SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
September 30, 2004
Date of Report (Date of earliest event reported)
ATMOS ENERGY CORPORATION
(Exact Name of Registrant as Specified in its Charter)
| TEXAS AND VIRGINIA | 1-10042 | 75-1743247 | ||
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(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
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1800 THREE LINCOLN CENTRE, 5430 LBJ FREEWAY, DALLAS, TEXAS |
75240 | |
| (Address of Principal Executive Offices) | (Zip Code) |
(972) 934-9227
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 1.01. Entry into a Material Definitive Agreement.
Amendment No. 1 to Merger Agreement
On September 30, 2004, LSG Acquisition Corporation (“LSG”), a wholly owned subsidiary of Atmos Energy Corporation (the “Company”), entered into an amendment (the “Amendment”) to the Agreement and Plan of Merger, dated June 17, 2004 (the “Merger Agreement”), by and between LSG and TXU Gas Company (“TXU Gas”). The Merger Agreement was previously filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 7, 2004.
The Amendment amended the Merger Agreement to recognize the conversion of TXU Gas from a corporation to a limited partnership, to provide for up to a $20 million reduction in the merger consideration to permit the granting of past service credit to TXU Gas employees transitioned to the Company under the Company’s Retiree Medical Plan, to revise the arrangements under which transition services would be provided by TXU Gas to the Company and to address property, insurance and other matters.
A copy of the Amendment is attached hereto as Exhibit 2.1 and is incorporated herein by reference. The foregoing summary does not purport to be complete and is qualified in its entirety by reference to the Amendment.
Transitional Services and Access Agreements
On October 1, 2004, the Company entered into transitional services agreements with TXU Gas and some of its affiliates to provide to the Company call center, meter reading, customer billing, collections, information reporting, software, accounting, treasury, administrative and other services traditionally provided to TXU Gas. The initial term of each of these agreements is 12 months from closing. Any particular service may be terminated during the initial term on 90 days’ notice, except for services provided under the Company’s agreement with TXU Gas, which may not be terminated during the initial term except for cause. After the initial term, all of the service agreements continue on a month to month basis until canceled by either party with at least 30 days’ prior written notice. In addition, the Company has an option to extend its agreement with TXU Business Services with respect to certain services for a period of six months beyond the initial term, so long as it exercises such option at least 120 days before the expiration of the initial term. The agreements require the Company to pay the service providers’ costs for the services.
Also, on October 1, 2004, the Company entered into a transitional access agreement with TXU Gas and some of its affiliates in order to allow the parties the same level of access to certain properties, facilities, software applications and other items that they were provided prior to the closing. The initial term of this agreement is also 12 months from the closing, and month to month thereafter until canceled by either party with at least 30 days’ prior written notice.
Copies of the transitional services agreements are attached hereto as Exhibits 10.1 through 10.4 and are incorporated herein by reference. The foregoing summary does not purport to be complete and is qualified in its entirety by reference to the agreements.
Item 2.01. Completion of Acquisition or Disposition of Assets.
On October 1, 2004, the Company completed the acquisition (the “TXU Gas Acquisition”) of the natural gas distribution and pipeline operations of TXU Gas (the “Acquired TXU Gas Operations”) pursuant to the terms and conditions of the Merger Agreement, as amended by the Amendment. The TXU Gas Acquisition was structured as a merger (the “Merger”) between LSG and TXU Gas, with both LSG and TXU Gas as surviving entities. The TXU Gas Acquisition will be treated as an asset acquisition for accounting purposes. Immediately following the Merger, LSG was merged into the Company. The Acquired TXU Gas Operations now constitute a new division of the Company.
The Acquired TXU Gas Operations are regulated businesses engaged in the purchase, transmission, storage, distribution and sale of natural gas in the north-central, eastern and western parts of Texas. The Acquired TXU Gas Operations provide gas distribution service through 26,431 miles of distribution mains and distribute and sell natural gas to approximately 1.5 million residential and business customers in approximately 550 cities and towns, including the 11-county Dallas/Fort Worth metropolitan area.
The Acquired TXU Gas Operations include interconnected natural gas transmission lines, five underground storage reservoirs (including a salt dome facility), a partial interest in a sixth underground storage reservoir, 20 compressor stations and related properties, all within Texas. The Acquired TXU Gas Operations also include a system consisting of 6,162 miles of transmission and gathering lines.
Upon the closing of the Merger, the Company added approximately 1,350 employees who, prior to the Merger, were employees of TXU Gas or involved in the Acquired TXU Gas Operations. The initial positions and base salaries of the transitioned employees are comparable to the positions and base salaries held by them immediately prior to the Merger, and the Company has agreed that the employees’ base salaries will not be reduced for at least one year after the Merger. The other terms of employment and employee benefit plans applicable for the transitioned employees are generally comparable to the Company’s similarly situated non-union gas utility employees. Although the Company did not assume the existing employee benefit liabilities or plans of TXU Gas, it has agreed to give the transitioned employees credit for years of TXU Gas service for specified purposes under its benefit plans.
The purchase price, excluding transaction costs, for the TXU Gas Acquisition was approximately $1.905 billion after making certain adjustments pursuant to the Merger Agreement, which the Company paid in cash. TXU Gas provided for the payment or redeemed all of its indebtedness and its preferred stock prior to the Merger and retained and agreed to pay certain other liabilities under the terms of the Merger Agreement, as amended by the Amendment. The purchase price is subject to further adjustment after closing for the actual amount of working capital acquired by the Company and other specified matters; however, the Company does not anticipate that any such further adjustment will be material.
The Company initially financed the transaction with the net proceeds of its July 2004 sale of 9,939,393 shares of its common stock and the issuance at the time of the Merger of $1.7 billion of commercial paper. The commercial paper is backstopped by a $1.7 billion 364-day Revolving Credit Agreement (the “Bridge Financing Facility”), dated as of September 24, 2004, by and among the Company, Bank One, NA, as Administrative Agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Syndication Agent and Lead Arranger and Book Runner, Bank of America, N.A. and Suntrust Bank, as Co-Documentation Agents, and a syndicate of nine banks identified therein. The Bridge Financing Facility was previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 29, 2004.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
On October 1, 2004, the Company issued $1.7 billion of commercial paper, backstopped
by the Bridge Financing Facility, to finance a portion of the TXU Gas Acquisition.
