett City Gate.............. 35 150
TOTAL CANON CITY GROUP........... 5,866
TOTAL CAPACITY RELEASE........... 4,814
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Contract No. 33182000C
PRIMARY POINT(S) OF MAXIMUM DELIVERY
PRIMARY POINT(S) OF DELIVERY DELIVERY QUANTITY PRESSURE
(NOTE 1) (DTH PER DAY) (NOTE 3) P.S.I.G.
---------------------------- ---------------------- ----------------
EADS GROUP:
Brandon Station 28 350
Eads City Gate 207 60
Highline Taps:
Neoplan (Bent County) 3 Line Pressure
Penrose South (Fremont County) 11 Line Pressure
The Piggery (Fremont County) 3 Line Pressure
L.J. Stafford (Baca County) 5 Line Pressure
TOTAL EADS GROUP 257
MCCLAVE DELIVERY 350 500
SPRINGFIELD 700 Line Pressure
TOTAL 6,121
Storage Injection 4,151 N/A
|
NOTES:
(1) Information regarding Point(s) of Receipt and Point(s) of Delivery, including legal descriptions, measuring parties, and interconnecting parties, shall be posted on Transporter's electronic bulletin board. Transporter shall update such information from time to time to include additions, deletions, or any other revisions deemed appropriate by Transporter.
(2) Each Point of Receipt Quantity may be increased by an amount equal to Transporter's Fuel Reimbursement percentage. Shipper shall be responsible for providing such Fuel Reimbursement at each Point of Receipt on a pro rata basis based on the quantities received on any Day at a Point of Receipt divided by the total quantity Delivered at all Point(s) of Delivery under this Transportation Service Agreement.
(3) The sum of the Delivery Quantities at Point(s) of Delivery shall be equal to or less than Shipper's MDQ.
(4) Minimum pressure Shipper will deliver gas to Transporter is 350 p.s.i.g.
(5) For Capacity Release purposes, the aggregate of the Canon City Group Point of Delivery Quantities is 4,814 Dth per Day. To the extent that Shipper is not utilizing a portion of its remaining Point of Delivery Quantities at non-Canon City Group Points of Delivery, Shipper may nominate up to 5,866 Dth per Day for the Canon City Group, provided that volumes Tendered by Shipper under this Agreement do not exceed the MDQ of 6,121 Dth per Day unless an Authorized Overrun has been granted to Shipper by Transporter.
(6) Line pressure but not less than 100 p.s.i.g.
Contract No. 33182000C
EXHIBIT "B"
Firm Transportation Service Agreement
Between
Colorado Interstate Gas Company
And
Greeley Gas Company.
a division of Atmos Energy, Corporation
Dated: October 1, 2001
Primary R(1)
Primary Point(s) Point(s) of Reservation Commodity Fuel
of Receipt Delivery Rate Rate Term of Rate Reimbursement Surcharges
---------------- ----------- ----------- --------- ------------ ------------- ----------
As Listed on As Listed on Through
Exhibit "A" Exhibit 'A" (Note 1) (Note 1) 09/30/06 (Note 2) (Note 3)
|
Primary R(1)
Primary Point(s) Point(s) of Reservation Commodity Fuel
of Receipt Delivery Rate Rate Term of Rate Reimbursement Surcharges
---------------- ----------- ----------- --------- ------------ ------------- ----------
Through
All All (Note 1) (Note 1) 09/30/06 (Note 2) (Note 3)
|
NOTES:
(1) Unless otherwise agreed by the Parties in writing, the rates for service hereunder shall be Transporter's maximum rates for service under Rate Schedule TF-1 or other superseding Rate Schedules, as such rates may be changed from time to time.
Service under this Agreement shall be subject to R, Reservation Rate applicable for:
(2) Fuel Reimbursement shall be as stated on Transporter's Schedule of Surcharges and Fees in the Tariff, as they may be changed from time to time, unless otherwise agreed between the Parties.
(3) Surcharges, If Applicable:
All applicable surcharges, unless otherwise specified, shall be the maximum surcharge rate as stated in the Schedule of Surcharges and Fees in The Tariff, as such Surcharges may be changed from time to time.
GAS QUALITY CONTROL SURCHARGE:
The Gas Quality Control Reservation Rate and commodity rate shall be assessed pursuant to Article 20 of the General Terms and Conditions as set forth in The Tariff.
