UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 1-10042
ATMOS ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
TEXAS and VIRGINIA 75-1743247
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
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)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X .No .
Number of shares outstanding of each of the issuer's classes of
common stock, as of July 30, 1997.
Class Shares Outstanding
------------ ------------------
No Par Value 16,204,504 <PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
ATMOS ENERGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share data)
June 30, September 30,
1997 1996
------------ ------------
ASSETS
Property, plant and equipment $722,742 $666,438
Less accum. depreciation and amort. 272,941 252,871
-------- --------
Net property, plant and equipment 449,801 413,567
Current assets
Cash and cash equivalents 2,140 3,726
Accounts receivable, net 44,367 25,284
Inventories 7,605 7,174
Gas stored underground 9,767 14,652
Prepayments 2,751 1,489
-------- --------
Total current assets 66,630 52,325
Deferred charges and other assets 37,470 35,969
-------- --------
$553,901 $501,861
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Shareholders' equity
Common stock outstanding:
16,192,897 shares at 6/30/97 and
16,021,321 shares at 9/30/96 $ 81 $ 80
Additional paid-in capital 115,268 111,206
Retained earnings 72,820 61,012
-------- --------
Total shareholders' equity 188,169 172,298
Long-term debt 157,303 122,303
-------- --------
Total capitalization 345,472 294,601
Current liabilities
Current maturities of long-term debt 8,000 9,000
Notes payable to banks 38,700 62,800
Accounts payable 41,715 31,640
Taxes payable 10,696 3,584
Customers' deposits 10,010 9,858
Other current liabilities 14,940 10,674
-------- --------
Total current liabilities 124,061 127,556
Deferred income taxes 42,523 39,056
Deferred credits and other liabilities 41,845 40,648
-------- --------
$553,901 $501,861
======== ========
See notes to condensed consolidated financial statements.
2 <PAGE>
ATMOS ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
Three months ended
June 30,
------------------
1997 1996
------- -------
Operating revenues $86,726 $93,571
Purchased gas cost 51,599 59,795
------- -------
Gross profit 35,127 33,776
Operating expenses
Operation 19,191 19,354
Maintenance 1,122 1,013
Depreciation and amortization 5,795 5,456
Taxes, other than income 4,022 3,742
Income taxes 292 152
------- -------
Total operating expenses 30,422 29,717
------- -------
Operating income 4,705 4,059
Other income (expense) (88) (303)
Interest charges 4,119 3,440
-------- -------
Net income $ 498 $ 316
======== =======
Net income per share $ .03 $ .02
======== =======
Cash dividends per share $ .25 $ .24
======== =======
Average shares outstanding 16,176 15,965
======== =======
See notes to condensed consolidated financial statements.
3 <PAGE>
ATMOS ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
Nine months ended
June 30,
--------------------
1997 1996
-------- --------
Operating revenues $444,226 $415,143
Purchased gas cost 290,061 265,248
-------- --------
Gross profit 154,165 149,895
Operating expenses
Operation 67,138 62,022
Maintenance 3,233 3,154
Depreciation and amortization 18,181 16,382
Taxes, other than income 15,252 13,446
Income taxes 14,050 15,715
--------- -------
Total operating expenses 117,854 110,719
--------- -------
Operating income 36,311 39,176
Other income (expense) (21) (288)
Interest charges 12,389 10,956
-------- --------
Net income $ 23,901 $ 27,932
======== ========
Net income per share $ 1.48 $ 1.76
======== ========
Cash dividends per share $ .75 $ .72
======== ========
Average shares outstanding 16,123 15,855
======== ========
See notes to condensed consolidated financial statements.
4 <PAGE>
ATMOS ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
Twelve months ended
June 30,
--------------------
1997 1996
-------- --------
Operating revenues $512,827 $491,136
Purchased gas cost 331,557 311,359
-------- --------
Gross profit 181,270 179,777
Operating expenses
Operation 87,923 82,334
Maintenance 4,291 4,206
Depreciation and amortization 22,648 21,623
Taxes, other than income 18,685 16,767
Income taxes 11,645 13,756
-------- --------
Total operating expenses 145,192 138,686
-------- --------
Operating income 36,078 41,091
Other income (expense) (29) (458)
Interest charges 16,131 14,331
-------- --------
Net income $ 19,918 $ 26,302
======== ========
Net income per share $ 1.24 $ 1.67
======== ========
Cash dividends per share $ .99 $ .95
======== ========
Average shares outstanding 16,093 15,767
======== ========
See notes to condensed consolidated financial statements.
5 <PAGE>
ATMOS ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
Nine months ended
June 30,
-------------------
1997 1996
-------- --------
Cash Flows From Operating Activities
Net income $ 23,901 $ 27,932
Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation and amortization
Charged to depreciation and
amortization 18,181 16,382
Charged to other accounts 2,872 2,705
Deferred income taxes 3,467 2,307
Other 306 219
Net change in operating assets and
liabilities 5,104 16,398
------- --------
Net cash provided by operating
activities 53,831 65,943
Cash Flows From Investing Activities
Capital expenditures (55,044) (57,874)
Retirements of property, plant and
equipment (2,243) 3,344
-------- --------
Net cash used in investing activities (57,287) (54,530)
Cash Flows From Financing Activities
Net increase (decrease) in notes
payable to banks (24,100) 2,600
Issuance of long-term debt 40,000 -
Cash dividends paid (12,093) (11,393)
Repayment of long-term debt (6,000) (7,000)
Issuance of common stock 4,063 4,239
-------- --------
Net cash provided (used)
in financing activities 1,870 (11,554)
-------- --------
Net decrease in cash and cash equivalents (1,586) (141)
Cash and cash equivalents at beginning
of period 3,726 2,294
-------- --------
Cash and cash equivalents at end
of period $ 2,140 $ 2,153
======== ========
See notes to condensed consolidated financial statements.
6 <PAGE>
ATMOS ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1997
1. Unaudited interim financial information
In the opinion of management, all material adjustments necessary
for a fair presentation have been made to the unaudited interim
period financial statements. Such adjustments consisted only of
normal recurring accruals. Because of seasonal and other
factors, the results of operations for the nine month period
ended June 30, 1997 are not indicative of expected results of
operations for the year ending September 30, 1997. These interim
financial statements and notes are condensed as permitted by the
instructions to Form 10-Q, and should be read in conjunction with
the audited consolidated financial statements in the 1996 annual
report to shareholders of Atmos Energy Corporation ("Atmos" or
the "Company"). The condensed consolidated balance sheet of
Atmos, as of June 30, 1997, and the related condensed
consolidated statements of income for the three-month, nine-
month, and twelve-month periods ended June 30, 1997 and 1996, and
the condensed consolidated statements of cash flows for the nine-
month periods ended June 30, 1997 and 1996, included herein have
been subjected to a review by Ernst & Young LLP, the Company's
independent accountants, whose report is included herein.
Common stock - As of June 30, 1997, the Company had 75,000,000
shares of common stock, no par value (stated at $.005 per share),
authorized.
2. Business combination activity
Agreement to acquire United Cities Gas Company
In July 1996, the Company announced that it had reached a
definitive agreement with United Cities Gas Company ("United
Cities") of Brentwood, Tennessee, wherein United Cities will be
merged with and into Atmos by means of a tax-free reorganization.
The merger was approved by the shareholders of both United Cities
and Atmos in November 1996. The final regulatory approval was
received on June 25, 1997. It was followed by a 30-day period
during which any of the parties to the proceeding could have
sought rehearing. Effective July 31, 1997, each of the
approximately 13.3 million shares of United Cities common stock
was converted into the right to receive one share of Atmos common
stock. Pursuant to the agreement with United Cities, Atmos will
increase the indicated annual dividend to not less than $1.02 per
share, for no less than four quarters, at the first Board meeting
following the closing of the transaction, which Board meeting
will be on August 13, 1997. The transaction will be accounted
for by the pooling of interests method. Certain pro forma
7 <PAGE>
combined financial statements are included herein as supplemental
information.
United Cities is a natural gas utility company engaged in the
distribution and sale of natural gas to approximately 316,000
customers in Tennessee, Illinois, Virginia, Kansas, Missouri,
South Carolina, Georgia, and Iowa, and in the sale of propane to
approximately 27,000 customers in Tennessee, Virginia and North
Carolina. United Cities' assets consist of the property, plant
and equipment used in its natural gas and propane sales and
distribution businesses. Following consummation of the merger,
United Cities' business will be operated as a division of Atmos,
along with Atmos' Energas Company, Trans Louisiana Gas Company,
Western Kentucky Gas Company, and Greeley Gas Company divisions.
The accompanying consolidated financial statements of the Company
do not include the assets, liabilities, or operating results of
United Cities.
3. Contingencies
On March 15, 1991, suit was filed in the 15th Judicial District
Court of Lafayette Parish, Louisiana (the "Court"), by the
"Lafayette Daily Advertiser" and others against the Trans La
Division of the Company, Trans Louisiana Industrial Gas Company,
Inc. ("TLIG"), a wholly owned subsidiary of the Company, and
Louisiana Intrastate Gas Corporation and certain of its
affiliates ("LIG"). LIG is the Company's primary supplier of
natural gas in Louisiana and is not otherwise affiliated with the
Company.
The plaintiffs purported to represent a class consisting of all
residential and commercial gas customers in the Trans La
Division's service area. Among other allegations, the plaintiffs
alleged that the defendants violated the antitrust laws of the
state of Louisiana by manipulating the cost-of-gas component of
the Trans La Division's gas rate to the purported customer class,
thereby causing such purported class members to pay a higher
rate. The plaintiffs made no specific allegation of an amount of
damages.
The defendants brought an appeal to the Louisiana Supreme Court
of rulings made by the Court and the Third Circuit Court of
Appeals which denied the defendants' exceptions to the
jurisdiction of the Court. It was the position of the defendants
that the plaintiffs' claims amount to complaints relating to the
level of gas rates and should be within the exclusive
jurisdiction of the Louisiana Public Service Commission (the
"Louisiana Commission").
On January 19, 1993, the Louisiana Supreme Court issued a
decision reversing in part the lower courts' rulings, dismissing
all of plaintiffs' claims against the defendants which sought
damages due to alleged overcharges and further ruling that all
such claims are within the exclusive jurisdiction of the
Louisiana Commission. Any claims which sought damages other than
8 <PAGE>
overcharges were remanded to the trial court but were stayed
pending the completion of the Louisiana Commission proceeding
referred to below.
The Company has reached a settlement with the plaintiffs in the
context of the Louisiana Commission proceeding referred to below,
which settlement resolves all outstanding issues relating to the
Company, subject to the satisfaction of certain procedural
conditions.
On July 14, 1995, the Louisiana Commission entered an order
approving a settlement with the Company and TLIG in connection
with its investigation of the costs included in the Trans La
Division's purchased gas adjustment component in its rates. The
order exonerated the Company of any wrongdoing with respect to
the manipulation of the cost of gas component of its gas rate to
residential and commercial customers. In the settlement, the
Company agreed to refund approximately $541,000 plus interest to
the Trans La Division's customers over a two-year period due to
certain issues related to the calculation of the weighted average
cost of gas. The refund totaling approximately $1,016,000, which
includes interest calculated through October 1, 1995, began in
September 1995 and was to be credited to customer bills along
with interest that accrued after October 1, 1995. The Company
refunded approximately $533,000 under the settlement in fiscal
1996 and the remaining amount in fiscal 1997. Most of the issues
that generated the refunds arose before the Trans La Division
(formerly Trans Louisiana Gas Company) was acquired by the
Company in 1986.
On April 18, 1997, the Louisiana Commission entered its Order
approving a settlement between LIG and the Louisiana Commission
pursuant to which LIG will make a payment of $10,275,000 to the
Trans La Division for the benefit of its ratepayers. This
settlement resolves all remaining issues in the Louisiana
proceeding discussed above. Pursuant to the Order, the Trans La
Division has been ordered to flow through a total of $9,725,000
of the LIG settlement, plus accrued interest, to its customers in
the form of credits to customers bills for the months November
1997 through March 1998. The remaining $550,000 will be credited
one half to TLIG with the other half credited to the Trans La
Division for legal fees. The Order became final on June 2, 1997
when no appeals had been filed during the appeal period which
ended June 1, 1997.
As a result of the settlements reached in the Louisiana
proceedings, a Joint Motion was filed in the Court on July 29,
1997, requesting the Court to lift the stay of the proceedings
entered by the Court on January 19, 1993 to permit the
consummation of the proposed settlement, certify a class for
purposes of settlement and to preliminarily approve the
settlement between the plaintiff class and all defendants. On
July 30, 1997, the Court entered its order lifting the stay of
the proceedings, certifying a class of current Trans La Gas rate
payers for purposes of settlement and receipt of proceeds of
9 <PAGE>
settlement, preliminarily approving the proposed settlement
between the plaintiff class and the defendants, approving the
form of notice to potential class members, and setting a fairness
hearing regarding the proposed settlement and disbursement of
proceeds. At the fairness hearing, which is set for December 15,
1997, final approval of the settlement by the Court will be
sought. If final approval of the Court is granted, the suit will
be dismissed.
In Colorado, the Greeley Gas Company Division of the Company is a
defendant in several lawsuits filed as a result of a fire in a
building in Steamboat Springs, Colorado on February 3, 1994. The
plaintiffs claim that the fire resulted from a leak in a severed
gas service line owned by the Greeley Division. On January 12,
1996, the jury awarded the plaintiffs approximately $2.5 million
in compensatory damages and approximately $2.5 million in
punitive damages. The jury assessed the Company with liability
for all of the damages awarded. The Company has filed a Notice
of Appeal with the Colorado Court of Appeals with respect to this
case. The Company has adequate insurance to cover the
compensatory damages awarded. However, the Company's insurance
carrier informed the Company that, based upon a recent Colorado
Court ruling, the punitive damages awarded against the Company
cannot be covered by the Company's insurance policy. The Company
is continuing to review the position of the insurance carrier
with respect to coverage of punitive damages. The Company
believes it has meritorious issues for an appeal but cannot
assess, at this time, the likelihood of success in the appeal.
From time to time, claims are made and lawsuits are filed against
the Company arising out of the ordinary business of the Company.
In the opinion of the Company's management, losses, if any,
arising from these actions, including the specific actions
described above, are either covered by insurance, adequately
reserved for by the Company or would not have a material adverse
effect on the financial condition, the results of operations or
the net cash flows of the Company.
4. Long-term and short-term debt
In November 1996 the Company issued $40,000,000 of 6.09% term
notes, payable in November 1998. The proceeds from the term
notes were used primarily to refinance a portion of notes payable
to banks and for working capital, capital expenditures and
general corporate purposes.
During the nine months ended June 30, 1997, the Company paid
installments due of $1,000,000 on its 9.75% Senior Notes,
$3,000,000 on its 9.76% Senior Notes and $2,000,000 on its 11.2%
Senior Notes.
At June 30, 1997, the Company had committed, short-term,
unsecured bank credit facilities totaling $92,000,000, of which
$80,000,000 was unused. The Company also had aggregate
10 <PAGE>
uncommitted lines of credit totaling $155,000,000, of which
$128,300,000 was unused at June 30, 1997.
5. Statements of cash flows
Supplemental disclosures of cash flow information for the nine
month periods ended June 30, 1997 and 1996 are presented below.