The commercial paper has a weighted average interest rate of 2.46% and has
maturities ranging from three to 12 months.
Item 9.01. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired
The audited consolidated financial statements of TXU Gas Company and its subsidiaries as of December 31, 2003 and 2002 and for the three years ended December 31, 2003 were previously filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 7, 2004.
The unaudited condensed consolidated financial statements of TXU Gas Company and its subsidiaries as of June 30, 2004 and for the three and six-month periods ended June 30, 2004 and 2003 were previously filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed with the SEC on August 31, 2004.
(b) Pro Forma Financial Information
The Company will file by amendment to this report the required pro forma financial information within 71 days of the date of this report.
(c) Exhibits
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 hereunto duly authorized.
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ATMOS ENERGY CORPORATION |
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(Registrant) |
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| DATE: October 6, 2004 | By: |
/s/ LOUIS P. GREGORY |
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| Louis P. Gregory | ||||
| Senior Vice President | ||||
| and General Counsel | ||||
EXHIBIT INDEX
EXHIBIT 2.1
AMENDMENT NO. 1 TO MERGER AGREEMENT
30 September 2004
This “Amendment” dated September 30, 2004 is between TXU Gas Company, a Texas corporation, and LSG Acquisition Corporation, a Texas corporation, and amends the Agreement and Plan of Merger between these parties dated June 17, 2004 (the “Merger Agreement”).
Recitals :
A. TXU Gas Company and LSG Acquisition Corporation (“LSG”) entered into the Merger Agreement dated June 17, 2004.
B. TXU Gas Company and LSG desire to amend certain provisions of the Merger Agreement, update and replace certain Schedules, and approve certain other actions, all as provided herein.
NOW THEREFORE, TXU Gas Company and LSG agree as follows:
| 1. | Amended Schedules . All of the Schedules attached to the Merger Agreement are deleted and replaced for all purposes with the attached Schedules with corresponding numbers. |
| 2. | Amended Exhibits . Exhibits A, B-1, B-2, B-3, B-4 and C-2 attached to the Merger Agreement are deleted and replaced for all purposes with the attached Exhibits with corresponding numbers. |
| 3. | Entity Conversion . TXU Gas has requested that LSG consent to the conversion of TXU Gas from a Texas corporation to a Texas limited partnership (the “Conversion”) and amend the Merger Agreement to reflect the Conversion. LSG hereby consents to, and TXU Gas hereby agrees to effect, the Conversion on the basis of and in accordance with the following: |
a. At least one day before Closing, TXU Corp. will form two new wholly-owned subsidiaries, TXU Gas Investment Co. LLC, a Delaware limited liability company (“DECo”), and TXU Gas Management Co. LLC, a Texas limited liability company (“TXCo”), and contribute to such entities all of the common stock of TXU Gas. The organizational documents of DECo and TXCo will be in the forms previously provided to LSG and certified copies thereof will be provided to LSG.
b. On or before September 30, 2004, TXU Gas shall irrevocably deposit cash in the amount of the redemption price of its outstanding Adjustable Rate Cumulative Preferred Stock, Series F (“Preferred Stock”) with a bank or trust company and take such other action as may be required so that the Preferred Stock is deemed to no longer be outstanding as of such day, all in accordance with Texas Law. In addition, not later than such day, TXU Gas shall irrevocably deposit cash with the trustee for its securities described in paragraphs 1, 2 and 3 of Schedule 8.01(d) and take such other action as may be required to effect the defeasance of such securities, effective on such day.
c. After the actions referred to in paragraph (b) above have been effected, TXU Gas shall convert from a Texas corporation into a Texas limited partnership in accordance with Article 5.17 of the Texas Business Corporation Act and change its name to “TXU Gas Company LP.” The only partners of the converted entity will be TXCo, as general partner, and DECo, as limited partner. The plan of conversion and the agreement of limited partnership for the converted entity shall be in the form previously provided to LSG and certified copies thereof will be provided to LSG. TXU Gas shall also file a certificate of limited partnership in accordance with the Texas Revised Limited Partnership Act.
d. Before Closing, TXCo, as general partner, shall ratify the Merger Agreement and this Amendment as an agreement and plan of merger of the converted entity and LSG and take any other act required by the Texas Revised Limited Partnership Act to adopt and approve such agreement and plan of merger.
e. The converted entity shall execute this Amendment and shall thereby expressly ratify, adopt and approve the Merger Agreement as amended by this Amendment.
f. At the Closing, TXU Gas shall provide LSG with evidence reasonably satisfactory to LSG that all of the foregoing have been effected as contemplated by this Section 3.
The Parties hereby acknowledge and agree that the foregoing is not intended to, and shall not, affect the rights and obligations of the parties to the Merger Agreement, all of the terms of which are binding on and enforceable by or against TXU Gas Company LP to the same extent that they are enforceable by or against TXU Gas Company.
