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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20579
--------------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event period) - July 19, 1996
UNITED CITIES GAS COMPANY
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(Exact name of registrant as specified in its charter)
Illinois and Virginia 0-12843 38-1801540
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(State of other (Commission (IRS Employer
jurisdiction of File Number) Identification No.
incorporation)
5300 Maryland Way, Brentwood, TN 37027
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (615) 373-0104.
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ITEM 5. OTHER EVENTS
On July 19, 1996, the Registrant entered into an Agreement and Plan of
Reorganization with Atmos Energy Cooperation ("Atmos") (the "Agreement").
Pursuant to the Agreement, the Registrant will be merged (the "Merger") with
and into Atmos. Atmos will be the surviving corporation in the Merger. In the
Merger, each share of the Registrant's Common Stock, without par value, issued
and outstanding immediately prior to the time when the Merger shall become
effective, shall be converted into the right to receive one share of Atmos
Common Stock. The consummation of the Merger is subject to receipt of the
approval of the shareholders of the Registrant and Atmos and all applicable
state and federal regulatory approvals.
The foregoing is qualified in its entirety by reference to the
Agreement, a copy of which is attached as an exhibit hereto and which is hereby
incorporated by reference herein. The Agreement contains provisions with
respect to the conditions to closing and termination provisions. Further
information regarding the Merger is provided in the Press Release, a copy of
which is attached as an exhibit hereto.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
2.1 Agreement and Plan of Reorganization, dated as of July 19, 1996,
between Atmos Energy Corporation and the Registrant (excluding certain
exhibits thereto)
2.2 List of exhibits omitted from Exhibit 2.1
20.1 Press release, dated July 22, 1996
99.1 Standstill Agreement, dated July 13, 1996 between Atmos Energy
Corporation and the Registrant
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED CITIES GAS COMPANY
Date: July 23, 1996 By:/s/James B. Ford
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Name: James B. Ford
Title: Senior Vice President
Treasurer.
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EXHIBIT INDEX
SEQUENTIALLY
EXHIBIT DESCRIPTION NUMBERED PAGE
2.1 Agreement and Plan of
Reorganization, dated as of
July 19, 1996,
between Atmos Energy
Corporation and the
Registrant (excluding certain
exhibits thereto)
2.2 List of exhibits omitted from
Exhibit 2.1
20.1 Press Release, dated July 22,
1996
99.1 Standstill Agreement, dated
July 13, 1996 between Atmos
Energy Corporation and the
Registrant
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EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made
and entered into this 19th day of July, 1996, by and between ATMOS ENERGY
CORPORATION, a Texas corporation ("Atmos"), and UNITED CITIES GAS COMPANY, an
Illinois and Virginia corporation ("United Cities").
In consideration of the mutual agreements herein contained, Atmos and
United Cities agree to carry out a plan of reorganization providing for a
statutory merger under the applicable laws of Texas, Illinois and Virginia
whereby:
A. United Cities will be merged with and into Atmos, with Atmos
as the surviving corporation incorporated and existing under the laws of the
States of Texas and Virginia;
B. the shareholders of United Cities, upon exchange of their
shares of common stock of United Cities, will receive shares of common stock of
Atmos; and
C. all of the assets, properties, and business of United Cities,
together with all of the obligations and liabilities of United Cities, shall
thereupon be transferred to and assumed by Atmos;
all subject to the following terms and conditions:
ARTICLE 1
REPRESENTATIONS AND WARRANTIES OF UNITED CITIES
United Cities hereby represents and warrants to Atmos that the
statements set forth in this Article 1 are true, correct and complete as of the
date of this Agreement and will be true, correct and complete as of the Closing
Date as though made then and as though the Closing Date were substituted for
the date of this Agreement throughout this Article 1, except as otherwise set
forth in the United Cities Disclosure Schedule attached hereto as Exhibit A;
provided, that each matter set forth in the United Cities Disclosure Schedule
shall be deemed to be an exception only to those representations and warranties
that are specifically referenced by Section number in the United Cities
Disclosure Schedule in connection with such matter.
Section 1.1 Organization and Qualification.
(a) United Cities is a corporation duly organized,
validly existing, and in good standing under the laws of the
jurisdictions of its incorporation and has all requisite corporate
power and authority and possesses all franchises, grants,
authorizations, licenses, permits, easements, consents, certificates,
approvals, and orders (collectively, "Governmental Authorizations")
necessary to own, lease, and operate its properties and assets and to
carry on its business as it is now being
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conducted except where the failure to have any of such Governmental
Authorizations would not have a material adverse effect on the
business, operations, properties, condition (financial or otherwise),
assets or liabilities, of the United Cities Entities, taken as a
whole. United Cities is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each
jurisdiction in which the character of the property owned, leased, or
operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except in such
jurisdictions (if any) where the failure to be duly qualified or
licensed does not and would not have a material adverse effect on the
business, operations, properties, condition (financial or otherwise),
assets or liabilities, of the United Cities Entities, taken as a
whole.
(b) United Cities 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) United Cities has heretofore delivered to Atmos true,
correct, and complete copies of United Cities' Articles of
Incorporation and Bylaws, including all amendments thereto.
Section 1.2 Subsidiaries.
(a) United Cities does not directly or indirectly own any
equity or similar interest in any corporation, partnership, joint
venture, or other business association or entity, except as set forth
in Section 1.2(b), other than (i) United Cities Energy Corporation, a
Delaware corporation that is wholly owned by United Cities, (ii)
United Cities Gas Storage Company, a Delaware corporation that is
wholly owned by United Cities, (iii) United Cities Propane Gas of
Tennessee, Inc., a Tennessee corporation that is wholly owned by
United Cities Energy Corporation, and (iv) United Cities Leasing,
Inc., a Georgia corporation that is wholly owned by United Cities
Energy Corporation (collectively, the "United Cities Subsidiaries").
(United Cities and the United Cities Subsidiaries are referred to
collectively in this Agreement as the "United Cities Entities.")
United Cities is the sole record and beneficial owner of, and has good
and valid title to, all of the outstanding shares of capital stock of
United Cities Energy Corporation and United Cities Gas Storage
Company, and United Cities Energy Corporation is the sole record and
beneficial owner of, and has good and valid title to, all of the
outstanding capital stock of United Cities Propane Gas of Tennessee,
Inc. and United Cities Leasing, Inc., in each case free and clear of
all liens, mortgages, pledges, security interests or other
encumbrances. All of the outstanding capital stock of each of the
United Cities Subsidiaries has been duly authorized and validly
issued, is fully paid and nonassessable.
(b) United Cities Energy Corporation owns a 45% equity
interest in Woodward Marketing, L.L.C., free and clear of all liens,
mortgages, pledges, security
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interests and other encumbrances. The equity ownership interest held
by United Cities Energy Corporation in Woodward Marketing, L.L.C. has
been duly authorized and validly issued, is fully paid and
nonassessable.
(c) Each of the United Cities Subsidiaries is a
corporation duly organized, validly existing, and in good standing
under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority and possesses all Governmental
Authorizations necessary to own, lease, and operate its properties and
assets and to carry on its business as it is now being conducted
except where the failure to have any of such Governmental
Authorizations would not have a material adverse effect on the
business, operations, properties, condition (financial or otherwise),
assets or liabilities, of the United Cities Entities, taken as a
whole. Each of the United Cities Subsidiaries is duly qualified or
licensed as a foreign corporation to do business, and is in good
standing, in each jurisdiction in which the character of the property
owned, leased, or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary,
except in such jurisdictions (if any) where the failure to be duly
qualified or licensed does not and would not have a material adverse
effect on the business, operations, properties, condition (financial
or otherwise), assets or liabilities of the United Cities Entities,
taken as a whole.
(d) Woodward Marketing, L.L.C. is a limited liability
company duly organized, validly existing and in good standing under
the laws of the State of Delaware and has all requisite limited
liability company power and authority to own, lease, and operate its
properties and assets and to carry on its business as it is now being
conducted and is duly qualified as foreign limited liability company
in the State of Texas.
(e) United Cities has heretofore delivered to Atmos true,
correct and complete copies of the Articles of Incorporation and
Bylaws, including all amendments thereto, of the United Cities
Subsidiaries, and of the charter documents and Limited Liability
Company Agreement of Woodward Marketing, L.L.C.
Section 1.3 Capitalization. The entire authorized capital stock
of United Cities consists of 40,000,000 shares of common stock, no par value
("United Cities Stock"), and 200,000 shares of preferred stock, no par value
("Preferred Stock"). As of June 30, 1996, (a) 13,102,913 shares of United
Cities Stock were issued and outstanding, all of which were duly authorized,
validly issued, fully paid, and nonassessable and free of preemptive rights,
(b) no shares of Preferred Stock were issued and outstanding, and (c) no shares
of United Cities Stock or Preferred Stock were held in the treasury of United
Cities. Except as set forth on the United Cities SEC Reports, there are no
options, warrants, or other rights, agreements, arrangements, or commitments of
any character relating to the issued or unissued capital stock of the United
Cities Entities or obligating the United Cities Entities
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to issue or sell any shares of capital stock of, or any securities convertible
into or evidencing the right to purchase any shares of capital stock of or
other equity interests in, the United Cities Entities. There are no
obligations, contingent or otherwise, of the United Cities Entities to
repurchase, redeem, or otherwise acquire any shares of capital stock or other
equity interests in any of the United Cities Entities.
Section 1.4 Authority Relative to this Agreement. United Cities
has all requisite corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated hereby, subject to the approval of United Cities
shareholders as contemplated in this Agreement and the terms and conditions of
this Agreement. The execution and delivery of this Agreement by United Cities
and the consummation by United Cities of the transactions contemplated hereby
have been duly and validly authorized by United Cities' Board of Directors and,
except for the approval of the shareholders of United Cities, no other
corporate proceedings on the part of United Cities are necessary to authorize
this Agreement or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by United Cities and
constitutes the legal, valid, and binding obligation of United Cities and is
enforceable against United Cities in accordance with its terms, subject to
bankruptcy, insolvency, moratorium and other laws generally affecting
creditors' rights.
Section 1.5 No Conflict; Required Filings and Consents. The
execution, delivery, and performance of this Agreement by United Cities and the
consummation by United Cities of the transactions contemplated hereby in
accordance with the terms and conditions hereof, including the Merger, do not
and will not:
(a) conflict with the Articles of Incorporation or Bylaws
of the United Cities Entities or the Certificate of Formation or
Limited Liability Company Agreement of Woodward Marketing, L.L.C.;
(b) conflict with or violate any law, rule, regulation,
order, judgment, or decree applicable to any of the United Cities
Entities or by which any of them or any of their respective properties
is bound or affected;
(c) except for those consents and waivers required to be
obtained pursuant to Section 3.5, require from any person other than a
governmental or regulatory authority any consent, approval, or notice
under, or violate, result in any breach of, constitute a default (or
an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination,
amendment, acceleration, or cancellation of, or result in the creation
of a lien or encumbrance on any of the property or assets of any of
the United Cities Entities pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, or other instrument or
obligation to which any of the United Cities Entities is a party or by
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which any of the United Cities Entities or any of their respective
properties is bound or affected; or
(d) require any consent, approval, authorization, or
permit of, or filing with or notification to, any governmental or
regulatory authority except (i) the applicable requirements of
federal and state securities laws, (ii) the filing requirements under
the Hart-Scott-Rodino Act, (iii) the filing and recordation of
appropriate merger or other documents as required by the Texas
Business Corporation Act, the Illinois Business Corporation Act, and
the Virginia Stock Corporation Act, (iv) approvals of the applicable
state public utility commissions in the states in which United Cities
or Atmos is doing business, and (v) approval of the Federal Energy
Regulatory Commission.
Section 1.6 Compliance. None of the United Cities Entities 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, (a) any of the United Cities Entities' Articles of Incorporation
or Bylaws or the Certificate of Formation or Limited Liability Company
Agreement of Woodward Marketing, L.L.C., (b) any law, rule, regulation, order,
judgment, or decree applicable to any of the United Cities Entities or by which
any of them or any of their respective properties is bound or affected, or (c)
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise, or other instrument or obligation to which any of the United
Cities Entities is a party or by which any of them or any of their respective
properties is bound or affected, nor have any of them received and not finally
resolved any complaint, citation, or notice of a breach, default, or violation
of any of the foregoing nor are any threatened.
Section 1.7 Environmental Matters.
(a) No Hazardous Materials are now located in, on, at,
upon, or under the Subject Property currently owned or operated by any
of the United Cities Entities or have migrated or emanated, or
threaten to migrate or emanate, to adjacent property in a quantity or
manner that is required to be reported under any Environmental
Requirements, or that is in violation of any Environmental
Requirements, or for which any of the United Cities Entities will be
liable under any Environmental Requirements for the cost of
remediation or other response if such costs are incurred by an
Environmental Agency; and no Hazardous Materials have been located in,
on, at, upon, or under the Subject Property, or migrated or emanated
from the Subject Property at any time prior to or during the Use of
the Subject Property by any of the United Cities Entities in a
quantity or manner that is required to be reported under any
Environmental Requirements, or that is in violation of any
Environmental Requirements, or for which any of the United Cities
Entities will be liable under any Environmental Requirements for the
cost of remediation or other response if such costs are incurred by an
Environmental Agency.
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(b) No Hazardous Materials have been generated, stored,
transported, disposed of on-site, or sent off-site from, in, on, at,
or upon the Subject Property at any time during the Use of the Subject
Property by any of the United Cities Entities (or prior to the Use of
the Subject Property by any of the United Cities Entities) in a
quantity or manner that is required to be reported under any
Environmental Requirements, or that is in violation of any
Environmental Requirements, or for which any of the United Cities
Entities will be liable under any Environmental Requirements for the
cost of remediation or other response if such costs are incurred by an
Environmental Agency.
(c) There are no off-site locations where Hazardous
Materials generated or transported from the Subject Property have been
stored, treated, recycled, or disposed of by any of the United Cities
Entities or their agents, employees, or representatives in a quantity
or manner that is required to be reported under any Environmental
Requirements, or that is in violation of any Environmental
Requirements, or for which any of the United Cities Entities will be
liable under any Environmental Requirements for the cost of
remediation or other response if such costs are incurred by an
Environmental Agency.
(d) Each of the United Cities Entities has all permits,
licenses, or authorizations from any Environmental Agency that it is
required to have by any Environmental Requirement in order to operate
any aspect of the Subject Property currently operated by it or the
business currently conducted at the Subject Property; the Use of the
Subject Property currently Used by each of the United Cities Entities,
including but not limited to any and all Environmental Activity, and
all Environmental Conditions, is and has been in compliance with all
Environmental Requirements during the Use of the Subject Property by
each of the United Cities Entities and at all times prior to its Use
by each of the United Cities Entities.
(e) No Environmental Costs have been suffered by any of
the United Cities Entities or by any third party prior to or during
the Use of the Subject Property by any of the United Cities Entities,
and United Cities is not aware of, and has not received notice of, any
past or present events, conditions, circumstances, activities,
practices, incidents, actions, or plans that may result in
Environmental Costs or that may give rise to any common law or legal
liability based on or related to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or
handling or the emission, discharge, release, or threatened release
into the environment, of any pollutant, contaminant, chemical, or
industrial toxic or hazardous substance or waste or Hazardous
Materials.
(f) None of the United Cities Entities has Used, in the
past, any facilities that could reasonably be expected to subject any
of the United Cities Entities to Environmental Costs.
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(g) All of the manufactured gas plants now or formerly
Used by any of the United Cities Entities and all locations where
waste from these plants was disposed of are set forth in the United
Cities SEC Reports.
(h) All of the underground storage tanks located on the
Subject Property are set forth in the United Cities SEC Reports.
Section 1.8 Contracts. United Cities has made available to Atmos
all material contracts, loan agreements, indentures, commitments, and other
agreements or documents to which any of the United Cities Entities is a party
or by which any of the United Cities Entities or any of their respective
properties is bound or affected. All such contracts and instruments are in
full force and effect and no party thereto is in default thereunder and no
default is threatened thereunder.
Section 1.9 SEC Filings; Financial Statements; Absence of
Undisclosed Liabilities.
(a) United Cities has filed all forms, reports, and
documents required to be filed with the SEC since January 1, 1993, and
has heretofore delivered or made available to Atmos, in the form filed
with the SEC, (i) its Annual Reports on Form 10-K for the fiscal years
ended December 31, 1993 through 1995, (ii) its Quarterly Report on
Form 10-Q for the period ended March 31, 1996, (iii) all proxy
statements relating to United Cities' meetings of shareholders
(whether annual or special) held since January 1, 1993, (iv) all Forms
8-K filed by United Cities with the SEC since January 1, 1993, (v) all
other reports or registration statements filed by United Cities with
the SEC since January 1, 1993, and (vi) all amendments and supplements
to all such reports, registration statements and proxy statements
filed by United Cities with the SEC since January 1, 1993
(collectively, the "United Cities SEC Reports"). As of their
respective dates, the United Cities SEC Reports were prepared in
substantial compliance 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. None of the
United Cities Entities other than United Cities is subject to the
reporting requirements of the Exchange Act.
(b) United Cities has heretofore delivered or made
available to Atmos its audited consolidated financial statements for
its fiscal years ended December 31, 1993 through 1995 and its
unaudited consolidated financial statements for the period ended March
31, 1996. All such financial statements of United Cities that have
been delivered or made available to Atmos have been prepared in
accordance with generally accepted accounting principles applied
(except as otherwise noted therein) on a consistent basis throughout
the periods covered thereby (subject, in the case of
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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). The
consolidated financial statements (together with the related notes
thereto) fairly present in all material respects the consolidated
financial condition and consolidated results of operation of United
Cities as of and for the respective dates indicated.
(c) None of the United Cities Entities has any
liabilities or obligations (whether accrued, absolute, contingent,
known or unknown, or otherwise) that (i) are not accrued or reserved
against in the consolidated balance sheet of United Cities as at March
31, 1996 or reflected in the notes thereto in accordance with
generally accepted accounting principles consistently applied or (ii)
were incurred after the date of such balance sheet outside of the
ordinary course of business of any of the United Cities Entities.
Section 1.10 Books and Records. United Cities has made available to
Atmos, and will continue to make available to Atmos, all of the United Cities
Entities' books, records, and certificates. All of such books, records, and
certificates are true, complete, and correct.
Section 1.11 Conduct of Business in Ordinary Course; Absence of
Certain Changes or Events. Since March 31, 1996, each of the United Cities
Entities has conducted its business only in the ordinary course; and, since
such date, there has not been any adverse change in the business, operations,
properties, condition (financial or otherwise), assets or liabilities of any of
the United Cities Entities, taken as a whole, or any condition, event, or
development that will result in an adverse change in the business, operations,
properties, condition (financial or otherwise), assets or liabilities of the
United Cities Entities, taken as a whole.
Section 1.12 Litigation. There are no material claims, actions,
suits, investigations, or proceedings pending or threatened against or
affecting any of the United Cities Entities 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 the
United Cities Entities nor any of their respective properties is subject to any
order, writ, judgment, injunction, decree, determination, or award.
Section 1.13 Title to, and Condition of, Assets. Each of the United
Cities Entities has good and marketable 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 United Cities
balance sheet dated March 31, 1996 referred to in Section 1.9 of this Agreement
(except for any properties or assets disposed of in the ordinary course of
business since the date of such balance sheet), necessary or appropriate for
the operation of its business, free and clear of all liens, mortgages, pledges,
security interests, or other encumbrances (except for matters set forth in the
notes to such balance sheet and the notes
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to the December 31, 1995 balance sheet). All of the United Cities Entities'
properties and assets are in good condition and repair (ordinary wear and tear
excepted) and are adequate and sufficient for the conduct of the United Cities
Entities' businesses.