Nine months ended
June 30,
-------------------
1997 1996
------- -------
(In thousands)
Cash paid for
Interest $14,174 $11,477
Income taxes 2,238 3,840
11 <PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Board of Directors
Atmos Energy Corporation
We have reviewed the accompanying condensed consolidated balance
sheet of Atmos Energy Corporation as of June 30, 1997, and the
related condensed consolidated statements of income for the
three-month, nine-month, and twelve-month periods ended June 30,
1997 and 1996 and the statements of cash flows for the nine-month
periods ended June 30, 1997 and 1996. These financial statements
are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical procedures to financial data, and making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing
standards, which will be performed for the full year with the
objective of expressing an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such
an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the accompanying condensed
consolidated financial statements referred to above for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Atmos
Energy Corporation as of September 30, 1996, and the related
consolidated statements of income, shareholders' equity, and cash
flows for the year then ended (not presented herein) and in our
report dated November 4, 1996, we expressed an unqualified
opinion on those consolidated financial statements. In our
opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of September 30, 1996, is fairly
stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
ERNST & YOUNG LLP
Dallas, Texas
August 6, 1997
12 <PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial
statements give effect to the merger of Atmos and United Cities
on a pooling of interests basis. The pooling of interests method
of accounting assumes that the combining companies were merged
from inception and the historical financial statements for the
periods prior to consummation of the merger are restated as
though the companies had been combined from inception. The pro
forma combined condensed balance sheet assumes that the Merger
took place on the balance sheet date and combines the June 30,
1997 balance sheets of Atmos and United Cities, respectively. The
pro forma combined condensed statements of income for the nine
month and twelve month periods ended June 30, 1997 include Atmos'
and United Cities' results of operations for the periods then
ended. Atmos' fiscal year ends on September 30, while United
Cities' fiscal year ends on December 31. Thus, the pro forma
combined condensed statements of income for the years ended
September 30, 1996, 1995, and 1994 include Atmos' results of
operations for the years then ended and United Cities' results of
operations for the years ended December 31, 1996, 1995, and 1994.
As a result, United Cities' results of operations for the three
months ended December 31, 1996 (operating revenues of
$122,971,000 and net income of $9,263,000) are included in the
pro forma statements of income for both the year ended September
30, 1996, and the nine and twelve month periods ended June 30,
1997. The pro forma combined condensed financial statements
include certain account reclassifications to conform United
Cities' classifications to Atmos' presentation.
These pro forma combined condensed financial statements should be
read in conjunction with the accompanying notes, the historical
financial statements and notes of Atmos and the historical
financial statements and notes of United Cities. The pro forma
adjustments are based upon available information and assumptions
that management of Atmos, through consultation with management of
United Cities, believes are reasonable. The pro forma combined
condensed financial statements do not purport to represent the
financial position or results of operations which would have
occurred had the merger been consummated on the dates indicated
or Atmos' financial position or results of operations for any
future date or period. In addition, due to the effect of weather
on sales and other factors which are characteristic of public
utility operations, pro forma financial results for the twelve
month period ended June 30, 1997, are not necessarily indicative
of trends for any 12-month period.
13 <PAGE>
<TABLE>
ATMOS ENERGY CORPORATION AND UNITED CITIES GAS COMPANY
PRO FORMA COMBINED CONDENSED BALANCE SHEET
JUNE 30, 1997
(Unaudited)
<CAPTION>
United Pro Forma
Atmos Cities Adj Pro Forma
-------- -------- -------- ----------
ASSETS (In thousands)
<S> <C> <C> <C> <C>
Property, plant and equipment $722,742 $570,950 $ - $1,293,692
Less accum. depreciation and amort. 272,941 206,865 - 479,806
--------- --------- -------- ----------
Net property, plant and equipment 449,801 364,085 - 813,886
Current assets
Cash and cash equivalents 2,140 5,067 - 7,207
Accounts receivable, net 44,367 31,053 - 75,420
Inventories 7,605 6,709 - 14,314
Gas stored underground 9,767 24,781 - 34,548
Other current assets 2,751 603 - 3,354
--------- --------- --------- ----------
Total current assets 66,630 68,213 - 134,843
Deferred charges and other assets 37,470 30,670 - 68,140
--------- --------- --------- ----------
$553,901 $462,968 $ - $1,016,869
========= ========= ========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Shareholders' equity
Common stock $ 81 $110,109 $(110,042)(b) $ 148
Additional paid-in capital 115,268 22,462 110,042 (b) 247,772
Retained earnings 72,820 32,599 - 105,419
--------- --------- --------- -----------
Total shareholders' equity 188,169 165,170 - 353,339
Long-term debt 157,303 149,233 - 306,536
--------- --------- --------- -----------
Total capitalization 345,472 314,403 - 659,875
Current liabilities
Current maturities of long-term debt 8,000 7,173 - 15,173
Notes payable to banks 38,700 39,626 - 78,326
Accounts payable 41,715 18,686 - 60,401
Taxes payable 10,696 7,646 - 18,342
Customers' deposits 10,010 6,255 - 16,265
Other current liabilities 14,940 21,593 - 36,533
--------- --------- ---------- -----------
Total current liabilities 124,061 100,979 - 225,040
Deferred income taxes 42,523 32,980 - 75,503
Deferred credits and other liabilities 41,845 14,606 - 56,451
--------- --------- ---------- -----------
$553,901 $462,968 $ - $1,016,869
========= ========= ========== ===========
<FN>
See accompanying notes to pro forma combined condensed financial statements.
</TABLE>
14
<TABLE>
ATMOS ENERGY CORPORATION AND UNITED CITIES GAS COMPANY
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
NINE MONTHS ENDED JUNE 30, 1997
(Unaudited)
<CAPTION>
United Pro Forma
Atmos Cities Adj Pro Forma
-------- -------- --------- ---------
(In thousands, except share data)
<S> <C> <C> <C> <C>
Operating revenues $444,226 $342,747 $ - $786,973
Purchased gas cost 290,061 215,850 - 505,911
--------- --------- --------- --------
Gross profit 154,165 126,897 - 281,062
Operating expenses
Operation 67,138 49,450 - 116,588
Maintenance 3,233 5,618 - 8,851
Depreciation and amortization 18,181 16,691 - 34,872
Taxes, other than income 15,252 10,357 - 25,609
Income taxes 14,050 13,450 - 27,500
--------- --------- --------- --------
Total operating expenses 117,854 95,566 - 213,420
--------- --------- --------- --------
Operating income 36,311 31,331 - 67,642
Other income (expense) (21) 3,947 - 3,926
Interest charges 12,389 13,417 - 25,806
--------- --------- --------- --------
Net income $ 23,901 $ 21,861 $ - $ 45,762
========= ========== ========= =========
Net income per share $ 1.48 $ 1.65 $ - $ 1.56
========= ========== ========= =========
Dividends per share $ .75 $ .76 $ - (c) $ .76
========= ========== ========= =========
Average shares outstanding 16,123 13,241 - 29,364
========= ========== ========= =========
<FN>
See accompanying notes to pro forma combined condensed financial statements.
</TABLE>
15 <PAGE>
<TABLE>
ATMOS ENERGY CORPORATION AND UNITED CITIES GAS COMPANY
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
TWELVE MONTHS ENDED JUNE 30, 1997
(Unaudited)
<CAPTION>
United Pro Forma
Atmos Cities Adj Pro Forma
-------- -------- --------- ---------
(In thousands, except share data)
<S> <C> <C> <C> <C>
Operating revenues $512,827 $390,291 $ - $903,118
Purchased gas cost 331,557 244,246 - 575,803
--------- --------- --------- ---------
Gross profit 181,270 146,045 - 327,315
Operating expenses
Operation 87,923 65,511 - 153,434
Maintenance 4,291 7,492 - 11,783
Depreciation and amortization 22,648 21,954 - 44,602
Taxes, other than income 18,685 13,234 - 31,919
Income taxes 11,645 9,463 - 21,108
--------- --------- --------- ---------
Total operating expenses 145,192 117,654 - 262,846
--------- --------- --------- ---------
Operating income 36,078 28,391 - 64,469
Other income (expense) (29) 4,585 - 4,556
Interest charges 16,131 17,587 - 33,718
--------- --------- --------- ---------
Net income $ 19,918 $ 15,389 $ - $ 35,307
========= ========= ========= =========
Net income per share $ 1.24 $ 1.16 $ - $ 1.20
========= ========= ========= =========
Dividends per share $ .99 $ 1.02 $ - (c) $ 1.00
========= ========= ========= =========
Average shares outstanding 16,093 13,215 - 29,308
========= ========= ========= =========
<FN>
See accompanying notes to pro forma combined condensed financial statements.
</TABLE>
16 <PAGE>
<TABLE>
ATMOS ENERGY CORPORATION AND UNITED CITIES GAS COMPANY
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED SEPTEMBER 30, 1996
(Unaudited)
<CAPTION>
As reported (a)
----------------------
United Pro Forma
Atmos Cities Adj Pro Forma
-------- -------- -------- ----------
(In thousands, except share data)
<S> <C> <C> <C> <C>
Operating revenues $483,744 $402,947 $ - $886,691
Purchased gas cost 306,744 255,535 - 562,279
--------- --------- --------- --------
Gross profit 177,000 147,412 - 324,412
Operating expenses
Operation 82,807 65,389 - 148,196
Maintenance 4,212 7,507 - 11,719
Depreciation and amortization 20,849 20,817 - 41,666
Taxes, other than income 16,879 13,735 - 30,614
Income taxes 13,310 9,646 - 22,956
--------- --------- --------- --------
Total operating expenses 138,057 117,094 - 255,151
-------- -------- --------- --------
Operating income 38,943 30,318 - 69,261
Other income (expense) (296) 3,863 - 3,567
Interest charges 14,698 16,979 - 31,677
--------- --------- --------- --------
Net income $ 23,949 $ 17,202 $ - $ 41,151
========= ========= ========= ========
Net income per share $ 1.51 $ 1.31 $ - $ 1.42
========= ========= ========= ========
Dividends per share $ .96 $ 1.02 $ - (c) $ .98
========= ========= ========= ========
Average shares outstanding 15,892 13,086 - 28,978
========= ========= ========= ========
<FN>
See accompanying notes to pro forma combined condensed financial statements.
</TABLE>
17 <PAGE>
<TABLE>
ATMOS ENERGY CORPORATION AND UNITED CITIES GAS COMPANY
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED SEPTEMBER 30, 1995
(Unaudited)
<CAPTION>
As reported (a)
----------------------
United Pro Forma
Atmos Cities Adj Pro Forma
-------- -------- ---------- ---------
(In thousands, except share data)
<S> <C> <C> <C> <C>
Operating revenues $435,820 $313,735 $ - $749,555
Purchased gas cost 268,810 180,587 - 449,397
--------- --------- --------- --------
Gross profit 167,010 133,148 - 300,158
Operating expenses
Operation 83,431 63,193 - 146,624
Maintenance 4,276 7,074 - 11,350
Depreciation and amortization 20,741 19,856 - 40,597
Taxes, other than income 16,611 13,369 - 29,980
Income taxes 9,574 6,616 - 16,190
--------- --------- --------- -------
Total operating expenses 134,633 110,108 - 244,741
--------- --------- --------- -------
Operating income 32,377 23,040 - 55,417
Other income 217 3,360 - 3,577
Interest charges 13,721 16,465 - 30,186
--------- --------- --------- ---------
Net income $ 18,873 $ 9,935 $ - $ 28,808
========= ========= ========= =========
Net income per share $ 1.22 $ .84 $ - $ 1.06
========= ========= ========= =========
Dividends per share $ .92 $ 1.02 $ - (c) $ .96
========= ========= ========= =========
Average shares outstanding 15,416 11,792 - 27,208
========= ========= ========= =========
<FN>
See accompanying notes to pro forma combined condensed financial statements.
</TABLE>
18 <PAGE>
<TABLE>
ATMOS ENERGY CORPORATION AND UNITED CITIES GAS COMPANY
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED SEPTEMBER 30, 1994
(Unaudited)
<CAPTION>
As reported (a)
--------------------
United Pro Forma
Atmos Cities Adj Pro Forma
-------- -------- --------- ---------
(In thousands, except share data)
<S> <C> <C> <C> <C>
Operating revenues $499,808 $326,494 $ - $826,302
Purchased gas cost 331,571 197,711 - 529,282
--------- --------- --------- --------
Gross profit 168,237 128,783 - 297,020
Operating expenses
Operation 92,132 58,852 - 150,984
Maintenance 5,888 6,595 - 12,483
Depreciation and amortization 18,841 17,870 - 36,711
Taxes, other than income 16,808 11,538 - 28,346
Income taxes 8,102 6,368 - 14,470
--------- --------- --------- --------
Total operating expenses 141,771 101,223 - 242,994
-------- --------- --------- --------
Operating income 26,466 27,560 - 54,026
Other income 503 351 - 854
Interest charges 12,290 15,818 - 28,108
--------- --------- --------- --------
Net income $ 14,679 $ 12,093 $ - $ 26,772
========= ========= ========= ========
Net income per share $ .97 $ 1.16 $ - $ 1.05
========= ========= ========= ========
Dividends per share $ .88 $ 1.005 $ - (c) $ .90
========= ========= ========= ========
Average shares outstanding 15,195 10,409 - 25,604
========= ========= ========= ========
<FN>
See accompanying notes to pro forma combined condensed financial statements.
</TABLE>
19 <PAGE>
ATMOS ENERGY CORPORATION AND UNITED CITIES GAS COMPANY
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Merger
Pursuant to the terms of the Reorganization Agreement, each
outstanding share of United Cities Stock has been converted into
the right to receive one share of Atmos Stock. The pro forma
financial statements assume the issuance of the Atmos Stock in
connection with the merger and that the transaction will be
accounted for as a pooling of interests. The cost of the merger
and integration are estimated to total approximately $17.0
million for the transaction costs and $32.0 million for the
separation and other costs. None of these estimated merger and
integration costs or the estimated cost savings resulting from
the merger, have been reflected in the pro forma combined
condensed financial statements.
The pro forma combined condensed balance sheet assumes that the
merger took place on the balance sheet date and combines the June
30, l997 balance sheets of Atmos and United Cities, respectively.
The pro forma combined condensed statements of income for the
nine and twelve months ended June 30, 1997 include Atmos' and
United Cities' results of operations for the periods then ended.
The pro forma combined condensed statements of income for the
years ended September 30, 1996, 1995, and 1994 include Atmos'
results of operations for the years then ended and United Cities'
results of operations for its fiscal years ended December 31,
1996, 1995, and 1994, respectively. As a result, United Cities'
results of operations for the three months ended December 31,
1996 (operating revenues of $122,971,000 and net income of
$9,263,000) are included in the pro forma combined condensed
statements of income for both the year ended September 30, 1996
and the nine month and twelve month periods ended June 30, 1997.
2. Pro forma adjustments
The pro forma adjustments in the accompanying unaudited pro forma
combined condensed financial statements are listed below.
(a) Reclassifications were made to certain "as reported" account
balances reflected in United Cities financial statements to
conform to this reporting presentation.
(b) To adjust common stock to relect the shares of Atmos Stock
(stated value of $.005) to be issued in exchange for the
shares of United Cities stock. One share of Atmos Stock
was exchanged for each share of United Cities Stock. At
June 30, 1997, 13,313,047 shares of United Cities Stock were
outstanding, resulting in an increase of $66,565 in Atmos
Common Stock and a reclassification of $110,041,860 to
additional paid-in capital. The actual number of shares
issued on July 31, 1997 was 13,320,221.