GRI:
The GRI Surcharge shall be assessed pursuant to Article 18 of the General Terms and Conditions as set forth in The Tariff.
ORDER NO. 636 TRANSITION COST MECHANISM:
Surcharge(s) shall be assessed pursuant to Article 21 of the General Terms and Conditions as set forth in The Tariff.
ACA:
The ACA Surcharge shall be assessed pursuant to Article 19 of the General Terms and Conditions as set forth in The Tariff.
EXHIBIT 10.9(d)
Contract No. 31044000
No-Notice Storage and
Transportation Delivery Service Agreement Rate Schedule NNT-1
between
Colorado Interstate Gas Company
and
Greeley Gas Company
(a division of Atmos Energy Corporation)
Dated: October 1, 2001
Contract No. 31044000
NO-NOTICE STORAGE AND TRANSPORTATION DELIVERY SERVICE AGREEMENT
RATE SCHEDULE NNT-1
The Parties identified below, in consideration of their mutual promises, agree as follows:
1. TRANSPORTER: COLORADO INTERSTATE GAS COMPANY
2. SHIPPER: GREELEY GAS COMPANY, (A DIVISION OF ATMOS ENERGY CORPORATION)
3. APPLICABLE TARIFF: Transport's FERC Gas Tariff, First Revised Volume No. 1, as the same may be amended or superseded from time to time ("the Tariff").
4. CHANGES IN RATES AND TERMS: Transporter shall have the right to propose to the FERC changes in its rates and terms of service, and this Agreement shall be deemed to include any changes which are made effective pursuant to FERC Order or regulation or provisions of law, without prejudice to Shipper's right to protest the same.
5. TRANSPORTATION SERVICE: Transportation Service at and between Point of Withdrawal and Primary Point(s) of Delivery shall be on a firm basis. Delivery of quantities at Secondary Point(s) shall be in accordance with the Tariff.
6. DELIVERY: Transporter agrees to transport and deliver Delivery Quantities to Shipper (or for Shipper's account) at the Point(s) of Delivery identified in Exhibit "A."
7. RATES AND SURCHARGES: As set forth in Exhibit "B." For example, Transporter and Shipper may agree that a specified discount rate will apply: (a) only to certain specified firm service entitlements under this Agreement; (b) only if specified quantity levels are actually achieved under this Agreement (with higher rates, charges, and fees applicable to all quantities above those levels, or to all quantities under the Agreement if the specified levels are not achieved); (c) only to production reserves committed by the Shipper; (d) only during specified time periods; (e) only to specified Point(s) of Receipt, Point(s) of Delivery, mainline area segments, supply areas, transportation routes, or defined geographical areas; or (f) in a specified relationship to the quantities actually Delivered (i.e., that the rates shall be adjusted in a specified relationship to quantities actually Delivered); provided, however, that any such discounted rates set forth above shall be between the minimum and maximum rates applicable to the service provided under this Agreement.
8. MAXIMUM DELIVERY QUANTITY ("MDQ"): 12,985 Dth per Day MAXIMUM AVAILABLE CAPACITY ("MAC"): 422,142 Dth MAXIMUM DAILY INJECTION QUANTITY ("MDIQ"): 4,151 Dth per Day MAXIMUM DAILY WITHDRAWAL QUANTITY ("MDWQ"): 12,985 Dth per Day
All storage entitlements as stated herein ("MAC," "MD1Q," and "MDWQ") are based on an Average Thermal Content of Gas in Storage of 1,000 Btu per cubic foot. The Available Daily Injection Quantity ("ADIQ"), Available Daily Withdrawal Quantity ("ADWQ"), and storage entitlements shall be subject to the General Terms and Conditions of the Tariff and stated on CIG's Electronic Bulletin Board.
REDUCTION OF MDQ. Effective May 1, 2002, and May 1 of any year thereafter through the term of this Agreement and subject to six months' prior written notice, Shipper shall have the right to reduce the MDQ under this Agreement subject to, and in accordance with, the following conditions and limitations:
(a) The applicable regulatory or legislative body issues a final and nonappealable order allowing Shipper to permanently unbundle its merchant and transportation functions;
Contract No. 31044000
(b) The following calculation shall be used to determine the amount of MDQ, if any, no longer needed by Shipper to provide service to the markets served by this Agreement resulting from sales volume losses due to unbundling ("Excess MDQ"):
EXCESS MD1Q = (A X B) - C
where:
AS = The Shipper system served by Transporter under this Agreement, which is affected by unbundling.