4. Amended Agreements . Effective upon the Conversion, the Merger Agreement is amended as follows:
a. Each reference to TXU Gas or TXU Gas Company will mean TXU Gas Company LP, a Texas limited partnership. Each reference to the Merger Agreement, including references in Section 1.02(a) of the Merger Agreement, will mean the Merger Agreement as amended by this Amendment.
b. The second sentence of Section 2.01 is amended to read as follows:
“As a result of the Merger, TXU Gas will continue as a surviving limited partnership of the merger and LSG will continue as a surviving corporation of the merger.”
c. The first sentence of Section 2.04(a) is amended to read as follows:
“At the Effective Time, TXU Gas’ Certificate of Limited Partnership, as in effect immediately before the Effective Time, will continue in the same form until thereafter amended in accordance with Texas Law.”
d. The first sentence of Section 2.04 (b) is amended to read as follows:
“At the Effective Time, TXU Gas’ Limited Partnership Agreement, as in effect immediately before the Effective Time, will continue in the same form until thereafter amended in accordance with Texas Law and such Limited Partnership Agreement.”
e. The first sentence of Section 2.05 is amended to read as follows:
“The officers of TXU Gas immediately prior to the Effective Time shall continue as the officers of such Surviving Company, each to hold office in accordance with TXU Gas’ Limited Partnership Agreement.”
f. Section 3.05(a) is amended to read as follows:
“At the Effective Time, all of the outstanding partnership interests of TXU Gas outstanding immediately before the Effective Time will remain outstanding from and after the Effective Time.”
g. Section 3.06 is amended to read as follows:
“Each of TXU Gas and LSG represents and warrants to the other that each partner, shareholder or other interest holder that has the right to approve the Conversion or the Merger has approved or will approve the Conversion and the Merger prior to the Effective Time and each of TXU Gas and LSG will indemnify the other from any liability or obligation for any payment to any of its partners, shareholders or other interest holders (as applicable) arising from the Conversion or the Merger.”
h. Paragraphs (a) and (b) of Section 4.03 are amended to read as follows:
“(a) a true and complete copy, certified by the secretary or an assistant secretary of TXU Gas, of the resolutions duly and validly adopted by the Board of Directors of TXU Gas (before the Conversion) evidencing the authorization of the execution and delivery of this Agreement and the ancillary agreements to which it is a party and the consummation of the transactions contemplated hereby and thereby, and a true and complete copy, certified by the secretary or assistant secretary of TXCo, as general partner of TXU Gas (after the Conversion), of partnership resolutions ratifying the execution and delivery of this Agreement and the authorization of the execution and delivery of this Agreement and the ancillary agreements to which it is a party and the consummation of the transactions contemplated hereby and thereby;
(b) a true and complete copy, certified by the secretary or an assistant secretary of TXU Corp. of the resolutions duly and validly adopted by TXU Corp., as TXU Gas’ sole common shareholder (before the Conversion), evidencing its consent to TXU Gas’ execution and delivery of this Agreement and the ancillary agreements to which it is a party and the consummation of the transactions contemplated hereby and thereby and a true and complete copy, certified by the secretary or an assistant secretary of TXCo of the resolutions duly and validly adopted by TXCo, as TXU Gas’ sole general partner (after the Conversion) evidencing its authorization of TXU Gas’ execution and delivery of this Agreement and the ancillary agreements to which it is a party and the consummation of the transactions contemplated hereby and thereby; . . .. ”
i. Section 5.01 is amended to read as follows:
“ Organization and Entity Power . Upon signing the Merger Agreement, TXU Gas is a corporation, duly organized, validly existing and in good standing under the laws of Texas, and upon Closing, TXU Gas will be a limited partnership, duly organized and validly existing under the laws of the State of Texas. TXU Gas is duly qualified to do business and is in good standing in Texas, the only jurisdiction in which qualification to do business is required. TXU Gas has full power and authority to carry on its business and to execute and deliver and carry out the transactions contemplated by this Agreement. Upon signing the Merger Agreement, TXU Parent owns beneficially and of record all of the issued and outstanding common stock of TXU Gas. Upon the Conversion and at Closing, TXU Parent will own beneficially, through its beneficial and record ownership of DECo and TXCo, all of the partnership interests in TXU Gas. TXU Gas does not own any equity interest in any Person other than: (i) the Excluded Subsidiaries; (ii) subsidiaries of the Excluded Subsidiaries; and (iii) the subsidiary formed before Closing and referred to as ‘HoldCo’ in Section 8 of the Amendment.”
j. Section 5.02 is amended to read as follows:
“ Authorization of Agreement and Transaction . The execution, delivery and performance of this Agreement by TXU Gas has been, and will be at Closing, duly authorized by all necessary corporate, partnership, or other entity action on the part of TXU Gas, and this Agreement constitutes a valid and binding obligation of TXU Gas, enforceable in accordance with its terms, subject to applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance and other laws affecting creditors’ rights generally from time to time in effect and to general equitable principles (whether considered in a proceeding at law or in equity).”
k. Section 5.03(a)(i)(A) is amended to read as follows:
“(A) TXU Gas’ charter or bylaws, or its Limited Partnership Agreement or Certificate of Limited Partnership (as applicable);”
l. Article V is amended by adding a new Section 5.22 to read as follow:
“SECTION 5.22. Conversion . Neither the Conversion nor any of the actions contemplated by Section 3 of the Amendment will: (i) interrupt the continued existence of TXU Gas; (ii) effect any reversion or impairment, or any transfer or assignment of any real estate or other property of TXU Gas, including the TXU Gas Merger Assets; (iii) create any liability or obligation of TXU Gas that was not in existence immediately prior to the Conversion; (iv) violate or breach the terms of, cause a default under, conflict with, result in the acceleration of, create in any party the right to accelerate, terminate, modify or cancel, or require any notice under any Material Contract or result in the creation or imposition of any Encumbrance; (v) result in any violation of law or order of any Governmental Authority; (vi) require the making of any filing (other than as contemplated under Texas Law by Section 3 of the Amendment or required as a result of a change in name) with or the obtaining of any authorization, consent or approval of any Governmental Authority in order for the Parties to consummate the transactions contemplated by this Agreement; or (viii) impair, in any material way, the effectiveness or sufficiency of any such filing, authorization, consent or approval made or obtained prior to the Conversion.”
m. Section 9.03(a) is amended by deleting the phrase “Sections 5.01, 5.02, or 5.03(a)(i)(A)” and substituting therefor the phrase “Sections 5.01, 5.02, 5.03(a)(i)(A) or 5.22.”
n. Section 9.09(c) is amended by adding “5.22,” immediately after “5.03(a)(i)(A)” in both the first and last sentences of such section.
o. Appendix A is amended by
(i) amending the definition of “Transfer Taxes” to read as follows:
“‘ Transfer Taxes ’ means all Taxes (other than Taxes measured by net income, including without limitation within the meaning of the phrase ‘Taxes measured by net income’ federal income taxes and the Texas franchise tax) incurred or imposed by reason of the Merger, regardless of upon whom such Taxes are levied or imposed by Law, including sales and use Taxes, real property transfer Taxes, excise Taxes, and stamp, documentary, filing, recording, permit, license, or authorization duties or fees; provided that Transfer Taxes do not include any such Taxes incurred or imposed by reason of any other transfers or other transactions between TXU Gas and any of its Affiliates, whether or not contemplated hereby or in connection herewith or by reason of the Conversion or any of the actions contemplated by Section 3 of the Amendment.”