20 <PAGE>
(c) Dividends per share are calculated by totaling the actual
dividends paid by Atmos and United Cities and dividing the
result by the total of the weighted average shares
outstanding for each period presented. The pro forma
dividends per share do not purport to represent the dividend
rate for any future date or period.
21 <PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Introduction
The Company distributes and sells natural gas to residential,
commercial, industrial and agricultural customers in six states.
Such business is subject to regulation by state and/or local
authorities in each of the states in which the Company operates.
In addition, the Company's business is affected by seasonal
weather patterns, competition within the energy industry, and
economic conditions in the areas that the Company serves.
Revenues and sales volume statistics for the three-month, nine-
month, and twelve-month periods ended June 30, 1997 and 1996
appear on pages 30-32. Average meters in service are as follows:
Nine months ended
June 30,
-------------------
1997 1996
-------- -------
Average Meters in Service
Residential 594,002 586,888
Commercial 61,951 61,385
Industrial (including agricultural) 17,628 18,985
Public authority and other 4,777 5,044
------- -------
Total 678,358 672,302
======= =======
Completion of Merger with United Cities Gas Company
Effective July 31, 1997 at 11:59 p.m. Eastern time, United Cities
Gas Company ("United Cities") of Brentwood, Tennessee, was merged
with and into Atmos by means of a tax-free reorganization. The
Company will operate United Cities as a division of Atmos and is
beginning the integration of the companies. United Cities will be
structured like other divisions of Atmos. To achieve this
structure, approximately 560 utility positions in United Cities
will be eliminated over the next 12 months. An additional 75
Atmos positions will be eliminated as part of the integration,
resulting in approximately 635 total position reductions in the
combined company over the next twelve months. Atmos also has
initiated plans to enhance its customer service in Texas,
Louisiana, Kentucky, Colorado, Kansas and Missouri through
business process changes which will result in a net reduction of
approximately 240 positions. These changes include restructuring
business office operations and establishing a network of payment
centers and a customer support call center.
Atmos estimates the cost of the merger and integration will total
approximately $17 million for the transaction costs and $32
million for the separation and other costs. The Company believes
22 <PAGE>
there are substantial longer term benefits to its customers and
shareholders from the merger of the two companies, which are
expected to result in operating cost savings over the next 10
years totaling approximately $375 million. The Company believes
a significant amount of the costs to achieve these benefits will
be recovered through rates and future operating efficiencies of
the combined operations.
The Company expects to record as regulatory assets the costs of
the merger and integration of United Cities as discussed above,
along with the costs of the customer service initiative, which
are primarily separation costs and are estimated to be
approximately $12 million. However, the Company will establish a
general reserve of approximately $20 million ($12.8 million
after-tax), to account for costs that may not be recovered. Since
the substantial portion of the costs are related to position
eliminations over the next 12 months and fees payable at the
close of the merger, the company expects to account for these
costs in the fourth quarter of fiscal year 1997 when the merger
is complete, separation plans are approved by the Board of
Directors, and announcements are made to employees.
For further information, please see Note 2 of the notes to
condensed consolidated financial statements and the pro forma
combined condensed financial statements included herein.
Rate Activity
In May 1996, the Company filed to increase revenues by
approximately $7.7 million for a portion of its Energas Division
service area, which includes approximately 200,000 customers
inside the city limits of 67 cities in West Texas. All cities
either approved, or took no action to reject, a settlement
allowing a $5.3 million increase in annual revenues to be
effective for bills rendered on or after November 1, 1996. In
October 1996, the Company filed a rate request with the Railroad
Commission of Texas to increase revenues by approximately $.5
million for the remaining 22,000 rural customers in West Texas.
The rate request was approved and became effective in April 1997.
In February 1995, the Company filed with the Kentucky Public
Service Commission (the "Kentucky Commission") for a rate
increase for its Western Kentucky Division, which includes
approximately 171,000 customers. In October 1995, the Kentucky
Commission issued an order authorizing the Company to increase
its rates by $2.3 million annually effective November 1, 1995,
and by an additional $1.0 million annually beginning in March
1996. The settlement included a decrease in depreciation rates,
recovery of expenses related to adoption of Statement of
Financial Accounting Standards No. 106 and included a provision
for the Company to begin a three-year demand-side management
pilot program for the 1996-97 heating season, which could cost up
to $450,000 annually, resulting in a total annual operating in-
come increase of approximately $4.0 million. To date the Company
23 <PAGE>
has incurred costs of approximately $170,000 on the demand-side
management pilot program.
FINANCIAL CONDITION
For the nine months ended June 30, 1997, net cash provided by
operating activities totaled $53.8 million compared with $65.9
million for the nine months ended June 30, 1996. The net change
in operating assets and liabilities was $5.1 million for the nine
months ended June 30, 1997 compared with $16.4 million for the
nine months ended June 30, 1996. Due to the seasonal nature of
the natural gas distribution business, large swings in accounts
receivable, accounts payable and inventories of gas in
underground storage will occur when entering and leaving the
winter or heating season.
Major cash flows used for investing activities for the nine
months ended June 30, 1997 included capital expenditures of $55.0
million compared with $57.9 million for the nine months ended
June 30, 1996. The capital expenditures budget for fiscal year
1997 is currently $92.1 million, as compared with actual capital
expenditures of $77.6 million in fiscal 1996. Capital projects
planned for 1997 include major expenditures for mains, services,
meters, vehicles, and computer equipment. In November 1996 the
Board of Directors approved an additional $24.0 million in the
1997 capital budget for a customer service initiative project
which includes a new Customer Information System (CIS), related
business process changes and technology infrastructure changes.
These expenditures will be financed from internally generated
funds and financing activities.
For the nine months ended June 30, 1997, cash provided by
financing activities amounted to $1.9 million compared with cash
used of $11.6 million for the nine months ended June 30, 1996.
During the nine months ended June 30, 1997, notes payable to
banks decreased $24.1 million, as compared with an increase of
$2.6 million for the nine months ended June 30, 1996 due to the
refinancing of short-term debt with proceeds from the issuance of
$40.0 million of long-term debt in the quarter ended December 31,
1996. Payments of long-term debt decreased $1.0 million to $6.0
million for the nine months ended June 30, 1997. Such payments
consisted of a $1.0 million installment on the Company's 9.75%
Senior Notes, a $3.0 million installment on its 9.76% Senior
Notes and a $2.0 million installment on its 11.2% Senior Notes.
The Company paid $12.1 million in cash dividends during the nine
months ended June 30, 1997, compared with $11.4 million in cash
dividends paid during the nine months ended June 30, 1996. This
reflects a $.01 per share increase in the quarterly dividend rate
and an increase in the number of shares outstanding. In the nine
month period ended June 30, 1997, the Company issued 171,576
shares of stock under the ESOP and the Directors' Stock-for-Fee
Plan compared with 463,192 shares, including 313,411 for the
Oceana Heights acquisition, issued during the nine months ended
June 30, 1996.
24 <PAGE>
The Company believes that internally generated funds, its short-
term credit facilities and access to the debt and equity capital
markets will provide necessary working capital and liquidity for
capital expenditures and other cash needs for the remainder of
fiscal 1997. At June 30, 1997 the Company had $92.0 million of
committed, short-term credit facilities, $80.0 million of which
was available for additional borrowing. The committed lines are
renewed or renegotiated at least annually. At June 30, 1997, the
Company also had $155.0 million of uncommitted short-term lines,
$128.3 million of which was unused.
In July 1997, the Company received its initial debt ratings from
two rating agencies. Standard & Poor's has assigned its single
- - -'A'- minus corporate credit rating to the Company. In addition,
a single -'A'- minus rating has been assigned to the Company's
senior secured and senior unsecured debt, and a single -'A'-
minus bank loan rating has been assigned. Moody's has assigned
an A3 rating to the Company's senior unsecured medium-term notes
and unsecured bank term loan.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997, COMPARED WITH THREE MONTHS
ENDED JUNE 30, 1996
Operating revenues decreased by approximately 7% to $86.7 million
for the three months ended June 30, 1997 from $93.6 million for
the three months ended June 30, 1996. The primary factor
contributing to the decrease in operating revenues was decreased
sales to industrial (including agricultural) customers. Volumes
sold to industrial (including agricultural) customers decreased
6.5 billion cubic feet ("Bcf") or 50%. During the quarter ended
June 30, 1997, temperatures averaged 57% colder than in the
corresponding quarter of the prior year, resulting in increased
sales volumes to all weather sensitive customers. Sales revenue
per Mcf also increased. However, the revenue impact of these
factors in the quarter ended June 30, 1997 was more than offset
by decreased industrial (including agricultural) sales volumes
due to higher rainfall which reduced the need for irrigation.
The total volume of gas sold and transported for the three months
ended June 30, 1997 was 25.9 Bcf compared with 29.2 Bcf for the
three months ended June 30, 1996. The average sales price per
Mcf sold increased $.57 to $4.50 as a result of a $.19 increase
in the average cost of gas per Mcf sold and rate increases in
Kentucky and Texas. Gas costs are passed through to end users
and do not affect gross profit directly.
Purchased gas cost for the quarter ended June 30, 1997 decreased
$8.2 million, or 14%, due to decreased sales volumes, as
discussed above. The decrease in volumes more than offset the
increase in the average cost of gas per Mcf sold.
Gross profit increased by approximately 4% to $35.1 million for
the three months ended June 30, 1997, from $33.8 million for the
25 <PAGE>
three months ended June 30, 1996. The increase in gross profit
was primarily due to $1.5 million of additional revenues from the
rate increases implemented in Texas and Kentucky. Increased
sales to weather sensitive customers also contributed. These
factors were partially offset by the 50% decrease in sales
volumes to industrial (including agricultural) customers, as
discussed above. Operating expenses, excluding income taxes,
increased 2% from $29.6 million for the three months ended June
30, 1996 to $30.1 million for the three months ended June 30,
1997 primarily due to slightly higher depreciation and taxes
other. Operating income increased for the three months ended
June 30, 1997 to $4.7 million from $4.1 million for the three
months ended June 30, 1996. The increase in operating income
primarily resulted from increased gross profit.
Net income increased from $.3 million for the three months ended
June 30, 1996 to $.5 million for the three months ended June 30,
1997. This increase in net income primarily resulted from the
increase in operating income. It was partially offset by a $.7
million increase in interest charges due to increased debt
outstanding during the quarter ended June 30, 1997 as compared
with the quarter ended June 30, 1996.
NINE MONTHS ENDED JUNE 30, 1997, COMPARED WITH NINE MONTHS ENDED
JUNE 30, 1996
Operating revenues increased by approximately 7% to $444.2
million for the nine months ended June 30, 1997 from $415.1
million for the nine months ended June 30, 1996. The primary
factor contributing to the higher operating revenues was
increased sales revenue per Mcf. Weather in the Company's
service areas was 2% warmer than normal and 1% warmer than
weather in the corresponding nine-month period of the prior
fiscal year. Volumes sold to industrial (including agricultural)
customers decreased from the corresponding period of the prior
year by 10.6 Bcf or 36% due to lower agricultural demand due to
increased rainfall and switching to transportation service by
industrial sales customers. The average sales price per Mcf
increased from $3.98 for the nine months ended June 30, 1996 to
$4.72 for the nine months ended June 30, 1997. The increase in
the average sales price reflects increased cost of gas and rate
increases implemented in Texas and Kentucky. The average cost of
gas per Mcf sold increased 21% from $2.61 for the nine months
ended June 30, 1996 to $3.16 for the nine months ended June 30,
1997. The average cost of gas increased due to increased supply
costs.
Gross profit increased to $154.2 million for the nine months
ended June 30, 1997, compared with $149.9 million for the nine
months ended June 30, 1996. The 3% increase in gross profit was
primarily due to rate increases in Texas and Kentucky, which
contributed approximately $5.8 million to gross profit for the
nine months ended June 30, 1997. The effect of these rate
increases was partially offset by lower sales volumes. Operating
26 <PAGE>
expenses, excluding income taxes, increased to $103.8 million for
the nine months ended June 30, 1997, from $95.0 million for the
nine months ended June 30, 1996. The increase was comprised of
$5.1 million in operation expense, $.8 million in maintenance
expense, $1.8 million in depreciation and $1.8 million in taxes
other than income. The principal factor contributing to the
increase in operation expense was the increase in administrative
and general expenses associated with approximately $4.4 million
of severance pay for management changes in the second quarter.
The increase in depreciation related to utility plant additions
placed in service during the past year. The primary factor in
the increase in taxes other than income taxes was taxes on
increased revenues. The provision for income taxes for the nine
months ended June 30, 1997 decreased $1.7 million from the
provision for the corresponding period of the prior year due to
decreased pre-tax income.
Operating income decreased for the nine months ended June 30,
1997 to $36.3 million from $39.2 million for the nine months
ended June 30, 1996. The decrease in operating income primarily
resulted from decreased sales to industrial (including
agricultural) customers and increased operating expenses as
discussed above.
Interest expense increased approximately $1.4 million or 13% for
the nine months ended June 30, 1997 compared with the nine months
ended June 30, 1996. This increase was primarily due to
increased average debt outstanding.
Net income decreased for the nine months ended June 30, 1997, by
approximately 14% to $23.9 million from $27.9 million for the
nine months ended June 30, 1996. The decrease in net income
resulted from the increases in operating expenses and interest
charges. Earnings per share decreased to $1.48 for the nine
months ended June 30, 1997 from $1.76 for the nine months ended
June 30, 1996, while average shares outstanding increased
approximately 2%. Dividends per share increased 4% to $.75 for
the nine months ended June 30, 1997.
TWELVE MONTHS ENDED JUNE 30, 1997, COMPARED WITH TWELVE MONTHS
ENDED JUNE 30, 1996
Operating revenues increased by approximately 4% to $512.8
million for the 12 months ended June 30, 1997 from $491.1 million
for the 12 months ended June 30, 1996. The increased revenues
for the 12 months ended June 30, 1997 were due to increased gas
sales revenue per Mcf as a result of rate increases and higher
gas costs which are passed through to end users. Total sales and
transportation volumes decreased to 137.4 Bcf for the 12 months
ended June 30, 1997 compared with 147.6 Bcf for the corresponding
prior 12-month period. Sales volumes to industrial (including
agricultural) customers decreased 13.9 Bcf while transportation
volumes increased 3.5 Bcf. This significant decrease in
industrial (including agricultural) sales volumes was due to
27 <PAGE>
decreased agricultural demand and switching from sales to
transportation service by some industrial customers. The average
sales price per Mcf increased from $3.93 to $4.62. The average
sales price reflects the increased cost of gas and rate increases
implemented in Texas and Kentucky. The average cost of gas per
Mcf sold increased from $2.56 to $3.08 for the 12 months ended
June 30, 1997. The average cost of gas increased due to
increased supply costs.
Gross profit increased by approximately 1% to $181.3 million for
the 12 months ended June 30, 1997, from $179.8 million for the 12
months ended June 30, 1996 due to the rate increases mentioned
above. Changes in cost of gas did not directly affect gross
profit. Operating expenses, excluding income taxes, increased 7%
from $124.9 million for the 12 months ended June 30, 1996, to
$133.5 million for the 12 months ended June 30, 1997. Increases
occurred in operation expenses, depreciation and taxes other than
income. Factors contributing to the $5.6 million increase in
operation expenses were administrative and general expenses of
approximately $4.4 million associated with severance pay for
recent management changes and smaller increases in distribution,
customer accounts, and customer service and information expenses.
