Asset Purchase Agreement

EXHIBIT 10.1


ASSET PURCHASE AGREEMENT


THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into as of August 7, 2000, by and among ATMOS ENERGY CORPORATION, a Texas and Virginia corporation ("Atmos"), ATMOS ENERGY MARKETING, LLC, a Delaware limited liability company ("Energy"), WOODWARD MARKETING, INC., a Texas corporation ("WMI"), J.D. Woodward, III, an individual, and Linda Lee Woodward, an individual (collectively, "Woodward"), and James Kifer, an individual, and Rita B. Kifer, an individual (collectively, "Kifer").


WHEREAS, WMI owns 55% and Energy owns 45%, respectively, of the membership interests of Woodward Marketing, L.L.C., a Delaware limited liability company (the "LLC");


WHEREAS, the boards of directors of Atmos and WMI, the stockholders of WMI and the managers of Energy have determined that it is in the best interests of their respective companies, stockholders and owner, to effect the sale of substantially all of the assets of WMI to Energy and to consummate the transactions contemplated hereby upon the terms and subject to the conditions set forth herein;


WHEREAS, in connection with the sale of substantially all of its assets, WMI has adopted a plan of complete liquidation and dissolution;


WHEREAS, for federal income tax purposes, it is intended that the sale of assets contemplated hereby, together with such liquidation, will constitute a "reorganization" under Section 368(a) of the Internal Revenue Code of 1986, as amended.


NOW, THEREFORE, in consideration of the mutual agreements herein contained, Atmos, Energy, WMI, Woodward and Kifer hereby agree as follows:


A. On the basis of the representations, warranties, covenants and agreements set forth herein, and subject to the terms and conditions set forth herein, at the Closing, WMI shall sell, convey, assign, transfer, and deliver to Energy, and Energy shall purchase and acquire from WMI, all of WMI's assets, franchises, interests, properties, and rights and privileges of every kind and description, real, personal or mixed, tangible or intangible, including all right, title and interest of WMI therein and thereto as all of the foregoing exist immediately prior to the Closing (collectively, exclusive of the Excluded Assets, the "Acquired Assets"), constituting the following:


(i) All of the LLC Membership Interests owned by WMI and all rights and benefits of WMI under the LLC Documents attributable to the period after the Closing; and


(ii) 345,500 shares of Common Stock, no par value, of Atmos ("Common Stock").


Notwithstanding the foregoing, WMI shall retain all of its other assets, including all cash and cash equivalents, all accounts receivable, all notes receivable from Woodward and Kifer, all life insurance policies, all rights to distributions from the LLC contemplated by Section 7.2, all books and records of WMI not related to the LLC, all rights under this Agreement and the


Ancillary Agreements and all rights and benefits under the LLC Documents that, under the terms of the LLC Documents, expressly survive the time when WMI is no longer an owner of LLC Membership Interests or are attributable to the period prior to the Closing (collectively, the "Excluded Assets").


B. As full payment for the Acquired Assets, WMI will receive the following consideration (the "Purchase Consideration"): (i) 960,000 shares of Common Stock, based upon a value of $24,000,000 at $25.00 per share (the "Base Shares"), (ii) 345,500 shares of Common Stock (the "Included Shares") and (iii) 463,193 shares of Common Stock, based on the Trading Value of the Common Stock as of the date hereof (the "Cumulative Shares").


C. The portion of the Purchase Consideration constituting the Base Shares shall be subject to adjustment in the circumstances, and to the extent, provided in this Section C, and subject to Section E below. If between the first anniversary of the Closing Date and the Date of Determination, the Closing Price for the Common Stock for each trading day in any period of thirty (30) consecutive days shall have been at least $25.00, no additional consideration shall be payable. If as of the Date of Determination there shall not have been any such period in which the Closing Price shall have been at least $25.00, additional consideration (the "True-up Consideration") shall be payable in respect of the Base Shares issued at the Closing Date. For each Base Share, the True-up Consideration shall be the amount by which the Trading Value as of the Date of Determination is less than $25.00. Any True-up Consideration required to be paid by this Section C shall be paid in shares of Common Stock, valued at the Trading Value as of the Date of Determination, no later than three (3) business days after the Date of Determination.


D. If any True-up Consideration is required to be delivered pursuant to Section C above, WMI shall also receive an amount (the "Dividend Adjustment") equal to the aggregate amount of dividends and other distributions that would have been received from the Closing Date to the Date of Determination (the "Missed Dividends") on or in respect of the number of shares of Common Stock to be delivered as True-up Consideration. To the extent the Missed Dividends are comprised of cash, the Dividend Adjustment shall be paid in shares of Common Stock, valued at the Trading Value as of the Date of Determination, not later than three (3) business days after the Date of Determination. To the extent the Missed Dividends are comprised of Common Stock, the Dividend Adjustment shall be paid in an equal number of shares of Common Stock.


