Exhibit 2.1
ASSET PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
DIVERSIFIED ENERGY CO. d/b/a HIGHLAND ENERGY
AND
ATMOS ENERGY MARKETING, LLC
ASSET PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
DIVERSIFIED ENERGY CO. d/b/a HIGHLAND ENERGY
AND
ATMOS ENERGY MARKETING, LLC
This Agreement is entered effective as of the 10th day of July, 2006
between Atmos Energy Marketing, LLC ("AEM") and Diversified Energy Company d/b/a
Highland Energy ("Highland"). This Agreement sets forth the terms and conditions
under which Highland will transfer for value to AEM all rights and
responsibilities under certain natural gas purchase and sales and related
agreements. In consideration of the mutual understandings and covenants
contained in this Agreement and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Parties agree as
follows:
1. DEFINITIONS.
Generally, words used in this Agreement shall be given their ordinary
meanings in common usage in the English language. The singular and plural shall
be regarded as interchangeable. All words are intended to be gender neutral. The
following capitalized terms when used in this Agreement are intended to have the
specialized meanings described below:
(a) "Acquired Assets" shall consist of the Assigned Contracts and
the related items described in Section 2.3.
(b) "Agreement" shall mean this Asset Purchase and Sale Agreement
together with all Exhibits and Attachments. Any reference to a
section, sub-part, exhibit, attachment or paragraph shall
refer to this Agreement unless the context clearly requires a
different interpretation.
(c) "Assigned Contracts" shall mean the natural gas purchase and
sale agreements between Highland and various customers,
described in Section 2.1 and itemized on Exhibit A.
(d) "Closing" shall have the meaning ascribed in Article 7.
(e) "Highland" shall mean Diversified Energy Company d/b/a
Highland Energy.
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(f) "Date of Transfer" shall mean the time of assignment of the
Assigned Contracts as measured from the first meter read
performed for each of the end user customers with Assigned
Contracts on or after August 1, 2006.
(g) "Parties" shall refer to Highland and AEM. The term "Party"
shall refer to either Highland or AEM, as context requires.
(h) "Purchase Price" shall mean the consideration, as adjusted,
paid for the Acquired Assets pursuant to Section 5.2.
(i) "Proprietary Information" shall have the meaning ascribed in
Section 11.8(a).
(j) "Responsibilities" shall have the meaning ascribed in Section
4.3.
(k) "AEM" shall mean Atmos Energy Marketing, LLC
2. SUBJECT MATTER OF TRANSFER: ACQUIRED ASSETS.
2.1 Assignment of Agreement. Effective on the Date of Transfer,
Highland shall sell, deliver and assign to AEM and AEM shall
purchase, accept and assume all rights and responsibilities
under each of the natural gas purchase and sales agreements
listed on Exhibit A ("Assigned Contracts"); provided however,
that AEM will not be obliged to accept the transfer of any
customer which does not consent to assignment. Highland shall
use its best efforts to obtain the consent to assignment of
each of the Assigned Contracts listed on Exhibit A, and, in
accordance with Section 9.1 below, AEM will cooperate fully
with Highland in supporting Highland's efforts to obtain such
consents. In the event that AEM does not accept any transfer
then, notwithstanding any provision in this agreement to the
contrary, Highland shall have the unrestricted right to
continue to provide any and all services to such customer,
whether under the applicable contract or any other contract
entered into with such customer in the future.
2.2 Assignments and Assumptions. In furtherance of the assignment
described in Section 2.1:
(a) Highland shall assign to AEM its rights and
responsibilities under all intrastate or interstate
pipeline transportation, guaranty or pooling
agreements, local distribution company transportation
agreements, and any associated agreements that are
necessary to facilitate delivery of natural gas to
end users subject of the Assigned Contracts; or, in
the alternative Highland will withdraw as agent from
such agreements immediately upon notice that AEM
has entered comparable agency agreements in its own
name;
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(b) Highland and AEM shall terminate the existing
agreement under which Highland purchases natural gas
from AEM to service contracts which are the subject
of this Agreement, and for which AEM has accepted
assignment. For any contracts for which AEM does not
accept assignment any applicable natural gas purchase
agreements from AEM shall continue at Highland's sole
discretion.