The primary reason for the $1.0 million increase in depreciation
was utility plant additions placed in service during the past
year. The $1.9 million increase in taxes other than income
resulted primarily from taxes on increased revenues. Income
taxes decreased $2.1 million for the 12 months ended June 30,
1997, as compared with the 12 months ended June 30, 1996 due to
decreased pretax income. Operating income decreased in the 12
months ended June 30, 1997 by approximately 12% to $36.1 million.
The primary reasons for the decrease in operating income were the
significant decrease in agricultural demand and the increase in
operating expenses discussed above.
Net income for the 12 months ended June 30, 1997 was $19.9
million compared with $26.3 million for the 12 months ended June
30, 1996. The decrease in net income resulted from the decrease
in operating income discussed above and an increase of $1.8
million in interest charges due to increased average debt
outstanding, including the issuance of $40 million of Senior
Notes issued in November 1996. Earnings per share decreased by
26% to $1.24. Average shares outstanding increased approximately
2% as compared with the prior year. Dividends per share
increased approximately 4% to $.99.
Cautionary Statement pursuant to the Private Securities
Litigation Reform Act of 1995
The matters discussed or incorporated by reference in this report
contain both historical and forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 or Section
21E of the Securities Exchange Act of 1934, as amended. The
forward-looking statements are subject to risks and uncertainties
that could cause actual results to differ materially from those
expressed or implied in the statements relating to the Company's
28 <PAGE>
operations, markets, services, rates, recovery of costs,
availability of gas supply, and other factors as discussed in the
Company's filings with the Securities and Exchange Commission.
These risks and uncertainties include, but are not limited to,
economic, competitive, governmental, weather, and technological
factors.
29 <PAGE>
ATMOS ENERGY CORPORATION
CONSOLIDATED OPERATING STATISTICS
Three months ended June 30,
1997 1996
------- -------
Sales Volumes -- MMcf (1)
Residential 7,905 6,568
Commercial 3,405 2,882
Industrial (including agricultural) 6,385 12,870
Public authority and other 718 549
------- -------
Total 18,413 22,869
Transportation Volumes -- MMcf (1) 7,485 6,335
------- -------
Total Volumes Delivered - MMcf (1) 25,898 29,204
======= =======
Operating Revenues (000's)
Gas Sales Revenues
Residential $43,101 $38,050
Commercial 15,845 13,648
Industrial (including agricultural) 20,599 35,492
Public authority and other 3,254 2,781
------- -------
Total Gas Revenues 82,799 89,971
Transportation Revenues 2,476 2,169
Other Revenues 1,451 1,431
------- -------
Total Operating Revenues $86,726 $93,571
======= =======
Average Gas Sales Revenues per Mcf $ 4.50 $ 3.93
Average Transportation Revenue per Mcf $ .33 $ .34
Cost of Gas per Mcf Sold $ 2.80 $ 2.61
HEATING DEGREE DAYS
Weather Three months ended June 30,
Service Sensitive ---------------------------
Area Customers % 1997 1996 Normal
- - -------------- ----------- ---- ---- ------
Texas 45% 406 192 227
Kentucky 26% 482 363 336
Louisiana 13% 102 91 42
Colorado, Kansas
and Missouri 16% 852 607 779
----
System Average 100% 458 291 321
Percent of Normal 143% 91%
(1) Volumes are reported as metered in million cubic
feet("MMcf").
30 <PAGE>
ATMOS ENERGY CORPORATION
CONSOLIDATED OPERATING STATISTICS
Nine months ended June 30,
1997 1996
-------- --------
Sales Volumes -- MMcf (1)
Residential 47,688 47,700
Commercial 19,912 19,413
Industrial (including agricultural) 19,297 29,930
Public authority and other 4,767 4,759
-------- --------
Total 91,664 101,802
Transportation Volumes -- MMcf (1) 23,050 20,018
-------- --------
Total Volumes Delivered - MMcf (1) 114,714 121,820
======== ========
Operating Revenues (000's)
Gas Sales Revenues
Residential $250,515 $217,603
Commercial 94,237 79,891
Industrial (including agricultural) 65,229 87,570
Public authority and other 23,115 19,754
-------- --------
Total Gas Revenues 433,096 404,818
Transportation Revenues 7,301 6,167
Other Revenues 3,829 4,158
-------- --------
Total Operating Revenues $444,226 $415,143
======== ========
Average Gas Sales Revenues per Mcf $ 4.72 $ 3.98
Average Transportation Revenue per Mcf $ .32 $ .31
Cost of Gas per Mcf Sold $ 3.16 $ 2.61
HEATING DEGREE DAYS
Weather Nine months ended June 30,
Service Sensitive -----------------------------
Area Customers % 1997 1996 Normal
- - -------------- ----------- ----- ----- ------
Texas 45% 3,534 3,286 3,513
Kentucky 26% 4,166 4,574 4,304
Louisiana 13% 1,523 1,989 1,771
Colorado, Kansas
and Missouri 16% 6,089 5,752 6,094
----
System Average 100% 3,846 3,870 3,906
Percent of Normal 98% 99%
See footnote on page 30.
31 <PAGE>
ATMOS ENERGY CORPORATION
CONSOLIDATED OPERATING STATISTICS
Twelve months ended June 30,
1997 1996
-------- --------
Sales Volumes -- MMcf (1)
Residential 51,531 51,824
Commercial 22,040 21,625
Industrial (including agricultural) 29,023 42,917
Public authority and other 5,190 5,195
-------- --------
Total 107,784 121,561
Transportation Volumes -- MMcf (1) 29,566 26,032
-------- --------
Total Volumes Delivered - MMcf (1) 137,350 147,593
======== ========
Operating Revenues (000's)
Gas Sales Revenues
Residential $276,030 $242,407
Commercial 104,695 90,088
Industrial (including agricultural) 92,551 123,314
Public authority and other 25,099 21,586
-------- --------
Total Gas Sales Revenues 498,375 477,395
Transportation Revenues 9,441 8,434
Other Revenues 5,011 5,307
-------- --------
Total Operating Revenues $512,827 $491,136
======== ========
Average Gas Sales Revenues per Mcf $ 4.62 $ 3.93
Average Transportation Revenue per Mcf $ .32 $ .32
Cost of Gas per Mcf Sold $ 3.08 $ 2.56
HEATING DEGREE DAYS
Weather Twelve months ended June 30,
Service Sensitive ----------------------------
Area Customers % 1997 1996 Normal
- - -------------- ----------- ----- ----- ------
Texas 45% 3,579 3,348 3,529
Kentucky 26% 4,202 4,628 4,339
Louisiana 13% 1,514 1,994 1,771
Colorado, Kansas
and Missouri 16% 6,249 5,931 6,268
----
System Average 100% 3,901 3,942 3,950
Percent of Normal 99% 100%
See footnote on page 30.
32 <PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Note 3 of notes to consolidated financial statements on pages
8, 9 and 10 herein for a description of legal proceedings.
Item 5. Other Information
The following officers have announced their plans to retire:
H.F. Harber, Senior Vice President - Corporate Services, retired
July 31, 1997.
Jack W. Eversull, Vice President - Investor Relations, will
retire effective December 3, 1997.
Don James, Senior Vice President of Public Affairs, will retire
effective December 31, 1997.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
A list of exhibits required by Item 601 of Regulation
S-K and filed as part of this report is set forth in the
Exhibits Index, which immediately precedes such exhibits.
(b) Reports on Form 8-K
The Company filed a Form 8-K Current Report, Item 5, Other
Events, dated April 4, 1997, disclosing:
(1) Robert F. Stephens and James F. Purser have
resigned from Atmos' Board of Directors.
(2) The Illinois hearing examiner in the regulatory
proceeding in Illinois recommended, in a proposed
order, that the Illinois Commerce Commission deny
Atmos' and United Cities' petition to merge. The
companies have an opportunity to respond to such
proposed order and they remain optimistic that the
Illinois Commission will ultimately approve the
merger.
(3) Larry J. Dagley has been appointed Executive Vice
President and Chief Financial Officer of Atmos.
He previously served as Senior Vice President and
Chief Financial Officer of Pacific Enterprises,
Chief Financial Officer of Transco Energy Company
and as an audit partner with Arthur Andersen & Co.
33 <PAGE>
The Company filed a Form 8-K Current Report, Item 5, Other
Events, dated June 10, 1997, disclosing the following:
(1) On June 10, 1997, Atmos, United Cities and the
staff of the Illinois Commerce Commission jointly
filed a proposed order, which if granted, would
approve the merger of United Cities and Atmos.
2) The Illinois Commerce Commission issued an order
dated June 25, 1997, approving the merger of
United Cities and Atmos.
34 <PAGE>
SIGNATURES
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.
ATMOS ENERGY CORPORATION
(Registrant)
Date: August 13, 1997 By: /s/ Larry J. Dagley
------------------------------
Larry J. Dagley
Executive Vice President
and Chief Financial Officer
Date: August 13, 1997 By: /s/ David L. Bickerstaff
------------------------------
David L. Bickerstaff
Vice President and Controller
(Principal Accounting Officer)
35 <PAGE>
EXHIBITS INDEX
Item 6. (a)
Page Number or
Exhibit Incorporation
Number Description by Reference to
------- -------------------------------------- ---------------
10.1 *Atmos Energy Corporation Supplemental
Executive Benefits Plan (Amended and
Restated in its entirety May 14, 1997)
10.2 *Consulting Agreement between the
Company and Charles K. Vaughan,
effective October 1, 1994
10.3 *Amendment No. 1 to Consulting
Agreement between the Company and
Charles K. Vaughan, dated May 14, 1997
15 Letter regarding unaudited interim
financial information
27 Financial Data Schedule for Atmos
Energy Corporation for the nine months
ended June 30, 1997
* This exhibit constitutes a "management contract or
compensatory plan, contract, or arrangement."
36 <PAGE>
EXHIBIT 10.1
------------
THE ATMOS ENERGY CORPORATION
SUPPLEMENTAL EXECUTIVE BENEFITS PLAN
Effective Date: October 1, 1987
Amended and Restated in its Entirety: May 14, 1997 <PAGE>
TABLE OF CONTENTS
Article Page
I. PURPOSE AND EFFECTIVE DATE . . . . . . . . . . . 1
Section 1.1 Purpose . . . . . . . . . . . . . . 1
Section 1.2 Effective Date . . . . . . . . . . . 1
II. DEFINITIONS AND CONSTRUCTION . . . . . . . . . . 1
Section 2.1 Definitions . . . . . . . . . . . . 1
Section 2.2 Construction . . . . . . . . . . . . 8
Section 2.3 Governing Law . . . . . . . . . . . 8
III. ELIGIBILITY AND PARTICIPATION . . . . . . . . . . 8
Section 3.1 Employees Eligible to Participate . 8
IV. ASSETS USED FOR BENEFITS . . . . . . . . . . . . 8
Section 4.1 Amounts Provided by the Employer . . 8
Section 4.2 Funding . . . . . . . . . . . . . . 9
V. SUPPLEMENTAL PENSION BENEFITS . . . . . . . . . 10
Section 5.1 Eligibility for
Supplemental Pension . . . . . . . 10
Section 5.2 Amount of Supplemental Pension . . 11
Section 5.3 Form of Payment of
Supplemental Pension . . . . . . . 12
Section 5.4 Commencement of
Supplemental Pension . . . . . . . 12
Section 5.5 Supplemental Pensions After a
Change in Control . . . . . . . . 13
VI. DISABILITY BENEFITS . . . . . . . . . . . . . . 15
Section 6.1 Eligibility for
Disability Benefits . . . . . . . 15
Section 6.2 Amount of Disability Benefits . . 15
Section 6.3 Payment of Disability Benefits . . 15
Section 6.4 Payment of Supplemental
Pension to Disabled Participants . 15
TABLE OF CONTENTS
Article Page
VII. DEATH BENEFITS . . . . . . . . . . . . . . . . 16
Section 7.1 Eligibility for Death Benefits . . 16
Section 7.2 Amount of Death Benefit . . . . . 16
Section 7.3 Form of Payment of Death Benefit . 17
<PAGE>
Section 7.4 Commencement of Death Benefits . . 18
VIII. ADMINISTRATION . . . . . . . . . . . . . . . . 18
Section 8.1 Plan Administration . . . . . . . 18
Section 8.2 Powers of Plan Administrator . . . 18
Section 8.3 Calculation of Funding Obligations 19
Section 8.4 Annual Statements . . . . . . . . 19
IX. MISCELLANEOUS PROVISIONS . . . . . . . . . . . 20
Section 9.1 Amendment or Termination
of the Plan . . . . . . . . . . . 20
Section 9.2 Nonguarantee of Employment . . . . 22
Section 9.3 Nonalienation of Benefits . . . . 22
Section 9.4 Liability . . . . . . . . . . . . 23
Section 9.5 Noncompetition Agreement . . . . . 23
Section 9.6 Participation Agreement . . . . . 23
Section 9.7 Successors to the Employer . . . . 23
<PAGE>
ARTICLE I
Purpose and Effective Date
Section 1.1. Purpose: The purpose of this Plan is to
provide supplemental retirement income, death and disability
benefits to certain executive employees of Atmos Energy
Corporation.
Section 1.2. Effective Date: The Plan initially became
effective on October 1, 1987, was amended and restated as of
November 11, 1992, was amended as of November 8, 1995, was
amended as of May 8, 1996, was amended and restated as of
November 13, 1996, and has been amended and restated as of
May 14, 1997.
ARTICLE II
Definitions and Construction
Section 2.1. Definitions: The following words and phrases
used in this Plan shall have the respective meanings set forth
below, unless the context in which they are used clearly
indicates a contrary meaning:
(a) Beneficiary: The individual or individuals
described in Section 7.3 of this Plan who are receiving any
benefit payments hereunder.
(b) Board of Directors: The Board of Directors of the
Employer.
(c) Cause: The termination of employment by the
Employer upon the happening of either (i) or (ii) as
follows:
(i) The willful and continued failure by the
Participant to substantially perform his duties with
the Employer (other than any such failure resulting
from the Participant's incapacity due to physical or
mental illness) after a written demand for substantial
performance is delivered to the Participant by the
Employer that specifically identifies the manner in
which the Employer believes that the Participant has
not substantially performed his duties.
(ii) The Participant's willful engagement in
conduct that is demonstrably and materially injurious
to the Employer, monetarily or otherwise.
For purposes of this paragraph, no act, or failure to act,
on the Participant's part shall be deemed "willful" if done,
or omitted to be done, by the Participant in good faith and
with a reasonable belief that the action or omission was in
the best interests of the Employer. Notwithstanding the
<PAGE>
foregoing, Participant shall not be deemed to have been
terminated for Cause unless and until there shall have been
delivered to Participant a copy of a resolution duly adopted
by the affirmative vote of not less than three-quarters
(3/4) of the entire membership of the Board of Directors of
the Employer at a meeting of such Board of Directors called
and held for such purpose (after reasonable notice to
Participant and an opportunity for Participant, together
with Participant's counsel, to be heard before the Board of
Directors), finding that in the good faith opinion of the
Board of Directors that Participant was guilty of conduct
set forth above in clauses (i) or (ii) of this Paragraph and
specifying the particulars thereof in detail.