A = The average peak day usage factor on the AS (in Dth per customer).
B = Sales customer losses by Shipper on the AS due to unbundling, excluding former Shipper sales customers being served by a Shipper affiliate.
C = Any incremental transportation, gathering, and storage volumes contracted for by Shipper for the AS after the execution of this Agreement.
The resulting value may not be negative and shall be rounded down to a whole number. However, should shipper demonstrate the loss of an individual sales customer whose estimated peak day demand exceeds 10 Dth, excluding former Shipper sales customers being served by a Shipper affiliate, then that volume shall be added to the Excess MDQ, provided that the total Excess MDQ from such individual customers is less than 1,000 Dth.
(c) Despite Shipper's use of its best efforts to acquire state approvals for cost recovery to avoid incurring "stranded costs" (including amounts due Transporter under this Agreement related to Excess MDQ), the applicable regulatory or legislative body does not approve a mechanism which provides Shipper the opportunity to recover from its rate payers such stranded costs.
(d) Despite Shipper's use of its best efforts to assign and/or release the Excess NMQ to recover the costs (if any) which Shipper was not afforded an opportunity to recover from its ratepayers under an approved mechanism, Shipper is unable to either so assign and/or release the Excess MDQ; and
(e) Shipper has exercised all rights it has to reduce contract entitlements under all firm transportation, gathering, and storage agreements with parties other than Transporter under which agreements gas is provided to the AS; then
(f) If the conditions set forth above have been satisfied, Shipper shall have the right to reduce the MDQ by an amount up to the Excess MDQ for the period from the effective date of Shipper's notice through a date designated by Shipper (not to exceed the date of termination of this Agreement). Provided, however, Transporter shall have the option, by notice delivered to Shipper within 45 days of Transporter's receipt of Shipper's notice, to designate an equivalent volume of the firm contract capacity under Transporter firm transportation and/or storage agreement(s) serving the AS other than this Agreement for reduction in lieu of a reduction of the MDQ under this Agreement.
9. NEGOTIATED RATE AGREEMENT: [ ] Yes [X] No
10. TERM OF AGREEMENT: Beginning: OCTOBER 1, 2001 Extending through: APRIL 30, 2005
Contract No. 31044000
1. NOTICES, STATEMENTS, AND BILLS:
TO SHIPPER:
INVOICES FOR TRANSPORTATION:
Greeley Gas Company, (a division of Atmos Energy Corporation)
160 Lincoln Centre
Three 5430 LBJ Freeway
Dallas, Texas 75240 Attention: John Hack
ALL NOTICES:
Greeley Gas Company, (a division of Atinos Energy Corporation)
160 Lincoln Centre
Three 5430 LBJ Freeway
Dallas, Texas 75240 Attention: John Hack
TO TRANSPORTER:
See Payments, Notices, Nominations and Points of Contact sheets in the Tariff.
11. SUPERSEDES AND CANCELS PRIOR AGREEMENT: When this Agreement becomes effective, it shall supersede and cancel the following agreement between the Parties: The No-Notice Storage and Transportation Delivery Service Agreement between Transporter and Shipper dated April 1, 2000, referred to as Transporter's Agreement No. 31028000B.
12. ADJUSTMENT TO RATE SCHEDULE NNT-1 AND/OR GENERAL TERMS AND CONDITIONS: N/A
2. INCORPORATION BY REFERENCE: This Agreement in all respects shall be subject to the provisions of Rate Schedule NNT-1 and to the applicable provisions of the General Terms and Conditions of the Tariff as filed with, and made effective by, the FERC as same may change from time to time (and as they may be amended pursuant to Section 12 of the Agreement).
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
Transporter: Shipper:
COLORADO INTERSTATE GAS COMPANY GREELEY GAS COMPANY
By: /s/ Donald J. Zinko, Vice President By: /s/ Gordon J. Roy, Vice President
Approved
For Execution
By
-----------------------------------
Legal Dept.
Accepted and agreed to this Accepted and agreed to this
_____ day of ____________,2001. 2nd day of October, 2001.
|
Contract No. 31044000
EXHIBIT "A"
No-Notice Storage and Transportation Delivery Service Agreement Between Colorado Interstate Gas Company And Greeley Gas Company,
(a division of Atmos Energy Corporation)
Dated: October 1, 2001
1. Shipper's Maximum Delivery Quantity ("MDQ") 12,985 Dth per Day
2. 2. Shipper's Maximum Available Capacity ("MAC"): 422,142 Dth.
