Asset Purchase Agreement With Atmos

PURCHASE AND SALE AGREEMENT
(LOUISIANA GAS OPERATIONS)


among


CITIZENS UTILITIES COMPANY,


LGS NATURAL GAS COMPANY


and


ATMOS ENERGY CORPORATION


Dated as of April 13, 2000


TABLE OF CONTENTS


Page


ARTICLE I DEFINITIONS 1
Section 1.1 Certain Defined Terms..................................................................1
Section 1.2 Other Defined Terms....................................................................9 ARTICLE II PURCHASE AND SALE 10
Section 2.1 Purchase and Sale of LGSN Assets......................................................10
Section 2.2 Purchase and Sale of Division Assets..................................................10
Section 2.3 Assumed Liabilities...................................................................10
Section 2.4 Retained Liabilities..................................................................11
Section 2.5 Condition on Assignment or Assumption of Contracts and Rights.........................12 ARTICLE III PURCHASE PRICE 12
Section 3.1 Purchase Price........................................................................12
Section 3.2 Calculation of Purchase Price.........................................................13
Section 3.3 Prorations and Adjustments as of the Closing Date.....................................13 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER 14
Section 4.1 Organization, Existence and Qualification.............................................14
Section 4.2 Authority Relative to this Agreement and Binding Effect...............................15
Section 4.3 Governmental and other Required Consents..............................................15
Section 4.4 Availability of Funds.................................................................15
Section 4.5 Filings...............................................................................15
Section 4.6 Brokers...............................................................................15
Section 4.7 Independent Investigation.............................................................16
Section 4.8 Public Utility Holding Company Status; Regulation as a Public Utility.................16
Section 4.9 Buyer's Financial Statements..........................................................16 ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLERS 16
Section 5.1 Organization, Existence and Qualification.............................................16
Section 5.2 Authority Relative to this Agreement and Binding Effect...............................17
Section 5.3 Governmental and Other Required Consents..............................................17
Section 5.4 Filings...............................................................................17
Section 5.5 Title to Assets; Encumbrances.........................................................17
Section 5.6 Financial Statements..................................................................18
Section 5.7 Compliance with Legal Requirements; Governmental Permits;
Business Practices..................................................................19
Section 5.8 Legal Proceedings; Outstanding Orders.................................................19
Section 5.9 Taxes ................................................................................19
Section 5.10 Intellectual Property.................................................................20
Section 5.11 Y2K Compliance........................................................................20
Section 5.12 Material Contracts....................................................................20
Section 5.13 Employee Benefit Matters..............................................................21
Section 5.14 Environmental Matters.................................................................23
Section 5.15 Labor Matters.........................................................................24
Section 5.16 State Regulatory Matters..............................................................25
Section 5.17 Public Utility Holding Company Status; Regulation as a Public Utility.................25
Section 5.18 Brokers...............................................................................25
Section 5.19 Insurance.............................................................................25
Section 5.20 Disclaimer............................................................................25 ARTICLE VI COVENANTS 26
Section 6.1 Covenants of Sellers..................................................................26
Section 6.2 Covenants of Buyer....................................................................29
Section 6.3 Governmental Filings..................................................................30
Section 6.4 Citizens Marks........................................................................31
Section 6.5 Transition Plan.......................................................................31
Section 6.7 Schedule of Easements and Interests...................................................32
Section 6.8 Rhodes Security.......................................................................32
Section 6.9 Certain Proceedings...................................................................32
Section 6.10 Buyer's Insurance.....................................................................32 ARTICLE VII CONDITIONS PRECEDENT 32
Section 7.1 Sellers' Conditions Precedent to Closing..............................................32
Section 7.2 Buyer's Conditions Precedent to Closing...............................................33 ARTICLE VIII CLOSING 35
Section 8.1 Closing...............................................................................35 ARTICLE IX TERMINATION 36
Section 9.1 Termination Rights....................................................................36
Section 9.2 Limitation on Right to Terminate: Effect of Termination...............................37 ARTICLE X EMPLOYEE MATTERS 38
Section 10.1 Employment of Transferred Employees...................................................38
Section 10.2 Intentionally Omitted.................................................................38
Section 10.3 Cessation of Participation in Sellers' Plans; Bonuses.................................38
Section 10.4 Similarity of Benefit Packages........................................................38
Section 10.5 Defined Benefit Pension Plan..........................................................39
Section 10.6 401(k) Plan...........................................................................39
Section 10.7 Welfare Benefits......................................................................40
Section 10.8 Flexible Spending Accounts............................................................41
Section 10.9 Employment Agreements.................................................................41
Section 10.10 Vacation/Time Off.....................................................................41
Section 10.11 Severance.............................................................................41
Section 10.12 Health Care Continuation Coverage.....................................................42 ARTICLE XI TAX MATTERS 42
Section 11.1 Purchase Price allocation.............................................................42
Section 11.2 Cooperation with Respect to Like-Kind Exchange........................................43
Section 11.3 Transaction Taxes.....................................................................43
Section 11.4 Clearance Certificates................................................................44 ARTICLE XII ENVIRONMENTAL MATTERS 44
Section 12.1 Environmental Due Diligence...........................................................44 ARTICLE XIII INDEMNIFICATION 46
Section 13.1 Indemnification by Sellers............................................................46
Section 13.2 Indemnification by Buyer..............................................................46
Section 13.3 Limitations on Liability..............................................................47
Section 13.4 Claims Procedure......................................................................50
Section 13.5 Exclusive Remedy......................................................................52
Section 13.6 Indemnification for Negligence........................................................52 ARTICLE XIV GENERAL PROVISIONS 52
Section 14.1 Expenses..............................................................................52
Section 14.2 Notices...............................................................................52
Section 14.3 Assignment............................................................................54
Section 14.4 Successor Bound.......................................................................54
Section 14.5 Governing Law.........................................................................54
Section 14.6 Dispute Resolution....................................................................55
Section 14.7 Cooperation...........................................................................56
Section 14.8 Construction of Agreement.............................................................56
Section 14.9 Publicity.............................................................................57
Section 14.10 Waiver................................................................................57
Section 14.11 Parties in Interest...................................................................57
Section 14.12 Section and Paragraph Headings........................................................57
Section 14.13 Amendment.............................................................................57
Section 14.14 Entire Agreement......................................................................57
Section 14.15 Counterparts..........................................................................57
Section 14.16 Severability..........................................................................57