Section 1.14 Intellectual Property. The United Cities Entities own
or possess, or can acquire on reasonable terms, the patents, patent rights,
licenses, inventions, copyrights, know-how (including trade secrets and other
unpatentable proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names presently employed by them in
connection with the business now operated by them, and none of the United
Cities Entities has received any notice of infringement of or conflict with
asserted rights of others with respect to any of the foregoing which, singly or
in the aggregate, if the subject of an unfavorable decision, ruling or finding,
would result in any material adverse change in the business, operations,
properties, condition (financial or otherwise), assets or liabilities of the
United Cities Entities, taken as a whole.
Section 1.15 Taxes. All Tax Returns of or relating to any Taxes that
are required to be filed with respect to United Cities and the United Cities
Subsidiaries or any of their income, properties, or operations have been duly
filed on a timely basis and were true, complete, and correct. All Taxes
attributable to United Cities and the United Cities Subsidiaries or any of
their income, properties, or operations that are or were due and payable have
been timely paid, and United Cities and the United Cities Subsidiaries have no
liability for any Taxes other than with respect to their current taxable year
for which adequate provisions have been made and are reflected in United
Cities' consolidated financial statements in accordance with generally accepted
accounting principles.
Section 1.16 Employee Benefit Plans.
(a) United Cities has previously delivered or made
available to Atmos true, correct and complete copies of (i) each Plan
that is a "multiemployer plan," as defined in ERISA Section 4001, (ii)
each other employee benefit plan as defined in Section 3(3) of ERISA
with respect to which a United Cities Entity or any Group Member is a
"Party in Interest," as defined in Section 3(14) of ERISA, and (iii)
each other Employee Benefit Arrangement.
(b) Each United Cities Entity, each Group Member, and
each Plan is now, and has been from its inception, in compliance with
the provisions of ERISA and the Code insofar as ERISA and the Code are
applicable to such Plans. Each Plan intended to be qualified under
Section 401(a) of the Code has been determined to be so qualified by
the IRS and nothing has occurred since the date of the last such
determination which resulted or is likely to result in the revocation
of such determination. All required reports and descriptions of each
Plan have been timely filed and distributed as required by ERISA.
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(c) There has not occurred with respect to any Plan any
non-exempt "Prohibited Transaction," as defined in either Section 406
of ERISA or Section 4975 of the Code.
(d) There has not occurred with respect to any Plan any
"Reportable Event," as defined in Section 4043 of ERISA. No Plan has
applied for or obtained a waiver from the IRS of any minimum funding
requirement under Section 412 of the Code.
(e) (i) No Plan has been terminated, and no withdrawal
from any "multiemployer plan," as defined in Section 4001 of ERISA,
has occurred since the inception of any Plan under circumstances that
have given rise to, or would give rise to, any actual or potential
liability to the PBGC or any other person (excluding liabilities to
participants (other than any liability for unpaid benefits) for
benefits payable in the normal course of events pursuant to any such
termination or withdrawal), (ii) no event or condition exists which
presents a risk of termination of any Plan by the PBGC, and (iii)
there is no actual or potential liability to the PBGC or any other
person expected by the United Cities Entities or any Group Member to
be incurred with respect to any Plan, including, but not limited to,
any liability for premium payments, for any accumulated funding
deficiency as defined in Section 302 of ERISA or for any minimum
funding contribution under Section 302 of ERISA.
(f) The current value (as defined in Section
4062(b)(1)(A) of ERISA) of all accrued benefits (as defined in
Section 3 of ERISA) under each Plan which is a plan subject to the
provisions of Title IV of ERISA does not, as of January 1, 1996,
exceed the current value of the assets of such Plan allocable to such
accrued benefits, by an amount which is more than $1,500,000.
(g) No lien imposed under Section 412(n) of the Code
exists in favor of any Plan upon any property belonging to a Group
Member.
(h) United Cities has previously delivered or made
available to Atmos true, correct and complete copies of the annual
reports and actuarial reports for the preceding two plan years (1993
and 1994) filed with respect to each such Plan and Employee Benefit
Arrangement, summary plan descriptions and other communications to
employees relating to each such Plan and Employee Benefit Arrangement,
any related trust or third-party funding vehicle documents and related
financial statements, and all letters from the IRS, if any, confirming
the tax-exempt status or qualification under Section 401(a) of the
Code of any Plan. There are no Plans or Employee Benefit Arrangements
other than those previously delivered and made available to Atmos.
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(i) Neither (i) the United Cities Entities, or any
director, officer, employee, or agent of a United Cities Entity, has,
with respect to any Plan, nor (ii) any Plan or trust created
thereunder or trustee or administrator thereof has, engaged in any
conduct that would result in any penalties under Section 502(i) of
ERISA or any liability under Section 409 of ERISA for breach of
fiduciary duty. No civil or criminal action or claim (other than
uncontested claims for benefits) is pending or threatened with respect
to any Plan.
(j) None of the United Cities Entities, any Group Member,
or any director, officer, or employee of any of the foregoing have
taken any elective action that would commit a United Cities Entity to
continue any Plan or Employee Benefit Arrangement or any benefit
thereunder for any present or former employee of a United Cities
Entity or that would prevent such United Cities Entity from changing
or terminating any such benefit or plan; provided, that this
representation shall not be construed to apply with respect to any
express provision of a document which provides for such effect without
further action or election by such persons.
(k) No United Cities Entity now has in effect, or
previously had in effect, any welfare benefit plan, commitment,
understanding, or arrangement providing for medical or death benefits
(whether insured or uninsured) with respect to current or former
employees beyond their date of retirement or other termination of
service (other than coverage mandated by Section 4980B of the Code and
Section 601 of ERISA, the cost of which is fully paid by the former
employee or his or her dependents).
(l) For purposes of this Section 1.16, the terms
"Employee Benefit Arrangement," "Group Member," and "Plan" shall be
interpreted to exclude all reference to Atmos Entities under Section
8.1(l), (v) and (hh) hereof.
Section 1.17 Labor Matters. United Cities has previously delivered
or made available to Atmos true, correct and complete copies of all labor
contracts and collective bargaining agreements. Except as set forth in the
United Cities SEC Reports, there are no employee activities or controversies
(including, but not limited to, any labor organizing activities, election
petitions or proceedings preparatory thereto, unfair labor practice complaints,
labor strikes, disputes, slowdowns, or work stoppages) pending or, to United
Cities' knowledge, threatened, between any of the United Cities Entities and
any of their employees.
Section 1.18 Disclosure; Information in the Proxy Statement/Prospect
us. No representation or warranty by United Cities in this Agreement and no
statement contained in any certificate furnished or to be furnished by United
Cities to Atmos pursuant to the provisions of this Agreement contains or will
contain any untrue statement of material fact or omits or will omit to state
any material fact necessary, in light of the circumstances under
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which it is made, in order to make the statements herein or therein not
misleading. Any written information supplied by United Cities specifically for
inclusion or incorporation by reference in the Proxy Statement/Prospectus and
which is included or incorporated by reference therein shall not, at the date
the Proxy Statement/Prospectus (or any amendment thereof or supplement thereto)
is filed with the SEC, at the time of the Atmos Shareholders Meeting, at the
time of the United Cities Shareholders Meeting, and at the time the Proxy
Statement/Prospectus becomes effective with the SEC as a registration
statement, be false or misleading with respect to any material fact, omit to
state any material fact required to be stated therein or necessary in order to
make the statements made therein, in the light of the circumstances under which
they are made, not misleading, or omit to state any material fact necessary to
correct any statement in any earlier communication with respect to the
solicitation of proxies for the Atmos Shareholders Meeting or the United Cities
Shareholders Meeting that has become materially false or misleading. If at any
time prior to the Effective Time any event relating to any of the United
Cities Entities or any of their respective directors or officers should be
discovered by United Cities which should be set forth in a supplement to the
Proxy Statement/Prospectus, United Cities shall promptly inform Atmos in
writing. Notwithstanding the foregoing, United Cities makes no representation
or warranty with respect to any information to be contained in the Proxy
Statement/Prospectus other than information provided in writing by United
Cities specifically for inclusion or incorporation by reference in the Proxy
Statement/Prospectus.
Section 1.19 Insurance. United Cities has not failed to give any
notice or present any claim under any insurance policies or binders maintained
by any of the United Cities Entities with respect to their properties and
business in due and timely fashion. None of the United Cities Entities has
received notice of cancellation or nonrenewal of any such policy or binder.
Section 1.20 Broker's Fees. No broker, finder, or investment banker
(other than PaineWebber Incorporated) is entitled to any brokerage, finder's,
or other fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of any of the
United Cities Entities.
Section 1.21 No United Cities Investment in Atmos Stock. None of the
United Cities Entities has acquired or is the beneficial owner of any Atmos
Stock.
Section 1.22 Board Recommendation. The Board of Directors of United
Cities has, by resolutions duly adopted by the requisite vote of directors
present at a meeting of such Board duly called and held on July 19, 1996,
determined that the Merger in accordance with the terms of this Agreement and
the Plan of Merger is fair and in the best interests of its shareholders and
has recommended that the shareholders of United Cities approve the Merger and
Plan of Merger, and ratify this Agreement.
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Section 1.23 PUHCA. Neither United Cities nor any other of the
United Cities Entities is required to register under PUHCA, or the rules and
regulations thereunder.
Section 1.24 Regulation as a Utility. United Cities is a regulated
public utility in the States of Tennessee, Illinois, Missouri, Georgia, South
Carolina, Virginia, Iowa, and Kansas and in no other state. Neither United
Cities nor any United Cities Entity is subject to regulation as a public
utility or public service company (or similar designation) by any other state
in the United States, by the United States or any agency or instrumentality of
the United States or by any foreign country, other than the Federal Energy
Regulatory Commission.
Section 1.25 Vote Required. The approval of the Merger by holders
of a majority of the shares of outstanding United Cities Stock is the only
vote of the holders of any class or series of the capital stock of United Cities
required to approve this Agreement, the Plan of Merger, the Merger, and the
other transactions contemplated hereby.
Section 1.26 Opinion of Financial Advisor. United Cities has
received the opinion of PaineWebber Incorporated, dated the date hereof, to
the effect that, as of the date hereof, the exchange ratio set forth in the
Plan of Merger is fair from a financial point of view to the holders of United
Cities Stock.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF ATMOS
Atmos hereby represents and warrants to United Cities that the
statements set forth in this Article 2 are true, correct and complete as of the
date of this Agreement and will be true, correct and complete as of the Closing
Date as though made then and as though the Closing Date were substituted for
the date of this Agreement throughout this Article 2, except as otherwise set
forth in the Atmos Disclosure Schedule attached hereto as Exhibit B; provided,
that each matter set forth in the Atmos Disclosure Schedule shall be deemed to
be an exception only to those representations and warranties that are
specifically referenced by Section number in the Atmos Disclosure Schedule in
connection with such matter.
Section 2.1 Organization and Qualification.
(a) Atmos is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdictions of
its incorporation and has all requisite corporate power and authority
and possesses all franchises, grants, authorizations, licenses,
permits, easements, consents, certificates, approvals, and orders
(collectively, "Governmental Authorizations") necessary to own, lease,
and operate its properties and assets and to carry on its business as
it is now being conducted except where the failure to have any of such
Governmental Authorizations would not have a material
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adverse effect on the business, operations, properties, condition
(financial or otherwise), assets or liabilities of the Atmos Entities,
taken as a whole. Atmos is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each
jurisdiction in which the character of the property owned, leased, or
operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except in such
jurisdictions (if any) where the failure to be duly qualified or
licensed does not and would not have a material adverse effect on the
business, operations, properties, condition (financial or otherwise),
assets or liabilities of the Atmos Entities, taken as a whole.
(b) Atmos 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) Atmos has heretofore delivered to United Cities true,
correct, and complete copies of Atmos' Articles of Incorporation and
Bylaws, including all amendments thereto.
Section 2.2 Subsidiaries.
(a) Atmos does not directly or indirectly own any equity
or similar interest in any corporation, partnership, joint venture, or
other business association or entity other than (i) Atmos Energy
Services, a Delaware corporation that is wholly owned by Atmos, (ii)
EGASCO, Inc., a Texas corporation that is wholly owned by Atmos, (iii)
EnerMart, Inc., a Delaware corporation that is wholly owned by Atmos,
(iv) EnerMart Trust, a Pennsylvania business trust that is wholly
owned by EnerMart, Inc., (v) Trans Louisiana Industrial Gas Company,
Inc., a Louisiana corporation that is wholly owned by Atmos, and (vi)
Western Kentucky Gas Resources Company, a Delaware corporation that is
wholly owned by Atmos (collectively, the "Atmos Subsidiaries").
(Atmos and the Atmos Subsidiaries are referred to collectively in this
Agreement as the "Atmos Entities.") Atmos is the sole record and
beneficial owner of, and has good and valid title to, all of the
outstanding shares of capital stock of the Atmos Subsidiaries other
than EnerMart Trust, and EnerMart, Inc. is the sole record and
beneficial owner of, and has good and valid title to, all of the
outstanding equity ownership interests in EnerMart Trust, in each case
free and clear of all liens, mortgages, pledges, security interests or
other encumbrances. All of the outstanding capital stock of each of
the Atmos Subsidiaries that is a corporation, and, in the case of
EnerMart Trust, the equity ownership interest held by EnerMart, Inc.,
has been duly authorized and validly issued, is fully paid and
nonassessable.
(b) Each of the Atmos Subsidiaries (other than EnerMart
Trust) is a corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation and
has all requisite corporate power and authority and possesses all
Governmental Authorizations necessary to own, lease, and
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operate its properties and assets and to carry on its business as it
is now being conducted except where the failure to have any of such
Governmental Authorizations would not have a material adverse effect
on the business, operations, properties, condition (financial or
otherwise), assets or liabilities of the Atmos Entities, taken as a
whole. Each of the Atmos Subsidiaries (other than EnerMart Trust) is
duly qualified or licensed as a foreign corporation to do business,
and is in good standing, in each jurisdiction in which the character
of the property owned, leased, or operated by it or the nature of the
business conducted by it makes such qualification or licensing
necessary, except in such jurisdictions (if any) where the failure to
be duly qualified or licensed does not and would not have a material
adverse effect on the business, operations, properties, condition
(financial or otherwise), assets or liabilities of the Atmos Entities,
taken as a whole.
(c) EnerMart Trust is a business trust duly organized,
validly existing and in good standing under the laws of the State of
Pennsylvania and has all requisite business trust power and authority
to own, lease, and operate its properties and assets and to carry on
its business as it is now being conducted.
(d) Atmos has heretofore delivered to United Cities true,
correct and complete copies of the Articles of Incorporation and
Bylaws, including all amendments thereto, of the Atmos Subsidiaries,
and the organizational documents of EnerMart Trust.
Section 2.3 Capitalization. The entire authorized capital stock
of Atmos consists of 75,000,000 shares of common stock, no par value ("Atmos
Stock"). As of June 30, 1996, (a) 15,982,304 shares of Atmos Stock were issued
and outstanding, all of which were duly authorized, validly issued, fully paid,
and nonassessable and free of preemptive rights, and (b) no shares of Atmos
Stock were held in the treasury of Atmos. There are no options, warrants, or
other rights, agreements, arrangements, or commitments of any character
relating to the issued or unissued capital stock of the Atmos Entities or
obligating the Atmos Entities to issue or sell any shares of capital stock of,
or any securities convertible into or evidencing the right to purchase any
shares of capital stock of or other equity interests in, the Atmos Entities.
There are no obligations, contingent or otherwise, of the Atmos Entities to
repurchase, redeem, or otherwise acquire any shares of capital stock or other
equity interests in any of the Atmos Entities.
Section 2.4 Authority Relative to this Agreement. Atmos has all
requisite corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder and to consummate the transactions
contemplated hereby, subject to the approval of Atmos shareholders as
contemplated in this Agreement and the terms and conditions of this Agreement.
The execution and delivery of this Agreement by Atmos and the consummation by
Atmos of the transactions contemplated hereby have been duly and validly
authorized by Atmos' Board of Directors and, except for the approval of the
shareholders
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of Atmos, no other corporate proceedings on the part of Atmos are necessary to
authorize this Agreement or to consummate the transactions so contemplated.
This Agreement has been duly and validly executed and delivered by Atmos and
constitutes the legal, valid, and binding obligation of Atmos and is
enforceable against Atmos in accordance with its terms, subject to bankruptcy,
insolvency, moratorium and other laws generally affecting creditors' rights.
Section 2.5 No Conflict; Required Filings and Consents. The
execution, delivery, and performance of this Agreement by Atmos and the
consummation by Atmos of the transactions contemplated hereby in accordance
with the terms and conditions hereof, including the Merger, do not and will
not:
(a) conflict with the Articles of Incorporation or Bylaws
of the Atmos Entities or, in the case of EnerMart Trust, its
organizational documents;
(b) conflict with or violate any law, rule, regulation,
order, judgment, or decree applicable to any of the Atmos Entities or
by which any of them or any of their respective properties is bound or
affected;
(c) except for those consents and waivers required to be
obtained pursuant to Section 4.6, require from any person other than a
governmental or regulatory authority any consent, approval, or notice
under, or violate, result in any breach of, constitute a default (or
an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination,
amendment, acceleration, or cancellation of, or result in the creation
of a lien or encumbrance on any of the property or assets of any of
the Atmos Entities pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, or other instrument or obligation
to which any of the Atmos Entities is a party or by which any of the
Atmos Entities or any of their respective properties is bound or
affected; or
(d) require any consent, approval, authorization, or
permit of, or filing with or notification to, any governmental or
regulatory authority except (i) the applicable requirements of
federal and state securities laws, (ii) the filing requirements under
the Hart-Scott-Rodino Act, (iii) the filing and recordation of
appropriate merger or other documents as required by the Texas
Business Corporation Act, the Illinois Business Corporation Act, and
the Virginia Stock Corporation Act, (iv) approvals of the applicable
state public utility commissions in the states in which Atmos or
United Cities is doing business, and (v) approval of the Federal
Energy Regulatory Commission.
Section 2.6 Compliance. None of the Atmos Entities 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, (a) any of the Atmos Entities' Articles
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of Incorporation or Bylaws, or, in the case of EnerMart Trust, its
organizational documents, (b) any law, rule, regulation, order, judgment, or
decree applicable to any of the Atmos Entities or by which any of them or any
of their respective properties is bound or affected, or (c) any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise, or
other instrument or obligation to which any of the Atmos Entities is a party or
by which any of them or any of their respective properties is bound or
affected, nor have any of them received and not finally resolved any complaint,
citation, or notice of a breach, default, or violation of any of the foregoing
nor are any threatened.
Section 2.7 Environmental Matters.
(a) No Hazardous Materials are now located in, on, at,
upon, or under the Subject Property currently owned or operated by any
of the Atmos Entities or have migrated or emanated, or threaten to
migrate or emanate, to adjacent property in a quantity or manner that
is required to be reported under any Environmental Requirements, or
that is in violation of any Environmental Requirements, or for which
any of the Atmos Entities will be liable under any Environmental
Requirements for the cost of remediation or other response if such
costs are incurred by an Environmental Agency; and no Hazardous
Materials have been located in, on, at, upon, or under the Subject
Property, or migrated or emanated from the Subject Property at any
time prior to or during the Use of the Subject Property by any of the
Atmos Entities in a quantity or manner that is required to be reported
under any Environmental Requirements, or that is in violation of any
Environmental Requirements, or for which any of the Atmos Entities
will be liable under any Environmental Requirements for the cost of
remediation or other response if such costs are incurred by an
Environmental Agency.
(b) No Hazardous Materials have been generated, stored,
transported, disposed of on-site, or sent off-site from, in, on, at,
or upon the Subject Property at any time during the Use of the Subject
Property by any of the Atmos Entities (or prior to the Use of the
Subject Property by any of the Atmos Entities) in a quantity or manner
that is required to be reported under any Environmental Requirements,
or that is in violation of any Environmental Requirements, or for
which any of the Atmos Entities will be liable under any Environmental
Requirements for the cost of remediation or other response if such
costs are incurred by an Environmental Agency.