(d) Change in Control:
(i) For periods prior to November 13, 1996, the
occurrence of any of the following:
(A) Any "person" (as defined in subparagraph
(ii) below), other than a trustee or other
fiduciary holding securities under an employee
benefit plan of the Employer, is or becomes the
"beneficial owner" (as defined in subparagraph
(ii) below), directly or indirectly, of securities
of the Employer representing 33-1/3% or more of
the combined voting power of the Employer's then
outstanding securities.
(B) During any period of two consecutive
years (the "Period"), individuals who at the
beginning of the Period constitute the Board of
Directors of the Employer and any "new director"
(as defined in subparagraph (ii) below) cease for
any reason to constitute a majority of the Board
of Directors.
(C) The shareholders of the Employer approve
a merger or consolidation of the Employer with any
other corporation, except if:
(1) the merger or consolidation would
result in the voting securities of the
Employer outstanding immediately prior
thereto continuing to represent (either by
remaining outstanding or by being converted
into voting securities of the surviving
entity) at least 60% of the combined voting
power of the voting securities of the
Employer or such surviving entity outstanding
immediately after such merger or
consolidation; or
(2) the merger or consolidation occurs
<PAGE>
in connection with the approval by the
shareholders of the Employer of a plan of
complete liquidation of the Employer or an
agreement for the sale or disposition by the
Employer of all or substantially all the
Employer's assets.
(ii) For purposes of subparagraph (i) above,
(A) "Person" shall have the meaning provided
in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange
Act").
(B) "Beneficial owner" shall have the
meaning provided in Rule 13d-3 under the Exchange
Act.
(C) "New director" shall mean an individual
whose election by the Employer's Board of
Directors or nomination for election by the
Employer's shareholders was approved by a vote of
at least 2/3's of the directors then still in
office who either were directors at the beginning
of the Period or whose election or nomination for
election was previously so approved. However,
"new director" shall not include a director
designated by a person who has entered into an
agreement with the Employer to effect a
transaction described in subparagraphs (i)(A) or
(B) above.
(iii) For periods from and after November 13,
1996, except as provided herein, the occurrence of any
of the following:
(A) Any "Person" (as defined in subparagraph
(iv) below), other than (1) the Employer or any of
its subsidiaries, (2) a trustee or other fiduciary
holding securities under an employee benefit plan
of the Employer or any of its Affiliates, (3) an
underwriter temporarily holding securities
pursuant to an offering of such securities, or (4)
a corporation owned, directly or indirectly, by
the shareholders of the Employer in substantially
the same proportions as their ownership of stock
of the Employer, is or becomes the "beneficial
owner" (as defined in subparagraph (iv) below),
directly or indirectly, of securities of the
Employer (not including in the securities
beneficially owned by such person any securities
acquired directly from the Company or its
Affiliates) representing 33-1/3% or more of the
combined voting power of the Employer's then
<PAGE>
outstanding securities, or 33-1/3% or more of the
then outstanding common stock of the Employer,
excluding any Person who becomes such a beneficial
owner in connection with a transaction described
in subparagraph (C)(1) below.
(B) During any period of two consecutive
years (the "Period"), individuals who at the
beginning of the Period constitute the Board of
Directors of the Employer and any "new director"
(as defined in subparagraph (iv) below) cease for
any reason to constitute a majority of the Board
of Directors.
(C) There is consummated a merger or
consolidation of the Employer or any direct or
indirect subsidiary of the Employer with any other
corporation, except if:
(1) the merger or consolidation would
result in the voting securities of the
Employer outstanding immediately prior
thereto continuing to represent (either by
remaining outstanding or by being converted
into voting securities of the surviving
entity or any parent thereof) at least 60% of
the combined voting power of the voting
securities of the Employer or such surviving
entity or any parent thereof outstanding
immediately after such merger or
consolidation; or
(2) the merger or consolidation is
effected to implement a recapitalization of
the Employer (or similar transaction) in
which no Person is or becomes the beneficial
owner, directly or indirectly, of securities
of the Employer (not including in the
securities beneficially owned by such Person
any securities acquired directly from the
Employer or its Affiliates other than in
connection with the acquisition by the
Employer or its Affiliates of a business)
representing 60% or more of the combined
voting power of the Employer's then
outstanding securities.
(D) The shareholders of the Employer approve
a plan of complete liquidation or dissolution of
the Employer or an agreement for the sale or
disposition by the Employer of all or
substantially all the Employer's assets, other
than a sale or disposition by the Employer of all
or substantially all of the Employer's assets to
<PAGE>
an entity, at least 60% of the combined voting
power of the voting securities of which are owned
by the stockholders of the Employer in
substantially the same proportions as their
ownership of the Employer immediately prior to
such sale.
Notwithstanding the foregoing provisions of this
subparagraph (iii), no actions or events related to the
merger of United Cities Gas Company ("United Cities")
with or into the Employer as contemplated by the
Agreement and Plan of Reorganization, dated as of
July 19, 1996, between the Employer and United Cities
(the "Merger"), including the consummation of the
Merger, shall constitute a Change in Control of the
Employer for any of the purposes in this Plan that a
Change in Control as defined under this subparagraph
(iii) applies.
(iv) For purposes of subparagraph (iii) above,
(A) "Person" shall have the meaning given in
Section 3(a)(9) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") as modified
and used in Sections 13(d) and 14(d) of the
Exchange Act.
(B) "Beneficial owner" shall have the
meaning provided in Rule 13d-3 under the Exchange
Act.
(C) "New director" shall mean an individual
whose election by the Employer's Board of
Directors or nomination for election by the
Employer's shareholders was approved by a vote of
at least 2/3's of the directors then still in
office who either were directors at the beginning
of the Period or whose election or nomination for
election was previously so approved or
recommended. However, "new director" shall not
include a director whose initial assumption of
office is in connection with an actual or
threatened election contest, including but not
limited to a consent solicitation relating to the
election of directors of the Company.
(D) "Affiliate" shall have the meaning set
forth in Rule 12b-2 promulgated under Section 12
of the Exchange Act.
(e) Compensation: Except as otherwise provided in the
Participant's Participation Agreement, the sum of (i), (ii)
and (iii) as follows:
<PAGE>
(i) The greater of (A) the Participant's annual
base salary at the date of his termination of
employment, or (B) the average of the Participant's
annual base salary for the highest three (3) calendar
years (whether or not consecutive) of the Participant's
employment with the Employer.
(ii) The greater of (A) the Participant's last
Performance Award, or (B) the average of the highest
three (3) Performance Awards (whether or not
consecutive).
(iii) The Participant's annual car allowance
amount at the date of his termination of employment.
(f) Death Benefit: The total benefit provided under
this Plan upon the death of a Participant, which benefit is
calculated in this Plan on a pre-tax basis.
(g) Disability: The termination of a Participant's
employment with the Employer on account of disability as
determined under the Group Long-Term Disability Plan.
(h) Disability Benefit: The monthly benefit provided
under this Plan to a Participant who suffers a Disability,
which benefit is calculated in this Plan on a pre-tax basis.
(i) Eligible Employee: An employee who is either a
corporate officer of the Employer elected by the Board of
Directors (excluding any assistant officers that may be
elected from time to time) or the president of an Operating
Division.
(j) Employer: Atmos Energy Corporation.
(k) Group Long-Term Disability Plan: The Atmos Energy
Corporation Group Long-Term Disability Plan, as amended from
time to time.
(l) Involuntary Termination: The termination of a
Participant's participation in the Plan due to either (i) or
(ii) as follows:
(i) The Participant's employment with the
Employer is terminated involuntarily by the Employer
for any reason other than Cause or Disability.
(ii) Any reason other than for Cause by the
Employer prior to his termination of employment with
the Employer.
(m) Operating Division: Energas Company, Greeley Gas
Company, Trans Louisiana Gas Company, Western Kentucky Gas
Company, and any other division of the Employer that the
Employer may hereafter establish.
<PAGE>
(n) Participant: An Eligible Employee of the Employer
who meets the requirements to participate in the Plan in
accordance with the provisions of Article III hereof.
(o) Participation Agreement: The agreement between
the Employer and a Participant described in Section 9.6 of
this Plan, executed in the form attached hereto as Exhibit
C-1 in the case of Participants who commenced participation
in the Plan prior to November 13, 1996 and Exhibit C-2 in
the case of all other Participants in the Plan, or in such
other form as the Board of Directors, in its sole
discretion, may establish from time to time.
(p) Plan: The Atmos Energy Corporation Supplemental
Executive Benefits Plan, as set forth herein and as amended
from time to time.
(q) Pension Plan: The Employees' Retirement Plan of
Atmos Energy Corporation, the Western Kentucky Gas
Retirement Plan, the Greeley Gas Company Employees' Pension
Plan, or any other defined benefit pension plan subsequently
adopted or established by the Employer, whichever is
applicable, as amended from time to time. Any amount
payable to or with respect to a Participant from any group
annuity contract maintained in connection with the Pension
Plan shall be deemed part of the benefit applicable to the
Participant under the Pension Plan.
(r) Performance Awards: Except as otherwise provided
in the Participant's Participation Agreement, any amount
paid, or authorized to be paid, to a Participant pursuant to
any annual performance bonus plan adopted or established by
the Employer, or, upon and after a Change in Control, any
amount paid, or authorized to be paid, to a Participant as a
performance related cash bonus in addition to his base cash
compensation.
(s) Plan Administrator: The Board of Directors.
(t) Plan Year: Each twelve (12) month period
beginning on January 1 and ending on December 31.
(u) Retired Participant: A Retired employee of the
Employer who receives benefits under this Plan.
(v) Retirement or Retire: A Participant's voluntary
termination from employment with the Employer after he is
vested in his retirement benefits under the Pension Plan and
has reached the age when he is eligible for the immediate
commencement of those benefits from the Pension Plan.
(w) Supplemental Pension: A Participant's monthly
pension benefit provided under this Plan, which benefit is
calculated in this Plan on a pre-tax basis.
<PAGE>
Section 2.2. Construction: The masculine gender, whenever
appearing in this Plan, shall be deemed to include the feminine
gender; the singular may include the plural; and vice versa,
unless the context clearly indicates to the contrary.
Section 2.3. Governing Law: This Plan shall be construed
in accordance with and governed by the laws of the State of
Texas, except to the extent otherwise preempted by the Employee
Retirement Income Security Act of 1974, as amended, or any other
Federal law.
ARTICLE III
Eligibility and Participation
Section 3.1. Employees Eligible to Participate: Each
Eligible Employee shall participate in this Plan, provided he
complies with the provisions of Sections 9.5 and 9.6 hereof. Any
Participant who ceases being an Eligible Employee during his
employment with the Employer shall immediately cease
participation in this Plan and shall no longer be a Participant,
except as otherwise set forth herein.
ARTICLE IV
Assets Used for Benefits
Section 4.1. Amounts Provided by the Employer: Benefits
payable under this Plan shall constitute general obligations of
the Employer in accordance with the terms of this Plan. The
Employer may, in its sole discretion, establish a trust or other
funding arrangement that is subject to the claims of the
Employer's general creditors for the purpose of funding a
Participant's accrued benefit payable under this Plan. Any such
trust or other funding arrangement may also provide for the
distribution to the Participant of an amount equal to any federal
or state income taxes that are incurred by the Participant in the
event the establishment of such trust or other funding
arrangement constitutes the constructive receipt by the
Participant of any benefits payable hereunder prior to the actual
receipt of such benefits. The Employer shall make appropriate
adjustments to the amount of the Participant's Supplemental
Pension payable each month in order to reflect the effect upon
such Supplemental Pension of the distribution described in the
foregoing sentence.
Section 4.2. Funding: Not later than the time each
Participant Retires or becomes eligible to receive an unreduced
Supplemental Pension under this Plan, whichever occurs first, the
Employer shall contribute to a trust or other funding arrangement
an amount necessary to fund 100% of the then-present value of
such Participant's accrued Supplemental Pension. The amount
required to be funded by this Section 4.2 shall be calculated in
accordance with Section 8.3 hereof. Notwithstanding the
<PAGE>
foregoing, immediately upon a Change in Control, the Employer
shall contribute to a trust or other funding arrangement an
amount necessary to fund 100% of the then-present value of all
Supplemental Pension benefits (vested and unvested) payable
hereunder to each Participant and Retired Participant, regardless
of whether any such person is then eligible to Retire or to
receive an unreduced Supplemental Pension. The Employer shall
review the funding status of each such trust or other funding
arrangement required to be established under this Section 4.2 on
an annual basis and shall make such contributions thereto as may
be required to maintain the value of the assets thereof at no
less than 100% of the then-present value of all such Supplemental
Pension benefits. For purposes of this Section 4.2 only,
notwithstanding the foregoing, no actions or events related to
the merger of United Cities Gas Company ("United Cities") with
and into the Employer, as contemplated by the Agreement and Plan
of Reorganization, dated as of July 19, 1996, between the
Employer and United Cities (the "Merger"), including shareholder
approval of the Merger or the consummation of the Merger, shall
constitute a Change in Control of the Employer that requires the
Employer to make any contributions pursuant to this Section 4.2.
ARTICLE V
Supplemental Pension Benefits
Section 5.1. Eligibility for Supplemental Pension:
(a) Upon Retirement. Except as otherwise provided
elsewhere in this Plan or in a Participant Agreement, a
Participant who has been an Eligible Employee for at
least two years and Retires shall be entitled to receive
a Supplemental Pension.
(b) Upon Involuntary Termination Prior to a Change in
Control. A Participant who suffers an Involuntary Termination
prior to a Change in Control shall be entitled to receive a
Supplemental Pension, subject to the provisions of Section 5.1(c)
of this Plan, so long as he is vested in his retirement benefits
under the Pension Plan at the time of his Involuntary Termination
and has been an Eligible Employee for at least two years prior to
the Involuntary Termination.
(c) Upon Voluntary Termination Prior to a Change in Control
or Termination For Cause. A Participant who voluntarily resigns
from employment with the Employer prior to being eligible for
Retirement and prior to a Change in Control or who is terminated
from employment with the Employer for Cause shall not be entitled
to receive a Supplemental Pension.
(d) Upon Disability. A Participant who suffers a
Disability shall be entitled to a Supplemental Pension as
provided in Section 6.4.
<PAGE>
Section 5.2. Amount of Supplemental Pension:
(a) Upon Retirement. Except as otherwise provided in the
Participant's Participation Agreement, the Supplemental Pension
payable to a Participant who Retires, and who has been an
Eligible Employee for at least two years shall, unless reduced as
provided in paragraph (b) below, equal (i) minus (ii) as follows:
(i) One-twelfth (1/12th) of seventy-five percent (75%)
of the Participant's Compensation, reduced if the
Participant has fewer than ten (10) years of vesting service
under the Pension Plan by one-tenth (1/10th) for each year
of his vesting service less than ten (10);
(ii) The monthly amount of pension payable to the
Participant under the Pension Plan as of the date that his
employment terminates assuming payment in the normal form
applicable to him under the Pension Plan;
provided, however, in no event shall the combined annual payment
from this Plan and the Pension Plan to any Participant listed on
the Minimum Benefit Schedule attached to this Plan as Exhibit A
be less than the minimum Annual Amount for such Participant
listed on the Minimum Benefit Schedule.