LIST OF EXHIBITS


Exhibit 6.7 Form of Substitute Agreement Exhibit 7.1(g) Form of Buyer's Opinion of Counsel Exhibit 7.2(g) Form of Sellers' Opinion of Counsel


LIST OF SCHEDULES


Schedule 1.1(a) Certain Assets Schedule 1.1(b) Certain Excluded Assets Schedule 4.3 Buyer's Governmental Approvals Schedule 5.2 Sellers' Authority Schedule 5.3 Sellers' Governmental and Other Required Consents Schedule 5.5 Encumbrances; Owned Real Property Schedule 5.6(a) Financial Statements Schedule 5.6(b) Certain Liabilities Schedule 5.6(c) Certain Changes Schedule 5.7 Compliance with Legal Requirements; Governmental Permits Schedule 5.8 Legal Proceedings; Outstanding Orders Schedule 5.9 Taxes Schedule 5.10 Intellectual Property Schedule 5.12 Material Contracts Schedule 5.13 Employee Matters Schedule 5.14 Environmental Matters Schedule 5.15 Labor Matters Schedule 5.16 State Regulatory Matters Schedule 5.19 Sellers' Insurance Schedule 6.1 Conduct of Business Prior to Closing Date Schedule 6.2(c) Citizens' Guarantees and Surety Instruments Schedule 10.7 Retirees and "Grandfathered Employees" Schedule 10.11 Severance Benefits


PURCHASE AND SALE AGREEMENT
(LOUISIANA GAS OPERATIONS)


This PURCHASE AND SALE AGREEMENT (this "Agreement") is made as of the 13th day of April, 2000, by and among CITIZENS UTILITIES COMPANY, a Delaware corporation ("Citizens"), LGS NATURAL GAS COMPANY, a Louisiana corporation ("LGSN" and, together with Citizens, "Sellers"), and ATMOS ENERGY CORPORATION, a Texas and Virginia corporation ("Buyer"). Capitalized terms used herein shall have the meanings ascribed to them in Article I, unless otherwise provided.


W I T N E S S E T H :


WHEREAS, Citizens own all of the Division Assets and LGSN owns all of the LGSN Assets; and


WHEREAS, Buyer desires to purchase, and Sellers desire to sell, the Division Assets and the LGSN Assets, subject in all respects to the provisions of this Agreement.