(c) There are no off-site locations where Hazardous
Materials generated or transported from the Subject Property have been
stored, treated, recycled, or disposed of by any of the Atmos Entities
or their agents, employees, or representatives in a quantity or manner
that is required to be reported under any Environmental Requirements,
or that is in violation of any Environmental Requirements, or for
which any of the Atmos Entities will be liable under any
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Environmental Requirements for the cost of remediation or other
response if such costs are incurred by an Environmental Agency.
(d) Each of the Atmos Entities has all permits, licenses,
or authorizations from any Environmental Agency that it is required
to have by any Environmental Requirement in order to operate any
aspect of the Subject Property currently operated by it or the
business currently conducted at the Subject Property; the Use of the
Subject Property currently Used by each of the Atmos Entities,
including but not limited to any and all Environmental Activity, and
all Environmental Conditions, is and has been in compliance with all
Environmental Requirements during the Use of the Subject Property by
each of the Atmos Entities and at all times prior to its Use by each
of the Atmos Entities.
(e) No Environmental Costs have been suffered by any of
the Atmos Entities or by any third party prior to or during the Use of
the Subject Property by any of the Atmos Entities, and Atmos is not
aware of, and has not received notice of, any past or present events,
conditions, circumstances, activities, practices, incidents, actions,
or plans that may result in Environmental Costs or that may give rise
to any common law or legal liability based on or related to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling or the emission, discharge, release,
or threatened release into the environment, of any pollutant,
contaminant, chemical, or industrial toxic or hazardous substance or
waste or Hazardous Materials.
(f) None of the Atmos Entities has Used, in the past, any
facilities that could reasonably be expected to subject any of the
Atmos Entities to Environmental Costs.
(g) All of the manufactured gas plants now or formerly
Used by any of the Atmos Entities and all locations where waste from
these plants was disposed of are set forth in the Atmos SEC Reports.
(h) All of the underground storage tanks located on the
Subject Property are set forth in the Atmos SEC Reports.
Section 2.8 Contracts. Atmos has made available to United Cities
all material contracts, loan agreements, indentures, commitments, and other
agreements or documents to which any of the Atmos Entities is a party or by
which any of the Atmos Entities or any of their respective properties is bound
or affected. All such contracts and instruments are in full force and effect
and no party thereto is in default thereunder and no default is threatened
thereunder.
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Section 2.9 SEC Filings; Financial Statements; Absence of
Undisclosed Liabilities.
(a) Atmos has filed all forms, reports, and documents
required to be filed with the SEC since January 1, 1993, and has
heretofore delivered or made available to Atmos, in the form filed
with the SEC, (i) its Annual Reports on Form 10-K for the fiscal years
ended September 30, 1993 through 1995, (ii) its Quarterly Report on
Form 10-Q for the periods ended December 31, 1995 and March 31, 1996,
(iii) all proxy statements relating to Atmos' meetings of shareholders
(whether annual or special) held since January 1, 1993, (iv) all Forms
8-K filed by Atmos with the SEC since January 1, 1993, (v) all other
reports or registration statements filed by Atmos with the SEC since
January 1, 1993, and (vi) all amendments and supplements to all such
reports, registration statements and proxy statements filed by Atmos
with the SEC since January 1, 1993 (collectively, the "Atmos SEC
Reports"). As of their respective dates, the Atmos SEC Reports were
prepared in substantial compliance 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. None of the
Atmos Entities other than Atmos is subject to the reporting
requirements of the Exchange Act.
(b) Atmos has heretofore delivered or made available to
United Cities its audited consolidated financial statements for its
fiscal years ended September 30, 1993 through 1995 and its unaudited
consolidated financial statements for the periods ended December 31,
1995 and March 31, 1996. All such financial statements of Atmos that
have been delivered or made available to United Cities have been
prepared in accordance with generally accepted accounting principles
applied (except as otherwise noted therein) on a consistent basis
throughout the periods covered thereby (subject, in the case of any
such financial statements that are unaudited, to year-end adjustments
in such amount and of such type as are or will be consistent with
adjustments made in prior fiscal years). The consolidated financial
statements (together with the related notes thereto) fairly present in
all material respects the consolidated financial condition and
consolidated results of operation of Atmos as of and for the
respective dates indicated.
(c) None of the Atmos Entities has any liabilities or
obligations (whether accrued, absolute, contingent, known or unknown,
or otherwise) that (i) are not accrued or reserved against in the
consolidated balance sheet of Atmos as at March 31, 1996 or reflected
in the notes thereto in accordance with generally accepted accounting
principles consistently applied or (ii) were incurred after the date
of such balance sheet outside of the ordinary course of business of
any of the Atmos Entities.
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Section 2.10 Books and Records. Atmos has made available to United
Cities, and will continue to make available to United Cities, all of the Atmos
Entities' books, records, and certificates. All of such books, records, and
certificates are true, complete, and correct.
Section 2.11 Conduct of Business in Ordinary Course; Absence of
Certain Changes or Events. Since March 31, 1996, each of the Atmos Entities has
conducted its business only in the ordinary course; and, since such date, there
has not been any adverse change in the business, operations, properties,
condition (financial or otherwise), assets or liabilities of the Atmos
Entities, taken as a whole, or any condition, event, or development that will
result in an adverse change in the business, operations, properties, condition
(financial or otherwise), assets or liabilities of the Atmos Entities, taken as
a whole.
Section 2.12 Litigation. There are no material claims, actions,
suits, investigations, or proceedings pending or threatened against or
affecting any of the Atmos Entities 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 the
Atmos Entities nor any of their respective properties is subject to any order,
writ, judgment, injunction, decree, determination, or award.
Section 2.13 Title to, and Condition of, Assets. Each of the Atmos
Entities has good and marketable 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 Atmos balance sheet dated
March 31, 1996 referred to in Section 2.9 of this Agreement (except for any
properties or assets disposed of in the ordinary course of business since the
date of such balance sheet), necessary or appropriate for the operation of its
business, free and clear of all liens, mortgages, pledges, security interests,
or other encumbrances (except for matters set forth in the notes to such
balance sheet and the notes to the December 31, 1995 balance sheet). All of
the Atmos Entities' properties and assets are in good condition and repair
(ordinary wear and tear excepted) and are adequate and sufficient for the
conduct of the Atmos Entities' businesses.
Section 2.14 Intellectual Property. The Atmos Entities own or
possess, or can acquire on reasonable terms, the patents, patent rights,
licenses, inventions, copyrights, know-how (including trade secrets and other
unpatentable proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names presently employed by them in
connection with the business now operated by them, and none of the Atmos
Entities has received any notice of infringement of or conflict with asserted
rights of others with respect to any of the foregoing which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would
result in any material adverse change in the business, operations, properties,
condition (financial or otherwise), assets or liabilities, of the Atmos
Entities, taken as a whole.
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Section 2.15 Taxes. All Tax Returns of or relating to any Taxes
that are required to be filed with respect to Atmos and the Atmos Subsidiaries
or any of their income, properties, or operations have been duly filed on a
timely basis and were true, complete, and correct. All Taxes attributable to
Atmos and the Atmos Subsidiaries or any of their income, properties, or
operations that are or were due and payable have been timely paid, and Atmos
and the Atmos Subsidiaries have no liability for any Taxes other than with
respect to their current taxable year for which adequate provisions have been
made and are reflected in Atmos' consolidated financial statements in
accordance with generally accepted accounting principles.
Section 2.16 Employee Benefit Plans.
(a) Atmos has previously delivered or made available to
United Cities true, correct and complete copies of (i) each Plan that
is a "multiemployer plan," as defined in ERISA Section 4001, (ii) each
other employee benefit plan as defined in Section 3(3) of ERISA with
respect to which an Atmos Entity or any Group Member is a "Party in
Interest," as defined in Section 3(14) of ERISA, and (iii) each other
Employee Benefit Arrangement.
(b) Each Atmos Entity, each Group Member, and each Plan
is now, and has been from its inception, in compliance with the
provisions of ERISA and the Code insofar as ERISA and the Code are
applicable to such Plans. Each Plan intended to be qualified under
Section 401(a) of the Code has been determined to be so qualified by
the IRS and nothing has occurred since the date of the last such
determination which resulted or is likely to result in the revocation
of such determination. All required reports and descriptions of each
Plan have been timely filed and distributed as required by ERISA.
(c) There has not occurred with respect to any Plan any
non-exempt "Prohibited Transaction," as defined in either Section 406
of ERISA or Section 4975 of the Code.
(d) There has not occurred with respect to any Plan any
"Reportable Event," as defined in Section 4043 of ERISA. No Plan has
applied for or obtained a waiver from the IRS of any minimum funding
requirement under Section 412 of the Code.
(e) (i) No Plan has been terminated, and no withdrawal
from any "multiemployer plan," as defined in Section 4001 of ERISA,
has occurred since the inception of any Plan under circumstances that
have given rise to, or would give rise to, any actual or potential
liability to the PBGC or any other person (excluding liabilities to
participants (other than any liability for unpaid benefits) for
benefits payable in the normal course of events pursuant to any such
termination or
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withdrawal), (ii) no event or condition exists which presents a risk
of termination of any Plan by the PBGC, and (iii) there is no actual
or potential liability to the PBGC or any other person expected by the
Atmos Entities or any Group Member to be incurred with respect to any
Plan, including, but not limited to, any liability for premium
payments, for any accumulated funding deficiency as defined in Section
302 of ERISA or for any minimum funding contribution under Section 302
of ERISA.
(f) The current value (as defined in Section
4062(b)(1)(A) of ERISA) of all accrued benefits (as defined in
Section 3 of ERISA) under each Plan which is a plan subject to the
provisions of Title IV of ERISA does not, as of the date of the most
recent actuarial report for such Plan exceed the current value of the
assets of such Plan allocable to such accrued benefits, except with
respect to the Greeley Gas Company Employees' Pension Plan.
(g) No lien imposed under Section 412(n) of the Code
exists in favor of any Plan upon any property belonging to a Group
Member.
(h) Atmos has previously delivered or made available to
United Cities true, correct and complete copies of the annual reports
and actuarial reports for the preceding two plan years (1993 and 1994)
filed with respect to each such Plan and Employee Benefit Arrangement,
summary plan descriptions and other communications to employees
relating to each such Plan and Employee Benefit Arrangement, any
related trust or third-party funding vehicle documents and related
financial statements, and all letters from the IRS, if any, confirming
the tax-exempt status or qualification under Section 401(a) of the
Code of any Plan. There are no Plans or Employee Benefit Arrangements
other than those previously delivered and made available to United
Cities.
(i) Neither (i) the Atmos Entities, or any director,
officer, employee, or agent of an Atmos Entity, has, with respect to
any Plan, nor (ii) any Plan or trust created thereunder or trustee or
administrator thereof has, engaged in any conduct that would result in
any penalties under Section 502(i) of ERISA or any liability under
Section 409 of ERISA for breach of fiduciary duty. No civil or
criminal action or claim (other than uncontested claims for benefits)
is pending or threatened with respect to any Plan.
(j) None of the Atmos Entities, any Group Member, or any
director, officer, or employee of any of the foregoing have taken any
elective action that would commit an Atmos Entity to continue any Plan
or Employee Benefit Arrangement or any benefit thereunder for any
present or former employee of an Atmos Entity or that would prevent
such Atmos Entity from changing or terminating any such benefit or
plan; provided, that this representation shall not be construed to
apply with
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respect to any express provision of a document which provides for such
effect without further action or election by such persons.
(k) No Atmos Entity now has in effect, or previously had
in effect, any welfare benefit plan, commitment, understanding, or
arrangement providing for medical or death benefits (whether insured
or uninsured) with respect to current or former employees beyond their
date of retirement or other termination of service (other than
coverage mandated by Section 4980B of the Code and Section 601 of
ERISA, the cost of which is fully paid by the former employee or his
or her dependents), except as otherwise provided under the Atmos
Energy Corporation Retiree Medical Plan.
(l) For purposes of this Section 2.16, the terms
"Employee Benefit Arrangement," "Group Member" and "Plan" shall be
interpreted to exclude all reference to United Cities Entities under
Section 8.1(l), (v) and (hh) hereof.
Section 2.17 Labor Matters. Atmos has no labor contracts or
collective bargaining agreements. There are no employee activities or
controversies (including, but not limited to, any labor organizing activities,
election petitions or proceedings preparatory thereto, unfair labor practice
complaints, labor strikes, disputes, slowdowns, or work stoppages) pending or,
to Atmos' knowledge, threatened, between any of the Atmos Entities and any of
their employees.
Section 2.18 Disclosure; Information in the Proxy Statement/
Prospectus. No representation or warranty by Atmos in this Agreement and no
statement contained in any certificate furnished or to be furnished by Atmos to
United Cities pursuant to the provisions of this Agreement contains or will
contain any untrue statement of material fact or omits or will omit to state
any material fact necessary, in light of the circumstances under which it is
made, in order to make the statements herein or therein not misleading. Any
written information supplied by Atmos specifically for inclusion or
incorporation by reference in the Proxy Statement/Prospectus and which is
included or incorporated by reference therein shall not, at the date the Proxy
Statement/Prospectus (or any amendment thereof or supplement thereto) is filed
with the SEC, at the time of the Atmos Shareholders Meeting, at the time of the
United Cities Shareholders Meeting, and at the time the Proxy
Statement/Prospectus becomes effective with the SEC as a registration
statement, be false or misleading with respect to any material fact, omit to
state any material fact required to be stated therein or necessary in order to
make the statements made therein, in the light of the circumstances under which
they are made, not misleading, or omit to state any material fact necessary to
correct any statement in any earlier communication with respect to the
solicitation of proxies for the Atmos Shareholders Meeting or the United Cities
Shareholders Meeting that has become materially false or misleading. If at any
time prior to the Effective Time any event relating to any of the Atmos
Entities or any of their respective directors or officers should be discovered
by Atmos which should be set forth in a supplement to the Proxy
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Statement/Prospectus, Atmos shall promptly inform United Cities in writing.
Notwithstanding the foregoing, Atmos makes no representation or warranty with
respect to any information to be contained in the Proxy Statement/Prospectus
and provided in writing by United Cities specifically for inclusion or
incorporation by reference in the Proxy Statement/Prospectus.
Section 2.19 Insurance. Atmos has not failed to give any notice or
present any claim under any insurance policies or binders maintained by any of
the Atmos Entities with respect to their properties and business in due and
timely fashion. None of the Atmos Entities has received notice of cancellation
or nonrenewal of any such policy or binder.
Section 2.20 Broker's Fees. No broker, finder, or investment
banker (other than Merrill Lynch, Pierce, Fenner & Smith Incorporated) is
entitled to any brokerage, finder's, or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of any of the Atmos Entities.
Section 2.21 No Atmos Investment in United Cities Stock. None of
the Atmos Entities has acquired or is the beneficial owner of any United Cities
Stock.
Section 2.22 Board Recommendation. The Board of Directors of
Atmos has, by resolutions duly adopted by the requisite vote of directors
present at a meeting of such Board duly called and held on July 19, 1996,
determined that the Merger in accordance with the terms of this Agreement and
the Plan of Merger is fair and in the best interests of its shareholders and has
recommended that the shareholders of Atmos approve the Merger and Plan of
Merger, and ratify this Agreement.
Section 2.23 PUHCA. Neither Atmos nor any other of the Atmos
Entities is required to register under PUHCA, or the rules and regulations
thereunder.
Section 2.24 Regulation as a Utility. Atmos is a regulated public
utility in the States of Texas, Louisiana, Kentucky, Colorado, Missouri and
Kansas and in no other state. Neither Atmos nor any Atmos Entity is subject to
regulation as a public utility or public service company (or similar
designation) by any other state in the United States, by the United States or
any agency or instrumentality of the United States or by any foreign country.
Section 2.25 Vote Required. The approval of the Merger by holders
of two-thirds of the shares of outstanding Atmos Stock is the only vote of the
holders of any class or series of the capital stock of Atmos required to
approve this Agreement, the Plan of Merger, the Merger, and the other
transactions contemplated hereby.
Section 2.26 Opinion of Financial Advisor. Atmos has received the
opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated, dated the date
hereof, to the effect
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that, as of the date hereof, the exchange ratio set forth in the Plan of Merger
is fair from a financial point of view to the holders of Atmos Stock.
ARTICLE 3
COVENANTS OF UNITED CITIES
Section 3.1 Conduct of Business by United Cities Pending the
Merger. United Cities covenants and agrees that, between the date of this
Agreement and the Effective Time, unless Atmos shall otherwise agree in
writing, each of the United Cities Entities shall conduct its business only in
the ordinary course of business and in a manner consistent with past practice;
and United Cities shall use its best efforts to maintain the corporate
existence of each of the United Cities Entities and preserve substantially
intact the business and organization of each of the United Cities Entities, to
keep available the services of its present officers, employees, and
consultants, and to preserve the relationships and goodwill of each of the
United Cities Entities with its customers, suppliers, and other persons with
which it has significant business relations. By way of amplification but not
limitation, United Cities shall not and shall not permit any of the United
Cities Subsidiaries, between the date of this Agreement and the Effective Time,
directly or indirectly, to do, agree to do, or propose to do any of the
following without the prior written consent of Atmos:
(a) amend or otherwise change its Articles of
Incorporation, Bylaws, Certificate of Formation or Limited Liability
Company Agreement;
(b) issue, sell, pledge, dispose of, or encumber, or
authorize the issuance, sale, pledge, disposition, or encumbrance of,
(i) any shares of capital stock of any class, or any options,
warrants, convertible securities, or other rights of any kind to
acquire any shares of capital stock, or any other ownership interest,
of any of the United Cities Entities (other than in the ordinary
course of business pursuant to United Cities' Long-Term Stock Plan of
1989, Non-Employee Director Stock Plan, Employee Stock Purchase Plan,
Customer Stock Purchase Plan, Dividend Reinvestment and Stock Purchase
Plan, and 401(k) Savings Plan), except that United Cities may issue
shares of its common stock upon the exercise or conversion in
accordance with their terms of any options, warrants, convertible
securities or other rights to acquire such stock that were outstanding
on the date of this Agreement and disclosed in the United Cities
Disclosure Schedule or (ii) any assets of any of the United Cities
Entities (except for sales of assets in the ordinary course of
business and in a manner consistent with past practice);
(c) declare, set aside, make, or pay any dividend or
other distribution, payable in cash, stock, property, or otherwise,
with respect to any of its capital stock, except for regular quarterly
cash dividends declared and paid by United Cities in a
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manner and amount consistent with past practice, and dividends
declared and paid by the United Cities Subsidiaries;
(d) reclassify, combine, split, subdivide or redeem,
purchase, or otherwise acquire or offer to acquire, directly or
indirectly, any of its capital stock;
(e) acquire (by merger, consolidation, or acquisition of
stock or assets) any corporation, partnership, or other business
organization or division thereof, except for acquisitions, the fair
market value of the consideration for which exceeds $3,000,000
individually or $10,000,000 in the aggregate, or acquire any shares of
Atmos Stock;
(f) incur any indebtedness for borrowed money or issue
any debt securities or assume, guarantee, or endorse, or otherwise as
an accommodation become responsible for, the obligations of any
person, or make any loans or advances (except for indebtedness
incurred under existing lines of credit in the ordinary course of
business consistent with past practice and except for indebtedness
issued under United Cities' currently effective shelf registration
statement in a principal amount not to exceed $15,000,000 in the
aggregate), or mortgage, pledge or subject to any lien or other
encumbrance any assets of any of the United Cities Entities;
(g) enter into or amend any contract, agreement,
commitment, or arrangement other than in the ordinary course of
business;
(h) authorize any capital expenditures that are in excess
of (i) $500,000 for any single project and (ii) $30,000,000 in the
aggregate since July 1, 1996;
(i) increase the compensation payable or to become
payable to its officers or employees, except for increases in salary
or wages of non-officer employees of the United Cities Entities in
accordance with past practices or grant any severance or termination
pay or stock options to, or enter into any employment or severance
agreement with any director, officer, or other employee of any of the
United Cities Entities, or establish, adopt, enter into, or amend any
collective bargaining, bonus, profit sharing, thrift, compensation,
stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance, or other plan,
agreement, trust, fund, policy, or arrangement for the benefit of any
current or former directors, officers, or employees;
(j) make any loan or advance (except for normal business
expense advances) to any of the United Cities Entities' directors,
officers, employees, or shareholders (of United Cities), or to any
other person or entity or cancel without payment in full any note,
loan, or other obligation receivable from any director, officer,
employee, or shareholder of any of the United Cities Entities or any
member
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of their families or from any corporation or other entity in which any
director, officer, employee, or shareholder or any member of their
families has any direct or indirect interest known to United Cities;
(k) take any action other than in the ordinary course of
business and in a manner consistent with past practice (none of which
actions shall be unreasonable or unusual) with respect to accounting
policies or procedures (including, without limitation, procedures with
respect to the payment of accounts payable and collection of accounts
receivable);
(l) make any tax election or settle or compromise any
material federal, state, local, or foreign income tax liability or
settle, waive, or compromise any other material claim, including
litigation;
(m) pay, discharge, or satisfy any claims, liabilities,
or obligations (absolute, accrued, asserted or unasserted, contingent
or otherwise), other than as may be paid, discharged, or satisfied in
the ordinary course of business and consistent with past practice;
(n) take any action or omit to take any necessary action,
which action or omission results in any breach of or constitutes a
default (or an event that with notice or lapse of time or both would
become a default) under any material note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise, or other
instrument or obligation to which any of the United Cities Entities is
a party or by which any of the United Cities Entities or any of their
respective properties is bound or affected; or
(o) cause any circumstance that might result in a
Material adverse change in the business, operations, properties,
condition (financial or otherwise), assets or liabilities of the
United Cities Entities, taken as a whole.