2.3 Related Acquired Assets. As evidence of this purchase and
sale, including the Highland interests in the Assigned
Contracts, Highland shall deliver to AEM a Conveyance,
Assignment and Bill of Sale in substantially the same form as
in Attachment 1. Highland shall also provide AEM with the
following:
(a) all business and financial records in whatever form
or media within Highland's possession, relating to
the Assigned Contracts, including but not limited to
billing and collection history, available prior
contracts, and available prior correspondence;
(b) any material copyrighted by Highland and used in
connection with the Assigned Contracts, if any; and
3. EFFECTIVE DATE OF TRANSFER.
3.1 The assignment and assumption of the Assigned Contracts shall
be effective at the time of the first meter read occurring
on or after August 1, 2006 for each of the Assigned Contracts.
Prior to such meter read, Highland shall provide all customer
services, assume all liabilities and be entitled to all
revenues and benefits for services through the Date of
Transfer under the Assigned Contracts. Commencing with such
meter read, and regardless of whether a consent to assignment
has been obtained for each Assigned Contract, AEM shall
provide all customer services, assume all liabilities,
and be entitled to all revenues and benefits for services on
and after the Date of Transfer under each of the Assigned
Contracts.
4. PERFORMANCE RESPONSIBILITIES AND INDEMNIFICATION OF THE
PARTIES.
4.1 Highland's Responsibilities. Until the Date of Transfer,
Highland shall be responsible for all performance obligations
related to each of the Assigned Contracts. HIGHLAND SHALL
DEFEND, INDEMNIFY AND HOLD AEM HARMLESS FROM ANY TORT OR
CONTRACT LIABILITY, ANY REGULATORY PENALTIES AND ANY COSTS ,
INCLUDING, BUT NOT LIMITED TO, TRANSPORTATION, SUPPLY, OR
TAXES, IN CONNECTION WITH ANY OF THE ASSIGNED CONTRACTS, BUT
ONLY TO THE EXTENT ARISING OR OCCURRING BEFORE THE DATE OF
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TRANSFER, EVEN IF DEMAND FOR PAYMENT IS MADE SUBSEQUENT TO THE
DATE OF TRANSFER.
4.2 AEM's Responsibilities. At the Date of Transfer, AEM shall
assume responsibility for all performance obligations related
to each of the Assigned Contracts. AEM SHALL DEFEND,
INDEMNIFY AND HOLD HIGHLAND HARMLESS FROM ANY TORT OR CONTRACT
LIABILITY, ANY REGULATORY PENALTIES AND ANY COSTS, INCLUDING,
BUT NOT LIMITED TO TRANSPORTATION, SUPPLY, OR TAXES, IN
CONNECTION WITH ANY OF THE ASSIGNED CONTRACTS COMMENCING ON
THE DATE OF TRANSFER.
5. PURCHASE PRICE AND ACCOUNTS RECEIVABLE.
5.1 AEM's Rights to Revenue from Assigned Contracts. AEM shall be
entitled to all revenues generated from the Assigned
Contracts, including revenues from contract extensions,
contract evergreen periods, and increased consumption and
facilities expansion, for services rendered by AEM commencing
on the Date of Transfer for periods beginning after the date
of transfer. In the event that any customer improperly tenders
payment to Highland for services rendered by AEM, Highland
shall immediately remit to AEM an amount equal to such
improperly received payment. The right to receive revenues
from all uncollected accounts receivable for the Assigned
Contracts for service rendered by Highland up to the Date of
Transfer, and such revenues, shall be solely the property of
Highland. In the event that any customer improperly tenders
payment to AEM for services rendered by Highland prior to the
date of transfer, AEM shall immediately remit to Highland an
amount equal to such improperly received payment.