(ii) amending clause (v) of the definition of “TXU Gas Retained Liabilities” to read as follows:
“(v) all Tax liabilities of TXU Gas or its Affiliates relating to any period on or before the Effective Time, including without limitation all Tax liabilities incurred by reason of the Conversion, any of the actions contemplated by Section 3 of the Amendment, or the Merger (other than Transfer Taxes).”
and deleting the word “and” immediately prior to clause (ix) and adding the following new clause (x) at the end of the sentence:
“and (x) any obligation or liability of TXU Gas arising out of or relating to the Conversion or any of the actions contemplated by Section 3 of the Amendment (including without limitation the indemnification and other obligations of TXU Gas to its partners under its Limited Partnership Agreement).”
5. Insurance .
a. Section 3.01(j) is amended to read as follows:
“(j) (i) claim proceeds under the insurance listed in Schedule 5.19 and any policies issued by Affiliates of TXU Gas or “captive insurers” for the benefit of TXU Gas in
effect before the Closing Date for matters listed in Schedule 5.10 and any other matters for which claims have been made under such policies that are related to the TXU Gas Merger Assets, the Business or the TXU Gas Merger Liabilities (other than with respect to any matters for which TXU has retained responsibility to the extent of such responsibility) and (ii) the benefit of, any claims under, or any rights of TXU Gas under any insurance policies other than insurance listed on Schedule 5.19 or insurance policies issued by Affiliates of TXU Gas or “captive insurers” to the extent that such policies relate to the TXU Gas Merger Assets, the Business or the TXU Gas Merger Liabilities (other than with respect to any matters for which TXU Gas has retained responsibility to the extent of such responsibility). LSG has no obligation to collect or attempt to collect on any of such policies, but to the extent that it collects proceeds therefrom, then any indemnity liability that TXU Gas may have under this Agreement with respect to the claim that is paid by the insurer will be reduced by the amounts actually collected by LSG.”
b. The last sentence of Section 5.19 is amended to read as follows:
“All such insurance policies will terminate with respect to TXU Gas and TXU Gas Merger Assets at Closing except as to coverage for the matters identified in Schedule 5.10 or as to matters for which a claim has been made on or before the Closing Date. TXU Gas has made all claims that, to its Knowledge, would be made consistent with TXU Gas’ customary past practice under such policies with respect to TXU Gas, the Business or the TXU Gas Merger Assets.”
6. Retiree Medical Benefits . Section 7.05(l) is amended to read as follows:
“(l) Retiree Medical Asset Transfer . Each Transitioned Employee shall be eligible, upon retirement or termination of employment from LSG, to participate in retiree medical benefits then maintained by LSG for then-retiring employees of LSG, subject to meeting the eligibility requirements therefor. To the extent that eligibility for such retiree coverage or any benefit thereunder is based on or in any way affected by the service credited to employees or retirees, each such Transitioned Employee who has not elected retiree medical benefits from TXU Gas shall receive service credit by LSG and any such plan of LSG for seventy-three percent (73%) of such Transitioned Employee’s service after age 45 which was recognized by the retiree medical plans of TXU Gas or its Affiliates. TXU Gas shall cause an aggregate of $20 million (as adjusted under the terms set forth below) to be transferred to LSG at Closing (which amounts may be credited against the LSG Merger Assets transferred at Closing) for the funding or payment of post-retirement medical benefits for the Transitioned Employees as contemplated in the foregoing sentence (“LSG Post-Retirement Trust”), which is the trust presently maintained for the funding of post-retirement medical benefits for LSG employees other than the Transitioned Employees. Notwithstanding the foregoing, if prior to the date of such transfer, one or more of the Transitioned Employees elect to receive retiree medical benefits from the retiree medical plan of TXU Gas or its Affiliates, then the $20 million amount described above shall be reduced by four-fifths (4/5ths) of the following amount, with respect to each such Transitioned Employee: The actuarially-determined amount, as calculated by actuaries mutually agreeable to LSG and TXU Gas, under Financial Accounting Standards No. 106, as amended or replaced, required to fund post-retirement medical benefits to such Transitioned Employee under the current retiree medical plans for employees of LSG who are similarly situated to the Transitioned Employees (based on one hundred percent (100%) of such Transitioned Employee’s service after age 45 which was recognized by the retiree medical plans of TXU Gas or its Affiliates). Any adjustments required to the amount due under this paragraph that are not made at Closing will be made in connection with the post-Closing adjustments provided for in Section 4.06(c).”
7. Employees on Active Duty .
a. The third sentence of Section 7.05(a) is amended to read as follows:
“As of the Effective Time and in connection with the transaction contemplated by this Agreement, LSG will offer to employ all employees of TXU Gas, including those transferred to TXU Gas pursuant to the preceding sentence (the “ Transitioned Employees ”) who either are actively at work, are on vacation or bereavement leave or are on military leave of absence due to active duty service in the United States armed forces.”
b. The first sentence of Section 7.05(b) is amended to read as follows:
“With respect to any Transitioned Employee who is on leave status, including medical (FMLA or otherwise), disability, salary continuation, sick leave, or other leave of absence, which has been approved by TXU Gas or is contemplated under its policies, other than a Transitioned Employee on military leave of absence due to active duty service in the United States armed forces, such employee shall remain an employee of TXU Gas until such employee returns to work or his/her employment is otherwise terminated.”