Section 3.2 No Solicitation of Competing Transaction. Subject to
the provisions of Section 3.11 below, United Cities agrees that it shall (a)
not, and that it shall not permit any of the United Cities Subsidiaries or any
of its or their respective officers, directors, employees, agents and
representatives (including, without limitation, any investment banker, attorney
or accountant) to, initiate, solicit or encourage (including by way of
furnishing information or assistance), or take any other action to facilitate,
any inquiries concerning, or the making or implementation of, any proposal
relating to, or that may reasonably be expected to lead to any Competing
Transaction, or engage in any negotiations concerning, agree to or endorse,
provide any confidential information or data to, or have any discussions with,
any person relating to, a Competing Transaction; and (b) notify Atmos promptly
if any such inquiries or proposals are received by, any such information is
requested from, or any such negotiations or discussions are sought to be
initiated or continued with, United Cities
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or any of the United Cities Subsidiaries, or any of its or their officers,
directors, employees, agents and representatives (such notification to include
the terms of the inquiry or proposal, the identity of the parties making such
inquiry or proposal and, if such inquiry or proposal is in writing, a copy of
the inquiry or proposal).
Section 3.3 Access to Information. From the date hereof to the
Effective Time, United Cities will, and will cause its directors, officers,
employees, and agents to, permit and afford Atmos and its representatives full
and complete access at all reasonable times to the employees, offices,
properties, books, and records of the United Cities Entities, including the
audit work papers of, and all correspondence with, its certified public
accountants, and will furnish Atmos with all financial, operating, and other
data and information as Atmos, through its officers, employees, or
representatives, may reasonably request.
Section 3.4 Environmental Audit and Covenants.
(a) Upon execution of this Agreement, United Cities and
Atmos shall cooperate to provide such information, files and documents
as United Cities and Atmos shall reasonably request of the other party
concerning the Environmental Activities and Environmental Condition of
the respective parties. Within sixty (60) days ("Initial
Environmental Inspection Period") after the date of this Agreement,
United Cities and Atmos shall meet and mutually agree upon a site
assessment and environmental compliance audit of the Subject Property
currently Used by each of the United Cities Entities and any Subject
Property formerly Used by any of the United Cities Entities and
described in the United Cities Disclosure Schedule pursuant to Section
1.7(f), which assessment and audit shall be in scope, form, and
substance ("Scope"), and prepared by an independent, competent, and
qualified engineer, reasonably satisfactory to United Cities and to
Atmos (the "Environmental Audit"). United Cities shall not withhold
its agreement to a Scope that does not involve any invasive or
subsurface testing, provided that such Scope is reasonable based upon
the information obtained during the Initial Environmental Inspection
Period. The terms of the engagement of the engineer shall be approved
by United Cities and Atmos. The engagement agreement shall provide
that the Environmental Audit shall be issued to United Cities and
Atmos and that United Cities and Atmos shall have all of the same
rights as United Cities under the engagement agreement. Any
investigation conducted by Atmos prior to the earlier of the
expiration of the Initial Environmental Inspection Period or the
agreement upon the Scope will be at the expense of Atmos. Within
ninety (90) days ("Additional Environmental Investigation Period") of
the end of the Initial Environmental Inspection Period, United Cities
shall cause to be prepared and submit to Atmos the Environmental Audit
at the sole cost and expense of the United Cities Entities.
(b) In the event that United Cities and Atmos cannot
agree upon a Scope for the Environmental Audit, then Atmos, at its
sole discretion, may during the Initial
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Environmental Inspection Period, commission at its sole cost and
expense such additional investigation and assessment work as Atmos
determines is reasonable, but which United Cities does not approve
("Additional Assessment"), and this Additional Assessment will be part
of the Scope; provided, however, in no event shall surface or
subsurface soil or groundwater sampling or assessment ("Sampling") of
a Subject Property previously or currently held as a manufacturing gas
plant be a part of the Scope. The United Cities Entities will pay the
agreed upon portions of the Scope and Atmos will pay the costs of the
Additional Assessment. United Cities agrees to permit Atmos to enter
upon the Subject Property within United Cities' control to perform the
Additional Assessment, provided, however, that United Cities shall
have the right, and Atmos' permission to enter is so limited, to
refuse to permit Atmos to enter upon any Subject Property previously
or currently held as a manufactured gas plant to perform Additional
Assessment work that involves Sampling.
(c) The Environmental Audit shall include a "Disclosure
Summary" that specifically addresses any exceptions to the
representations and warranties set forth in Section 1.7 of this
Agreement and shall include a "Conclusion" section that states whether
there is a low, medium, or high probability of environmental
impairment or liability associated with a Subject Property, whether
the current operations of each United Cities Entity at a Subject
Property are in compliance with Environmental Requirements, and
whether further investigation is recommended. If further
investigation is recommended by the initial Environmental Audit, the
scope and extent of this investigation and the engineer performing the
investigation must be mutually approved by United Cities and Atmos.
All costs of the further investigation shall be paid by United Cities.
Except in connection with the right to refuse access to any Subject
Property previously used as a manufactured gas plant, the agreement of
United Cities to any additional investigation will not be unreasonably
withheld.
(d) United Cities further agrees that prior to Closing it
shall:
(i) comply with all applicable Environmental
Requirements relating to the Subject Property currently Used
by United Cities and the Use of such Subject Property by
United Cities, and not engage in or permit others to engage in
any Environmental Activity in violation of any applicable
Environmental Requirements;
(ii) deliver to Atmos no later than three (3) days
following the occurrence of any such event, written notice of
the discovery by United Cities of any event, the occurrence of
which would render any representation or warranty contained in
Section 1.7 of this Agreement incorrect in any material
respect if made at the time of such discovery; and
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(iii) cause any party who Uses the Subject Property
currently Used by United Cities to comply with this Section
3.4(d).
Section 3.5 Consents and Approvals.
(a) United Cities shall use all reasonable efforts to
obtain all consents, waivers, approvals, authorizations, and orders of
all third parties and local, state, and federal governmental
authorities (including, but not limited to, the approvals of the Iowa
Utility Board, Kansas Corporation Commission, Missouri Public Service
Commission, Illinois Commerce Commission, Tennessee Regulatory
Authority, Georgia Public Service Commission, South Carolina Public
Service Commission, Virginia State Corporation Commission and the
Federal Energy Regulatory Commission required in connection with the
authorization, execution, and delivery of this Agreement and the
consummation of the transactions contemplated hereby. United Cities
shall attend all proceedings of, and file all documents with, the Iowa
Utility Board, Kansas Corporation Commission, Missouri Public Service
Commission, Illinois Commerce Commission, Tennessee Regulatory
Authority, Georgia Public Service Commission, South Carolina Public
Service Commission, Virginia State Corporation Commission and the
Federal Energy Regulatory Commission that are necessary to obtain each
of such commissions' approval of the Merger. United Cities shall also
cooperate with and assist Atmos in all proceedings before and in the
preparation and filing of any documents it is required to file with
the Colorado Public Utilities Commission, Kansas Corporation
Commission, Kentucky Public Service Commission, and Missouri Public
Service Commission, and with respect to the preparation of the Proxy
Statement/Prospectus and Listing Application to the NYSE.
(b) United Cities shall, as soon as practicable after the
date of this Agreement, file any Notification and Report Forms and
related material that it may be required to file with the Federal
Trade Commission and the Antitrust Division of the Department of
Justice under the Hart-Scott-Rodino Act, shall use its reasonable
efforts to obtain an early termination of the applicable waiting
period, and shall make any further filings pursuant thereto that may
be necessary, proper, or advisable and respond as promptly as
practicable to all inquiries received from the Federal Trade
Commission or the Antitrust Division of the Department of Justice for
additional information or documentation.
(c) United Cities shall use all reasonable efforts to
arrange for the transfer to Atmos on the Closing Date of all permits
required by Environmental Requirements for the Use of the Subject
Property and all other permits material to the continued operation of
United Cities' business.
Section 3.6 Meeting of United Cities Shareholders. As soon as
practicable following the approval by the SEC of the Proxy
Statement/Prospectus, United Cities shall
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take all action necessary in accordance with the Illinois Business Corporation
Act and Virginia Stock Corporation Act and its Articles of Incorporation and
Bylaws to convene a meeting of its shareholders promptly to consider and vote
upon approval of the Merger and the Plan of Merger, and the ratification of
this Agreement. United Cities shall, subject to Section 3.11, use its
reasonable efforts to solicit from the shareholders of United Cities proxies in
favor of such approval and ratification and take all other action reasonably
necessary or, in the reasonable opinion of United Cities, helpful to secure a
vote of the shareholders of United Cities in favor of the Merger and the Plan
of Merger, and the ratification of this Agreement.
Section 3.7 Shareholder Appraisal Rights. United Cities shall
not settle or compromise any claim for shareholder appraisal rights in respect
of the Merger prior to the Effective Time without the prior written consent of
Atmos.
Section 3.8 Insurance. Through the Effective Time, United Cities
shall maintain in full force and effect all of the policies of insurance of the
United Cities Entities that were in effect on the date hereof or insurance
comparable to the coverage afforded by such policies.
Section 3.9 Agreement of Certain United Cities Shareholders
Regarding Rule 145 Compliance. At or prior to the Closing Date, United Cities
shall deliver to Atmos a certificate identifying each of its shareholders who
in United Cities' reasonable judgment is an affiliate of United Cities for
purposes of SEC Rule 145 and shall use all reasonable efforts to obtain from
such affiliates a written agreement, in form and substance satisfactory to
Atmos, not to offer to sell, sell, or otherwise dispose of any shares of Atmos
Stock received in the Merger (a) except pursuant to an effective registration
statement under the Securities Act or in compliance with SEC Rule 145, as
amended from time to time, or in a transaction which, in the opinion of legal
counsel (such opinion and counsel being reasonably satisfactory to Atmos) is
exempt from the registration requirements of the Securities Act and (b) in no
event at any time prior to the public release and dissemination by Atmos of
financial results covering at least thirty (30) days of the combined operations
of Atmos and United Cities. Such agreement shall also include the agreement
and acknowledgement of each of such shareholders that his or her shares of
Atmos Stock received in the Merger shall contain a legend setting forth the
restrictions that such shares may be sold only as provided in this Section 3.9.
Section 3.10 Cooperation in Registration of Atmos Stock. United
Cities shall cooperate fully with Atmos and shall furnish such information
concerning United Cities as Atmos shall request in connection with the
registration with the SEC by Atmos of the Atmos Stock and the preparation and
filing with the SEC by Atmos of the Proxy Statement/Prospectus in connection
with the Atmos Shareholders Meeting. In addition, United Cities shall obtain
the consent of Arthur Andersen LLP to the inclusion of such
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audited financial statements of United Cities in the Proxy Statement/Prospectus
as may be necessary or desirable, as determined by Atmos.
Section 3.11 Fiduciary Limitations.
(a) Nothing contained in this Agreement, including
without limitation Sections 3.1, 3.2 and 5.6(b) hereof, shall prohibit
United Cities from (i) furnishing information to, or entering into
discussions or negotiations with, any person or entity that makes an
unsolicited contact in connection with a bona fide Competing
Transaction, if, and only to the extent that,
(A) the Board of Directors of United
Cities determines in good faith, based on, among
other matters, the written advice of independent
legal counsel (which for the purposes of this
Agreement includes Chapman and Cutler), that such
action is required for the Board of Directors to
comply with its fiduciary duties to shareholders
imposed by law;
(B) prior to United Cities furnishing
any confidential information to such other person,
such other person executes a confidentiality
agreement with United Cities in customary form;
(C) prior to furnishing such information
to, or entering into discussions (other than
responding to an initial inquiry) or negotiations
with, such person or entity, United Cities provides
written notice to Atmos to the effect that it is
furnishing information to, or entering into
discussions or negotiations with, such person or
entity; and
(D) United Cities keeps Atmos reasonably
informed of the status of any such discussions or
negotiations; or
(ii) taking or disclosing to the shareholders of United Cities a position with
respect to any such Competing Transaction, or the Merger that, in the judgment
of the Board of Directors of United Cities, as determined in good faith based
on, among other matters, the written advice of independent legal counsel, is
required for the Board of Directors to comply with its fiduciary duties to
shareholders imposed by law, and, to the extent applicable, complying with Rule
14e-2 promulgated under the Exchange Act with regard to a Competing
Transaction.
(b) Nothing in this Section 3.11 shall (i) permit United
Cities to terminate this Agreement (except as specifically provided in
Section 7.1 hereof), or (ii) permit United Cities to enter into any
agreement with respect to a Competing Transaction during the term of
this Agreement (it being agreed that during the term of this
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Agreement, United Cities shall not enter into any agreement with any
person that provides for, or in any way facilitates, a Competing
Transaction (other than a confidentiality agreement in customary
form)).
Section 3.12 Delivery of Monthly Financials. United Cities shall
deliver to Atmos, as promptly as practicable following the end of each calendar
month after the date of this Agreement, its consolidated monthly financial
statements prepared in the ordinary course of its business.
Section 3.13 Termination of Supplemental Executive Retirement Plan.
Prior to Closing, United Cities shall have (a) terminated the United Cities and
Subsidiaries Supplemental Executive Retirement Plan and all accompanying
Joinder Agreements, (b) obtained waivers and releases from all "active
participants" (as defined in such Plan), with respect to any and all rights and
benefits to which they were entitled thereunder and (c) in order to cover all
obligations currently in pay status under such Plan, purchased an annuity for
Mr. Bobby Gaylor (in an amount equal to the most favorable commercial rate
available from an "excellent" rated insurance company) and, in consideration
therefor, obtained his release with respect to any further rights and benefits
to which he is entitled under such Plan. In consideration for such waivers and
releases (other than those obtained from Mr. Gaylor), United Cities shall pay
to each such participant (other than Mr. Gaylor) an amount equal to one dollar
less than three hundred percent (300%) of the average of such participant's
compensation paid by United Cities and included in his or her gross income for
Federal income tax purposes for the five (5)-year period ending on the December
31 immediately preceding the Closing Date; provided that, the aggregate of all
such payments shall not exceed $5,000,000. Notwithstanding the preceding
provisions of this Section 3.13, Mr. Gene Koonce shall, prior to the Closing
Date, be given the option to (i) provide a waiver and release with respect to
his rights and benefits under the United Cities Gas and Subsidiaries
Supplemental Executive Retirement Plan, in which event he shall receive payment
pursuant to the immediately preceding sentence of $2,247,434 or (ii) continue
to participate in such Plan. If Mr. Koonce elects to provide such a waiver,
then the aggregate amount of payments made to all participants shall be
increased by the payment made to Mr. Koonce in consideration for such waiver.
Section 3.14 Directors' and Officers' Insurance. United Cities
shall use its best efforts to procure a policy of directors' and officers'
liability insurance, to be effective for a period of five (5) years, with
respect to matters involving United Cities and occurring prior to the
consummation of the Merger, and, if United Cities does obtain such a policy,
to use its best efforts to assign the benefits of such policy to Atmos
following the consummation of the Merger.
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ARTICLE 4
COVENANTS OF ATMOS
Section 4.1 Conduct of Business by Atmos Pending the Merger.
Atmos covenants and agrees that, between the date of this Agreement and the
Effective Time, unless United Cities shall otherwise agree in writing, each of
the Atmos Entities shall conduct its business only in the ordinary course of
business and in a manner consistent with past practice; and Atmos shall use its
best efforts to maintain the corporate existence of each of the Atmos Entities
that is a corporation and preserve substantially intact the business and
organization of each of the Atmos Entities. Atmos shall not and shall not
permit any of the Atmos Subsidiaries, between the date of this Agreement and
the Effective Time, directly or indirectly, to do, agree to do, or propose to
do any of the following without the prior written consent of United Cities:
(a) except as otherwise contemplated by this Agreement,
amend or otherwise change its Articles of Incorporation or Bylaws;
(b) issue, sell, pledge, dispose of, or encumber, or
authorize the issuance, sale, pledge, disposition, or encumbrance of,
(i) any shares of capital stock of any class, or any options,
warrants, convertible securities, or other rights of any kind to
acquire any shares of capital stock, or any other ownership interest,
of any of the Atmos Entities (other than in the ordinary course of
business pursuant to Atmos' Restricted Stock Grant Plan, Dividend
Reinvestment and Stock Purchase Plan, Employee Stock Ownership Plan
and Directors' Stock for Fee Plan), except that Atmos may issue shares
of its common stock upon the exercise or conversion in accordance with
their terms of any options, warrants, convertible securities or other
rights to acquire such stock that were outstanding on the date of this
Agreement and disclosed in the Atmos Disclosure Schedule or (ii) any
assets of any of the Atmos Entities (except for sales of assets in the
ordinary course of business and in a manner consistent with past
practice);
(c) declare, set aside, make, or pay any dividend or
other distribution, payable in cash, stock, property, or otherwise,
with respect to any of its capital stock, except for regular quarterly
cash dividends declared and paid in a manner and amount consistent
with past practice;
(d) reclassify, combine, split, subdivide or redeem,
purchase, or otherwise acquire or offer to acquire, directly or
indirectly, any of its capital stock;
(e) acquire (by merger, consolidation, or acquisition of
stock or assets) any corporation, partnership, or other business
organization or division thereof, except
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for acquisitions the consideration for which exceeds $10,000,000
individually or $20,000,000 in the aggregate, or acquire any shares of
United Cities Stock;
(f) make any loan or advance (except for normal business
expense advances) to any of the Atmos Entities' directors, officers,
employees, or shareholders (of Atmos), or to any other person or
entity or cancel without payment in full any note, loan, or other
obligation receivable from any director, officer, employee, or
shareholder of any of the Atmos Entities or any member of their
families or from any corporation or other entity in which any
director, officer, employee, or shareholder or any member of their
families has any direct or indirect interest known to Atmos;
(g) take any action other than in the ordinary course of
business and in a manner consistent with past practice (none of which
actions shall be unreasonable or unusual) with respect to accounting
policies or procedures (including, without limitation, procedures with
respect to the payment of accounts payable and collection of accounts
receivable);
(h) take any action or omit to take any necessary action,
which action or omission results in any breach of or constitutes a
default (or an event that with notice or lapse of time or both would
become a default) under any material note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise, or other
instrument or obligation to which any of the Atmos Entities is a party
or by which any of the Atmos Entities or any of their respective
properties is bound or affected; or
(i) cause any circumstance that might result in a
Material adverse change in the business, operations, properties,
condition (financial or otherwise), assets or liabilities of the Atmos
Entities, taken as a whole.