E. Notwithstanding Section C above, the aggregate number of shares of Common Stock delivered under Section C above shall not exceed 232,547 shares.


F. For purposes of the foregoing:


(i) The term "Date of Determination" shall mean the earlier of (A) the fifth anniversary of the Closing Date or (B) the date of a Change in Control.


(ii) The term "Trading Value" shall mean, for any date, the average Closing Price for the Common Stock for the ten (10) then most recent trading days ending on the second trading day prior to such date.


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(iii) The term "Closing Price" shall mean, for any trading day, the closing price for the Common Stock as reported for New York Stock Exchange Composite Transactions or, if the Common Stock is not listed on the New York Stock Exchange, as reported for the principal exchange or system on which such shares are listed or traded.


(iv) The number, kind and value of shares or other consideration so issuable, and determinations of prices associated therewith, shall be subject to such customary anti-dilution adjustments as shall be determined in good faith by Atmos to reflect any stock splits, reverse stock splits, stock dividends, reclassifications, recapitalizations, mergers, consolidations or other changes in capital structure occurring or for which a record date occurs after the date hereof.


(v) No certificates representing fractional shares of Common Stock will be issued as a result of the transactions contemplated hereby. If WMI would otherwise have been entitled to receive a fraction of a share of Common Stock, WMI shall receive, in lieu thereof, additional Common Stock in order to round up to the next whole share the Common Stock it is otherwise entitled to receive.


G. At the Closing, Energy shall assume the executory obligations of WMI under (i) the LLC Documents relating to the period beginning immediately after the Closing Date and (ii) the Bank of America Facility (the "Assumed Obligations"). Notwithstanding any other provisions hereof or any doctrine of law, except for Assumed Obligations, WMI shall retain and Energy shall not assume or agree to pay, perform, or discharge, any liabilities or obligations of WMI, whether known or unknown, accrued or contingent or otherwise, including (i) any liabilities or obligations that WMI owes to any Affiliate, (ii) any liabilities or obligations that relate to the Excluded Assets, (iii) any obligations or liabilities to employees, whether for compensation, under any Employee Benefit Arrangement or by applicable law, rule or regulation, (iv) any liabilities or obligations with respect to any Environmental Requirements or Hazardous Materials, (v) any liabilities for any pending or threatened claims, actions, suits, investigations or proceedings, or (vi) any Taxes (collectively, the "Retained Liabilities").


H. The parties acknowledge that, as the owners of WMI, Woodward and Kifer will receive consideration for their obligations hereunder as a result of the consideration to be delivered to WMI hereunder.


ARTICLE I.
REPRESENTATIONS AND WARRANTIES
OF WMI, WOODWARD AND KIFER


WMI, Woodward and Kifer, jointly and severally, hereby represent and warrant to Atmos and Energy that the statements set forth in this Article I are true, correct and complete, except as set forth in the WMI Disclosure Schedule attached hereto as Exhibit A.
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SECTION 1.1. Organization and Qualification.


(a) WMI is a corporation duly organized, validly existing and in good standing under the laws of the State of Texas. The LLC is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware. Each of WMI and the LLC has all requisite corporate or limited liability company power and authority and possesses


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all franchises, grants, authorizations, licenses, permits, easements, consents, certificates, approvals and orders ("Governmental Authorizations") necessary to own, lease and operate its properties and assets and to carry on its business as it is presently conducted, except where the failure to have any of such Governmental Authorizations would not reasonably be expected to have a Material Adverse Effect on WMI or the LLC. Each of WMI and the LLC is duly qualified as a foreign corporation and limited liability company, respectively, to do business and is in good standing in the State of Texas and each jurisdiction in which the character of the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to so qualify would not reasonably be expected to have a Material Adverse Effect on WMI or the LLC.


(b) WMI has not been a subsidiary or division of another corporation or entity at any time during the two-year period prior to the date of this Agreement.


(c) WMI has heretofore delivered to Atmos and Energy true and complete copies of WMI's Articles of Incorporation and Bylaws, including all amendments thereto, and the LLC Documents, including all amendments thereto.