(b) Reduction for Early Commencement of Supplemental
Pensions. If a Participant's Supplemental Pension commences
before the Participant attains age 62, his Supplemental Pension
shall, unless otherwise provided in Exhibit A or in a
Participation Agreement, be reduced for each year (or fraction
thereof, based on full months) that the date of commencement
precedes age 62. The reduction shall be made in the same manner
as reductions are made for early commencement under the Pension
Plan.
(c) Cost of Living and Other Adjustments. A Participant
who has begun to receive his Supplemental Pension shall be
entitled to receive any cost of living or other adjustments to
which he is otherwise entitled pursuant to the Pension Plan, and
his Supplemental Pension shall not be reduced by such
adjustments. If a Participant would not be entitled to receive a
cost of living or other adjustment due to statutory or regulatory
limitations on Pension Plan benefits, the Supplemental Pension
shall be increased by the amount of such adjustment for the time
the limitations are in effect.
(d) Upon Involuntary Termination Prior to a Change in
Control. The Supplemental Pension payable to a
Participant who suffers an Involuntary Termination prior
to a Change in Control shall be determined in accordance
with paragraph (a) above, but, except as otherwise
provided in the Participant's Participation Agreement,
for purposes of subparagraph (a)(i) shall be based upon
his Compensation and years of vesting service under the
Pension Plan as of the date of his Involuntary
<PAGE>
Termination.
Section 5.3. Form of Payment of Supplemental Pension:
(a) Married Participants. Except as otherwise provided in
the Participant's Participation Agreement, if a Participant is
married when his Supplemental Pension commences, it shall be paid
in the form of a joint and 50% survivor annuity, with the
Participant's spouse on the date payment commences as the joint
annuitant.
(b) Unmarried Participants. Except as otherwise provided
in the Participant's Participation Agreement, if a Participant is
not married when his Supplemental Pension commences, it shall be
paid in the form of a ten year certain and life annuity payable
to the Participant or the Participant's named beneficiary.
Section 5.4. Commencement of Supplemental Pension:
(a) Upon Retirement. The Supplemental Pension of a
Participant who Retires shall commence at the time he begins
receiving retirement benefits from the Pension Plan.
(b) Upon Involuntary Termination Prior to a Change in
Control. The Supplemental Pension of a Participant who suffers
an Involuntary Termination prior to a Change in Control shall
commence at the time he begins receiving retirement benefits from
the Pension Plan.
Section 5.5. Supplemental Pensions After a Change in
Control:
(a) Eligibility For Supplemental Pension. Notwithstanding
anything to the contrary in this Plan, a Participant shall be
entitled to a Supplemental Pension, regardless of whether he has
been an Eligible Employee for at least two years or is vested in
his retirement benefits under the Pension Plan, if following a
Change in Control of the Employer which occurs at a time when he
is an Eligible Employee, either (i) or (ii) occurs:
(i) The Participant's employment is terminated
(A) on account of disability;
(B) if the Change in Control occurred prior to
November 13, 1996, either (I) voluntarily, or (II)
involuntarily by the Employer for any reason other than
for Cause; or
(C) if the Change in Control occurred on or after
November 13, 1996, involuntarily by the Employer for
any reason other than for Cause.
(ii) The Participant's participation in the Plan is
terminated by the Employer for any reason other than for
<PAGE>
Cause prior to his termination of employment with the
Employer.
In the case of any employee of the Employer who becomes an
Eligible Employee on or after May 14, 1997, other than any such
employee who becomes an Eligible Employee in accordance with the
Agreement and Plan of Reorganization, dated as of July 19, 1996,
between the Employer and United Cities Gas Company, in order for
the provisions of this Section 5.5 to apply, the involuntary
termination of employment referred to in subparagraph (i)(C)
above or the termination of participation referred to in
subparagraph (ii) above must occur within three (3) years after
the Change in Control.
From and after May 14, 1997, for purposes of this Section
5.5, if a Participant's employment is involuntarily terminated by
the Employer for any reason other than for Cause, or his
participation in the Plan is terminated by the Employer for any
reason other than for Cause, prior to a Change in Control
(whether or not a Change in Control ever occurs) and such
termination either (A) was at the request or direction of a
person who has entered into an agreement with the Employer, the
consummation of which would constitute a Change in Control, or
(B) was otherwise in connection with or in anticipation of a
Change in Control (whether or not a Change in Control ever
occurs), then such Participant's termination of employment or
participation shall be deemed to have followed a Change in
Control of the Employer, and such Participant shall be one who is
described in this paragraph (a).
(b) Amount of Supplemental Pension. The Supplemental
Pension payable to a Participant described in paragraph (a) above
shall be calculated in the same manner as set forth in Section
9.1(c) for benefits payable in the event of a termination of the
Plan, but based on his Compensation as of the date his
participation in the Plan is terminated.
(c) Commencement of Supplemental Pension. The Supplemental
Pension payable to a Participant described in paragraph
(a) above shall commence at the time such Participant
begins receiving retirement benefits from the Pension
Plan, or if he is not entitled to benefits from the
Pension Plan when his employment is terminated, at the
time he would otherwise be entitled to begin receiving
retirement benefits under the Pension Plan if he were so
entitled.
<PAGE>
ARTICLE VI
Disability Benefits
Section 6.1. Eligibility For Disability Benefits: A
Participant shall be entitled to a Disability Benefit if he
suffers a Disability prior to his Retirement.
Section 6.2. Amount of Disability Benefits: The Disability
Benefit payable to an eligible Participant shall equal (a) minus
(b) as follows:
(a) One-twelfth (1/12th) of sixty percent (60%) of the
Participant's Compensation calculated as of the date of his
Disability.
(b) The monthly amount of disability benefit payable
to the Participant under the Group Long-Term
Disability Plan as of the date that his employment
terminates due to Disability.
Section 6.3. Payment of Disability Benefits: A
Participant's Disability Benefits shall commence at the same time
such Participant begins receiving benefits from the Group Long-
Term Disability Plan and shall continue for so long as benefits
are paid under the Group Long-Term Disability Plan.
Section 6.4. Payment of Supplemental Pension to Disabled
Participants:
(a) Upon Reaching Normal Retirement Age. If a Participant
who has suffered a Disability reaches his normal retirement age
under the Pension Plan while still receiving Disability Benefits,
such Participant shall be entitled to a Supplemental Pension
commencing at the time Participant begins receiving retirement
benefits from the Pension Plan regardless of whether the
Participant has been an Eligible Employee for at least two years.
The Supplemental Pension payable to such Participant shall be in
the form provided in Section 5.3 and determined in accordance
with Subsection 5.2(a). Upon commencement of a Participant's
Supplemental Pension under this Section 6.4(a), such
Participant's Disability Benefit under Section 6.3 hereof shall
cease.
(b) Prior to Reaching Normal Retirement Age.
Notwithstanding the provisions of paragraph (a) above, a
Participant receiving a Disability Benefit may elect to
receive a Supplemental Pension at any time after becoming
eligible to Retire and prior to his normal retirement age
under the Pension Plan. If such an election is made, the
Participant's Disability Benefits shall cease and the
Participant shall commence receiving a Supplemental
Pension in the form provided in Section 5.3 at the same
time he begins receiving retirement benefits from the
<PAGE>
Pension Plan. The Supplemental Pension payable to such
Participant shall be determined in accordance with
Subsections 5.2(a) and (b), and shall be determined based
on the Participant's Compensation as of the date that
such individual terminated employment on account of
disability.
ARTICLE VII
Death Benefits
Section 7.1. Eligibility For Death Benefits: A Participant
shall be entitled to a Death Benefit if he meets the requirements
of either (a) or (b) as follows:
(a) He dies before his employment with the Employer
terminates or while receiving a Disability Benefit under
this Plan.
(b) He Retires but dies before the commencement of his
Supplemental Pension.
Section 7.2. Amount of Death Benefit:
(a) In-Service Death: In the case of a Participant who
dies as provided in Subsection 7.1(a), the Death Benefit will be
the total of the following (i), (ii), and (iii):
(i) A lump sum payment equal to two times the
Participant's Compensation minus any amount payable under
the Employer's Group Basic Life Insurance Plan (the "Lump
Sum Death Benefit").
(ii) A monthly benefit equal to one-twelfth of an
amount equal to fifty percent of the Participant's
Compensation at the time of his death (the "Monthly Death
Benefit").
(iii) If the Participant leaves a child or children
to whom payments are to be made under Section 7.3 hereof, a
monthly benefit equal to one-twelfth of an amount equal to
twenty-five percent of the Participant's Compensation at the
time of his death (the "Dependent Death Benefit").
(b) Post Retirement Death: In the case of a Participant
who dies as provided in Subsection 7.1(b), a Death
Benefit will be paid in the amount and to the beneficiary
that would have been applicable had the Participant's
Supplemental Pension commenced in the month of his death.
Section 7.3. Form of Payment of Death Benefit:
<PAGE>
(a) Lump Sum and Monthly Death Benefits: The Lump Sum and
Monthly Death Benefits are payable to the Participant's surviving
spouse. If the Participant does not have a surviving spouse, the
Lump Sum and Monthly Death Benefits are payable to the
Participant's surviving children in equal shares (regardless of
dependent status) or, if there are no surviving children, to the
Participant's surviving parents or siblings as designated by the
Participant for this purpose and in the manner specified by the
Participant on a form supplied by the Employer. Payment of the
Monthly Death Benefit shall be as a single life annuity if
payable to Participant's surviving spouse or a 120-month term
certain annuity if payable to a child, parent, or sibling.
(b) Dependent Death Benefit: The Dependent Death Benefit
is payable to the Participant's dependent children in
equal shares until there cease to be any dependent
children remaining. As each child loses his or her
dependent status, the child's share of the Dependent
Death Benefit shall be paid to the remaining dependent
child or children in equal shares. A child of the
Participant is deemed to be a dependent until the child
reaches age eighteen or, if a full-time student (i.e.
enrolled in twelve hours or more of courses of higher
education), age 25, or until the child's death if
earlier. At the discretion of the Plan Administrator,
any dependent child's share of the Dependent Death
Benefit may be paid to the Participant's surviving spouse
or other guardian of such child if applicable and shall
constitute full settlement of the Plan's obligation to
such child with respect to such payment. If the
Participant's surviving spouse dies while receiving the
Monthly Death Benefit and while any dependent child or
children of the Participant remain, then the Monthly
Death Benefit shall be added to the Dependent Death
Benefit and shall be payable in equal shares to the
dependent children in the same manner and for the same
time period as the Dependent Death Benefit.
Section 7.4. Commencement of Death Benefits: The Death
Benefits shall be paid, with respect to the Lump Sum Death
Benefit, or shall commence, with respect to the Monthly and
Dependent Death Benefits, as of the first day of the month next
following the Participant's death.
<PAGE>
ARTICLE VIII
Administration
Section 8.1. Plan Administration: The Plan shall be
administered by the Board of Directors. The Board of Directors
may, in its sole discretion, establish a committee to carry out
the day-to-day administration of the Plan and may delegate any
portion of its authority and responsibilities as Plan
Administrator to such committee.
Section 8.2. Powers of Plan Administrator: The Plan
Administrator shall have the discretionary power and authority to
interpret and administer the Plan according to its terms,
including the power to construe and interpret the Plan, to supply
any omissions therein, to reconcile and correct any errors or
inconsistencies, to decide any questions in the administration
and application of the Plan, and to make equitable adjustments
for any mistakes or errors in the administration and application
of the Plan. The Plan Administrator shall have such additional
powers as may be necessary to discharge its duties and
responsibilities hereunder.
Section 8.3. Calculation of Funding Obligations: The
Employer shall calculate its funding obligations hereunder solely
by using the actuarial assumptions and methodology set forth in
Exhibit D hereto. In its discretion, at any time prior to a
Change in Control of the Employer, the Employer may amend Exhibit
D to change such actuarial assumptions and methodology, provided
that such changes are communicated promptly in writing to all
Participants, Retired Participants, and Beneficiaries. Upon and
after a Change in Control of the Employer, the actuarial
assumptions and methodology set forth in Exhibit D may be changed
with respect to any Participant, Retired Participant, or
Beneficiary who was a Participant, Retired Participant, or
Beneficiary at the time of such Change in Control, only with the
written consent of such affected Participant, Retired
Participant, or Beneficiary. For purposes of this Section 8.3
only, and notwithstanding the foregoing, no actions or events
related to the merger of United Cities Gas Company ("United
Cities") with and into the Employer, as contemplated by the
Agreement and Plan of Reorganization, dated as of July 19, 1996,
between the Employer and United Cities, including shareholder
approval of the Merger or the consummation of the Merger, shall
constitute a Change in Control of the Employer that requires any
consent be obtained pursuant to this Section 8.3.
Section 8.4. Annual Statements: As soon as practicable
after the end of each Plan Year, the Employer shall deliver to
each Participant, Retired Participant, and Beneficiary a
statement containing (i) the present value of the Employer's
future benefit obligations to the Participant, Retired
Participant, or Beneficiary; (ii) the actuarial assumptions used
to calculate the present value of the Employer's future benefit
<PAGE>
obligations hereunder; and (iii) the current value of the assets,
if any, held in a trust or other funding arrangement for the
benefit of the Participant, Retired Participant, or Beneficiary.
ARTICLE IX
Miscellaneous Provisions
Section 9.1. Amendment or Termination of the Plan:
(a) In General. Subject to the remaining provisions of
this Section 9.1, the Board of Directors may by resolution, in
its absolute discretion, from time to time, amend, suspend, or
terminate any or all of the provisions of the Plan; provided,
however, that no amendment, suspension, or termination may apply
so as to decrease the payment to any Participant or beneficiary
of any benefit under the Plan that he accrued prior to the
effective date of such amendment, suspension, or termination
unless the Participant has engaged in dishonest or competitive
activities as described in Section 9.5 hereof.
(b) Amendment That Decreases Benefits. If the Board of
Directors amends the Plan and such amendment results in a
decrease in the Supplemental Pension, Death Benefit or
Disability Benefit that otherwise would be paid under
this Plan but for the amendment, except as provided in
subparagraphs (iii) and (iv) below, the Participant's
Supplemental Pension, Death Benefit or Disability Benefit
shall equal the sum of (i) and (ii) as follows:
(i) The amount derived by multiplying the
Participant's benefit calculated pursuant to the terms of
the Plan in effect immediately prior to the amendment and
based upon the Participant's Compensation used to calculate
the appropriate benefit by the following fraction: The
numerator is the number of years of vesting service the
Participant has under the Pension Plan prior to the
effective date of the amendment, and the denominator is the
total number of years of vesting service the Participant has
under the Pension Plan; however, neither the numerator nor
the denominator shall exceed 10.
(ii) The amount derived by multiplying the
Participant's benefit as calculated pursuant to the terms of
the Plan as amended based upon the Participant's
Compensation used to calculate the appropriate benefit by
the following fraction: The numerator is the number of
years that the Participant participated in the Pension Plan
after the effective date of the amendment (but this number
when added to the numerator of the fraction in subparagraph
(i) above, shall not exceed 10) and the denominator is the
total number of years of vesting service the Participant has
under the Pension Plan (but this number shall not exceed
<PAGE>
10).