Section 4.2 Meeting of Atmos Shareholders. As soon as
practicable following the approval by the SEC of the Proxy
Statement/Prospectus, Atmos shall take all action necessary in accordance with
the Texas Business Corporation Act and its Articles of Incorporation and Bylaws
to convene a meeting of its shareholders promptly to consider and vote upon
approval of the Merger and the Plan of Merger, the ratification of this
Agreement, and the approval of the issuance of the Atmos Stock to the United
Cities shareholders. Atmos will use its reasonable efforts to solicit from the
shareholders of Atmos proxies in favor of such approvals and ratification and
will take all other action reasonably necessary or, in the reasonable opinion
of Atmos, helpful to secure a vote of the shareholders of Atmos in favor of the
Merger and the Plan of Merger, the ratification of this Agreement, and the
issuance of Atmos Stock contemplated hereby and thereby.
Section 4.3 Registration and Listing of Atmos Stock. As soon as
practicable after the date of this Agreement, Atmos will file a registration
statement on Form S-4 with the
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SEC under the Securities Act with respect to the offering, sale, and delivery
of the shares of Atmos Stock to be issued to United Cities' shareholders
pursuant to this Agreement and the Plan of Merger; and Atmos will use all
reasonable efforts to cause such registration statement to become effective as
promptly as practicable after filing and to cause the shares of Atmos Stock
registered thereby to be duly listed for trading on the NYSE. Atmos shall also
use all reasonable efforts to take any action required to be taken under state
securities laws with respect to the Atmos Stock.
Section 4.4 Access to Information. From the date hereof to the
Effective Time, Atmos will, and will cause its directors, officers, employees,
and agents to, permit and afford United Cities and its representatives full and
complete access at all reasonable times to the employees, offices, properties,
books, and records of the Atmos Entities, including the audit work papers of,
and all correspondence with, its certified public accountants, and will furnish
United Cities with all financial, operating, and other data and information as
United Cities, through its officers, employees, or representatives, may
reasonably request.
Section 4.5 Environmental Covenants. Atmos agrees that prior to
Closing it shall:
(a) comply with all applicable Environmental Requirements
relating to the Subject Property currently Used by Atmos and the Use
of such Subject Property by Atmos, and not engage in or permit others
to engage in any Environmental Activity in violation of any applicable
Environmental Requirements;
(b) deliver to United Cities no later than three (3) days
following the occurrence of any such event, written notice of the
discovery by Atmos of any event, the occurrence of which would render
any representation or warranty contained in Section 2.7 of this
Agreement incorrect in any material respect if made at the time of
such discovery; and
(c) cause any party who Uses the Subject Property
currently Used by Atmos to comply with this Section 4.5.
Section 4.6 Consents and Approvals.
(a) Atmos shall use all reasonable efforts to obtain all
consents, waivers, approvals, authorizations, and orders of all third
parties and local, state, and federal governmental authorities
(including, but not limited to, the approvals of the Colorado Public
Utilities Commission, Kansas Corporation Commission, Kentucky Public
Service Commission, and Missouri Public Service Commission) required
in connection with the authorization, execution, and delivery of this
Agreement and the consummation of the transactions contemplated
hereby. Atmos shall attend all proceedings of, and file all documents
with, the Colorado Public Utilities Commission, Kansas Corporation
Commission, Kentucky Public Service Commission, and Missouri
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Public Service Commission that are necessary to obtain each of such
commissions' approval of the Merger. Atmos shall also cooperate with
and assist United Cities in all proceedings before and in the
preparation and filing of any documents it is required to file with
the Iowa Utility Board, Kansas Corporation Commission, Missouri Public
Service Commission, Illinois Commerce Commission, Tennessee Regulatory
Authority, Georgia Public Service Commission, South Carolina Public
Service Commission, Virginia State Corporation Commission and the
Federal Energy Regulatory Commission.
(b) Atmos shall, as soon as practicable after the date of
this Agreement, file any Notification and Report Forms and related
material that it may be required to file with the Federal Trade
Commission and the Antitrust Division of the Department of Justice
under the Hart-Scott-Rodino Act, shall use its reasonable efforts to
obtain an early termination of the applicable waiting period, and
shall make any further filings pursuant thereto that may be necessary,
proper, or advisable and respond as promptly as practicable to all
inquiries received from the Federal Trade Commission or the Antitrust
Division of the Department of Justice for additional information or
documentation.
Section 4.7 Employees and Employee Benefits.
(a) At the Effective Time, all employees of the United
Cities Entities shall become employees of Atmos. Such employees'
titles and job duties will be determined by Atmos in its sole
discretion. Except as otherwise set forth in Section 4.7(b) hereof,
Atmos agrees to retain all of such employees for a period of one (1)
year following the Effective Time at their approved rate of pay as in
effect immediately prior to such Effective Time; provided, however,
that Atmos shall have the right to terminate any such employee for
cause; provided, further, that no such employee who is a former
officer of any of the United Cities Entities shall be terminated for
cause during such one (1)-year period without having been given a
reasonable opportunity to cure and correct, to the satisfaction of
Atmos, the deficiencies or other circumstances giving rise to such
cause. Following such one (1)-year period, such employees will be
employed by Atmos on an "at will" basis.
(b) At the Closing, Atmos will enter into an employment
contract with each of Messrs. James B. Ford and Thomas R. Blose, Jr.
for a term of three (3) years, which contracts shall be in
substantially the forms of Exhibits C-1 and C-2, respectively, to
this Agreement. In addition, at the Closing, Atmos will enter into an
employment contract with Mr. Gene C. Koonce for a term of six (6)
months, which contract shall be in substantially the form of Exhibit
C-3 to this Agreement.
(c) During the one (1)-year period described in Section
4.7(a) hereof and except as otherwise provided in Section 3.13 hereof,
any employee of a United Cities
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Entity who continues his or her employment with Atmos as set forth in
such Section 4.7(a) and who was a participant in a Plan or Employee
Benefit Arrangement maintained by a United Cities Entity shall
continue to participate in such Plan or Employee Benefit Arrangement
which shall be maintained by Atmos during such one (1)-year period;
provided, however, that, during such period, Atmos shall have the
right to merge or terminate any such Plan or Employee Benefit
Arrangement if, in its sole judgment, Atmos determines that the same
or better benefits are available to the employees covered thereunder
under a Plan or Employee Benefit Arrangement which provides the same
or similar benefits, which was maintained by Atmos before the
Effective Time (and continues to be so maintained) and under which
immediate coverage for such employees can be provided. Atmos will
credit all employees of the United Cities Entities who continue their
employment with Atmos as set forth in Section 4.7(a) and (b) above for
service performed as employees of the United Cities Entities prior to
the Effective Time for eligibility, participation and vesting (but not
benefit accrual) purposes in any employee plan or program maintained
by Atmos at or after the Effective Time for which such employees are
eligible (it being understood that employees who continue to be
covered under any Plan or Employee Benefit Arrangement previously
maintained by any United Cities Entity will not, during the period of
such coverage, be eligible to participate in any Plan or Employee
Benefit Arrangement which provides the same or similar benefits and
which was maintained by Atmos before the Effective Time). Certain key
management employees as selected by Atmos will be eligible to
participate in Atmos' Annual Performance Bonus Plan for Key Management
Employees and Atmos' Mini-Med Plan. Subject to the foregoing, the
rights of any employees of the United Cities Entities at or after the
Effective Time shall be governed by the terms, as may be amended or
modified from time to time, of any Atmos Plan or Employee Benefit
Arrangement in which they participate. Those employees of the United
Cities Entities, if any, who become participants in one of Atmos'
defined benefit pension plans will have no rights in or claims against
Atmos' pension or retirement funds, except with respect to
contributions made for their benefit subsequent to the Effective Time.
(d) It is expressly understood by the parties hereto
that, except as otherwise provided in Section 4.7(c) hereof, Atmos
assumes no responsibility, and makes no commitment, for the
maintenance and continuation, after the Closing, of any Plan or
Employee Benefit Arrangement previously adopted or maintained by any
United Cities Entity or any United Cities Group Member, provided that
a decision to discontinue any such Plan or Employee Benefit
Arrangement shall not be based solely on the status of the
participants thereunder as former employees of the United Cities
Entities.
(e) Atmos shall provide coverage for each individual
(other than Mr. Gene Koonce) who was an active participant in the
United Cities Gas and Subsidiaries
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Supplemental Executive Retirement Plan immediately prior to the date
on which this Agreement was signed, under a "death benefit only" plan
providing the same "survivor benefit" as provided under, and defined
in, Section 4.4 of the United Cities and Subsidiaries Supplemental
Executive Retirement Plan; provided that United Cities shall have,
prior to the Effective Time, transferred ownership of any and all
insurance policies described in Section 7.12(b) of such Plan to Atmos.
Section 4.8 Declaration of Dividends. Atmos will take
appropriate action, at the first regularly scheduled meeting of Atmos' Board
of Directors after the Effective Time, to cause to be declared and paid, for a
period of not less than four (4) quarters, quarterly cash dividends at an
indicated annual rate of not less than $1.02 per share (subject to adjustment
for any stock split, stock dividend, combination of shares or other similar
event), except to the extent that the ability of Atmos' Board of Directors to
declare, and Atmos' ability to pay, such dividends are limited by applicable
state statutory requirements of the state or states in which Atmos is
incorporated or by such directors' fiduciary duties to Atmos and its
shareholders, as such fiduciary duties are determined by Atmos and its counsel
in their sole discretion.
Section 4.9 Options. Following the consummation of the Merger,
Atmos agrees to continue in effect the United Cities Gas Company Long-Term
Stock Plan of 1989, as amended. Persons holding options under such plan shall
be allowed to exercise their options for Atmos Stock at the exchange rate set
forth in the Plan of Merger. Persons holding stock appreciation rights under
such plan shall be allowed to exercise such rights based on the price of Atmos
Stock taking into account the exchange rate set forth in the Plan of Merger.
Section 4.10 Indemnification. Atmos agrees that all rights to
indemnification and advancement of expenses existing in favor of the present or
former directors, officers, employees, fiduciaries and agents of the United
Cities Entities (collectively, the "Indemnified Parties") as provided in United
Cities' Articles of Incorporation or Bylaws as in effect as of the date hereof
with respect to matters occurring prior to the Effective Time shall survive the
Merger and shall continue in full force and effect for a period of not less
than the statutes of limitations applicable to such matters.
Section 4.11 Insurance. Through the Effective Time, Atmos shall
maintain in full force and effect all of the policies of insurance of the Atmos
Entities that were in effect on the date hereof or insurance comparable to the
coverage afforded by such policies.
Section 4.12 Cooperation in Preparation of Proxy
Statement/Prospectus. Atmos shall cooperate fully with United Cities and shall
furnish such information concerning Atmos as United Cities shall request in
connection with the preparation and filing with the SEC by United Cities of the
Proxy Statement/Prospectus in connection with the United Cities Shareholders
Meeting. In addition, Atmos shall obtain the consent of Ernst & Young LLP
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to the inclusion of such audited financial statements of Atmos in the Proxy
Statement/Prospectus as may be necessary or desirable, as determined by Atmos.
Section 4.13 Delivery of Monthly Financials. Atmos shall deliver
to United Cities, as promptly as practicable following the end of each calendar
month after the date of this Agreement, its consolidated monthly financial
statements prepared in the ordinary course of its business.
ARTICLE 5
MUTUAL COVENANTS OF ATMOS AND UNITED CITIES
Section 5.1 The Merger.
(a) Subject to the terms and conditions of this
Agreement, Atmos and United Cities agree to enter into a statutory
merger under the applicable laws of the States of Texas, Illinois and
Virginia whereby United Cities will be merged with and into Atmos,
with Atmos as the surviving corporation (the "Merger"); and Atmos and
United Cities hereby respectively agree that the terms and conditions
of such Merger, the mode of carrying the same into effect, the manner
of converting the shares of capital stock of United Cities into shares
of Atmos Stock, and other necessary or proper details and provisions
relating to such Merger shall be as contained in the form of Plan of
Merger attached hereto as Exhibit D (the "Plan of Merger").
Notwithstanding anything to the contrary contained in this Agreement
or the Plan of Merger, if any state authority or commission requires
that the survivor pursuant to the Merger be a corporation incorporated
under the laws of such state, each party agrees to take all necessary
actions prior to the mailing of the Proxy Statement/Prospectus to
comply with such requirement and provide that such survivor will be
incorporated in such state, including, without limitation, making any
necessary amendments to the Plan of Merger, as authorized by the
respective Board of Directors of United Cities and Atmos by approval
of this Agreement.
(b) At any time before approval of this Agreement and the
Plan of Merger by the respective shareholders of Atmos and United
Cities and prior to the Closing Date, this Agreement and the Plan of
Merger may be amended in writing by Atmos and United Cities in
accordance with the provisions of Section 7.3.
(c) The closing of the transactions contemplated hereby
(the "Closing") shall take place at 10:00 a.m., local time, within
fifteen (15) business days following the latest to occur of (i) the
meeting of shareholders of Atmos held pursuant to Section 4.2 of this
Agreement, (ii) the meeting of shareholders of United Cities held
pursuant to Section 3.6 of this Agreement, (iii) the expiration or
termination of the waiting period (and any extension thereof)
applicable to the consummation of the
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Merger under the Hart-Scott-Rodino Act, or (iv) the date all approvals
contemplated by Section 6.1(c) of this Agreement have been granted,
and each of the other conditions set forth in Article VI hereof have
been satisfied, or at such other date and time as Atmos and United
Cities shall agree upon in writing (the "Closing Date"). The Closing
shall take place at the office of Locke Purnell Rain Harrell (A
Professional Corporation) at 2200 Ross Avenue, Suite 2200, Dallas,
Texas 75201 or at such other place as Atmos and United Cities shall
agree upon in writing.
(d) The "Paying Agent" referred to in the Plan of Merger
shall be Boston EquiServe Limited Partnership or such other party as
Atmos and United Cities may mutually agree.
Section 5.2 Execution, Filing, and Recording of Merger Documents.
Subject to the terms and conditions of this Agreement and upon approval and
adoption of the Plan of Merger by the respective shareholders of United Cities
and Atmos in accordance with the laws of Texas, Illinois and Virginia, as
applicable, relating to statutory mergers, Atmos and United Cities each agree
to properly execute and deliver the Plan of Merger in compliance with the laws
of Texas, Illinois and Virginia, as well as the requisite certificate(s) and
articles of merger in compliance with the laws of Texas, Illinois and Virginia,
as applicable, and to cause the requisite filing and recording of the
certificate(s) and articles of merger in accordance with the laws of the States
of Texas, Illinois and Virginia, as applicable, all with a view of making the
Merger effective at the Closing Date.
Section 5.3 Notice of Certain Events. Each of the parties hereto
shall give prompt written notice to the other party of (a) the occurrence, or
non-occurrence, of any event, the occurrence or non-occurrence of which would
be likely to cause any representation or warranty of such party contained in
this Agreement to be untrue or inaccurate and (b) any failure of such party to
comply with or satisfy any cost, condition, or agreement to be complied with or
satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section 5.3 shall not limit or otherwise affect the remedies
available hereunder to the other party hereto.
Section 5.4 Expenses. Except as otherwise provided in this
Section 5.4, all costs and expenses incurred in connection with this Agreement,
the Plan of Merger, and the transactions contemplated hereby and thereby
(including without limitation any fees, commissions or expenses of the type
referred to in Sections 1.20 and 2.20 above) shall be paid by the party
incurring such expense. The SEC filing fee for registering the Atmos Stock on
Form S-4 and the expenses incurred in connection with printing and mailing the
Proxy Statement/Prospectus shall be shared equally by Atmos and United Cities.
Notwithstanding the foregoing, if
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(a) this Agreement is terminated
(i) by United Cities, because of the failure of
Atmos to satisfy the conditions to closing set forth in
Sections 6.1(a), 6.3(a), 6.3(b), or 6.3(c) or the failure of
Atmos to obtain the opinion described in Section 6.2(d)
hereof; or
(ii) by Atmos, because of the failure of United
Cities to satisfy the conditions to closing set forth in
Sections 6.1(a), 6.2(a), 6.2(b), 6.2(c), or 6.2(g) or the
failure of United Cities to obtain the opinion described in
Section 6.3(d) hereof,
then the terminating party shall be reimbursed, by the party failing to satisfy
such condition(s), for its reasonable expenses (including attorneys,
accountants and investment bankers fees (as accrued as of the date of
termination)) incurred in connection with this Agreement and the transactions
contemplated hereby; and
(b) if this Agreement is terminated by United Cities
under Section 7.1(k), by Atmos under Section 7.1(c), or by Atmos
because United Cities' shareholders have approved a Competing
Transaction involving United Cities, then United Cities will pay to
Atmos a fee in immediately available funds equal to $15,000,000
promptly, but in no event later than two (2) business days, after such
termination.
Section 5.5 Public Announcements. Atmos and United Cities shall
consult with one another before issuing any press release or otherwise making
any public statements with respect to the Merger and shall not issue any such
press release or make any such public statement prior to such consultation,
except as may be required by law, under Atmos' listing agreement with the NYSE
or under United Cities' listing agreement with Nasdaq.
Section 5.6 Further Action. Upon the terms and subject to the
conditions hereof, each of the parties hereto shall (a) promptly make its
respective filings, and thereafter make any other required submissions, and (b)
use all reasonable efforts to take, or cause to be taken, all appropriate
action, and to do or cause to be done, all things necessary, proper, or
advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement and the Plan of
Merger, including, without limitation, using all reasonable efforts to obtain
all Governmental Authorizations and all consents of parties to contracts with
Atmos and United Cities as are necessary for the consummation of the
transactions contemplated by this Agreement and the Plan of Merger and to
fulfill the conditions of the Merger. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement, the parties to this Agreement shall use all reasonable efforts
to take all such necessary action.
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ARTICLE 6
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 6.1 Conditions to Obligations of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger shall
be subject to the satisfaction at or prior to the Closing Date of the following
conditions:
(a) Shareholder Approvals. The issuance of the Atmos
Stock to the shareholders of United Cities shall have been approved by
the requisite vote of the shareholders of Atmos as required by the
rules of the NYSE, and the Merger shall have been approved by the
requisite vote of the shareholders of Atmos in accordance with the
provisions of the Texas Business Corporation Act and by the requisite
vote of the shareholders of United Cities in accordance with the
provisions of the Illinois Business Corporation Act, the Virginia
Stock Corporation Act and Nasdaq.
(b) Securities Act Registration, Blue Sky Registration or
Exemption and NYSE Listing. The shares of Atmos Stock to be issued to
United Cities' shareholders pursuant to this Agreement and the Plan
of Merger shall have been registered with the SEC under the Securities
Act by means of an effective registration statement, shall have been
registered under or shall be exempt from registration under all
applicable state securities or blue sky laws, and shall have been
approved for listing, upon official notice of issuance, on the NYSE.