NOW, THEREFORE, 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:


ARTICLE I


DEFINITIONS


Section 1.1 Certain Defined Terms. For purposes of this Agreement, the following terms have the meanings specified or referred to in this Article I (such definitions to be equally applicable to both the singular and plural forms of the terms defined):


"Affiliates" or "Affiliated Entities" -- entities shall be deemed "Affiliated" as to each other to the extent (i) one of the entities directly or indirectly controls the other, or the direct or indirect control of one of the entities is exercised by the officers, directors, stockholders, or partners of the other entity (whether or not such persons exercise such control in their capacities as officers, directors, stockholders, or partners) or (ii) is deemed to be an Affiliate under existing statutes or regulations of the SEC.


"Assets" -- means, collectively, all of the Division Assets and all of the LGSN Assets, including the following (except to the extent included among the Excluded Assets):


(a) the Real Property described in Schedule 5.5, and all buildings, structures and other improvements, fixtures and fittings located on such Real Property, and all Easements, appurtenances and other interests owned or held by a Seller and necessary for or relating to the Business (including all gas pipes and pipelines, and all facilities used for storing and delivering natural gas or propane);


(b) all inventories of natural gas, propane and other fuels, and all supplies, materials and critical spares held by a Seller for use in connection with the Business and located on, in storage for, or in transit to the Real Property on the Closing Date;


(c) all machinery, equipment, tools, vehicles, furniture and other tangible personal property used in connection with the Business, including the items of tangible personal property listed on Schedule 1.1(a); and all warranties, guarantees, and service and replacement programs of manufacturers, service providers or other vendors relating thereto, in each case to the extent that the same are transferable;


(d) all Contracts relating to the Business;


(e) the franchises, ordinances or similar agreements listed on Schedule 1.1(a) with respect to Citizens' authority to distribute natural gas and all other licenses, permits and authorizations held by a Seller and relating to the Business, in each case to the extent the same are assignable;


(f) originals or copies of all records, books, operating records, operating, safety and maintenance manuals, engineering design plans, blueprints and as-built plans, specifications, procedures and similar items of Citizens or LGSN relating to the Assets, including all books of account, customer lists, billing records and other customer correspondence relating to the Business, records relating to the Transferred Employees (to the extent such transfer is not prohibited by any Legal Requirement), all regulatory filings and all other books and records relating to the rates and services provided by Citizens or LGSN in connection with the operation of the Business;


(g) all rights or choses in action arising out of occurrences before or after the Closing Date and related to any of the Assets, including all related claims, credits, rights of recovery and set-off and other similar contractual rights (other than with respect to rights to insurance and condemnation proceeds described in clause (h)), as to third parties held by or in favor of a Seller; provided, however, that notwithstanding the foregoing provisions of this clause (g), to the extent that a Seller pays or discharges a liability related to the Business or any of the Assets that is related to such right or chose in action (whether by reason of indemnification under this Agreement or otherwise), Buyer will reassign or reconvey to such Seller such right or chose in action to the extent that such right or chose in action relates to a recovery of amounts paid to Buyer;


(h) all rights to insurance and condemnation proceeds outstanding on the Closing Date to the extent relating to the damage, destruction, taking or other impairment of the Assets which damage, destruction, taking or other impairment occurs on or prior to the Closing, but only to the extent of any proceeds remaining after any repair or replacement of the affected Assets; and


(i) all accounts receivable (including rights to earned but unbilled revenue) and prepayments, in each case attributable exclusively to the Business and accrued or outstanding on the Closing Date.


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"Business" -- means collectively:


(a) the regulated natural gas distribution business conducted by Citizens within the State of Louisiana through its Louisiana Gas Service division;


(b) the nonregulated natural gas transportation and sales business conducted by Citizens within the State of Louisiana through its LGS Intrastate Company division;


(c) the nonregulated natural gas supply, storage and trans- mission activities conducted by LGSN within the State of Louisiana; and


(d) the provision of related services and products and the engagement in related activities by Citizens, through its Louisiana Gas Service division and its LGS Intrastate Company division, and by LGSN, in each case within the State of Louisiana.


"Claim Notice" -- means a written notice of a claim given by a party seeking indemnification pursuant to the terms of this Agreement that specifies in reasonable detail the nature of the Losses and the estimated amount of such Losses.


"Confidentiality Agreement" -- means the confidentiality agreement dated October 20, 1999, between Buyer and Citizens.