3. Shipper's Maximum Daily Injection Quantity ("MDIQ"): 4,151 Dth per Day.
4. Shipper's Maximum Daily Withdrawal Quantity ("IVIDWQ"): 12,985 Dth per Day.
Maximum
Primary Point of Deliver Quantity Delivery
Point(s) of (Dth per Day) Pressure
Delivery (Note 1) p.s.i.g.
----------- ------------------------- --------
Canon City Group (Note 3)
Canon City 8,968 (Note 2)
Colorado State Penitentiary 635 100
Engineer's Station 476+78 12 Line Pressure
Florence City Gate 2,096 60
Fremont County Industrial Park 18 Line Pressure
Penrose City Gate 285 60
Penrose PBS-2 274 Line Pressure
Portland City Gate 75 100
Pritchett City Gate 75 150
TOTAL CANON CITY GROUP 12,438
------
CAPACITY RELEASE TOTAL 10,195
------
|
Contract No. 31044000
EXHIBIT "A"
PRIMARY POINT(S) OF DELIVERY
PRIMARY POINT(S) QUANTITY (DTH PER DAY) MAXIMUM DELIVERY
OF DELIVERY (NOTE 1) PRESSURE P.S.I.G.
---------------- ---------------------------- -----------------
EADS GROUP
Brandon Station 59 350
Eads City Gate 440 60
Highline Taps: 9 Line Pressure
Nepolan (Bent County)
Penrose (Fremont County) 23 Line Pressure
Piggery (Fremont County) 8 Line Pressure
L.J. Stafford (Baca County) 8 Line Pressure
TOTAL EADS GROUP 547
MCCLAVE DELIVERY 748 500
SPRINGFIELD 1,495 Line Pressure
TOTAL 12,985
|
NOTES:
(1) The sum of the Delivery Quantities at Point(s) of Delivery shall not be greater than Shipper's MDQ.
(2) Line Pressure but not less than 100 p.s.i.g.
(3) For Capacity Release purposes, the aggregate of the Canon City Group Point of Delivery Quantities is 10,195 Dth per Day. To the extent that Shipper is not utilizing a portion of its remaining Point of Delivery Quantities at non-Canon City Group Points of Delivery, Shipper may take up to 12,438 Dth per Day for the Canon City Group provided that total deliveries under this Agreement do not exceed the MDQ of 12,985 Dth per Day unless an Authorized Overrun has been granted to Shipper by Transporter.
Contract No. 31044000
EXHIBIT "B"
No-Notice Storage and Transportation Delivery Service Agreement
between
COLORADO INTERSTATE GAS COMPANY
and
GREELEY GAS COMPANY,
(a division of Atmos Energy Corporation)
Dated: October 1, 2001
COMMODITY FUEL
INJECTION RATE REIMBURSEMENT SURCHARGES
-------------- ------------- ----------
Storage Injection ....... ..... (Note 1) (Note 2) (Note 3)
|
PRIMARY POINT(S) R1-RESERVATION COMMODITY OF DELIVERY RATE DELIVERY RATE TERM OF RATE SURCHARGES ---------------- -------------- ------------- ------------ ---------- As listed on Exhibit "A" (Note 1) (Note 1) Through 4/30/2005 (Note 3) |
NOTES:
(1) Unless otherwise agreed by the Parties in writing, the rates for service hereunder shall be Transporter's maximum rates for service under Rate Schedule NNT-1 or other superseding Rate Schedules, as such rates may be changed from time to time.
(2) Fuel Reimbursement shall be as stated on Transporter's Schedule of Surcharges and Fees in The Tariff, as they may be changed from time to time, unless otherwise agreed between the Parties.
(3) Surcharges, If Applicable:
All applicable surcharges, unless otherwise specified, shall be the maximum surcharge rate as stated in the Schedule of Surcharges and Fees in The Tariff, as such surcharges may be changed from time to time.
GAS QUALITY SURCHARGE:
The Gas Quality Control Surcharge shall be assessed pursuant to Article 20 of the General Terms and Conditions as set forth in The Tariff.
GRI:
The GRI Surcharge shall be assessed pursuant to Article 18 of the General Terms and Conditions as set forth in The Tariff.