(c) Utility Commission Approvals. All necessary
approvals of the state public utility commissions for which approval
is required shall have been granted by final order and all applicable
appeal and waiting periods shall have expired and such orders shall
not contain any condition which, in the reasonable judgment of Atmos,
would result in a material adverse change in the business, operations,
properties, condition (financial or otherwise), assets or liabilities
of the United Cities Entities, taken as a whole, or the Atmos
Entities, taken as a whole.
(d) Hart-Scott-Rodino Act. The waiting period (and any
extension thereof) applicable to the consummation of the Merger under
the Hart-Scott-Rodino Act shall have expired or been terminated.
(e) Consents Obtained. All consents and waivers required
to be obtained for the authorization, execution, and delivery of this
Agreement and the consummation of the transactions contemplated hereby
other than those consents and waivers the failure of which to obtain
would not have a material adverse effect on Atmos or United Cities, as
the case may be, shall have been obtained, including required
consents, waivers and releases from each of Atmos' and United Cities'
lenders and creditors and from Woodward Marketing, L.L.C., in form and
substance reasonably satisfactory to Atmos and United Cities.
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(f) Litigation. No action, suit, or proceeding shall be
pending or threatened before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (i)
prevent consummation of any of the transactions contemplated by this
Agreement, (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation, (iii) materially
affect adversely the right of Atmos to own the former assets and to
operate the former business of United Cities and the United Cities
Subsidiaries, or (iv) materially affect adversely the right of any of
the United Cities Entities to own its assets and to operate its
business (and no such injunction, judgment, order, decree, ruling, or
charge shall be in effect).
(g) Pooling Letter. Atmos shall have received from Ernst
& Young LLP a written opinion dated the Closing Date, in form and
substance satisfactory to Atmos, to the effect that pooling of
interests accounting treatment by Atmos is required for the Merger.
(h) Comfort Letters.
(i) Immediately prior to the time that the
Registration Statement on Form S-4 becomes effective, Atmos
and United Cities shall have received from Ernst & Young LLP a
letter dated such date, in form and substance satisfactory to
Atmos.
(ii) Immediately prior to the time that the
Registration Statement on Form S-4 becomes effective, Atmos
and United Cities shall have received from Arthur Andersen
LLP a letter dated such date, in form and substance
satisfactory to Atmos.
(iii) Atmos and United Cities shall have received
from Ernst & Young LLP a letter, dated as of the Closing Date,
to the effect that they reaffirm the statements made in the
letter furnished pursuant to subsection (i) of this Section
6.1(h), except that the specified date referred to shall be a
date not more than five (5) days prior to the Closing Date.
(iv) Atmos and United Cities shall have received
from Arthur Andersen LLP a letter, dated as of the Closing
Date, to the effect that they reaffirm the statements made in
the letter furnished pursuant to subsection (ii) of this
Section 6.1(h), except that the specified date referred to
shall be a date not more than five (5) days prior to the
Closing Date.
Section 6.2 Additional Conditions to Obligations of Atmos. The
obligations of Atmos to issue the Atmos Stock to United Cities' shareholders
and to effect the Merger are,
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at the option of Atmos, also subject to the satisfaction at or prior to the
Closing Date of the following conditions:
(a) Representations and Warranties. (i) The
representations and warranties of United Cities contained in Sections
1.1, 1.2, 1.3, 1.4, 1.5(a), 1.5(b), 1.5(d), 1.6(a), 1.6(b), 1.9(a)
(except with respect to the second sentence of Section 1.9(a) as it
relates to financial statements), 1.10, 1.14, 1.17, 1.18, 1.21, 1.22,
1.23, 1.24, 1.25 and 1.26 of this Agreement shall be true and correct
in all material respects as of the date of this Agreement and as of
the Closing Date with the same force and effect as if made at and as
of the Closing Date, and (ii) all of the other representations and
warranties of United Cities contained in this Agreement shall be true
and correct as of the date of this Agreement and as of the Closing
Date with the same force and effect as if made at and as of the
Closing Date, except where the failure of such representation(s) or
warranty(ies) to be true and correct and would not have a Material (as
defined in Section 8.1(bb)) adverse effect on the United Cities
Entities, taken as a whole. Atmos shall have received a certificate
signed by the Chief Executive Officer and the Chief Financial Officer
of United Cities dated as of the Closing Date to the foregoing effect.
(b) Agreements and Covenants. United Cities shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with
by it at or prior to the Closing Date and Atmos shall have received a
certificate signed by the Chief Executive Officer of United Cities and
dated as of the Closing Date to that effect.
(c) Material Adverse Changes. Since the date of this
Agreement, no Material adverse change in the business, operations,
properties, condition (financial or otherwise), assets or liabilities
of any of the United Cities Entities shall have occurred; and Atmos
shall not have discovered or become aware of any fact, error,
misstatement or omission materially adverse to the business,
operations, properties, condition (financial or otherwise), assets or
liabilities of any of the United Cities Entities that has not been
disclosed by United Cities to Atmos in the United Cities Disclosure
Schedule which would result in a Material adverse change.
(d) Opinion of Investment Banker. The Board of Directors
of Atmos shall have received from Merrill Lynch, Pierce, Fenner &
Smith Incorporated a written opinion, dated as of the mailing date of
the Proxy Statement/Prospectus, in form and substance satisfactory to
Atmos, to the effect that the Merger is fair to the shareholders of
Atmos from a financial point of view.
(e) Opinion of Tax Counsel. Atmos shall have received
from Locke Purnell Rain Harrell (A Professional Corporation) a written
opinion dated the Closing Date, in form and substance satisfactory to
Atmos, to the effect that the
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Merger will constitute a tax-free reorganization pursuant to Section
368(a)(1)(A) of the Code.
(f) Opinion of United Cities' Counsel. Atmos shall have
received an opinion of Chapman and Cutler, counsel to United Cities,
dated the Closing Date, regarding the United Cities Entities and the
Merger, in form and substance satisfactory to Atmos.
(g) Dissenting United Cities Shareholders. Written
objections to the Merger shall not have been made by the holders of
ten (10%) percent or more of the outstanding shares of the common
stock of United Cities, pursuant to the provisions of the Illinois
Business Corporation Act or the Virginia Stock Corporation Act,
respecting rights of dissenting shareholders.
Section 6.3 Additional Conditions to Obligations of United
Cities. The obligations of United Cities to effect the Merger are, at the
option of United Cities, also subject to the satisfaction at or prior to the
Closing Date of the following conditions:
(a) Representations and Warranties. (i) The
representations and warranties of Atmos contained in Sections 2.1,
2.2, 2.3, 2.4, 2.5(a), 2.5(b), 2.5(d), 2.6(a), 2.6(b), 2.9(a) (except
with respect to the second sentence of Section 2.9(a) as it relates to
financial statements), 2.10, 2.14, 2.17, 2.18, 2.21, 2.22, 2.23, 2.24,
2.25 and 2.26 of this Agreement shall be true and correct in all
material respects as of the date of this Agreement and as of the
Closing Date, with the same force and effect as if made on and as of
the Closing Date, and (ii) all of the other representations and
warranties of Atmos contained in this Agreement shall be true and
correct as of the date of this Agreement and as of the Closing Date
with the same force and effect as if made at and as of the Closing
Date, except where the failure of such representation(s) and
warranty(ies) to be true and correct would not have a Material (as
defined in Section 8.1(cc)) adverse effect on the Atmos Entities taken
as a whole. United Cities shall have received a certificate signed by
the Chief Operating Officer and Chief Financial Officer of Atmos dated
as of Closing Date to the foregoing effect.
(b) Agreements and Covenants. Atmos shall have performed
or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it at
or prior to the Closing Date and United Cities shall have received a
certificate signed by the Chief Operating Officer of Atmos and dated
as of the Closing Date to that effect.
(c) Material Adverse Changes. Since the date of this
Agreement, no Material adverse change in the business, operations,
properties, condition (financial or otherwise), assets or liabilities
of any of the Atmos Entities shall have occurred;
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and United Cities shall not have discovered or become aware of any
fact, error, misstatement or omission materially adverse to the
business, operations, properties, condition (financial or otherwise),
assets or liabilities of any of the Atmos Entities that has not been
disclosed by Atmos to United Cities in the Atmos Disclosure Schedule
which would result in a Material adverse change.
(d) Opinion of Investment Banker. The Board of Directors
of United Cities shall have received from PaineWebber Incorporated a
written opinion, dated as of the mailing date of the Proxy
Statement/Prospectus, in form and substance satisfactory to United
Cities, to the effect that the Merger is fair to the shareholders of
United Cities from a financial point of view.
(e) Opinion of Tax Counsel. United Cities shall have
received from Chapman and Cutler a written opinion dated the Closing
Date, in form and substance satisfactory to United Cities, to the
effect that the Merger will constitute a tax-free reorganization
pursuant to Section 368(a)(1)(A) of the Code.
(f) Opinion of Atmos' Counsel. United Cities shall have
received from Locke Purnell Rain Harrell (A Professional Corporation)
a written opinion dated the Closing Date regarding the Atmos Entities
and the Merger, in form and substance satisfactory to United Cities.
(g) Employment Agreements. Atmos shall have executed
employment contracts with Messrs. James B. Ford, Thomas R. Blose, Jr.
and Gene C. Koonce substantially in the forms of Exhibits C-1, C-2 and
C-3, respectively.
ARTICLE 7
TERMINATION, AMENDMENT, AND WAIVER
Section 7.1 Termination. This Agreement may be terminated and
the Merger contemplated hereby may be abandoned at any time prior to the
Effective Time, notwithstanding approval thereof by the shareholders of Atmos
or United Cities:
(a) by mutual written consent duly authorized by the
Boards of Directors of Atmos and United Cities;
(b) by Atmos or United Cities if the Merger shall not
have been consummated on or before March 31, 1997, or such later date
as may be agreed to in writing by the parties; provided, however, that
the right to terminate this Agreement under this Section 7.1(b) shall
not be available to any party whose willful failure to fulfill any
material obligation under this Agreement has been the cause of, or
resulted in, the failure of the Effective Time to occur on or before
such date;
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(c) by Atmos if the Board of Directors of United Cities
has, pursuant to Section 3.11, taken a position recommending a
Competing Transaction, or whereby it fails to recommend the Merger, to
the shareholders of United Cities;
(d) by Atmos or United Cities if a federal or state court
of competent jurisdiction or a federal or state governmental
regulatory or administrative agency or commission shall have issued an
order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, and such order, decree or ruling or
other action shall have become final and nonappealable; provided, that
the party seeking to terminate this Agreement pursuant to this Section
7.1(d) shall have used all reasonable efforts to remove such
injunction, order or decree;
(e) by Atmos if the shareholders of United Cities have
not approved the matters specified in Section 3.6 hereof at the vote
taken thereon at the meeting of shareholders of United Cities convened
pursuant to Section 3.6 hereof or any adjournment thereof;
(f) by United Cities if the shareholders of Atmos have
not approved the matters specified in Section 4.2 hereof at the vote
taken thereon at the meeting of shareholders of Atmos convened
pursuant to Section 4.2 hereof or any adjournment thereof;
(g) by Atmos if there has occurred (i) a material breach
by United Cities of any of its representations or warranties contained
in Sections 1.1, 1.2, 1.3, 1.4, 1.5(a), 1.5(b), 1.5(d), 1.6(a),
1.6(b), 1.9(a) (except with respect to the second sentence of Section
1.9(a) as it relates to financial statements), 1.10, 1.14, 1.17, 1.18,
1.21, 1.22, 1.23, 1.24, 1.25 or 1.26 of this Agreement or of any of
the covenants or agreements, contained in this Agreement or the Plan
of Merger, or (ii) a Material (as defined in Section 8.1(bb)) breach
by United Cities of any of its other representations or warranties
contained in this Agreement or the Plan of Merger, if the same has not
been cured within twenty (20) days after written notice of such breach
has been given to United Cities by Atmos;
(h) by United Cities if there has occurred (i) a material
breach by Atmos of any of its representations or warranties contained
in Sections 2.1, 2.2, 2.3, 2.4, 2.5(a), 2.5(b), 2.5(d), 2.6(a),
2.6(b), 2.9(a) (except with respect to the second sentence of Section
2.9(a) as it relates to financial statements), 2.10, 2.14, 2.17, 2.18,
2.21, 2.22, 2.23, 2.24, 2.25 and 2.26 of this Agreement or any of the
covenants or agreements contained in this Agreement or the Plan of
Merger or (ii) a Material (as defined in Section 8.1(cc)) breach by
Atmos of any of its other representations or warranties contained in
this Agreement or the Plan of Merger, if the same has not been cured
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within twenty (20) days after written notice of such breach has been
given to Atmos to United Cities;
(i) by Atmos, prior to the expiration of the Initial
Environmental Inspection Period, in its sole discretion, because of
(i) the failure of United Cities and Atmos to agree upon a Scope for
the Environmental Audit, or (ii) the results of the preliminary review
of information about the Environmental Activities or Environmental
Condition of United Cities are not satisfactory to Atmos;
(j) by Atmos, prior to the expiration of twenty (20) days
from and after a period of forty (40) days from the date of this
Agreement, in its sole discretion, in the event United Cities fails to
terminate all liabilities of United Cities under the United Cities and
Subsidiaries Supplemental Executive Retirement Plan for an aggregate
amount of not more than $5,000,000; provided, however, that United
Cities shall not be required to include in such amount any amount in
respect to United Cities' liability to Gene C. Koonce under the United
Cities and Subsidiaries Supplemental Executive Retirement Plan; or
(k) by United Cities, in the exercise of United Cities'
Board of Directors' fiduciary duties pursuant to Section 3.11 with
respect to a Competing Transaction.
Section 7.2 Effect of Termination. In the event of the
termination of this Agreement pursuant to Section 7.1, except as otherwise
expressly provided for in this Section 7.2, this Agreement shall forthwith
become void and, except as otherwise expressly provided for in this Section
7.2, there shall be no liability on the part of any party hereto, provided,
however, that nothing herein shall relieve any party from liability for any
intentional or willful breach hereof, provided, further, that the obligations
of the parties under Section 5.4, the Confidentiality Agreement and the
Standstill Agreement shall remain in full force and effect.
Section 7.3 Amendment. This Agreement may be amended by mutual
action taken by or on behalf of the respective Boards of Directors of the
parties hereto at any time prior to the Closing Date; provided, however, that,
after approval by the shareholders of either party of the Merger, no amendment
may be made which would increase or decrease the amount or change the type of
consideration into which each share of United Cities Stock shall be converted
upon consummation of the Merger, and provided further that any amendments
required by Section 5.1(a) do not require further approval of the respective
Boards of Directors. This Agreement may not be amended except by an instrument
in writing signed by the parties hereto.
Section 7.4 Waiver. At any time prior to the Effective Time, any
party hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other party hereto, (b) waive any inaccuracies
in the representations and warranties contained
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herein or in any document delivered pursuant hereto, and (c) waive compliance
with any of the agreements or conditions contained herein. Any such extension
or waiver shall be valid if set forth in an instrument in writing signed by the
party or parties to be bound thereby and shall be applicable only with respect
to the particular condition or provision as extended or waived and not to any
other condition or provision herein.
ARTICLE 8
MISCELLANEOUS
Section 8.1 Definitions. For purposes of this Agreement, the
following terms used herein shall have the meanings set forth below:
(a) "Additional Assessment" has the meaning set forth in
Section 3.4(b) above.
(b) "Additional Environmental Investigation Period" has
the meaning set forth in Section 3.4(a) above.
(c) "Atmos SEC Reports" has the meaning set forth in
Section 2.9(a) above.
(d) "Atmos Shareholders Meeting" means the special
meeting of Atmos' shareholders called for the purpose of considering
and voting upon the Merger and the issuance of Atmos Stock to United
Cities' shareholders as consideration for the Merger in accordance
with and pursuant to the terms and provisions of this Agreement.
(e) "Atmos Stock" has the meaning set forth in Section
2.3(a) above.
(f) "Closing" means the closing of the Merger as set
forth in Section 5.1(c) of this Agreement.
(g) "Closing Date" means the date of the Closing as set
forth in Section 5.1(c) of this Agreement.
(h) "Competing Transaction" means any of the following
(other than the transactions contemplated by this Agreement) involving
United Cities or any United Cities Entity: (i) any merger,
consolidation, share exchange, business combination or similar
transaction; (ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of twenty percent (20%) or more of the
assets of the United Cities Entities; (iii) any tender offer or
exchange offer for twenty percent (20%) or more of the outstanding
shares of capital stock of United Cities; (iv) any person acquiring
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beneficial ownership of, or any group (as such term is defined under
Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder) being formed which beneficially owns or has
the right to acquire beneficial ownership of, twenty percent (20%) of
more of the outstanding shares of capital stock of United Cities; or
(v) any public announcement of a proposal, plan or intention to do any
of the foregoing or any agreement to engage in any of the foregoing;
provided, that this shall not apply to transactions permitted under
Section 3.1(e).
(i) "Confidentiality Agreement" means the Confidentiality
Agreement dated July 5, 1996 by and between United Cities and Atmos.
(j) "Code" means the Internal Revenue Code of 1986, as
amended, and regulations promulgated thereunder.
(k) "Effective Time" means the effective time of the
Merger, determined in accordance with the Plan of Merger.
(l) "Employee Benefit Arrangement" means any plan,
agreement, or arrangement which is not an employee benefit plan within
the meaning of Section 3(3) of ERISA but which provides benefits to
any one or more of the officers or other employees of any United
Cities Entity or Atmos Entity, as the case may be, such as a bonus,
incentive, stock purchase, stock option, or stock appreciation rights
plan, or any employment or consulting agreement.
(m) "Environmental Activity" means any storage, holding,
manufacture, emission, discharge, generation, processing, treatment,
abatement, removal, disposition, handling, transportation, or
disposal, or any actual, proposed, or threatened release of any
Hazardous Materials from, under, into, or on any Subject Property or
otherwise relating to any Subject Property or the Use of any Subject
Property, including but not limited to (i) the migration or emanation
of Hazardous Materials from the Subject Property onto or into the
environment beyond the physical boundaries of the Subject Property;
(ii) the off-site disposal of Hazardous Materials from any Subject
Property; and (iii) including but not limited to activity occurring in
connection with ambient air, surface, and subsurface soil conditions,
and all surface and subsurface waters.
(n) "Environmental Agency" means any federal, state, or
local entity or agency with jurisdiction over Environmental
Requirements.
(o) "Environmental Audit" has the meaning set forth in
Section 3.4(a) above.
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(p) "Environmental Condition" means (i) the presence or
existence in, on, at, or under the Subject Property of any Hazardous
Materials, underground or above-ground storage tanks, wells,
covered-over surface impoundments or similar areas, any "facility," as
that term is defined under applicable Environmental Requirements, or
wetlands and (ii) the presence or existence in, on, at, or under the
environment beyond the physical boundaries of the Subject Property of
any Hazardous Materials, which migrated or emanated from the Subject
Property.
(q) "Environmental Costs" means any of the following
which arise in any manner in connection with Environmental Activity or
an Environmental Condition, regardless of whether based in contract,
tort, implied or express warranty, strict liability, Environmental
Requirement, or otherwise: all liabilities, losses, judgments,
damages, punitive damages, consequential damages, treble damages,
costs and expenses (including, without limitation, the reasonable fees
and disbursements of legal counsel and environmental consultants, all
costs related to the performance of any required or necessary
assessments, investigations, remediation, response, containment,
closure, restoration, repair, cleanup, or detoxification of any
Subject Property or any part thereof, the preparation and
implementation of any maintenance, monitoring, closure, remediation,
abatement, or other plans required by an Environmental Agency or by
Environmental Requirements and any other costs recovered or
recoverable under any Environmental Requirement), fines, penalties, or
monetary sanctions. Environmental Costs shall include without
limitation: (i) damages for personal injury or death, or injury to
property or to natural resources; (ii) damage to the Subject Property
or damage resulting from the loss of the Use of all or any part of the
Subject Property, including but not limited to business loss; (iii)
the cost of any demolition, rebuilding, or repair of the Subject
Property or other property, required by Environmental Requirements or
necessary to restore the Subject Property or such other property to
its condition prior to damage caused by an Environmental Condition,
Environmental Activity, or by the remediation of an Environmental
Activity, or by the remediation of an Environmental Condition or
Environmental Activity; and (iv) diminution in value of the Subject
Property or other property.