(iii) Notwithstanding the foregoing provisions of
this paragraph (b), if the Plan is so amended before a
Participant has five years of vesting service under the
Pension Plan, the Participant's Supplemental Pension, Death
Benefit or Disability Benefit shall be calculated solely in
accordance with the terms of the Plan as amended.
(iv) Notwithstanding the foregoing provisions of this
paragraph (b), if any such amendment occurs upon or after a
Change in Control, the Participant's Supplemental Pension
shall at least equal the benefits which would be paid under
paragraph (c) below if there was a termination of the Plan
at the time of such amendment.
Notwithstanding the foregoing provisions of this paragraph
(b), the Amendment and Restatement of the Plan effective May 14,
1997 shall not for any purposes be treated as resulting in a
decrease in the Supplemental Pension, Death Benefit or Disability
Benefit otherwise payable under this Plan.
(c) Termination of the Plan.
(i) If the Board of Directors terminates all or any
portion of the Plan and such termination adversely affects a
Participant's Supplemental Pension, such Participant shall
be entitled to receive a Supplemental Pension whether or not
such Participant has been an Eligible Employee for at least
two years or has five years of vesting service under the
Pension Plan at the time of such Plan termination.
(A) It shall be based upon the Participant's
Compensation as of the date of the termination of the
Plan;
(B) If payment of the Supplemental Pension begins
before the Participant has ten years of vesting service
in the Pension Plan, the reduction referred to in
Section 5.2(a)(i) shall not apply;
(C) If payment of the Supplemental Pension begins
before the Participant attains age 62, the reductions
referred to in Section 5.2(b) shall not apply; and
(D) If the Participant is not otherwise vested
under the Pension Plan, the calculation made under
Subsection 5.2(a)(ii) above shall be made as if he were
so vested.
The Supplemental Pension determined under this paragraph (c)
shall commence at the time the Participant begins receiving
retirement benefits from the Pension Plan, or if he is not
entitled to benefits from the Pension Plan when his
<PAGE>
employment is terminated, at the time he would otherwise be
entitled to begin receiving retirement benefits under the
Pension Plan if he were so entitled.
(ii) If the Board of Directors terminates all or any
portion of the Plan and such termination adversely affects
the Disability Benefits or Death Benefits described in the
Plan, a Participant shall continue to be entitled to the
Disability Benefits or Death Benefits described in the Plan
if he thereafter dies or suffers a Disability. Any such
Death Benefit or Disability Benefit, however, shall be
calculated as of the date of termination of such benefit or
the Plan as if such date of termination was the date the
Participant died or suffered a Disability. Payment of any
such Death Benefit or Disability Benefit shall be made in
accordance with the terms of the Plan as in effect
immediately prior to the date of termination of such benefit
or the Plan.
Section 9.2. Nonguarantee of Employment: Nothing contained
in this Plan shall be construed as a contract of employment
between the Employer and any employee, as a right of any employee
to be continued in the employment of the Employer, or as a
limitation of the right of the Employer to discharge any of its
employees, with or without Cause.
Section 9.3. Nonalienation of Benefits: To the extent
permitted by law, benefits payable under this Plan shall not,
without the Plan Administrator's consent, be subject in any
manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, charge, garnishment, execution, or levy of
any kind, either voluntary or involuntary. Any unauthorized
attempt to anticipate, alienate, sell, transfer, assign, pledge,
encumber, charge, or otherwise dispose of any right to benefits
payable hereunder shall be void. No part of the assets of the
Employer shall be subject to seizure by legal process resulting
from any attempt by creditors of or claimants against any
Participant or beneficiary or any person claiming under or
through the foregoing to attach his interest under the Plan.
Section 9.4. Liability: No director, officer, or employee
of the Employer shall be liable for any act or action, whether of
commission or omission, taken by any other director, officer,
employee, or agent of the Employer under the terms of the Plan
or, except in circumstances involving his bad faith, for anything
done or omitted to be done by him under the terms of the Plan.
Section 9.5. Noncompetition Agreement: All Participants in
the Plan shall have entered into Noncompetition Agreements in the
form attached hereto as Exhibit B as a condition to their
participation in the Plan. Notwithstanding any other provisions
of this Plan to the contrary, no benefits shall be payable under
the Plan, and payment of benefits will cease, if a Participant is
in breach of such agreement at any time during the term of such
<PAGE>
agreement.
Section 9.6. Participation Agreement: Each Participant
shall enter into a Participation Agreement as a condition to his
participation in the Plan. Such Participation Agreement shall
constitute a separate and enforceable agreement between the
Employer and the Participant regarding the Participant's rights
in the Plan.
Section 9.7. Successors to the Employer: Any successor to
the Employer hereunder, which successor continues or acquires any
of the business of the Employer, shall be bound by the terms of
this Plan in the same manner and to the same extent as the
Employer.
IN WITNESS WHEREOF, and as conclusive evidence of its
adoption of this Amended and Restated Supplemental Executive
Benefits Plan, the Employer has caused this Plan to be duly
executed on this 14th day of May, 1997, to be effective as of the
date set forth in Section 1.2 above.
ATMOS ENERGY CORPORATION
By: /s/ Robert W. Best
----------------------
Robert W. Best,
Chairman of the Board,
President and Chief
Executive Officer
<PAGE>
EXHIBIT A
MINIMUM BENEFIT SCHEDULE
One twelfth (1/12th) of the Annual Amount set forth below
for a Participant is the minimum total monthly pension amount
payable from this Plan and the Pension Plan to the Participant so
long as payment commences no earlier than the specified Earliest
Commencement Age. Earlier commencement will result in reduction
under Section 5.2 of this Plan, except in the case of Mr.
Vaughan, whose benefits under this Plan (including the minimum
Annual Amount stated below) are payable upon his retirement at
any time after he has reached age fifty-five (55).
Participant Name Annual Amount Earliest
Commencement
Age
62
E. G. Carter $ 84,503
J. A. Enloe 76,924 62
N. V. Fariss 84,060 62
D. E. James 104,668 62
W. P. McKee, Jr. 79,851 62
H. E. Neel 100,259 62
J. F. Purser 124,625 62
C. G. Shaffer 69,499 62
R. F. Stephens 143,028 62
C. K. Vaughan 277,103 55
<PAGE>
EXHIBIT B
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT is entered into as of the
day of , 199 , by and between ATMOS ENERGY CORPORATION,
a Texas corporation (the "Employer"), and
("Participant").
W I T N E S S E T H:
WHEREAS, the Employer has adopted the Atmos Energy Corporation
Supplemental Executive Benefits Plan (the "Plan"), pursuant to
which certain executive or management employees of the Employer
are eligible to receive supplemental retirement, disability, and
death benefits; and
WHEREAS, in accordance with the requirements of the Plan and
as an inducement to the Employer to allow Participant's
participation in the Plan, Participant has agreed to execute and
enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as
follows:
1. Participant agrees that, during the term of this
Agreement, Participant shall not (a) participate, directly or
indirectly, as an employee, agent, representative, officer,
director, stockholder, partner, joint venturer, or otherwise or
(b) have any direct or indirect financial interest in any form in
any business that sells or offers for sale, directly or
indirectly, any products or services that are competitive with
the products or services sold or offered for sale by the Employer
in any geographic location in which the Employer shall be doing
business during such period of time as Participant is a
participant in the Plan; provided, however, that the ownership by
Participant of any stock listed on a national securities exchange
of any corporation conducting a competing business shall not be
deemed a violation of this Agreement if the aggregate amount of
such stock owned by Participant does not exceed one percent (1%)
of the total outstanding stock of such corporation.
2. In the event of a breach or threatened breach of the
provisions of this Agreement by Participant, the Employer shall
be entitled (as an absolute right and without the necessity of
proving irreparable injury or damages and in addition to any
other remedies available under the Plan or otherwise) to an
injunction restraining Participant from such violation.
3. If any provision of this Agreement shall, for any
reason, be adjudged by any court of competent jurisdiction to be
<PAGE>
invalid or unenforceable, such judgment shall not affect, impair,
or invalidate the remainder of this Agreement but shall be
confined in its operation to the provisions of this Agreement
directly involved in the controversy in which such judgment shall
have been rendered. To the extent that the provisions of this
Agreement are adjudged to be invalid or unenforceable, this
Agreement shall be construed and (in the absence of such
construction) reformed so as to allow the maximum benefit of the
provisions of this Agreement permitted by law. If, however, this
Agreement shall for any reason be held by a court of competent
jurisdiction to be excessively broad as to time, duration,
geographical scope, activity, or subject matter, it shall be
construed by limiting and reducing it so as to be enforceable to
the extent compatible with the applicable laws as they shall then
appear.
4. This Agreement shall become effective as of the
commencement of Supplemental Pension or Disability Benefits from
the Plan and shall terminate upon the earliest to occur of (i)
five (5) years from the date Participant begins receiving
Supplemental Pension or Disability Benefits from the Plan, (ii)
the attainment of age 67 by Participant, or (iii) Participant's
death.
5. This Agreement shall be construed and enforced in
accordance with the laws of the State of Texas.
IN WITNESS WHEREOF, the parties hereto have executed this
Noncompetition Agreement as of the date first written above.
PARTICIPANT ATMOS ENERGY CORPORATION
- - -------------------------- By:--------------------------
<PAGE>
EXHIBIT C-1
PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT is entered into as of the
day of , 19 by and between ATMOS ENERGY CORPORATION, a
Texas corporation (the "Employer"), and
("Participant").
W I T N E S S E T H:
WHEREAS, the Employer adopted and has been maintaining the
Atmos Energy Corporation Supplemental Executive Benefits Plan
(the "Plan"), pursuant to which certain executive or management
employees of the Employer may receive supplemental retirement,
disability, and death benefits; and
WHEREAS, Participant has been a participant in the Plan; and
WHEREAS, effective as of May 14, 1997 (the "Effective
Date"), the Employer amended and restated the Plan; and
WHEREAS, the parties desire to enter into a new
participation agreement in order for Participant to continue
participation in the amended and restated Plan; and
WHEREAS, in accordance with Section 9.6 of the Plan, the
Employer and Participant have agreed to execute and enter into
this Agreement;
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as
follows:
1. Agreement. The Employer hereby agrees to provide to
Participant the benefits described in the Plan pursuant to the
terms and conditions set forth in the Plan and in this Agreement.
2. Amendment or Termination of the Plan; Termination of
Employment or Participation Without Cause. The Employer hereby
agrees that, if
(i) the Employer amends or terminates the Plan after
May 14, 1997 in such a manner that results in a
decrease in the amount of the benefits to be paid under
the Plan to Participant, or
(ii) Participant's employment is terminated voluntarily
or involuntarily by the Employer for any reason other
than for Cause (as defined in Subparagraph 2(e) below),
or
(iii) Participant's participation in the Plan is
<PAGE>
terminated by the Employer for any reason other than
for Cause prior to the Participant's termination of
employment with the Employer,
Participant shall have the right to, and the Employer agrees to
pay to Participant, any benefits accrued prior to the effective
date of such amendment or termination of the Plan or of such
termination of Participant's employment with the Employer or
participation in the Plan. The amount of benefits that shall be
paid under this Paragraph 2 shall be calculated as follows:
(a) In the event the Employer amends the Plan after
May 14, 1997 and such amendment results in a decrease
in the amount of the Supplemental Pension, Disability
Pension, or Death Benefit that would be paid under the
Plan but for the amendment thereof, the amount of
Participant's benefit shall be the sum of:
(i) Participant's benefit as calculated
pursuant to the terms of the Plan in effect
immediately prior to the amendment thereof,
based upon Participant's Compensation as of
the date of his retirement, disability, or
death, multiplied by a fraction, the
numerator of which shall be the number of
years of vesting service by Participant in
the Pension Plan prior to the effective date
of the amendment (which number shall not be
less than 5 nor greater than 10) and the
denominator of which shall be the total
number of years of vesting service by
Participant in the Pension Plan (which
number, for purposes of calculating
Participant's Supplemental Pension, shall not
be greater than 10); plus
(ii) Participant's benefit as calculated
pursuant to the terms of the Plan as amended,
based upon Participant's Compensation as of
the date of his retirement, disability, or
death, multiplied by a fraction, the
numerator of which shall be the number of
years that Participant participated in the
Pension Plan after the effective date of the
amendment (which number, for purposes of
calculating Participant's Supplemental
Pension, when added to the numerator of the
fraction in clause (i) above, may not exceed
10) and the denominator of which shall be the
total number of years of vesting service by
Participant in the Pension Plan (which number
for purposes of calculating Participant's
Supplemental Pension, shall not be greater
than 10);
<PAGE>
provided, however, that if the Plan is so amended prior
to Participant's fifth year of vesting service in the
Pension Plan, Participant's Supplemental Pension
payable hereunder shall be calculated solely in
accordance with the terms of the Plan as amended;
provided, further, that, Participant's Supplemental
Pension must at least equal the benefits which would be
paid under Section 9.1(c) of the Plan if there was a
termination of the Plan at the time of such amendment.
(b) In the event the Employer terminates the Plan or
any portion thereof after May 14, 1997 and such
termination affects the Disability Pension or Death
Benefit described in the Plan, Participant's Disability
Pension and Death Benefit shall be calculated as of the
date of termination of such benefit as though the date
of such termination was the date that Participant
became disabled or died. Such Disability Pension and
Death Benefit shall become payable, however, only upon
Participant's disability or death occurring in
accordance with the terms of the Plan or any portion
thereof in effect immediately prior to the date of its
termination.
(c) In the event the Employer terminates the Plan or
any portion thereof after May 14, 1997 and such
termination affects the Supplemental Pension described
in the Plan, Participant's Supplemental Pension shall
be the amount determined in accordance with Section 5.2
of the Plan except that
(i) It shall be based upon the Participant's
Compensation as of the date of the
termination of the Plan;
(ii) If payment of the Supplemental Pension
begins before the Participant has ten years
of vesting service in the Pension Plan, the
reduction referred to in Section 5.2(a)(i) of
the Plan shall not apply;
(iii) If payment of the Supplemental
Pension begins before the Participant attains
age 62, the reductions referred to in Section
5.2(b) of the Plan shall not apply; and
(iv) If the Participant is not otherwise
vested under the Pension Plan, the
calculation made under Subsection 5.2(a)(ii)
of the Plan shall be made as if he were so
vested.
(d) If Participant's employment with the Employer is
terminated voluntarily or involuntarily by the Employer
<PAGE>
for any reason other than for Cause (as defined in
Subparagraph 2(e) below) or if Participant's
participation in the Plan is terminated by the Employer
for any reason other than for Cause, Participant shall
be entitled to receive a Supplemental Pension at such
time as he becomes entitled to receive a benefit under
the Pension Plan. Such Supplemental Pension shall be
calculated in the same manner as set forth in
Subparagraph 2(c) above for benefits payable in the
event of a termination of the Plan.
(e) As used in this Agreement, "Cause" for termination
of employment shall mean termination upon
(i) the willful and continued failure by
Participant to substantially perform his
duties with the Employer (other than any such
failure resulting from Participant's
incapacity due to physical or mental illness)
after a written demand for substantial
performance is delivered to Participant by
the Employer that specifically identifies the
manner in which the Employer believes that
Participant has not substantially performed
his duties, or
(ii) Participant's willful engagement in
conduct that is demonstrably and materially
injurious to the Employer, monetarily or
otherwise.