8. Harwood and Other Properties . Prior to the Effective Time, TXU Gas shall convey and transfer the properties listed on Schedule 8 to this Amendment (the “HoldCo Properties”) to a wholly-owned corporation (“HoldCo”), newly formed solely for such purpose as a “C corporation” under the Code, in the manner previously provided to LSG. Upon formation, the stock of HoldCo shall be a TXU Gas Merger Asset and as such is required to be transferred to LSG. TXU Gas hereby acknowledges that the formation of Holdco shall not qualify for tax free treatment under Section 351(a) of the Code since TXU Gas does not meet the control requirement as defined under Section 368(c) of the Code and the related Treasury regulations. The Parties hereby acknowledge and agree that such conveyance and transfer shall be a taxable transaction under the Code (and any applicable state Tax laws) and the Parties shall file all applicable Tax Returns accordingly. On all applicable tax returns reporting the taxable conveyance, the Parties agree to report the value of the transferred properties in a manner consistent with the fair market value of the property at the date of transfer. TXU Gas and LSG agree to promptly provide the other party with any information and reasonable assistance required to determine the fair market value of the conveyed property. LSG will indemnify TXU Gas from any income or similar tax attributable to the operations of the HoldCo Properties by HoldCo for the period from the date of their transfer to HoldCo to the Effective Time to the extent such tax would not have been incurred if the HoldCo Properties had not been placed into a new entity prior to the Effective Time. For the avoidance of doubt, it is acknowledged that such tax does not include the taxes associated with the formation of HoldCo or the conveyance of the HoldCo Properties to HoldCo in accordance with this Section 8. Notwithstanding the conveyance and transfer provided in this Section 8, the indemnifications provided in Sections 9.02 and 9.04 of the Merger Agreement (including the definitions of the terms used in such sections for the purposes thereof) shall continue to apply to the HoldCo Properties as if they were directly owned TXU Gas Merger Assets at the Effective Time.
9. Conforming Changes .
a. The definition of “Texas Law” in Appendix A is amended to read as follows:
“‘ Texas Law ’ means the Texas Business Corporation Act or the Texas Revised Limited Partnership Act (as applicable) amended or any successor statutes and any regulations promulgated thereunder.”
b. The definition of “TXU Gas Retained Liabilities” in Appendix A is amended by substituting the word “reimbursement” for the word “reimbursed.”
c. The last sentence of Section 4.02 is amended to read as follows:
“The effective time of the Closing and the Merger will be the time of the issuance of the certificate of the merger for the Merger by the Texas Secretary of State.”
d. Section 8.01(a) is amended by substituting the word “Guaranty” for the word “Company.”
e. Section 9.04(c) is amended by adding after the word “Liabilities” the phrase “except to the extent of the TXU Gas indemnification provided in Section 9.02.”
10. Miscellaneous .
a. Capitalized Terms . Unless otherwise defined herein, each of the capitalized terms used herein, but not defined herein, shall have the same meaning given to such term in the Merger Agreement. Terms defined herein that are used in an amended provision of the Merger Agreement shall have the same meaning as their definition herein.
b. Entire Agreement . This Amendment, together with the Merger Agreement, sets forth the entire understanding and agreement among the parties with respect to the subject matter hereof and supersedes and replaces any prior understandings, agreements or statements (written or oral). Except as specifically amended by this Amendment, the Merger Agreement remains in effect in accordance with all terms and conditions contained therein.
| TXU GAS COMPANY | ||
| By: |
/s/ MIKE McCALL |
|
|
Name: |
Mike McCall | |
| Title: | President | |
| LSG ACQUISITION CORPORATION | ||
| By: |
/s/ J. PATRICK REDDY |
|
| Name: | J. Patrick Reddy | |
| Title: | Senior Vice President | |
| and Chief Financial Officer | ||
Approved, executed and delivered by TXU Gas Company LP on October 1, 2004.
| TXU GAS COMPANY LP | ||
| By: TXU GAS MANAGEMENT CO. LLC | ||
| By: |
/s/ MIKE McCALL |
|
| Name: |
Mike McCall |
|
| Title: |
President |
|
EXHIBIT 10.1
TRANSITIONAL SERVICES AGREEMENT
THIS TRANSITIONAL SERVICES AGREEMENT (this “ Agreement ”) is entered into as of October 1, 2004 (the “ Execution Date ”), by and between TXU Gas Company LP (“ TXU Gas ”) and Atmos Energy Corporation (“ Atmos Energy ”). TXU Gas and Atmos Energy are referred to collectively as the “ Parties ” and individually as a “ Party ”.
WHEREAS, the Parties desire that TXU Gas continue to provide the services set forth in this Agreement to Atmos Energy for a transition period after the Execution Date.
NOW, THEREFORE, in consideration of the foregoing, the Parties agree as follows:
ARTICLE I
SERVICES
1.1 The Services . TXU Gas shall provide or cause to be provided to Atmos Energy the Services set forth in Schedule 1 . The Party providing or causing to be provided the Services hereunder shall be referred to herein as the “ Service Provider ” and the Party receiving such Services shall be referred to herein as the “ Service Recipient .”
1.2 Service Parameters . The Service Provider shall provide and the Service Recipient shall accept the Services, to the extent, but only to the extent, that such Services were provided (by the Service Provider or by employees transferred to the Service Provider) immediately prior to the Execution Date, unless otherwise mutually agreed by the Parties. The Service Provider shall only be obligated to provide the Services under the personnel availability conditions that such Services were provided by the Service Provider immediately prior to the Execution Date. Furthermore, the Services will be available only for purposes of supporting the conduct of business substantially in the manner it was conducted immediately prior to the Execution Date, unless otherwise mutually agreed by the Parties.