5.2 Payment of Purchase Price to Highland. The Purchase Price for
the Acquired Assets shall be $414,270, to be paid in the
following manner: AEM will pay Highland the sum of $233,216 in
immediately available funds at Closing. The remaining $181,054
will be paid by AEM to Highland on the first annual
anniversary of the Closing provided however that said amount
will be adjusted downward in the event that one or more
customers pursuant an Assigned Contract or Assigned Contracts
is no longer a customer on such anniversary date and such
customer was not a customer for two of the preceding twelve
months. Such adjustment will be made in the following manner:
the remaining $181,054 payment shall be reduced by the Price
Allocation Amount indicated in Exhibit B "Highland Energy
Customer Allocation" for each customer. In addition, if any
customer in Exhibit B has reduced their average natural gas
volumetric purchases by more than 20 percent, the remaining
$181,054 payment will be adjusted by the proportional decline
in volumetric purchases.
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5.3 Wire Transfers. Payments required to be made pursuant to this
Agreement shall be made by wire transfer on the day of
Closing, with transaction confirmation requested, as follows:
(a) if payment is to be made to Highland:
Customer Name: Diversified Energy Company
Bank Name: Wachovia Bank, NA
Bank Code: ABA # 0514-0054-9
Customer Account Number:
Location: Roanoke, Virginia
(b) if payment is to be made to AEM:
Customer Name: Atmos Energy Marketing, L.L.C.
Bank Name: Bank of America
Bank Code: ABA # 111 000 012
Customer Account Number:
6. TRANSITION PERIOD.
6.1. Highland Assistance to AEM. Highland shall make reasonable
efforts to provide for a period of thirty days from the date
of Closing, during normal business hours, at no cost to AEM
such general transition services as may be reasonably
necessary to transition the Acquired Assets to AEM's control.
6.2 Industrial Marketing Representative. In addition to the
transition services described in Section 6.1 above, Highland
agrees to make its Industrial Marketing Representative
available to perform customer contact services as AEM may
reasonably require, for a period of two years from the date of
Closing. AEM agrees, in consideration of the provision of
customer contact services by Highland's Industrial Marketing
Representative during such two year period, to pay Highland
the sum of $48,000 in four equal installments of $12,000 each,
payable on the 6th month, 12th month, 18th month and 24th
month anniversaries of the date of Closing. In the event that
AEM determines that the services of such Industrial Marketing
Representative are not required for the full two year period,
AEM shall notify Highland in writing not less than ninety days
prior to the last day such services will be required, and the
amount of the $48,000 will be prorated for the period of time
such services were provided prior to such date, with credit
given for prior installments. The parties agree that the
services of Highland's Industrial Marketing representative are
not expected to exceed one quarter of the representative's
work time.
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7. CLOSING.
7.1 Closing Date. The Closing of the transactions contemplated by
this Agreement shall take place at AEM's offices in Franklin,
Tennessee or such other location as deemed mutually convenient
by the Parties on July 25, 2006.
7.2 Deliveries by Highland at Closing. At Closing Highland will
deliver to AEM:
(a) all Assigned Contracts, including any amendments, as
described in Exhibit A, along with evidence of
consent to assign;
(b) the most recent available customer contact list and
all Highland records described in Section 2.3(a);
(c) Evidence of confirmation of the wire transfer payment
described in Section 5.3, if applicable.
7.3 Deliveries by AEM at Closing. No later than the next business
day following the day of Closing, AEM will deliver to
Highland:
(a) evidence of confirmation of the wire transfer payment
described in Section 5.3, if applicable.
7.4 Mutual Deliveries at Closing. At Closing the Parties shall
deliver to one another (as appropriate) executed duplicate
originals of:
(a) This Agreement;
(b) Conveyance, Assignment and Bill of Sale; and
(c) Such other documents as either Party may reasonably
request, consistent with the terms of this Agreement,
at least five days prior to Closing.