SECTION 1.2. Subsidiaries. Other than its 55% ownership interest in the LLC and 345,500 shares of Common Stock, WMI does not own, directly or indirectly, any equity or similar interest in any corporation, partnership, limited liability company, joint venture or other business association or entity. The entire ownership interest in the LLC consists of 100 Units of LLC Membership Interests, all of which are issued and outstanding. All of such ownership interest is duly authorized, validly issued, fully paid and, except as provided in the LLC Documents, non-assessable and free of preemptive rights. WMI and Energy are the only members of the LLC, and no other person or entity owns or has the right to acquire any ownership interest in the LLC by, through or under WMI. Except as provided in the LLC Documents, there are no options, warrants, or other rights, agreements, arrangements, or commitments of any character relating to WMI's ownership interest in the LLC or obligating the LLC to issue or sell any such ownership interest, or any securities convertible into or evidencing the right to purchase any such ownership interest or other equity interests in the LLC. There are no obligations, contingent or otherwise, of the LLC to repurchase, redeem or otherwise acquire any of its ownership interest except as provided in the LLC Documents.


SECTION 1.3. Capitalization. The entire authorized capital stock of WMI consists of 100,000 shares, par value $0.01 per share, of common stock (the "WMI Stock"), of which 1,695 shares of WMI Stock are issued and outstanding.


SECTION 1.4. Authority Relative to this Agreement. WMI has all requisite corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements to which it is a signatory, and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Ancillary Agreements to which WMI is a signatory have been duly and validly authorized by WMI's board of directors and stockholders, and no other corporate proceedings on the part of WMI are necessary to authorize this Agreement or the Ancillary Agreements to which WMI is a signatory or to consummate the transactions contemplated herein and therein. This Agreement has been, and the Ancillary Agreements to which they are signatories will be, duly and validly executed and delivered by WMI and, assuming that this Agreement constitutes, and the Ancillary Agreements to which they are


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signatories will constitute when signed, the legal, valid and binding obligations of the other parties hereto and thereto, each such agreement constitutes or will constitute the legal, valid and binding obligation of WMI, enforceable in accordance with its terms subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws (including court decisions) and doctrines affecting the rights of creditors generally and general equitable principles.


SECTION 1.5. No Conflicts.


(a) Except as set forth in the WMI Disclosure Schedule, the execution, delivery and performance of this Agreement and the Ancillary Agreements to which WMI is a signatory by WMI and the consummation by WMI of the transactions contemplated hereby and thereby do not and will not conflict with or constitute a breach or violation of or default under, or trigger any payment or other material obligations pursuant to, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of WMI or the LLC pursuant to, any contract, indenture, mortgage, loan agreement, note, license, franchise, permit, lease or other instrument to which WMI or the LLC is a party or by which either of them is or may be bound or to which any of their respective properties or assets is subject, nor will such action result in any breach or violation of, or default under, the provisions of the Articles of Incorporation or Bylaws of WMI or the LLC Documents or of any applicable law, administrative regulation or administrative or court decree.


(b) Except as set forth in the WMI Disclosure Schedule, the execution, delivery and performance of this Agreement and the Ancillary Agreements to which they are signatories by Woodward and Kifer and the consummation by Woodward and Kifer of the transactions contemplated hereby and thereby do not and will not conflict with or constitute a breach or violation of or a default under, any contract, indenture, mortgage, loan agreement, note or other instrument to which Woodward or Kifer is a party or by which either of them is or may be bound, nor will such action result in any breach or violation of, or default under any applicable law, administrative regulation or administrative or court decree.


SECTION 1.6. Required Filings and Consents. No authorization, approval or consent of, or registration or filing with, any Person is required for the execution, delivery or performance by WMI, Woodward or Kifer of this Agreement or the Ancillary Agreements to which they are signatories or the consummation by WMI, Woodward or Kifer of the transactions contemplated herein and therein, except (i) the applicable requirements of federal and state securities laws, (ii) the filing requirements under the Hart-Scott-Rodino Act and (iii) the consents of those Persons listed in Section 1.6 of the WMI Disclosure Schedule.


SECTION 1.7. Compliance. Neither WMI nor the LLC is in breach, default or violation of, and no event has occurred or is occurring that with notice or lapse of time or both would become a breach, default or violation of (i) WMI's Articles of Incorporation or Bylaws or the LLC Documents, (ii) any law, rule, regulation, order, judgment or decree applicable to WMI or the LLC or by which WMI or the LLC or any of their respective properties is bound or affected, or (iii) any material contract, indenture, mortgage, loan agreement, note, license, franchise, permit, lease or other instrument to which WMI or the LLC is a party or by which either of them


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is or may be bound or to which any of their respective property or assets is subject, nor has WMI or the LLC received and not finally resolved any written notice of a breach, default or violation of any of the foregoing nor, to the best of WMI's Knowledge, are any threatened, except for any such breaches, defaults or violations that would not reasonably be expected to have a Material Adverse Effect on WMI or the LLC.