1.3 Impracticability . The Service Provider shall not be required to provide any Service to the extent the performance of such Service (a) becomes impracticable, in any material respect, as a result of a cause or causes outside the reasonable control of the Service Provider, (b) would require the Service Provider to violate any applicable laws, rules, or regulations, or (c) would result in the breach of any agreement or other applicable contract existing on the Execution Date.
1.4 Information to be Furnished to Service Provider . The Service Recipient agrees to provide the Service Provider in a timely manner with information necessary for, or reasonably requested by, the Service Provider to provide the Services required to be provided by the Service Provider hereunder.
1.5 Additional Resources . In providing the Services, the Service Provider shall not be obligated to (a) hire any additional employees, (b) maintain the employment of any specific employee, or (c) purchase, lease or license any additional equipment or materials.
ARTICLE II
TERM AND TERMINATION
Term . The Services shall commence on the date this Agreement is executed and continue for an initial term of one (1) year, and month to month thereafter until canceled by either Party with at least thirty (30) days’ prior written notice.
ARTICLE III
COMPENSATION
3.1 Charges For Services . The charge for each Service will be calculated upon TXU Gas’ actual costs to provide such Service, provided that the total cost of all Services provided hereunder, unless otherwise mutually agreed by the Parties, will not exceed $26,000,000 for the initial term of one (1) year as set forth in Section 2.1.
3.2 Payment Terms . The Service Provider shall bill the Service Recipient monthly for all charges pursuant to this Agreement. Such bills shall be accompanied by reasonable documentation supporting such charges. Such invoices shall be paid within ten (10) days after receipt. Late payments shall bear interest at the lesser of: (i) the Prime Rate as reported under “Money Rates” in the Wall Street Journal plus 4%, or (ii) the maximum rate allowed by law. The Service Provider may suspend its performance of this Agreement at any time, and for such time, as undisputed charges due to the Service Provider remain outstanding more than thirty (30) days after the receipt of any such invoice. The term of this Agreement shall not be extended by the amount of time of any suspension under this Section 3.2.
ARTICLE IV
GENERAL OBLIGATIONS; STANDARD OF CARE
4.1 Performance Standards . The Service Provider shall, to the extent applicable, use its reasonable commercial efforts to provide the Services in accordance with its policies, procedures, and practices in effect immediately prior to the Execution Date and, in providing the Services, shall exercise the same degree of care and skill as it exercises in performing similar services for itself.
4.2 DISCLAIMER OF WARRANTIES. EXCEPT AS OTHERWISE SET FORTH HEREIN, THE SERVICE PROVIDER MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS, IMPLIED, OR STATUTORY, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO THE SERVICES OR OTHER DELIVERABLES PROVIDED BY IT HEREUNDER.
4.3 Indemnification by the Service Recipient . With respect to the Services provided under this Agreement, the Service Recipient shall indemnify, defend, and hold harmless the Service Provider, as applicable, its officers, employees, agents, and consultants from and against any and all liabilities that arise out of, or result from, the provision of Services by the Service Provider in accordance with this Agreement, other than liabilities arising solely from the gross negligence or willful misconduct of the Service Provider or its agents or employees. Additionally, each Party will maintain policies of insurance with coverages, limits and deductibles that are reasonable and customary within the industry.
4.4 Good Faith Cooperation . The Parties will use good faith efforts to cooperate with each other in all matters relating to the provision and receipt of the Services.
4.5 Confidentiality. It is understood that from time to time in the performance of this Agreement, that the Parties may receive, or have access to, confidential or proprietary information of the other Party. As such, each Party agrees to keep any such information confidential and not to disclose such confidential information to third parties. Notwithstanding the forgoing, each Party will have the right to make such disclosures, if any, to governmental agencies, courts of law and to its affiliates, attorneys, auditors and accountants, as may be reasonably necessary. In the event a Party is required to provide such confidential information in a proceeding before a governmental agency or court of law, then such Party will immediately notify the other Party, who may seek a protective order or confidentiality agreement, whichever is applicable, and the Party in possession of such confidential information will fully cooperate with the other Party in such efforts. In the event a Party discloses such confidential information to its affiliates, attorneys, auditors or accountants, then such Party will nevertheless continue to have the obligation to protect such confidential information of the other Party, and will remain liable for any failure to do so.
ARTICLE V
RELATIONSHIP BETWEEN THE PARTIES
The relationship between the Parties established under this Agreement with respect to Services provided is that of independent contractors, and neither Party shall be deemed an employee, agent, partner, or joint venturer of or with the other. The Service Provider will, subject to reimbursement pursuant to Article III, be solely responsible for the payment of any employment-related taxes, insurance premiums, or employment benefits in respect of the performance of the Services by the Service Provider personnel under this Agreement.
ARTICLE VI
SUBCONTRACTORS
The Service Provider may engage one or more subcontractors to perform all or any portion of its duties under this Agreement, provided that the Service Provider remains responsible for the performance of each such subcontractor in accordance with this Agreement, and the charges for the Services delegated to a subcontractor shall be the lesser of (a) the amount charged by the subcontractor or (b) the amount that would have been payable to the Service Provider under Article III above if the Service Provider had provided such Services.
ARTICLE VII
FORCE MAJEURE
The Service Provider will be excused for any failure or delay in performing any of its obligations under this Agreement if such failure or delay is caused by Force Majeure. For the purposes of this Agreement, “Force Majeure” means any circumstance or event beyond the reasonable control of the Party relying upon such event or circumstance, including, without limitation: any act of God; any accident, explosion, fire, ice, earthquake, lightning, tornado, hurricane, or other severe weather condition or calamity; any civil disturbance, labor dispute, or labor or material shortage or interruption; any sabotage or acts of terrorism; any acts of a public enemy, uprising, insurrection, civil unrest, war, or rebellion; or any action or restraint by court order or public or governmental authority or lawfully established civilian authorities.
ARTICLE VIII
MISCELLANEOUS
8.1 Entire Agreement . This Agreement and the Schedule attached hereto constitute the entire agreement between the Parties with respect to the subject matter hereof and thereof and shall supersede all prior written and oral and all contemporaneous oral agreements and understandings with respect to the subject matter hereof and thereof.