7.5 AEM's Conditions to Closing. AEM's obligation to complete the
transactions contemplated by this Agreement shall be subject
to fulfillment of the following conditions:
(a) All representations and warranties made by Highland
shall be true, current and correct in all material
respects as of the date of Closing;
(b) Highland shall have complied in all material respects
with all terms, covenants and conditions of this
Agreement as of the date of Closing;
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(c) No legal action or administrative proceeding is
pending against Highland which would prevent the
consummation of the transactions contemplated by this
Agreement; and
(d) All documents required to be delivered to AEM
pursuant to this Article 7 have been delivered.
7.6 Highland's Conditions to Closing. Highland's obligation to
consummate the transactions contemplated by this Agreement
shall be subject to fulfillment of the following conditions:
(a) All representations and warranties made by AEM shall
be true, current and correct in all material respects
as of the date of Closing;
(b) AEM shall have complied in all material respects with
all the terms, conditions and covenants of this
Agreement, including payment obligations, as of the
date of Closing;
(c) No legal action is pending against AEM which would
prevent the consummation of the transactions
contemplated by this Agreement; and
(d) All documents required to be delivered to Highland
pursuant to this Article 7 have been delivered.
8. REPRESENTATIONS AND WARRANTIES.
8.1 Representations of Highland. Highland represents and warrants
to AEM that the following statements shall be true, current
and correct as of the date of Closing:
(a) Corporate Existence and Powers. Highland is a
corporation organized and in good standing under the
laws of the Commonwealth of Virginia. Highland has
all requisite authority to enter into the
transactions contemplated by this Agreement.
(b) Validity and Enforceability. This Agreement has been
duly executed and delivered by Highland and
constitutes the binding obligation of Highland
enforceable against Highland in accordance with its
terms, except as such enforceability may be limited
by bankruptcy, insolvency, reorganization or such
other laws of general application relating to the
rights and remedies of creditors, or by general
principles of equity, including the availability of
specific performance.
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(c) Assigned Contracts. Highland has delivered to AEM
originals or copies of each of the Assigned
Contracts, all of which remain in full force and
effect. Each of the Assigned Contracts constitutes
a valid, genuine and legally enforceable obligation,
in accordance with its terms. Neither Highland, nor
to the best of its knowledge, any other party is in
default under any of the Assigned Contracts (except
for late payments by customers) and no event has
occurred which (with passage of time and giving of
notice) would constitute a default under any of the
Assigned Contracts. No counterparty to any of the
Assigned Contracts has prepaid any of its
obligations, and none, to Highland's actual
knowledge, has any valid defenses, counterclaims,
rights of set off or other similar rights respecting
the performance of its obligations under any of the
Assigned Contracts.
(d) No Pending Disputes. There are no customer disputes
or claims litigation proceedings or governmental
investigations, other than those already disclosed in
writing to AEM, pending or known by Highland to be
threatened against Highland's interest in any of the
Assigned Contracts.
(e) Consents and Approvals. No consent, approval or
authorization of or registration with any third party
is required to me made or obtained by RGC in
connection with the execution, delivery and
performance of this Agreement or the consummation of
the transactions contemplated by it, other than
consents of the customers to the Assigned Contracts
and consents, approvals, authorizations, filings or
registrations which have been made or obtained.
8.2 AEM's Representations and Warranties. AEM represents and
warrants to Highland that the following statements are true,
current and correct in all material respects as of the date of
Closing:
(a) Existence and Powers. AEM is a limited liability
company existing and in good standing under the laws
of the State of Delaware.
(b) Validity and Enforceability. This Agreement is a
binding and valid obligation of AEM and is
enforceable according to its terms, except as such
enforceability may be limited by bankruptcy,
insolvency, reorganization or such other laws of
general application relating to the rights and
remedies of creditors, or by general principles of
equity, including the availability of specific
performance.
(c) Consents and Approvals. No consent, approval or
authorization of, or filing or registration with any
third party is required to me made or
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obtained by AEM in connection with the execution,
delivery, and performance of this Agreement or the
consummation of the transactions contemplated by it,
other than consents, approvals, authorizations,
filings or registrations which have been made or
obtained.