(r) "Environmental Requirements" means all laws,
ordinances, statutes, codes, rules, regulations, agreements,
judgments, orders, and decrees now or hereafter enacted, promulgated,
or amended, of the United States, the states, the counties, the
cities, or any other political subdivisions in which a Subject
Property is located, and any other political subdivision, agency, or
instrumentality exercising jurisdiction over any of the United Cities
Entities, any Subject Property, or the Use of the Subject Property,
relating to pollution, the protection or regulation of human health,
natural resources, or the environment, or the emission, discharge,
release or threatened release of pollutants, contaminants, chemicals,
or industrial, toxic, or hazardous substances or waste or Hazardous
Materials into the environment
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(including, without limitation, ambient air, surface water, ground
water, or land or soil).
(s) "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
(t) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(u) "Governmental Authorizations" has the meaning set
forth in Section 1.1(a) above.
(v) "Group Member" means any member of any "affiliated
service group," as defined in Section 414(m) of the Code, that
includes any United Cities Entity or Atmos Entity, as the case may be,
any member of any "controlled group of corporations," as defined by
Section 1563 of the Code, that includes any United Cities Entity or
Atmos Entity, as the case may be, or any member of any group of
"trades or businesses under common control," as defined in Section
414(c) of the Code, that includes any United Cities Entity or Atmos
Entity, as the case may be.
(w) "Hart-Scott-Rodino Act" means the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
(x) "Hazardous Material" means any substance which is or
contains (i) any "hazardous substance" as now or hereafter defined in
Section 101(14) of the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended ("CERCLA") (42
U.S.C. Section 9601 et seq.) or any regulations promulgated under
CERCLA; (ii) any "hazardous waste" as now or hereafter defined in the
Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et
seq.) ("RCRA") or regulations promulgated under RCRA; (iii) any
substance regulated by the Toxic Substances Control Act (15 U.S.C.
Section 2601 et seq.); (iv) gasoline, diesel fuel, or other petroleum
hydrocarbons; (v) asbestos and asbestos containing materials, in any
form, whether friable or non-friable; (vi) polychlorinated biphenyls;
or (vii) radon gas; and any additional substances or materials which
are now or hereafter classified or considered to be hazardous or toxic
under Environmental Requirements or the common law, or any other
applicable laws relating to the Subject Property. Hazardous Materials
shall include, without limitation, any substance, the presence of
which on any Subject Property (A) requires reporting, investigation,
or remediation under Environmental Requirements; (B) causes or
threatens to cause a nuisance on any Subject Property or adjacent
property or poses or threatens to pose a hazard to the health or
safety of persons on any Subject Property or adjacent property; or (C)
which, if it emanated or migrated from the Subject Property, could
constitute a trespass.
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(y) "Indemnified Parties" has the meaning set forth in
Section 4.10 above.
(z) "Initial Environmental Inspection Period" has the
meaning set forth in Section 3.4(a) above.
(aa) "IRS" means the Internal Revenue Service.
(bb) "Material" with respect to United Cities means that
the effect of any untrue statement, misrepresentation or omission of
United Cities contained in this Agreement on, or of any breach or
failure to perform by United Cities of any of its covenants,
warranties, agreements or obligations contained in this Agreement on,
or the occurrence of any event affecting, the business, operations,
properties, conditions (financial or otherwise), assets or liabilities
of United Cities that result, individually or in the aggregate, in an
reduction on a pro forma basis of $2,000,000 or more in the net profit
of United Cities on an annualized basis for a twelve (12)-month
period, or a reduction on a pro forma basis of $12,500,000 or more in
the stockholders equity of United Cities as of the most recent audited
balance sheet; provided, however, that no amounts shall be included in
determining the foregoing amounts which arise with respect to any
former manufactured gas plant site or the Kansas Department of Health
and Environment mercury meter proceeding, except to the extent that
such amounts arise from events or occurrences arising after the
Initial Environmental Inspection Period; provided, further, that for
purposes of calculating any such effect on the net profit of United
Cities, there shall not be taken into account any item that would
reduce such net profit on a pro forma basis by less than $5,000. In
the event of any dispute between the parties as to the determination
of whether any such matter is Material, the parties agree to submit
such dispute to Arthur Andersen LLP ("AA") and Ernst & Young LLP
("EY") for resolution on a joint basis. In the event AA and EY are
unable to resolve such dispute within ten (10) days, then the parties
agree to submit the dispute to Coopers & Lybrand LLC whose
determination shall be final and binding on the parties.
(cc) "Material" with respect to Atmos means that the
effect of any untrue statement, misrepresentation or omission of Atmos
contained in this Agreement on, or of any breach or failure to perform
by Atmos of any of its covenants, warranties, agreements or
obligations contained in this Agreement on, or the occurrence of any
event affecting, the business, operations, properties, conditions
(financial or otherwise), assets or liabilities of Atmos that result,
individually or in the aggregate, in an reduction on a pro forma basis
of $2,000,000 or more in the net profit of Atmos on an annualized
basis for a twelve (12)-month period, or a reduction on a pro forma
basis of $12,500,000 or more in the stockholders equity of Atmos as of
the most recent audited balance sheet; provided, however, that for
purposes of calculating any such effect on the net profit of Atmos,
there shall not be taken into account any item that would reduce such
net profit on a pro forma basis by less than $5,000. In the
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event of any dispute between the parties as to the determination of
whether any such matter is Material, the parties agree to submit such
dispute to Arthur Andersen LLP ("AA") and Ernst & Young LLP ("EY") for
resolution on a joint basis. In the event AA and EY are unable to
resolve such dispute within ten (10) days, then the parties agree to
submit the dispute to Coopers & Lybrand LLC whose determination shall
be final and binding on the parties.
(dd) "Merger" and "Plan of Merger" have the meanings set
forth in Section 5.1(a) above.
(ee) "Nasdaq" means the Nasdaq National Market.
(ff) "NYSE" means the New York Stock Exchange.
(hh) "PBGC" means the Pension Benefit Guaranty
Corporation.
(ii) "Plan" means at any time any employee benefit plan as
defined in Section 3(3) of ERISA (i) which is either (1) maintained by
a United Cities Entity (or an Atmos Entity, as the case may be) or any
Group Member or (2) maintained pursuant to a collective bargaining
agreement or any other arrangement under which more than one employer
makes contributions and (ii) to which any of the United Cities
Entities (or Atmos Entities, as the case may be) or any Group Member
is then making or accruing an obligation to make contributions or has
within the preceding five plan years made contributions.
(jj) "Proxy Statement/Prospectus" means the joint proxy
which constitutes (i) a proxy statement to be delivered to Atmos'
shareholders in connection with the Atmos Shareholders Meeting, (ii) a
registration statement on Form S-4 to be filed by Atmos with the SEC
to register the Atmos Stock that will be received by the shareholders
of United Cities in the Merger, and (iii) a joint proxy statement and
prospectus to be delivered to United Cities' shareholders in
connection with the Atmos Stock and the United Cities' Shareholders
Meeting with respect to the Merger.
(kk) "PUHCA" means the Public Utility Holding Company Act
of 1935, as amended.
(ll) "Sampling" has the meaning set forth in Section
3.4(a) above.
(mm) "Scope" has the meaning set forth in Section 3.4(a)
above.
(nn) "SEC" means the Securities and Exchange Commission.
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(oo) "Securities Act" means the Securities Act of 1933, as
amended.
(pp) "Standstill Agreement" means the Standstill Agreement
dated as of July 13, 1996 by and between United Cities and Atmos.
(qq) "Subject Property" means the real property currently
or formerly Used by any of the United Cities Entities or any of their
current or former subsidiaries and all improvements, fixtures,
equipment, and personal property now or hereafter located on such real
property.
(rr) "Taxes" means all taxes, charges, fees, levies,
imports, or other assessments by any federal, state, local, or foreign
taxing authority, including, but not limited to, income, excise,
property, sales, transfer, employment, payroll, franchise, and
withholding taxes, and any interest, penalties, or additions
attributable thereto, imposed thereon, or with respect thereof.
(ss) "Tax Returns" means any return, report, information
return, or other document (including any related or supporting
information) filed or required to be filed with any federal, state,
local, or foreign taxing authority in connection with the
determination, assessment, or collection of any Tax.
(tt) "United Cities Pension Plan" means the Retirement
Plan for Employees of United Cities.
(uu) "United Cities SEC Reports" has the meaning set forth
in Section 1.9(a) above.
(vv) "United Cities Shareholders Meeting" means the
special meeting of United Cities' shareholders called for the purpose
of considering and voting upon the Merger in accordance with and
pursuant to the terms and provisions of this Agreement.
(ww) "Use" means use, ownership, tenancy, development,
construction, maintenance, management, operation, or occupancy and
when referring to Use by United Cities shall also be deemed to include
Use by the United Cities Subsidiaries or any other current or former
subsidiaries of any of the United Cities Entities.
Section 8.2 Non-Survival of Representations, Warranties, and
Agreements. The representations, warranties, and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 7.1, as the case may be, except that the agreements set
forth in Sections 4.7, 4.8, 4.9, 4.10 and 5.4 shall survive the Merger or the
termination of this Agreement.
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Section 8.3 Notices. All notices and other communications given
or made pursuant hereto shall be in writing and shall be deemed to have been
duly given or made as of the date delivered or mailed if delivered personally
or by facsimile or mailed by registered or certified mail (postage prepaid,
return receipt requested) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) If to Atmos :
Atmos Energy Corporation
P.O. Box 650205
Dallas, Texas 75265-0205
Attention: Mr. Robert F. Stephens
With a copy to:
Locke Purnell Rain Harrell (A Professional
Corporation)
2200 Ross Avenue, Suite 2200
Dallas, Texas 75201-6776
Attention: Mr. Dan Busbee
(b) If to United Cities:
United Cities Gas Company
5300 Maryland Way
Brentwood, Tennessee 37207
Attention: Mr. James B. Ford
With a copy to:
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
Attention: Mr. Terence O'Meara
Section 8.4 Assignment. This Agreement is not assignable by any
of the parties hereto.
Section 8.5 Severability. If any term or other provision of this
Agreement is invalid, illegal, or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. Upon such determination that any term or other
provision is invalid, illegal, or incapable of being enforced, the parties
hereto shall negotiate
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in good faith to modify this Agreement so as to effect the original intent of
the parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
Section 8.6 Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit, or remedy of any nature whatsoever under or by
reason of this Agreement other than officers, directors and employees of United
Cities who are third party beneficiaries pursuant to Sections 4.7, 4.9 and
4.10.
Section 8.7 Entire Agreement. This Agreement constitutes the
entire agreement and supersedes all prior agreements and undertakings (other
than the Confidentiality Agreement and the Standstill Agreement, both between
Atmos and United Cities, which shall survive in accordance with their
respective terms), both written and oral, between the parties, with respect to
the subject matter hereof and is not intended to confer upon any other person
any rights or remedies hereunder.
Section 8.8 Specific Performance. The parties hereto agree that,
if for any reason any party hereto shall have failed to perform its obligations
under this Agreement, then the other party hereto seeking to enforce this
Agreement against such non-performing party shall be entitled to specific
performance and injunctive and other equitable relief, and the parties hereto
further agree to waive any requirement for the securing or posting of any bond
in connection with the obtaining of any such injunctive or other equitable
relief. This provision is without prejudice to any other rights that any party
hereto may have against the other party hereto for any willful failure to
perform its obligations under this Agreement.
Section 8.9 Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Texas; provided,
however, that all provisions of this Agreement relating to (a) the rights,
duties and conduct of Board of Directors of United Cities with respect to this
Agreement and the transactions hereby, pursuant to Sections 3.2 and 3.11 hereof
and (b) whether Atmos shall be required to be an Illinois corporation as the
survivor under Merger, shall be governed by, and construed in accordance with
the laws of the State of Illinois.
Section 8.10 Construction; Headings. The parties hereto have
participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement. The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
58
<PAGE> 59
Section 8.11 Incorporation of Exhibits. The Exhibits identified
in this Agreement are incorporated herein by reference and made a part hereof
for all purposes.
Section 8.12 Counterparts. This Agreement may be executed in
counterparts, each of which will be an original, but all of which together will
constitute one and the same agreement.
IN WITNESS WHEREOF, Atmos and United Cities have executed this
Agreement and Plan of Reorganization on the date first written above by their
respective officers thereunto duly authorized.
ATMOS ENERGY CORPORATION
By: /s/ Robert F. Stephens
-------------------------------
Robert F. Stephens
President and Chief Operating Officer
UNITED CITIES GAS COMPANY
By: /s/ Gene C. Koonce
-------------------------------
Gene C. Koonce
President and Chief Executive Officer
59
<PAGE> 60
EXHIBIT D
PLAN OF MERGER
This PLAN OF MERGER (this "Plan") by and between ATMOS ENERGY
CORPORATION, a Texas corporation ("Atmos"), and UNITED CITIES GAS COMPANY, an
Illinois and Virginia corporation ("United Cities"). Pursuant to this Plan,
United Cities shall be merged with and into Atmos, with Atmos as the surviving
corporation (the "Merger"), and the outstanding capital stock of United Cities
shall be converted into the right to receive shares of capital stock of Atmos.
W I T N E S S E T H:
WHEREAS, Atmos is a corporation duly organized and existing under the
laws of the State of Texas, and United Cities is a corporation duly organized
and existing under the laws of the States of Illinois and Virginia;
WHEREAS, Atmos and United Cities have entered into an Agreement and
Plan of Reorganization dated July 19, 1996 (the "Reorganization Agreement"),
which contemplates the merger of United Cities with and into Atmos, with Atmos
as the surviving corporation as provided in this Plan; and
WHEREAS, the respective Boards of Directors of Atmos and United Cities
have duly authorized the execution of this Plan and have directed that the
Merger be submitted to their respective shareholders for a vote in accordance
with the requirements of the Texas Business Corporation Act, the Illinois
Business Corporation Act, and the Virginia Stock Corporation Act, the Boards of
Directors and shareholders of Atmos and United Cities have approved the Merger,
and the Board of Directors and shareholders of Atmos have authorized the
issuance of shares of the common stock, no par value, of Atmos (the "Common
Stock") in connection with the Merger;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereto agree as follows:
ARTICLE I
MERGER OF UNITED CITIES INTO ATMOS
SECTION 1.01 The Merger. In accordance with the Texas Business
Corporation Act, the Illinois Business Corporation Act, and the Virginia Stock
Corporation Act, United Cities shall be merged with and into Atmos at the
effective time of the Merger (the "Effective
D-1
<PAGE> 61
Time"). Following the Merger, the separate corporate existence of United
Cities shall cease and Atmos shall be the surviving corporation, organized
under the laws of the States of Texas and Virginia (the "Surviving
Corporation").
SECTION 1.02 Effects of the Merger.
(a) The Merger shall have the effects set forth in
the applicable provisions of the Texas Business Corporation Act, the
Illinois Business Corporation Act, and the Virginia Stock Corporation
Act. Without limiting the generality of the foregoing sentence, and
subject thereto, at the Effective Time, by operation of law, all of
the property, rights, privileges, powers and franchises of United
Cities and Atmos shall vest in the Surviving Corporation, and all
debts, liabilities and obligations of United Cities and Atmos shall be
assumed by the Surviving Corporation and shall become the debts,
liabilities and obligations of the Surviving Corporation.
(b) If, at any time after the Merger, the
Surviving Corporation shall deem it necessary to obtain further
assignments or documents to vest, perfect, confirm or record in the
Surviving Corporation title to any property or rights of United Cities
acquired as a result of the Merger, United Cities hereby authorizes
the officers and directors of the Surviving Corporation or its
successors to execute and deliver on behalf of and in the name of
United Cities all such proper deeds, assignments and other instruments
and to do all things necessary and proper to vest, perfect, confirm or
record title to such property or rights in the Surviving Corporation
or its successor.
SECTION 1.03 Articles of Incorporation; Bylaws.
(a) The Restated Articles of Incorporation of
Atmos, as in effect immediately prior to the Effective Time,
shall be amended as provided herein, and such Restated
Articles of Incorporation, as so amended, shall be the
Articles of Incorporation of the Surviving Corporation,
without any other modification or amendment until thereafter
amended as provided by law.
(b) The text of Article II of the Restated
Articles of Incorporation of Atmos shall be amended and
restated in its entirety to read as follows:
"The purpose for which the Corporation is
organized is the transaction of any or all lawful
business for which corporations may be incorporated
under the Texas Business Corporation Act and the
Virginia Stock Corporation Act, including, but not
limited to, the following: the transportation and
distribution of natural gas by pipeline as a public
utility."
D-2
<PAGE> 62
(c) There is hereby added to the Restated
Articles of Incorporation of Atmos the following
new Article VIII, the text of which is set forth
below in its entirety:
"ARTICLE VIII
These Articles of Incorporation may be
amended only upon the affirmative vote of more than
two-thirds of the outstanding shares of Common Stock
of the Corporation entitled to vote thereon."
(d) The Bylaws of Atmos, as in effect immediately
prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation, without any modification or amendment
until thereafter amended as provided by law.
SECTION 1.04 Directors and Officers.
(a) At the Effective Time, the number of
directors of the Surviving Corporation shall be fifteen (15), and
thereafter shall be set in the manner provided in the Bylaws of the
Surviving Corporation. The directors of the Surviving Corporation
shall be the eleven (11) directors of Atmos in office at and as of the
Effective Time and the following four (4) former directors of United
Cities: Messrs. Gene C. Koonce, __________, __________, and
__________. Each of the Atmos directors in office prior to the
Effective Time shall continue to serve in the class and for the term
that he was serving at and as of the Effective Time, and the following
directors shall serve in the classes and for the terms indicated: Mr.
Koonce (Class I, with a term expiring in 1999); Mr. __________, (Class
I, with a term expiring in 1999); Mr. __________ (Class II, with a
term expiring in 1997); and Mr. __________ (Class III, with a term
expiring in 1998). All of such directors shall remain in office until
their respective successors are duly elected or appointed and
qualified.
(b) The officers of Atmos in office at and as of
the Effective Time shall remain the officers of the Surviving
Corporation, in each case until their respective successors are duly
elected or appointed and qualified.
ARTICLE II
CONVERSION AND EXCHANGE OF SHARES
SECTION 2.01 Conversion of Shares. (a) At and as of the Effective
Time, each outstanding share of the common stock of United Cities (the "United
Cities Stock") automatically shall become and be converted into the right to
receive one (1) share of Common Stock (as the same may be adjusted in
accordance with the terms hereof). The
D-3
<PAGE> 63
exchange ratio set forth in the immediately preceding sentence shall be
appropriately and proportionately adjusted in the event of any stock dividend
on, or stock split or stock combination of, or any other like change in the
Common Stock or the United Cities Stock based on a record date occurring during
the period from July 19, 1996 until immediately prior to the Effective Time.
(b) At and as of the Effective Time, each share
of the United Cities Stock then held in the treasury of United Cities,
if any, shall, by virtue of the Merger and without any action on the
part of the holder thereof, be cancelled without payment of any
consideration therefor and without any conversion thereof.
(c) No fraction of a share of Common Stock will
be issuable upon the conversion of shares of United Cities Stock in
the Merger. Instead, each shareholder of United Cities who but for
this provision would be entitled to a fractional share of Common Stock
shall, upon surrender to Atmos' Paying Agent (as hereinafter defined)
of his certificate or certificates formerly representing shares of
United Cities Stock (each, an "Old Certificate"), receive in lieu of
such fractional share, and without interest, a cash amount determined
by multiplying such fraction by the average of the closing sale
prices for a share of Common Stock, as reported on the NYSE, for the
five (5) business days prior to the date on which the Effective Time
shall occur.