ORDER NO. 636 TRANSITION COST MECHANISM:
Surcharge(s) shall be assessed pursuant to Article 21 of the General Terms and Conditions as set forth in The Tariff.
ACA:
The ACA Surcharge shall be assessed pursuant to Article 19 of the General Terms and Conditions as set forth in The Tariff.
EXHIBIT 10.28(f)
MINI-MED/DENTAL BENEFIT EXTENSION AGREEMENT
THIS AGREEMENT is entered into effective as of the 1st day of October 1994 (the "Effective Date") by and between ATMOS ENERGY CORPORATION, a Texas corporation (the "Company") and CHARLES K. VAUGHAN ("Mr. Vaughan").
RECITALS
A. Mr. Vaughn is presently a participant in the Atmos Energy Corporation Mini-Med Plan (the "Mini-Med Plan") and, as an active employee of the Company, participates in the Company's Group Dental Plan (the "Dental Plan").
B. Mr. Vaughn desires to retire from the employ of the Company, but as a retiree may no longer be eligible for participation in the Mini-Med Plan or the Dental Plan.
C. The Company, in consideration of Mr. Vaughan's long and valuable service to the Company, has agreed to provide Mr. Vaughan with the benefits of the Mini-Med Plan and the Dental Plan.
NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Benefits Provided to Mr. Vaughan. From and after the Effective Date, and for the term of this Agreement, the Company shall pay to Mr. Vaughan, in cash (a) the benefits he (and his eligible dependents) would be entitled to under the terms of the Mini-Med Plan, as in effect from time to time during the term of this Agreement, if Mr. Vaughan continued to be a participant in the Mini-Med Plan and if he remained a participant in the Dental Plan, but in no event less than the benefits provided under the terms of the Mini-Med Plan as in effect on the Effective Date, and (b) the benefits Mr. Vaughan (and his eligible dependents) would be entitled to under the Dental Plan, as in effect from time to time during the term of this Agreement, if Mr. Vaughan had remained an employee of the Company through the term of this Agreement, but in no event less than the benefits provided under the terms of the Dental Plan as in effect on the Effective Date.
2. Benefits Provided to Mr. Vaughan's Surviving Spouse. If Mr. Vaughan dies prior to reaching age 65 and leaves a surviving spouse, said spouse shall, for the balance of the term of this Agreement, be entitled to the benefits being provided to Mr. Vaughan under Section 1 hereof, as if Mr. Vaughan had not died.
3. Term of the Agreement. Except as otherwise provided in this
Section 3, the term of this Agreement shall commence on the Effective Date and
shall
end on the earlier of the date Mr. Vaughan reaches age 65, or the date he dies. Notwithstanding the foregoing provisions of this Section 3, in the event Mr. Vaughan dies prior to reaching age 65 and leaves a surviving spouse, the term of this Agreement shall end on the earlier of the date such surviving spouse dies or remarries, or the date Mr. Vaughan would have attained age 65.
4. Procedure for Receipt of Benefits. In order to receive the benefits provided in this Agreement, Mr. Vaughan, or his surviving spouse, shall present claims for those benefits on the same forms as if he was participating in the Mini-Med Plan or the Dental Plan, as the case may be, but shall submit such claims to the Vice President-Human Resources.
5. Entire Agreement. This Agreement embodies the entire understanding between the parties hereto respecting the subject matter hereof, and no change, alteration or modification may be made except by authorization of the Board of Directors of the Company and except in writing signed by both parties hereto.
6. Controlling Law. This Agreement shall in all respects be construed and enforced in accordance with the laws of the State of Texas.
7. Payment of Legal Fees. The Company agrees to pay any and all legal fees and expenses incurred by Mr. Vaughan or his surviving spouse in seeking to obtain any of the benefits or enforce any of the provisions of this Agreement.
8. Successors and Assigns. Any successor to the Company shall be bound by the terms of this Agreement in the same manner and to the same extent as the Company, and this Agreement shall be binding upon Mr. Vaughan, his heirs and legal representatives.
IN WITNESS WHEREOF, the Company and Mr. Vaughan have each duly executed this Agreement the 30th day of October, 1994, effective as of the date and year first written above.