9. OTHER ACTION.
9.1 Assignment of Contracts. Each Party agrees to use commercially
reasonable efforts to accomplish all actions necessary to
consummate the transactions contemplated by this Agreement,
including but not limited to submitting all notices and
obtaining all authorizations, waivers and approvals required
in connection with the assignment of the Assigned Contracts.
10. FUTURE MARKETING.
Except as otherwise contemplated by this agreement, neither Highland
nor any entity affiliated with Highland through ownership by Highland's
parent company, directly or indirectly, of at least fifty percent of
that entity's voting shares, shall attempt to sell any natural gas for
consumption by an existing customer at any facility serviced under the
Assigned Contracts for a period beginning on the Date of Transfer and
ending on July 1, 2009. The Parties acknowledge that existing Highland
customers have the right to purchase "tariff" gas from Roanoke Gas
Company and any such purchase decision by a customer does not violate
this agreement. The Parties further acknowledge that in the event of an
alleged violation of the provisions of this section, AEM shall be
entitled to seek injunctive relief in addition to damages and other
remedies for such violation.
11. MISCELLANEOUS.
11.1 Survival. All covenants, representations and indemnifications
made in this Agreement shall survive the Closing for a period
of one year.
11.2 Further Assurances. From time to time, each Party shall,
without further consideration, execute and deliver such
instruments as shall be reasonably necessary to effectuate the
intentions of this Agreement. The Parties shall cooperate and
take such other commercially reasonable actions to effectuate
the timely transfer of the Assigned Contracts.
11.3 Conformity with Laws. Each Party shall be responsible for
compliance with all laws or regulations applicable to its
actions or obligations under this Agreement.
11.4 Expenses. Each Party shall bear its own costs and expenses
incurred in connection with the transactions and
investigations contemplated by this
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Agreement, including the fees and expenses of respective legal
counsel, accountants and financial advisors.
11.5 NO CONSEQUENTIAL DAMAGES. IN NO EVENT SHALL EITHER PARTY BE
LIABLE TO THE OTHER PARTY IN CONNECTION WITH THIS AGREEMENT
FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL OR SPECIAL DAMAGES OF
ANY NATURE, INCLUDING, BUT NOT LIMITED TO LOSS OF PROFITS OR
SALES. NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR
ANY EXEMPLARY OR PUNITIVE DAMAGES. THE ACTUAL ECONOMIC LOSS
FROM DAMAGES CLAIMED BY A PARTY WILL BE COMPUTED BY NETTING
OUT ANY INSURANCE RECOVERIES FROM THE LOSS OR DAMAGE CLAIMED,
AND TAX BENEFITS RECEIVED.
11.6 Independent Contractor. The Parties at all times shall be
deemed to be independent of each other. Except as specified in
this Agreement, each Party shall bear its own expenses in
connection with its performance under the terms of this
Agreement. No employee of either Party shall be deemed to be
an employee of the other Party in connection with the
discharge of duties under this Agreement for any purpose.
11.7 Successor and Assigns. This Agreement shall be binding on and
inure to the benefit of the successors and permitted assigns
of the Parties. Notwithstanding the foregoing, no transfer or
assignment of the rights and obligations under this Agreement
shall be made by a Party without the written consent of the
other Party, which may be withheld in the sole opinion of the
Party's whose consent is sought; provided however, that if
either Party, its members, general partners or parent
corporation sells or transfers all or substantially all of its
assets to a third party, then assignment of all rights and
obligations under this Agreement shall be effective upon the
written notice to the other Party of such sale or transfer.
11.8 Confidentiality. All Proprietary Information of either Party
shall be and remain the exclusive property of that Party and
shall not be disclosed by the other Party to any third persons
or be used for any purpose not contemplated by this Agreement.