SECTION 1.8. Contracts. The WMI Disclosure Schedule contains a list of all material contracts, including without limitation, gas purchase agreements, gas sales agreements, pipeline transportation agreements, loan agreements, natural gas hedging, trading and gas commodity futures, options and swap agreements, indentures, commitments, indemnities and other material agreements or arrangements to which WMI or the LLC is a party or by which WMI or the LLC or any of their respective properties is bound as of the date of this Agreement. All such contracts and instruments have been duly and validly authorized, executed and delivered by WMI or the LLC, are in full force and effect and neither WMI nor the LLC are in breach or default of any obligation, agreement, covenant or condition contained in any such contract or instrument, other than breaches or defaults which, singly or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on WMI or the LLC; none of such contracts or instruments has been assigned by WMI or the LLC and neither WMI nor the LLC has received written notice of any present condition or fact which would prevent compliance by WMI or the LLC with the terms of any such contract or instrument in all material respects; and neither WMI nor the LLC has received written notice that any other party to any such contract or instrument has any intention not to render full performance in all material respects as contemplated by the terms thereof.


SECTION 1.9. Financial Statements.


(a) WMI has heretofore delivered to Atmos and Energy the unaudited financial statements of WMI and the audited financial statements of the LLC for the fiscal years ended December 31, 1998 and 1999 and the unaudited financial statements of WMI and the LLC for the four month period ended April 30, 2000 attached hereto as Schedule 1.9(a) (collectively, the "Financial Statements"). The Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods covered thereby and fairly present in all material respects the financial condition, results of operations and cash flows, as the case may be, of WMI and the LLC as of and for the respective dates or periods indicated, except in the case of interim statements, for the omission of note disclosure and normal year end adjustments not expected to be material in amount.


(b) Since December 31, 1999, and except as contemplated by this Agreement or described in the WMI Disclosure Schedule, (i) WMI and the LLC have conducted their business only in the ordinary course of business and have taken no action of the type referred to in Section 4.1, (ii) to the Knowledge of WMI, there has been no Material Adverse Effect on WMI or the LLC, whether or not arising in the ordinary course of business, (iii) there have been no transactions, agreements or arrangements entered into by WMI or the LLC, other than those in the ordinary course of business, which are material with respect to WMI or the LLC and (iv) there has been no dividend or distribution of any kind declared, paid or made by WMI on its capital stock.


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(c) Neither WMI nor the LLC has any liabilities or obligations (whether accrued, absolute, contingent, known or otherwise) that are material in amount, whether individually or in the aggregate, except for liabilities and obligations that (i) are accrued or reserved against in the balance sheets of WMI and the LLC as of April 30, 2000 included in the Financial Statements, or disclosed in the notes to the balance sheets of WMI and the LLC as of December 31, 1999 included in the Financial Statements, (ii) were incurred after April 30, 2000 in the ordinary course of business consistent with past practice (none of which is materially adverse), or (iii) arise under any contract, commitment or agreement disclosed in the WMI Disclosure Schedule and, in the case of any liability relating to any default, violation or performance at a loss thereunder that could reasonably be expected to have a Material Adverse Effect on WMI or the LLC, are disclosed in the WMI Disclosure Schedule.


(d) WMI has no trading activity.


SECTION 1.10. Books and Records. WMI has made available to Atmos and Energy, and will continue to make available to Atmos and Energy, all of the books, records and certificates of WMI and the LLC. The books and records of WMI and the LLC fairly reflect in all material respects the transactions to which WMI or the LLC is or was a party or by which any of their respective properties are or were bound, and such books and records are and have been properly kept and maintained in all material respects, with the revenues, expenses, assets and liabilities of WMI and the LLC accurately recorded therein in all material respects.


SECTION 1.11. Litigation. The WMI Disclosure Schedule contains a list of all material claims, actions, suits, investigations or proceedings pending or, to WMI's Knowledge, threatened against or affecting WMI or the LLC or any of their respective properties or rights at law or in equity before or by any court, arbitrator or administrative, governmental or regulatory authority or body. None of such claims, actions, suits, investigations or proceedings is reasonably expected to have a Material Adverse Effect on WMI or the LLC or to hinder in any material respect or prevent the consummation by WMI of the transactions contemplated by this Agreement and the Ancillary Agreements. Neither WMI, the LLC nor any of their respective properties is subject to any order, writ, judgment, injunction, decree, determination or award reasonably expected to have a Material Adverse Effect on WMI or the LLC.