8.2 Governing Law . This Agreement shall be governed and construed and enforced in accordance with the laws of the State of Texas as to all matters, without regard to principles of conflicts of laws that would require the application of the law of another state.
8.3 Interpretation . 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.
8.4 Notices . Any notice, demand, offer, request, or other communication required or permitted to be given by either Party pursuant to the terms of this Agreement shall sent to the other Party’s address set forth below, and will be deemed to be received: (i) when placed in the United States Mail, postage pre-paid, if mailed; or (ii) when actually received, if delivered by any other means:
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TXU Gas Company LP |
Atmos Energy Corporation |
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1601 Bryan Street |
1800 Three Lincoln Centre |
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42 nd Floor |
5430 LBJ Freeway |
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Dallas, Texas 75201 |
Dallas, Texas 75240 |
8.5 Assignability; Third-Party Beneficiaries . Neither Party may, directly or indirectly, in whole or in part, whether by operation of law or otherwise, assign or transfer this Agreement, without the other Party’s prior written consent, which consent will not be unreasonably withheld; provided, however, either Party may transfer its interests, rights and obligations under this Agreement without consent to (i) any parent, (ii) any affiliate, (iii) any individual, bank, trustee, company or corporation as security for any note, notes, bonds or other obligations or securities of such assignor; or (iv) any party that acquires all or substantially all of the transferring Party’s assets. Each Party shall cause the transferee of any assets necessary for the provision of any Services hereunder or of any documents or records to which either party may be entitled to access hereunder to be bound by the terms of this Agreement with respect thereto. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective legal representatives and permitted successors and assigns, and nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement.
8.6 Severability . If any term or other provision of this Agreement is determined by a nonappealable decision by a court, administrative agency or arbitrator to be 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 are not affected in any manner materially adverse to either Party. Upon such determination that any term or other provision is invalid, illegal, or incapable of being enforced, the Parties shall negotiate 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 fullest extent possible.
8.7 Failure Or Indulgence Not Waiver; Remedies Cumulative . No failure or delay on the part of either Party hereto in the exercise of any right hereunder shall impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty, or agreement herein, nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or of any other right. All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available.
8.8 Amendment . No change or amendment will be made to this Agreement except by a written instrument signed on behalf of each of the Parties hereto.
8.9 Counterparts . This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same Agreement, and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Parties.
IN WITNESS WHEREOF, the Parties have signed this Transitional Services Agreement effective as of the Execution Date.
| TXU Gas Company LP | ||
| By: | TXU Gas Management Company LLC, | |
| Its General Partner | ||
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By: |
/s/ MIKE McCALL |
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Title: |
President |
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| Atmos Energy Corporation | ||
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By: |
/s/ J. PATRICK REDDY |
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Title: |
Senior Vice President and Chief Financial Officer |
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Schedule 1: Services
| • | Billing and Customer Information Services |
The processing of information and data for customer accounts, calculations, preparation of bill print-ready files, and other activities in support of related processes.
| • | Bill Printing and Mailing |
The preparation of bills for mailing to customers and the mailing of bills complete with inserts, where appropriate.
| • | Remittance Processing |
The collection and clearing of payments by customer account.
| • | Collections |
The process of providing support to collect funds from past due customer accounts.
| • | Customer Care Services |
The handling of all customer communications.
| • | New Construction Management |
The process of working with contractors and builders to establish the customer’s premises in the System (as defined below) and schedule work orders for gas underground and gas meter installation.
| • | Reporting |
Information reports as currently provided or available.
| • | Account Manager Services |
A single point of contact within TXU Gas or its designee for handling requests from Atmos and providing information to Atmos.
| • | Software Services |
Normal quarterly updates of TXU Energy’s computer networks, software, and databases used to provide Customer Services (the “ System ”), that have been transferred to Atmos Energy.
| • | System Changes |
Any changes to the System that are reasonably necessary to comply with regulatory requirements applicable to the TXU Gas assets transferred to Atmos Energy.
EXHIBIT 10.2
TRANSITIONAL SERVICES AGREEMENT
THIS TRANSITIONAL SERVICES AGREEMENT is entered into as of October 1, 2004 (the “ Execution Date ”), by and between Oncor Utility Solutions (Texas) Company (“OUS”), TXU Electric Delivery Company (“TXU Electric Delivery,” and, together with OUS, the “TXU Parties”) and Atmos Energy Corporation (“ Atmos Energy ”). OUS, TXU Electric Delivery and Atmos Energy are referred to collectively as the “ Parties ” and individually as a “ Party .”
WHEREAS, TXU Gas Company LP (“TXU Gas”) has utilized resources shared with TXU Electric Delivery Company, and in order to effectuate such sharing after the Execution Date, in accordance with the Resource Sharing Agreement between TXU Electric Delivery Company and OUS on file with the Public Utility Commission of Texas and dated January 17, 2002, Atmos Energy shall hereafter obtain such shared resources from OUS.
NOW, THEREFORE, in consideration of the foregoing, the Parties agree as follows:
ARTICLE I
SERVICES
1.1 The Services . OUS shall provide or cause to be provided to Atmos Energy the Services set forth in Schedule 1. Atmos Energy shall provide or cause to be provided to TXU Electric Delivery the Services set forth in Schedule 2. The Party providing or causing to be provided the Services hereunder shall be referred to herein as the “ Service Provider ” and the Party receiving such Services shall be referred to herein as the “ Service Recipient .”
1.2 Service Parameters . The Service Provider shall provide and the Service Recipient shall accept the Services, to the extent, but only to the extent, that such Services were provided (by the Service Provider or by employees transferred to the Service Provider) immediately prior to the Execution Date, unless otherwise mutually agreed by the Parties. The Service Provider shall only be obligated to provide the Services under the personnel availability conditions that such Services were provided by the Service Provider immediately prior to the Execution Date. Furthermore, the Services will be available only for purposes of supporting the conduct of business substantially in the manner it was conducted immediately prior to the Execution Date, unless otherwise mutually agreed by the Parties.