This Agreement shall not be construed to grant either Party
any license or other rights to the Proprietary Information of
the other Party, except as specifically provided for in this
Agreement. These obligations regarding confidentiality shall
survive the Date of Transfer or termination of this Agreement,
whichever were to occur first, for a period of twenty four
months. The Parties acknowledge (1) that RGC Resources, Inc.,
the parent company of Highland, will have certain disclosure
requirements with respect to this agreement as a result of its
status of a publicly traded and NASDAQ listed company and any
such disclosures on the part of RGC Resources do not violate
this provision and (2) that Atmos Energy Corporation,
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the parent company of AEM, may have certain disclosure
requirements with respect to this agreement as a result of its
status as a publicly traded and New York Stock Exchange listed
company and any such disclosures on the part of Atmos Energy
Corporation do not violate this provision. Furthermore,
Roanoke Gas Company and Atmos Energy Corporation, as regulated
public utilities, may be required to make certain regulatory
disclosures to the Virginia State Corporation Commission or
other regulatory authorities having jurisdiction over Roanoke
Gas Company or Atmos Energy Corporation and their respective
utility operations, and the Parties acknowledge that such
disclosures do not violate this provision.
(a) Description of Proprietary Information. As used in
the context of this Agreement, Proprietary
Information includes any information described by the
disclosing Party as confidential, or which a
reasonable business person would recognize as
confidential in nature. Proprietary Information shall
include, but not be limited to:
(1) the terms of this Agreement, except as may
be required disclosures under RGC Resources,
Inc. and/or Atmos Energy Corporation SEC
filing requirements;
(2) the terms of the Assigned Contracts; and
(3) any current or future business plans of
either Party.
11.9 Exclusions from Confidentiality. The obligation to protect
the confidentiality of Proprietary Information shall not
apply to:
(1) information which is in the public domain as
of the date of this Agreement, or which
later enters the public domain from a source
other than the receiving Party;
(2) information which the receiving Party
receives from a bona fide third party which
is not under any obligation of
confidentiality;
(3) information approved in writing for
disclosure by the Party owning such
information; and
(4) information which is required to be
disclosed by law or administrative order, in
which case the Parties shall seek to obtain
the strongest possible protective orders to
limit the disclosure of such information.
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The Party seeking to disclose information as described in this section shall
have the burden of proof in any dispute to establish the applicability of any of
the above exclusions.
11.10 Controlling Law. This Agreement shall be interpreted in
accordance with the contract law of the Commonwealth of
Virginia without regard to the applicability of conflicts of
law principles. Venue shall lie in any court of competent
jurisdiction within Roanoke City, Virginia.
11.11 Media Announcements. Neither Party shall deliver to the press
an announcement of this Agreement without the express written
consent of the other Party, notwithstanding, however, both
Parties recognize the potential obligation of RGC Resources,
Inc., parent company of Highland and Atmos Energy Corporation,
parent company of AEM, to disclose financial information in
SEC filings and to respond to media inquiries relative to
quarterly financial releases and SEC filings, and agree that
such disclosure or response shall not be subject to the
written consent requirement of this Section 11.11.
11.12 Integration and Amendment. This Agreement sets forth the
entire understanding between the Parties with respect to the
subject matter. This Agreement supersedes all prior
negotiations, discussions or agreements. This Agreement may
not be modified or amended except in writing signed by the
Parties. Any waiver of a right under this Agreement shall not
be deemed to be a subsequent waiver of that right, or any
other right or remedy.
IN WITNESS OF THIS AGREEMENT, the Parties have caused their duly
authorized representatives to sign this Agreement in multiple counterparts, each
of which shall be deemed to be an original document.
DIVERSIFIED ENERGY COMPANY ATMOS ENERGY MARKETING, LLC
d/b/a HIGHLAND ENERGY
P. O. Box 13007 11251 Northwest Freeway
Roanoke, Virginia 24030 Suite 400
Houston, Texas 77092
By: /s/ John B. Williamson, III By: /s/ Rob Ellis
Printed Name: John B. Williamson, III Printed Name: Rob Ellis
Title: Chairman, President and CEO Title: Senior Vice President
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LIST OF EXHIBITS AND ATTACHMENTS
Exhibit A - Assigned Contracts
Exhibit B - Highland Energy Customer Allocation
Attachment 1 - Assignment, Conveyance and Bill of Sale
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