SECTION 1.12. Title to, and Condition of, Assets. WMI and the LLC each have good and indefeasible title to, or a valid leasehold interest in, all of its assets and properties, real and personal, including the properties, assets and leasehold interests reflected in the Financial Statements (except for any properties or assets disposed of in the ordinary course of business), necessary or appropriate for the operation of its business, free and clear of all liens, mortgages, pledges, security interests or other encumbrances, except for such liens, mortgages, pledges, security interests or other encumbrances that, if present, would not reasonably be expected to have a Material Adverse Effect on WMI or the LLC (collectively, the "Permitted Encumbrances"). All of the personal property and assets of WMI and the LLC are, in all material respects, in good condition and repair, taken as a whole, ordinary wear and tear excepted, and are adequate and sufficient for the conduct of the business of WMI and the LLC as conducted as of the date hereof.


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SECTION 1.13. Real Property Interests. Neither WMI nor the LLC has ever owned any real property or, except for leases of office facilities, had any interest in real property. All real property now or heretofore leased by WMI or the LLC was and has been used in compliance, in all material respects, with all Environmental Requirements. No Hazardous Materials were or have been generated, stored, transported, disposed of on site or sent off-site by WMI or the LLC from, in, on, at or upon the premises so leased except materials of a type and used and stored in quantities normally used or stored in connection with the operation of office facilities. Neither WMI nor the LLC has received any written notice asserting any violation of Environmental Requirements or any obligation or liability of WMI or LLC to remediate any condition or pay any costs in respect of remediation or other environmental response.


SECTION 1.14. Taxes.


(a) Tax Returns Filed and Taxes Paid. All Tax Returns required to be filed by or on behalf of WMI and the LLC have been duly filed (or extensions obtained, as disclosed in the WMI Disclosure Schedule), and such Tax Returns are true, complete and correct in all material respects. All Taxes reflected on such Tax Returns or any subsequent assessments with respect thereto have been paid in full on a timely basis, and no other Taxes that are material in amount, whether individually or in the aggregate, are payable by WMI or the LLC with respect to items or periods covered by such Tax Returns (whether or not shown on or reportable on such Tax Returns) or with respect to any period prior to the date of this Agreement. WMI and the LLC have withheld and paid over all Taxes that are material in amount, whether individually or in the aggregate, required to have been withheld and paid over, and complied with all information reporting and backup withholding requirements, including maintenance of required records with respect thereto, in connection with amounts paid to any employee, creditor, independent contractor, or other third party. There are no liens on any of the assets of WMI or the LLC with respect to Taxes, other than liens for Taxes not yet due and payable. Neither WMI nor the LLC does any material business in or derives any material income from any state, local, territorial or foreign taxing jurisdiction other than those for which all Tax Returns required to be filed by WMI or the LLC have been furnished to Atmos and Energy.


(b) Tax Returns Furnished. WMI has furnished to Atmos and Energy true, correct and complete copies of (i) income tax audit reports, statements of deficiencies, closing or other material agreements received by the LLC relating to Taxes, and (ii) all federal and state income or franchise Tax Returns for the LLC for all periods ending on and after 1995.


(c) Tax Deficiencies. To the Knowledge of WMI, no deficiency for any Taxes that are material in amount, whether individually or in the aggregate, has been proposed, asserted, assessed or threatened against WMI or the LLC that has not been resolved and paid in full. WMI and the LLC are neither a party to any action or proceeding for assessment or collection of Taxes, nor has WMI received written notice that such an event has been asserted or threatened against WMI, the LLC or any of their assets. No waiver or extension of any statute of limitations is in effect with respect to Taxes or Tax Returns of WMI or the LLC.


(d) Tax Sharing Agreements. Neither WMI nor the LLC is (nor has either of them ever been) a party to any Tax sharing agreement and have not assumed the Tax liability of any other person under contract.


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(e) Tax Elections and Special Tax Status. The LLC is not a party to any safe harbor lease within the meaning of Section 168(f)(8) of the Code, as in effect prior to amendment by the Tax Equity and Fiscal Responsibility Act of 1982. From the formation of WMI, all stockholders of WMI have been individuals, and no stockholder of WMI has ever been a person other than a United States person within the meaning of Code Section 7701(a)(30). WMI is not a "foreign person" (as that term is defined in Sections 1445 and 6038A(c)(3) of the Code). The LLC has not entered into any compensatory agreements with respect to the perform ...