COMPANY:
ATMOS ENERGY CORPORATION
By: /s/ DEWEY G. WILLIAMS
-----------------------------------
Dewey G. Williams
Chairman, Human Resources
Committee of the Board of Directors
/s/ CHARLES K. VAUGHAN
-----------------------------------
Charles K. Vaughan
|
EXHIBIT 10.28(g)
AMENDMENT NO. 1 TO
MINI-MED/DENTAL BENEFIT EXTENSION AGREEMENT
THIS AMENDMENT NO. 1 TO MINI-MED/DENTAL BENEFIT EXTENSION AGREEMENT (the "Amendment") is made and entered into this 14th day of August, 2001, by and between Atmos Energy Corporation, a Texas and Virginia corporation (the "Company"), and CHARLES K. VAUGHAN ("Mr. Vaughan").
WHEREAS, the Company and Mr. Vaughan entered into that certain Mini-Med/Dental Benefit Extension Agreement dated October 1, 1994, (the "Agreement"); and
WHEREAS, the Company and Consultant desire to amend the Agreement as set forth below to provide for an extension of the benefits under the Agreement to Mr. Vaughan and his eligible dependents for his and his surviving spouse's lifetimes.
NOW THEREFORE, for and in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
1. Benefits Provided to Mr. Vaughan's Surviving Spouse. Section 2 of the Agreement shall be amended and restated in its entirety to read as follows:
If Mr. Vaughan dies prior to reaching age 65 and leaves a surviving spouse, said spouse shall, for the remainder of her life, be entitled to the benefits being provided to Mr. Vaughan under Section 1 hereof, as if Mr. Vaughan had not died.
2. Term of the Agreement. Section 3 of the Agreement shall be amended and restated in its entirety to read as follows:
The term of this Agreement shall commence on the Effective
Date and shall end on the date Mr. Vaughan dies.
Notwithstanding the foregoing provision of this Section 3, as
provided in Section 2, in the event Mr. Vaughan leaves a
surviving spouse at the time of his death, the term of this
Agreement shall not end until the date such surviving spouse
dies.
3. No Other Amendment. Except as expressly amended hereby, all of the other terms, provisions, and conditions of the Agreement are hereby ratified and confirmed and shall remain unchanged and in full force and effect. To the extent any terms or provisions of this Amendment conflict with those of the Agreement, the terms and provisions of the Agreement shall control. This Amendment shall be deemed a part of, and is hereby incorporated into the Agreement. The Agreement and any and all other documents heretofore, now, or hereafter executed and delivered pursuant to the terms of the Agreement are hereby amended so that any reference to the Agreement shall mean a reference to the Agreement as amended hereby.
4. Governing Law. This Amendment shall be governed by, and construed in accordance with, the laws of the State of Texas.
5. Counterparts. This Amendment may be executed in counterparts, each of which will be an original, but all of which together will constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment effective as of the date and year first above written.
COMPANY
ATMOS ENERGY CORPORATION
By: /s/ ROBERT W. BEST
---------------------------
Robert W. Best
Chairman, President and
Chief Executive Officer
/s/ CHARLES K. VAUGHAN
---------------------------
CHARLES K. VAUGHAN
|
EXHIBIT 12
Atmos Energy Corporation
Computation of Earnings to Fixed Charges
Year Ended September 30
----------------------------------------------------
2001 2000 1999 1998 1997
-------- -------- -------- -------- --------
Income from continuing operations
before provision for income taxes
per statement of income $ 89,458 $ 56,237 $ 27,299 $ 87,071 $ 38,136
Add:
Portion of rents representative of
the interest factor 2,917 3,007 3,520 3,050 3,507
Interest on debt & amortization
of debt expense 47,011 43,823 37,063 35,579 33,595
-------- -------- -------- -------- --------
Income as adjusted $139,386 $103,067 $ 67,882 $125,700 $ 75,238
======== ======== ======== ======== ========
Fixed charges:
Interest on debt & amortization
of debt expense (1) $ 47,011 $ 43,823 $ 37,063 $ 35,579 $ 33,595
Capitalized interest (2) 1,494 -- 3,724 4,132 1,570
Capitalized expenses related
to indebtedness (3) 4,718 -- -- -- --
Rents 8,752 9,020 10,560 9,149 10,522
Portion of rents representative of
the interest factor (4) 2,917 3,007 3,520 3,050 3,507
-------- -------- -------- -------- --------
Fixed charges (1)+(2)+(3)+(4) $ 56,140 $ 46,830 $ 44,307 $ 42,761 $ 38,672
======== ======== ======== ======== ========
Ratio of earnings to fixed charges 2.48 2.20 1.53 2.94 1.95
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EXHIBIT 21
SUBSIDIARIES OF ATMOS ENERGY CORPORATION
State of Percent of
Name Incorporation Ownership
------------------------------------------------------------ ------------- ---------
ATMOS ENERGY HOLDINGS, INC. Delaware 100%
ATMOS ENERGY SERVICES, LLC Delaware 100%
(a limited liability company)
(wholly-owned by Atmos Energy Holdings, Inc.)