1.3 Impracticability . The Service Provider shall not be required to provide any Service to the extent the performance of such Service (a) becomes impracticable, in any material respect, as a result of a cause or causes outside the reasonable control of the Service Provider, (b) would require the Service Provider to violate any applicable laws, rules, or regulations, or (c) would result in the breach of any agreement or other applicable contract existing on the Execution Date.
1.4 Information to be Furnished to Service Provider . The Service Recipient agrees to provide the Service Provider in a timely manner with information necessary for, or reasonably requested by, the Service Provider to provide the Services required to be provided by the Service Provider hereunder.
1.5 Additional Resources . In providing the Services, the Service Provider shall not be obligated to (a) hire any additional employees, (b) maintain the employment of any specific employee, or (c) purchase, lease or license any additional equipment or materials.
1.6 Communication Sites. OUS will provide, or cause to be provided to Atmos Energy, access to the communication towers and sites that are utilized by TXU Gas Company immediately prior to the Execution Date and that are owned by subsidiaries of TXU Corp.
1.7 Resources . To the extent that either Party or its contractors requires resources owned by the other Party in order to perform the Services, each Party grants to the other Party and its contractors, for the term of this Transition Services Agreement, the limited permission to use such assets, systems and software of the Party granting the permission, as is required for the sole purpose of performing the Services.
ARTICLE II
TERM AND TERMINATION
2.1 Term . The Services shall commence on the date this Agreement is executed and continue for an initial term of one year, and month to month thereafter until canceled by either Party with at least 30 days’ prior written notice to the other Party.
2.2 Termination . Before the expiration of the initial term, the performance of any particular Service may be terminated by either Party at any time by providing ninety (90) days’ prior written notice to the other Party. Furthermore, this Agreement or the performance of any Service may be terminated by the mutual written consent of the Parties at any time.
ARTICLE III
COMPENSATION
3.1 Charges For Services . The charge for each Service will be calculated upon the Service Provider’s actual costs to provide such Service, unless otherwise mutually agreed by the Parties.
3.2 Payment Terms . The Service Provider shall bill the Service Recipient monthly for all charges pursuant to this Agreement. Such bills shall be accompanied by reasonable documentation supporting such charges. Such invoices shall be paid within ten (10) days after receipt. Late payments shall bear interest at the lesser of: (i) the Prime Rate as reported under “Money Rates” in the Wall Street Journal plus 4%, or (ii) the maximum rate allowed by law. Either Party may suspend its performance of this Agreement at any time, and for such time, as undisputed charges due to such Party remain outstanding more than thirty (30) days after the receipt of any such invoice. The term of this Agreement shall not be extended by the amount of time of any suspension under this Section 3.2.
ARTICLE IV
GENERAL OBLIGATIONS; STANDARD OF CARE
4.1 Performance Standards . The Service Provider shall, to the extent applicable, use its reasonable commercial efforts to provide the Services in accordance with the policies, procedures, and practices in effect with respect to shared resources immediately prior to the Execution Date and, in providing the Services, shall exercise the same degree of care and skill as it exercises in performing similar services for itself.
4.2 DISCLAIMER OF WARRANTIES. EXCEPT AS OTHERWISE SET FORTH HEREIN, THE SERVICE PROVIDER MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS, IMPLIED, OR STATUTORY, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO THE SERVICES OR OTHER DELIVERABLES PROVIDED BY IT HEREUNDER.
4.3 Indemnification by the Service Recipient . With respect to the Services provided under this Agreement, the Service Recipient shall indemnify, defend, and hold harmless the Service Provider, as applicable, its officers, employees, agents, and consultants from and against any and all liabilities that arise out of, or result from, the provision of Services by the Service Provider, in accordance with this Agreement, other than liabilities arising solely from the gross negligence or willful misconduct of the Service Provider, as applicable, or its agents or employees. Additionally, each Party will maintain policies of insurance with coverages, limits and deductibles that are reasonable and customary within the industry.
4.4 Good Faith Cooperation . The Parties will use good faith efforts to cooperate with each other in all matters relating to the provision and receipt of the Services.
4.5 Confidentiality. It is understood that from time to time in the performance of this Agreement, that the Parties may receive, or have access to, confidential or proprietary information of the other Party. As such, each Party agrees to keep any such information confidential and not to disclose such confidential information to third parties. Notwithstanding the forgoing, each Party will have the right to make such disclosures, if any, to governmental agencies, courts of law and to its affiliates, attorneys, auditors and accountants, as may be reasonably necessary. In the event a Party is required to provide such confidential information in a proceeding before a governmental agency or court of law, then such Party will immediately notify the other Party, who may seek a protective order or confidentiality agreement, whichever is applicable, and the Party in possession of such confidential information will fully cooperate with the other Party in such efforts. In the event a Party discloses such confidential information to its affiliates, attorneys, auditors or accountants, then such Party will nevertheless continue to have the obligation to protect such confidential information of the other Party, and will remain liable for any failure to do so.
ARTICLE V
RELATIONSHIP BETWEEN THE PARTIES
The relationship between the Parties established under this Agreement with respect to Services provided is that of independent contractors, and neither Party shall be deemed an employee, agent, partner, or joint venturer of or with the other. The Service Provider will, subject to reimbursement pursuant to Article III, be solely responsible for the payment of any employment-related taxes, insurance premiums, or employment benefits in respect of the performance of the Services by the Service Provider personnel under this Agreement.
ARTICLE VI
SUBCONTRACTORS
The Service Provider may engage one or more subcontractors to perform all or any portion of its duties under this Agreement, provided that the Service Provider remains responsible for the performance of each such subcontractor in accordance with this Agreement, and the charges for the Services delegated to a subcontractor shall be the lesser of (a) the amount charged by the subcontractor or (b) the amount that would have been payable to the Service Provider under Article III abov