"Consent" -- any approval, consent, ratification, waiver, or other authorization from any Person.


"Contract" -- any agreement, contract, document, instrument, obligation, promise or undertaking (whether written or oral) that is legally binding, including Easements.


"Division Assets" -- all of the assets, property and interests of every type and description, real, personal or mixed, tangible and intangible, of Citizens and relating primarily to the Business as engaged in by Citizens through the Louisiana Gas Service (also known as LGS Gas) division of Citizens or the LGS Intrastate Company division of Citizens, other than the Excluded Assets.


"Easements"-- means all easements, servitudes, rights of way, permits, licenses, and other ways of necessity, whether or not of record.


"Encumbrance" -- any charge, adverse claim, lien, mortgage, pledge, security interest, imperfection in title, limitation, Easement, restriction or other encumbrance of any kind.


"Environmental Law"-- any Order or Legal Requirement, and any judicial and administrative interpretation thereof and related policies, guidelines and standards, relating to pollution or protection of the environment and natural resources, including those relating to (a) emissions, discharges, Releases or threatened Releases of Hazardous Material into the environment (including ambient air, surface water, groundwater or land), and (b) the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Material, each as in effect as of the date of determination.


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"Environmental Liability" -- means any liability, responsibility or obligation arising out of or relating to:


(a) the presence of any Hazardous Material in the fixtures, structures, soils, groundwater, surface water or air on, under or about or emanating from the assets and properties currently or formerly used, operated, owned, leased, controlled, possessed, occupied or maintained by a Person, and any such Hazardous Material emanating to adjoining or other properties;


(b) the use, generation, production, manufacture, treatment, storage, disposal, Release, threatened Release, discharge, spillage, loss, seepage or filtration of Hazardous Materials by a Person or its employees, agents or contractors from, on, under or about the assets or properties currently or formerly used, operated, owned, leased, controlled, possessed, occupied or maintained by such Person or the presence therein or thereunder of any underground or above-ground tanks for the storage of fuel oil, gasoline and/or other petroleum products or by-products or other Hazardous Material;


(c) the violation or noncompliance or alleged violation or noncompliance by a Person or its employees, agents or contractors of any Environmental Law arising from or related to its or their conduct, actions or operations or the former or current use, operation, ownership, lease, possession, control, occupancy, maintenance or condition of any of such Person's former or current assets or properties;


(d) the failure by a Person or its employees, agents, or contractors to have obtained or maintained in effect any certificate, permit or authorization required by any Environmental Law as a result of its or their conduct, actions or operations or the use, operation, ownership, lease, control, possession, occupancy, maintenance or condition of such Person's assets or properties;


(e) any and all Proceedings arising out of any of the above-described matters, including Proceedings by Governmental Bodies for enforcement, cleanup, removal, treatment, response, remedial or other actions or damages and Proceedings by any third Person seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief; and


(f) any and all remedial work and other corrective action (including investigation or monitoring of site conditions, or any clean-up, containment, restoration or removal) taken by, or the costs of which are imposed upon, a Person arising from any of the above-described matters.


"ERISA" - the Employee Retirement Income Security Act of 1974, as amended, or any successor law, and regulations and rules issued pursuant to that act or any successor law.


"ERISA Affiliate" -- any corporation or trade or business (whether or not incorporated) which is, as of the date of this Agreement or at any time within the six years preceding the date hereof would be treated as a single employer under IRC Section 414.


"Excluded Assets" -- means the following assets of Citizens or LGSN, each of which shall be excluded from the Assets, and not acquired by Buyer, at Closing:


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(a) assets that Citizens uses in both the Business and in Citizens' other gas, electric, communications or water businesses that are described generally in Schedule 1.1(b), and Contracts regarding the procurement of services or goods by Citizens for use in such other businesses;


(b) cash and cash equivalents in transit, in hand or in bank accounts;


(c) except as otherwise set forth in Article X, assets at- tributable to or related to a Benefit Plan of Citizens;


(d) the stock record and minute books of Citizens and LGSN, all records prepared in connection with the sale of the Business (including bids received from third parties and analysis relating to the Business), and duplicate copies of all books and records transferred to Buyer;


(e) assets disposed of by Citizens or LGSN after the date of this Agreement to the extent such dispositions are not prohibited by this Agreement;


(f) except to the extent set forth in Section 3.3, rights to refunds of Taxes payable with respect to the Business, assets, properties or operations of Citizens, LGSN or a ...