GREELEY ENERGY SERVICES, INC. Delaware 100%
(wholly-owned by Atmos Energy Services, LLC)
TRANS LOUISIANA ENERGY SERVICES, INC. Delaware 100%
(wholly-owned by Atmos Energy Services, LLC)
UNITED CITIES ENERGY SERVICES, INC. Delaware 100%
(wholly-owned by Atmos Energy Services, LLC)
WKG ENERGY SERVICES, INC. Delaware 100%
(wholly-owned by Atmos Energy Services, LLC)
EGASCO, LLC Texas 100%
(a limited liability company) (wholly-owned by
Atmos Energy Holdings, Inc.)
ENERGAS ENERGY SERVICES TRUST Pennsylvania 100%
(a business trust)
(wholly-owned by Atmos Energy
Services, LLC)
UNITED CITIES PROPANE GAS, INC. Tennessee 100%
(a wholly-owned subsidiary of Atmos Energy
Holdings, Inc.)
ENERMART ENERGY SERVICES TRUST (a Pennsylvania 100%
business trust)
(wholly-owned by Atmos Energy Holdings, Inc.)
ATMOS ENERGY MARKETING, LLC Delaware 100%
(a limited liability company)
(wholly-owned by Atmos Energy Holdings, Inc.)
ATMOS POWER SYSTEMS, INC. Georgia 100%
(a wholly-owned subsidiary of Atmos Energy
Holdings, Inc.)
|
State of Percent of
Name Incorporation Ownership
------------------------------------------------------------ ------------- ---------
ATMOS PIPELINE AND STORAGE, LLC Delaware 100%
(a limited liability company)
(wholly-owned by Atmos Energy Holdings, Inc.)
UCG STORAGE, INC. Delaware 100%
(wholly-owned by Atmos Pipeline and Storage, LLC)
WKG STORAGE, INC. Delaware 100%
(wholly-owned by Atmos Pipeline and Storage, LLC)
ATMOS EXPLORATION AND PRODUCTION, INC. Delaware 100%
(wholly-owned by Atmos Pipeline and Storage, LLC)
TRANS LOUISIANA INDUSTRIAL GAS COMPANY, INC. Delaware 100%
(wholly-owned by Atmos Energy Marketing, LLC)
WOODWARD MARKETING, LLC Delaware 100%
(a limited liability company)
(wholly-owned by Atmos Energy Marketing, LLC)
SOUTHERN RESOURCES, INC. Kentucky 100%
(wholly-owned by Woodward Marketing, LLC)
TRANS LOUISIANA GAS PIPELINE, INC. Louisiana 100%
(wholly-owned by Atmos Pipeline and Storage, LLC)
Trans Louisiana Gas Storage, Inc. Delaware 100%
(wholly-owned by Atmos Pipeline and Storage, LLC)
|
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements (Form S-3, No. 33-37869; Form S-3 D/A, No. 33-70212; Form S-3, No. 33-58220; Form S-3, No. 33-56915; Form S-3/A, No. 333-03339; Form S-3/A, No. 333-32475; Form S-3/A, No. 333-50477; Form S-3/A, No. 333-93705; Form S-3, No. 333-95525; Form S-4, No. 333-13429; Form S-8, No. 33-68852; Form S-8, No. 33-57687; Form S-8, No. 33-57695; Form S-8, No. 333-32343; Form S-8, No. 333-46337, Form S-8, No. 333-73143; Form S-8, No. 333-73145; and Form S-8, No. 333-63738) of Atmos Energy Corporation and in the related Prospectuses of our report dated November 2, 2001, with respect to the consolidated financial statements of Atmos Energy Corporation included in this Annual Report (Form 10-K) for the year ended September 30, 2001.
ERNST & YOUNG LLP
Dallas, Texas
November 20, 2001