SECTION 2.02 Exchange of Certificates. (a) Following the Effective
Time, the shareholders of United Cities shall deliver to the Paying Agent their
Old Certificates. Upon surrender to the Paying Agent of outstanding Old
Certificates, the holder of such Old Certificate or Old Certificates shall
receive in exchange therefor a certificate (a "New Certificate") representing
whole shares of the Common Stock (the "Atmos Shares") and cash in lieu of
fractional shares in accordance with the provisions of Sections 2.01(a) and
2.01(c) of this Plan. Until so surrendered and exchanged, each Old Certificate
shall be deemed at and after the Effective Time to represent only the right to
receive upon such surrender a New Certificate representing Atmos Shares and
cash in lieu of fractional shares without any interest thereon. All rights to
receive the Atmos Shares into which the shares of United Cities Stock are
converted, and cash in lieu of fractional shares, pursuant to this Plan shall
be deemed to have been issued and paid in full satisfaction of all rights
pertaining to such United Cities Stock.
(b) The New Certificates representing the Atmos
Shares to be issued in connection with the Merger shall in each case
be issued to the person in whose name the surrendered Old Certificate
or Old Certificates is or are registered. A restrictive legend shall
be placed on the New Certificates representing those Atmos Shares
issued to persons who (i) were affiliates of United Cities prior to
the Merger, and/or (ii) become affiliates of Atmos after the Merger,
and a notation shall be made
D-4
<PAGE> 64
in the appropriate records of Atmos, indicating that the shares
represented thereby are subject to certain restrictions on transfer.
(c) At the Effective Time, the stock transfer
books of United Cities shall be closed, and there shall be no further
registration or transfers of shares of United Cities Stock thereafter
in the records of United Cities.
(d) Unless and until an Old Certificate shall be
surrendered to the Paying Agent as set forth herein, the holder of
such Old Certificate shall not receive any dividends or other
distributions payable to record holders of the Common Stock. Upon and
after such surrender, there shall be paid (without interest) to the
record holder of the New Certificate issued and exchanged for such Old
Certificate, the amount of any such dividend or other distribution
(the record date for the payment of which was after the Effective
Time) not previously paid to such holder. Holders of New Certificates
who shall have surrendered their Old Certificates prior to any
dividend record date will receive their dividends on the corresponding
payment date.
(e) The Atmos Shares issuable in the Merger are
hereinafter called the "Merger Consideration." Immediately following
the Effective Time, Atmos shall deposit or cause to be deposited in
trust with a bank or trust company to be designated by Atmos (the
"Paying Agent"), as agent for the holders of the Old Certificates, the
certificates representing the Atmos Shares that constitute the Merger
Consideration. As soon as practicable after the Effective Time, the
Paying Agent shall cause to be mailed, and shall make available at the
offices of the Paying Agent, to each person entitled to receive the
Merger Consideration, a form of a letter of transmittal and
instructions for use in effecting the surrender for payment of the Old
Certificates which, immediately prior to the Effective Time,
represented shares of United Cities Stock. Upon surrender to the
Paying Agent of such Old Certificates, together with such letter of
transmittal, duly executed and completed in accordance with the
instructions thereto, the Paying Agent shall promptly deliver the
Merger Consideration to the persons entitled thereto, less any amount
required to be withheld under applicable federal income tax
regulations. If payment is to be made to a person other than the
registered holder of the Old Certificate surrendered, it shall be a
condition of such payment that the Old Certificate so surrendered
shall be properly endorsed or otherwise be in proper form for transfer
and that the person requesting such payment shall pay any transfer
taxes required by reason of the payment to a person other than the
registered holder of the Old Certificate surrendered or establish to
the satisfaction of Atmos and the Paying Agent that such tax has been
paid or is not applicable. The Paying Agent shall be authorized to
deliver the Merger Consideration with respect to any Old Certificate
for United Cities Stock theretofore issued which has been lost or
destroyed, upon receipt of evidence satisfactory to Atmos and the
Paying Agent of ownership of the United Cities Stock represented
thereby and of appropriate indemnification. One year
D-5
<PAGE> 65
following the Effective Time, Atmos, as the surviving corporation in
the Merger, shall be entitled to require the Paying Agent to deliver
to Atmos any certificates representing United Cities Stock which have
not been disbursed to holders of Old Certificates representing United
Cities Stock outstanding immediately prior to the Effective Time, and
thereafter such holders shall be entitled to look only to Atmos
(subject to abandoned property, escheat, or other similar laws) for
the New Certificates representing Atmos Shares payable upon due
surrender of their Old Certificates representing United Cities Stock.
Atmos shall pay all charges and expenses, including those of the
Paying Agent, in connection with the exchange of the Merger
Consideration for certificates representing United Cities Stock.
SECTION 2.03. Dissenting Shares. Notwithstanding anything in this
Plan to the contrary, shares of United Cities Stock that are issued and
outstanding immediately prior to the Effective Time and that are held by a
holder of United Cities Stock who has not voted such shares in favor of
adoption of this Plan and shall have properly demanded dissenters' rights for
such shares in the manner provided in Section 11.70(a) of the Illinois Business
Corporation Act ("United Cities Dissenting Shares") shall not be converted into
the right to receive the Merger Consideration unless and until such holder
becomes ineligible for such dissenters' rights. If such holder becomes
ineligible for such dissenters' rights, then, as of the Effective Time or the
occurrence of such event, whichever occurs last, such shares shall thereupon
cease to be United Cities Dissenting Shares and shall be converted into the
right to receive the Merger Consideration as provided in Section 2.01 hereof.
SECTION 2.04 Treatment of United Cities Options. Following the
consummation of the Merger, Atmos agrees to continue in effect the United
Cities Gas Company Long-Term Stock Plan of 1989, as amended. Persons holding
options under such plan shall be allowed to exercise their options for Common
Stock at the exchange rate set forth in Section 2.01. Persons holding stock
appreciation rights under such plan shall be allowed to exercise such rights
based on the price of Common Stock taking into account the exchange rate set
forth in Section 2.01.
ARTICLE III
EFFECTIVE TIME
SECTION 3.01. Effective Time. The Merger shall become effective in
Texas upon the issuance by the Secretary of State of Texas of a Certificate of
Merger, in Illinois upon the issuance by the Secretary of State of Illinois of
a Certificate of Merger and in Virginia upon the issuance by the Secretary of
State of Virginia of a Certificate of Merger.
SECTION 3.02 Amendment. At any time before the approval of the
Reorganization Agreement and this Plan by the respective shareholders of Atmos
and
D-6
<PAGE> 66
United Cities and prior to the Effective Time, the Reorganization Agreement and
this Plan may be amended in writing by Atmos and United Cities; provided,
however, that after approval by the shareholders of either party to the Merger,
no amendment may be made which would increase or decrease the amount or change
the type of consideration into which each share of United Cities Stock shall be
converted upon consummation of the Merger. This Plan may not be amended except
by an instrument in writing signed by the parties hereto.
D-7
<PAGE> 1
Exhibit 2.2
List of Schedules
Omitted from Exhibit 2.1,
Agreement and Plan of Reorganization
1. Exhibit A, United Cities Gas Company Disclosure Schedule, containing
information regarding United Cities' subsidiaries, capitalization,
required consents, debt instruments, compliance with laws and agreements,
environmental matters, material contracts, litigation, liens and
encumbrances on assets, taxes, employee benefit plans, labor matters, and
other matters.
2. Exhibit B, Atmos Energy Corporation Disclosure Schedule, containing
information regarding Atmos' capitalization, required consents, debt
instruments, material contracts, litigation, liens and encumbrances on
assets, employee benefit plans, and other matters.
3. Exhibit C-1, Form of Employment Agreement to be entered into by and
between Atmos and James B. Ford
4. Exhibit C-2, Form of Employment Agreement to be entered into by and
between Atmos and Thomas R. Blose
5. Exhibit C-3, Form of Employment Agreement to be entered into by and
between Atmos and Gene C. Koonce
United Cities Gas Company agrees to furnish supplementally to the
Commission upon request a copy of any omitted schedule.
<PAGE> 1
Exhibit 20.1
Date: July 22, 1996 Atmos Media Contact: Margaret Watson
214/450-4050
For Release: Immediately Atmos Investor/Analyst
Contact: Jack Eversull
214/788-3729
United Cities Contact: Linda Kelley
615/373-0104, Ext. 224
ATMOS ENERGY CORPORATION, UNITED CITIES GAS COMPANY
ANNOUNCE DEFINITIVE AGREEMENT TO MERGE
Dallas, Texas -- Atmos Energy Corporation (NYSE: ATO) and United Cities Gas
Company (NASDAQ; UCIT) jointly announced today that the companies have reached
a definitive agreement for the acquisition by merger of United Cities by Atmos.
Atmos will be the surviving entity following the merger.
Under the terms of the definitive agreement, one share of Atmos stock will
be exchanged for each share of United Cities stock. No adjustment to the
exchange ratio will be made to reflect changes in Atmos' stock price. Atmos
has agreed to increase the indicated annual dividend to not less than $1.02 per
share at the first board meeting following the closing of the transaction. The
current annual dividend is $.96 per share. The transaction is expected to be
tax-free to United Cities shareholders and accounted for as a pooling of
interests. On June 30, 1996, there were 15,982,304 shares of Atmos common
stock outstanding and 13,102,913 common shares of United Cities outstanding.
Atmos' stock closed at $25.875 per share, and United Cities' stock closed at
$17.00 per share on Friday, July 19.
The Board of Directors of the combined company will consist of all 11
current members of the Atmos board and four current members from the 10-member
United Cities board. Charles K. Vaughan will remain chairman of the board of
Atmos and will be the chief executive officer of Atmos. Gene C. Koonce,
currently United Cities chairman of the board, president and chief executive
officer, will become vice chairman of the Atmos board. Robert F. Stephens will
remain president and chief operating officer of Atmos, and James F. Purser will
remain executive vice president and chief financial officer. James B. Ford,
currently senior vice president and treasurer of United Cities, will become
senior vice president of finance for Atmos. Thomas R. Blose, currently senior
vice president - operations and engineering of United Cities, will become
president of United Cities Gas Company, a division of Atmos Energy Corporation,
and vice president of Atmos.
The transaction is subject to approval by the shareholders of both
companies. Approval by appropriate regulatory bodies also will be required.
United Cities, based in Brentwood, Tenn., is primarily a distributor of
natural gas, serving approximately 310,000 natural gas customers in Tennessee,
Illinios, Missouri, Kansas, Iowa, Georgia, South Carolina, and Virginia, and
has gas storage facilities in
<PAGE> 2
Kentucky and Kansas. United Cities also serves about 25,000 propane customers
in Tennessee, North Carolina and Virginia.
The combined entity would serve approximately 1 million customers in 13
states, making it one of the largest natural gas utilities in the U.S. based on
number of customers.
"We welcome United Cities to the Atmos family of companies. This is a
good fit -- both companies have strong track records of internal growth and
growth through acquisitions, as well as similar management philosophies," said
Charles K. Vaughan, Atmos chairman of the board.
"This transaction is consistent with Atmos' continuing long-term corporate
development strategy of increasing the value of the company through external
growth," said Robert F. Stephens, president and chief operating officer of
Atmos. "We believe the transaction will be additive to earnings per share
after the initial one-time cost and assimilation are completed. We believe
this merger will further position the company to be successful in the
increasingly competitive environment for utilities because of our larger size
and geographic diversity. United Cities' unregulated businesses also
complement Atmos' unregulated businesses."
"We are pleased to be joining the Atmos family of companies, and feel the
combination of Atmos and United Cities will result in a very strong company
that will continue to be successful in the future," said Gene C. Koonce, United
Cities chairman of the board, president and chief executive officer.
Atmos acquired Trans Louisiana Gas Company in 1986, Western Kentucky Gas
Company in 1987, Greeley Gas Company in 1993, as well as several smaller gas
systems in Louisiana. The company has continued to aggressively search for
additional natural gas distribution properties. Since 1985, United Cities has
added approximately 180,000 new customers in its natural gas distribution
system through acquisitions and internal growth.
Atmos Energy Corporation, based in Dallas, Texas, currently provides
natural gas service to approximately 673,000 customers in Texas, Colorado,
Kansas, Missouri, Louisana and Kentucky through its operating companies --
Energas Company, Greeley Gas Company, Trans Louisiana Gas Company and Western
Kentucky Gas Company.
2
<PAGE> 3
ATMOS AND UNITED CITIES COMBINED STATISTICS
From public documents as of March 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
OPERATIONAL ATMOS UNITED CITIES COMBINED
<S> <C> <C> <C> <C>
No. of customers 673,000 335,000* 1,008,000
No. of employees 1,650 1,300 2,950
No. of states served 6 10 13
FINANCIAL
12 mos. ending 3/31/96
(000's except per share)
Utility operating revenues $482,250 $309,701 $791,951
Net plant in service $387,379 $341,454 $728,833
COMMON STOCK
12 mos. ending 3/31/96
Earnings $ 26,068 $ 13,982 $ 40,050
Earnings per share $1.67 $1.14
Cash flow $ 56,353 $ 36,067 $ 92,420
Cash flow per share $3.60 $2.93
Av. shares outstanding 15,638 12,306 27,944
% Total
Capital
Shareholders equity $181,505 $161,283 $342,788 54%
Long term debt $125,303 $162,998 $288,301 46%
Total capitalization $306,808 $324,281 $631,089 100%
</TABLE>
- --------------
* includes propane customers
3
<PAGE> 1
EXHIBIT 99.1
STANDSTILL AGREEMENT
This STANDSTILL AGREEMENT (the "Agreement"), made and entered
into by and between ATMOS ENERGY CORPORATION, a Texas corporation ("Atmos"),
and UNITED CITIES GAS COMPANY, an Illinois and Virginia corporation ("United
Cities"), and effective as of this 13th day of July, 1996,
W I T N E S S E T H:
WHEREAS, the parties hereto have entered into that certain
Confidentiality Agreement, dated July 5, 1996 (the "Confidentiality
Agreement");
WHEREAS, pursuant to the Confidentiality Agreement, the
parties hereto are evaluating a possible merger of United Cities and Atmos,
subject to approval by the boards of directors and shareholders of United
Cities and Atmos (the "Possible Transaction"); and
WHEREAS, this Agreement is not intended to create any
obligations for either party hereto with respect to the Possible Transaction,
other than the agreements expressly set forth herein, and no other contract or
agreement providing for the Possible Transaction shall be deemed to exist
between the parties hereto.
NOW, THEREFORE, for and in consideration of the premises and
the agreements herein contained, the sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Standstill Provisions. For a period of two years
from the date of this Agreement, except as may otherwise be provided pursuant
to the terms of a written definitive agreement between the parties and approved
by their respective boards of directors with respect to the Possible
Transaction negotiated pursuant to the Confidentiality Agreement, neither party
shall, directly or indirectly:
(a) acquire, or offer or agree to acquire, by
purchase or otherwise, any securities or property of the other party
(or direct or indirect rights or options to acquire any securities or
property of the other party) except by way of stock, dividends or
other distributions made on a pro rata basis with respect to
securities of the other party acquired prior to the date of this
Agreement;
(b) solicit proxies or consents or become a
participant in a "solicitation" (as such term is used in the Proxy
Rules of the Securities and Exchange Commission) of proxies or
consents with respect to securities of the other party with regard to
any matter or otherwise act, alone or in concert with others, to seek
to control or influence the management, board of directors or policies
of the other party;
1
<PAGE> 2
(c) induce, attempt to induce or in any manner
assist any other person in initiating any stockholder proposal or a
tender or exchange offer for securities of the other party or any
change of control of the other party, or for the purpose of convening
a stockholders' meeting of the other party;
(d) make any public announcement or make any
written or oral proposal or invitation to discuss any possibility,
intention, plan or arrangement, relating to a tender or exchange offer
for securities of the other party or a merger, consolidation or other
business combination (or other similar transaction which should result
in a change of control), sale of all or a substantial portion of the
assets of the other party, recapitalization, restructuring,
liquidation, dissolution or other extraordinary corporate transaction
between such party and any of its affiliates and the other party or
take any action which might require the other party to make a public
announcement regarding any of the foregoing;
(e) deposit any securities of the other party in
a voting trust or subject any securities of the other party to any
arrangement or agreement with respect to the voting of securities of
the other party;
(f) form, join or in any way participate in a
partnership, limited partnership, syndicate or other group (or
otherwise act in concert with any other person) for the purpose of
acquiring, holding, voting and disposing of securities of the other
party or taking any other actions restricted or prohibited under
clauses (a) through (e) of this paragraph, or announce an intention to
do, or enter into any arrangement or understanding with others to do,
any of the actions restricted or prohibited under clauses (a) through
(e) of this paragraph; or
(g) request the other party (or its directors,
officers, employees or agents), to amend or waive any provision of
this paragraph (including this subsection (g)), except as may
otherwise be provided pursuant to the terms of a written definitive
agreement between the parties and approved by their respective boards
of directors with respect to the Possible Transaction negotiated
pursuant to the Confidentiality Agreement.
2. Exception to Standstill Provisions.
(a) Notwithstanding clauses (a), (e), and (f) of
Paragraph 1 above, the employee benefit plans of either party
may acquire securities of the other party if the aggregate
beneficial ownership of all such plans of such party does not
exceed one percent (1%) of the outstanding securities of the
same class of the other party.
2
<PAGE> 3
(b) Nothing in this Agreement shall preclude or
prevent Atmos from making a counter-offer to acquire United
Cities in the event that (A) prior to the earlier of (i) the
termination of negotiations pursuant to the Confidentiality
Agreement relating to a Possible Transaction, or (ii) the
execution of a definitive agreement between the parties and
approved by the respective boards of directors providing for
the Possible Transaction, a third party makes an unsolicited
bona fide publicly announced offer to acquire control of
United Cities pursuant to a tender offer, merger,
consolidation, share exchange, purchase of a substantial
portion of assets, business combination or other similar
transaction (a "Third Party Offer") and (B) United Cities
thereafter (i) issues a statement recommending the Third Party
Offer to its shareholders or (ii) United Cities either issues
a statement not recommending the Third Party Offer or takes no
position with respect to such offer but is required by a court
to furnish the party making the Third Party Offer a list of
shareholders of United Cities.
3. No Further Agreement. This Agreement constitutes the
entire agreement between the parties hereto concerning the subject matter
hereof. This Agreement does not constitute an offer to engage in any
transaction, including without limitation, the Possible Transaction, it does
not impose any obligation to bargain in good faith in connection therewith, and
no party hereto intends to be bound by any agreement concerning a Possible
Transaction unless and until it agrees to and signs a formal written contract
approved by its board of directors. Either party may terminate discussions
regarding the Possible Transaction at any time, for any reason. Each party is
free to pursue any other possible business transactions with any other persons
at any time, and without any obligations to notify the other party that any
such transaction is being considered, including any merger or other business
combination. No person may reasonably rely on any promises inconsistent with
this paragraph.
4. Binding Upon Successors. This Agreement shall be
binding upon and inure to the benefit of (i) the successors in interest of each
of the parties hereto and (ii) any affiliate of any party hereto or any
affiliate of any such successor in interest.
5. Choice of Law. This Agreement shall be governed by
and in accordance with the laws of the State of Illinois, without regard to the
conflict of laws principles thereof.
IN WITNESS WHEREOF, the undersigned have executed this
Standstill Agreement as of the date first written above.
3
<PAGE> 4
ATMOS ENERGY CORPORATION UNITED CITIES GAS COMPANY
By: /s/ James F. Purser By: /s/ James B. Ford
-------------------------------- ------------------------------
James F. Purser James B. Ford
Executive Vice President and Senior Vice President and Treasurer
Chief Financial Officer
4