For purposes of this Subparagraph, no act, or failure
to act, on Participant's part shall be deemed "willful"
unless done, or omitted to be done, by Participant not
in good faith and without a reasonable belief that the
action or omission was in the best interests of the
Employer. Notwithstanding the foregoing, Participant
shall not be deemed to have been terminated for Cause
unless and until there shall have been delivered to
Participant a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4)
of the entire membership of the Board of Directors of
the Employer at a meeting of such Board of Directors
called and held for such purpose (after reasonable
notice to Participant and an opportunity for
Participant, together with Participant's counsel, to be
heard before the Board of Directors), finding that in
the good faith opinion of the Board of Directors that
Participant was guilty of conduct set forth above in
clauses (i) or (ii) of this Subparagraph 2(e) and
specifying the particulars thereof in detail.
3. Limitations. Participant agrees that nothing in this
Agreement or the Plan shall entitle him, or be deemed to entitle
<PAGE>
him, to receive a Supplemental Pension under the Plan if
(i) he has not met the requirements for a
Supplemental Pension as set forth in the Plan, or
(ii) his employment with the Employer or
participation in the Plan is terminated for Cause (as
defined in Subparagraph 2(e) above).
4. Amendment. No amendment or termination of the Plan by
the Employer shall constitute an amendment or termination of this
Agreement. This Agreement may be amended or modified only by the
written agreement of the parties hereto, and will terminate only
upon the occurrence of the earlier of the following events: (i)
the execution of a written agreement to terminate this Agreement
signed by all of the parties hereto, (ii) the satisfaction of all
of the Employer's obligations to Participant under the Plan and
this Agreement, (iii) the termination for Cause of Participant's
employment with the Employer or participation in the Plan, or
(iv) the breach by Participant of any of the terms or provisions
of the Noncompetition Agreement executed by Participant in
accordance with the Plan.
5. Funding.
(a) Not later than the time the Participant
Retires or becomes eligible to receive an unreduced
Supplemental Pension under the Plan, whichever occurs
first, the Employer shall contribute to a trust or
other funding arrangement an amount necessary to fund
100% of the then-present value of the Participant's
accrued Supplemental Pension. Notwithstanding the
foregoing, immediately upon a Change in Control, the
Employer shall contribute to a trust or other funding
arrangement an amount necessary to fund 100% of the
then-present value of all Supplemental Pension benefits
(vested and unvested) payable under this Agreement
and/or the Plan to the Participant, regardless of
whether the Participant is then eligible to Retire.
The amount required to be funded by this Paragraph 5
shall be calculated in accordance with Paragraph 6
hereof. The Employer shall review the funding status
of the trust or other funding arrangement established
under this Paragraph 5 on an annual basis and shall
make contributions thereto as may be required to
maintain the value of the assets thereof at no less
than 100% of the then-present value of all such
Supplemental Pension benefits.
(b)(i) As used in this Paragraph 5 and
Paragraph 6, except as provided herein, a "Change
in Control" of the Employer shall be deemed to
have occurred if:
<PAGE>
(A) Any "Person" (as defined in
subparagraph (ii) below), other than (1) the
Employer or any of its subsidiaries, (2) a
trustee or other fiduciary holding securities
under an employee benefit plan of the
Employer or any of its Affiliates, (3) an
underwriter temporarily holding securities
pursuant to an offering of such securities,
or (4) a corporation owned, directly or
indirectly, by the shareholders of the
Employer in substantially the same
proportions as their ownership of stock of
the Employer, is or becomes the "beneficial
owner" (as defined in subparagraph (ii)
below), directly or indirectly, of securities
of the Employer (not including in the
securities beneficially owned by such person
any securities acquired directly from the
Company or its Affiliates) representing 33-
1/3% or more of the combined voting power of
the Employer's then outstanding securities,
or 33-1/3% or more of the then outstanding
common stock of the Employer, excluding any
Person who becomes such a beneficial owner in
connection with a transaction described in
subparagraph (C)(1) below.
(B) During any period of two consecutive years (the
"Period"), individuals who at the beginning of the
Period constitute the Board of Directors of the
Employer and any "new director" (as defined in
subparagraph (ii) below) cease for any reason to
constitute a majority of the Board of Directors.
(C) There is consummated a merger or consolidation
of the Employer or any direct or indirect subsidiary of
the Employer with any other corporation, except if:
(1) the merger or consolidation would result in
the voting securities of the Employer outstanding
immediately prior thereto continuing to represent
(either by remaining outstanding or by being
converted into voting securities of the surviving
entity or any parent thereof) at least 60% of the
combined voting power of the voting securities of
the Employer or such surviving entity or any parent
thereof outstanding immediately after such merger
or consolidation; or
(2) the merger or consolidation is effected to
implement a recapitalization of the Employer (or similar
transaction) in which no Person is or becomes the
beneficial owner, directly or indirectly, of securities
of the Employer (not including in the securities
<PAGE>
beneficially owned by such Person any securities
acquired directly from the Employer or its Affiliates
other than in connection with the acquisition by the
Employer or its Affiliates of a business) representing
60% or more of the combined voting power of the
Employer's then outstanding securities;
(D) The shareholders of the Employer approve a plan of
complete liquidation or dissolution of the Employer or
an agreement for the sale or disposition by the
Employer of all or substantially all the Employer's
assets, other than a sale or disposition by the
Employer of all or substantially all of the Employer's
assets to an entity, at least 60% of the combined
voting power of the voting securities of which are
owned by the stockholders of the Employer in
substantially the same proportions as their ownership
of the Employer immediately prior to such sale.
Notwithstanding the foregoing provisions of this subparagraph
(b)(i), no actions or events related to the merger of United
Cities Gas Company ("United Cities") with and into the Employer,
as contemplated by the Agreement and Plan of Reorganization,
dated as of July 19, 1996, between the Employer and United Cities
(the "Merger"), including the consummation of the Merger, shall
constitute a Change in Control of the Employer for purposes of
this Agreement.
(ii) For purposes of subparagraph (i) above,
(A) "Person" shall have the meaning given in Section
3(a)(9) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") as modified and used in
Sections 13(d) and 14(d) of the Exchange Act.
(B) "Beneficial owner" shall have the meaning provided
in Rule 13d-3 under the Exchange Act.
(C) "New director" shall mean an individual whose
election by the Employer's Board of Directors or
nomination for election by the Employer's shareholders
was approved by a vote of at least 2/3's of the
directors then still in office who either were
directors at the beginning of the Period or whose
election or nomination for election was previously so
approved or recommended. However, "new director" shall
not include a director whose initial assumption of
office is in connection with an actual or threatened
election contest, including but not limited to a
consent solicitation relating to the election of
directors of the Company.
(D) "Affiliate" shall have the meaning set forth in
Rule 12b-2 promulgated under Section 12 of the Exchange
<PAGE>
Act.
6. Calculation of Funding Obligations. The Employer shall calculate
its funding obligations under this Agreement and the Plan solely by using
the actuarial assumptions and methodology set forth in Exhibit D to the
Plan. Upon and after a Change in Control of the Employer, the actuarial
assumptions and methodology set forth in Exhibit D may be changed with
respect to the Participant or, if applicable, his Beneficiary, only with
the Participant's, or, if applicable, his Beneficiary's, written consent.
7. Annual Statements: As soon as practicable after the end of each
Plan Year, the Employer shall deliver to the Participant or, if applicable,
his Beneficiary, a statement containing (i) the present value of the
Employer's future benefit obligations to the Participant, or, if
applicable, his Beneficiary; (ii) the actuarial assumptions used to
calculate the present value of the Employer's future benefit obligations
under the Plan; and (iii) the current value of the assets, if any, held in
any trust or other funding arrangement for the benefit of the Participant,
or, if applicable, his Beneficiary.
8. No Guarantee of Employment. Nothing contained in this Agreement
shall be construed as a contract of employment between the Employer and
Participant, or as a right of Participant to be continued in the employment
of the Employer, or as a limitation of the right of the Employer to
discharge Participant with or without cause.
9. Legal Fees and Expenses. The Employer agrees to pay any and all
legal fees and expenses incurred by Participant in seeking to obtain or
enforce any right or benefit provided by this Agreement.
10. Capitalized Terms. Each capitalized term used in this Agreement
that is not otherwise defined herein shall have the same meaning attributed
to it in the Plan.
11. Agreement Binding on Successors to the Employer. Any successor
to the Employer hereunder, which successor continues or acquires any of the
business of the Employer, shall be bound by the terms of this Agreement in
the same manner and to the same extent as the Employer.
12. Prior Agreements Superseded. The terms of this Agreement
supersede the terms of all prior Participation Agreements between
Participant and the Employer.
13. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Texas.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Participation Agreement as of the date first written above.
PARTICIPANT: ATMOS ENERGY CORPORATION:
By:
- - ------------------------- ------------------------
<PAGE>
EXHIBIT C-2
PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT is entered into as of the day of
, 19 by and between ATMOS ENERGY CORPORATION, a Texas corporation (the
"Employer"), and ("Participant").
W I T N E S S E T H:
WHEREAS, the Employer has adopted the Atmos Energy Corporation
Supplemental Executive Benefits Plan (the "Plan"), pursuant to which
certain executive or management employees of the Employer may receive
supplemental retirement, disability, and death benefits; and
WHEREAS, in accordance with Section 9.6 of the Plan, the Employer and
Participant have agreed to execute and enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Agreement. The Employer hereby agrees to provide to Participant
the benefits described in the Plan pursuant to the terms and conditions set
forth in the Plan and in this Agreement.
2. Amendment or Termination of the Plan; Termination of Employment
or Participation Without Cause. The Employer hereby agrees that, if
(i) the Employer amends or terminates the Plan in such a
manner that results in a decrease in the amount of the benefits
to be paid under the Plan to Participant, or
(ii) Participant's employment is terminated involuntarily by
the Employer for any reason other than for Cause (as defined in
Subparagraph 2(e) below), or
(iii) Participant's participation in the Plan is
terminated by the Employer for any reason other than for Cause
prior to the Participant's termination of employment with the
Employer,
Participant shall have the right to, and the Employer agrees to pay to
Participant, any benefits accrued prior to the effective date of such
amendment or termination of the Plan or of such termination of
Participant's employment with the Employer or participation in the Plan.
The amount of benefits that shall be paid under this Paragraph 2 shall be
calculated as follows:
(a) In the event the Employer amends the Plan and such
amendment results in a decrease in the amount of the Supplemental
Pension, Disability Pension, or Death Benefit that would be paid
under the Plan but for the amendment thereof, the amount of
Participant's benefit shall be the sum of:
<PAGE>
(i) Participant's benefit as calculated pursuant to
the terms of the Plan in effect immediately prior to
the amendment thereof, based upon Participant's
Compensation as of the date of his retirement,
disability, or death, multiplied by a fraction, the
numerator of which shall be the number of years of
vesting service by Participant in the Pension Plan
prior to the effective date of the amendment (which
number shall not be less than 5 nor greater than 10)
and the denominator of which shall be the total number
of years of vesting service by Participant in the
Pension Plan (which number, for purposes of calculating
Participant's Supplemental Pension, shall not be
greater than 10); plus
(ii) Participant's benefit as calculated pursuant
to the terms of the Plan as amended, based upon
Participant's Compensation as of the date of his
retirement, disability, or death, multiplied by a
fraction, the numerator of which shall be the number of
years that Participant participated in the Pension Plan
after the effective date of the amendment (which
number, for purposes of calculating Participant's
Supplemental Pension, when added to the numerator of
the fraction in clause (i) above, may not exceed 10)
and the denominator of which shall be the total number
of years of vesting service by Participant in the
Pension Plan (which number for purposes of calculating
Participant's Supplemental Pension, shall not be
greater than 10);
provided, however, that if the Plan is so amended prior to
Participant's fifth year of vesting service in the Pension Plan,
Participant's Supplemental Pension payable hereunder shall be
calculated solely in accordance with the terms of the Plan as
amended; provided, further, that, if such amendment occurs upon
or after a "Change in Control" (as defined in Subparagraph 3(b)
below), Participant's Supplemental Pension must be at least equal
the benefits which would be paid under Section 9.1(c) of the Plan
if there was a termination of the Plan at the time of such
amendment.
(b) In the event the Employer terminates the Plan or any portion
thereof and such termination affects the Disability Pension or
Death Benefit described in the Plan, Participant's Disability
Pension and Death Benefit shall be calculated as of the date of
termination of such benefit as though the date of such
termination was the date that Participant became disabled or
died. Such Disability Pension and Death Benefit shall become
payable, however, only upon Participant's disability or death
occurring in accordance with the terms of the Plan or any portion
thereof in effect immediately prior to the date of its
termination.
<PAGE>
(c) In the event the Employer terminates the Plan or any portion
thereof and such termination affects the Supplemental Pension
described in the Plan, Participant's Supplemental Pension shall
be the amount determined in accordance with Section 5.2 of the
Plan except that
(i) It shall be based upon the Participant's
Compensation as of the date of the termination of the
Plan;
(ii) If payment of the Supplemental Pension begins
before the Participant has ten years of vesting service
in the Pension Plan, the reduction referred to in
Section 5.2(a)(i) of the Plan shall not apply;
(iii) If payment of the Supplemental Pension begins
before the Participant attains age 62, the reductions
referred to in Section 5.2(b) of the Plan shall not
apply; and
(iv) If the Participant is not otherwise vested under
the Pension Plan, the calculation made under Subsection
5.2(a)(ii) of the Plan shall be made as if he were so
vested.
(d) If, at any time prior to a "Change in Control" (as defined
in Subparagraph 3(b) hereof), Participant's employment with the
Employer is terminated involuntarily by the Employer for any
reason other than for Cause (as defined in Subparagraph 2(e)
below) or if Participant's participation in the Plan is
terminated by the Employer for any reason other than for Cause,
Participant shall nevertheless be entitled to the benefits
payable under the Plan that have accrued prior to the termination
of Participant's employment or Plan participation, the amount of
such benefits to be calculated in the manner set forth in Section
5.2 of the Plan; provided, however, that Participant's right to a
Supplemental Pension shall vest only if Participant has been an
Eligible Employee for at least two years and has at least five
years of vesting service under the Pension Plan as of the date of
such termination.
(e) As used in this Agreement, "Cause" for termination of
employment shall mean termination upon
(i) the willful and continued failure by Participant
to substantially perform his duties with the Employer
(other than any such failure resulting from
Participant's incapacity due to physical or mental
illness) after a written demand for substantial
performance is delivered to Participant by the Employer
that specifically identifies the manner in which the
Employer believes that Participant has not
substantially performed his duties, or
<PAGE>
(ii) Participant's willful engagement in conduct that
is demonstrably and materially injurious to the
Employer, monetarily or otherwise.
For purposes of this Subparagraph, no act, or failure to act, on
Participant's part shall be deemed "willful" unless done, or
omitted to be done, by Participant not in good faith and without
a reasonable belief that the action or omission was in the best
interests of the Employer. Notwithstanding the foregoing,
Participant shall not be deemed to have been terminated for Cause
unless and until there shall have been delivered to Participant a
copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters (3/4) of the entire membership of the
Board of Directors of the Employer at a meeting of such Board of
Directors called and held for such purpose (after reasonable
notice to Participant and an opportunity for Participant,
together with Participant's counsel, to be heard before the Board
of Directors), finding that in the good faith opinion of the
Board of Directors that Participant was guilty of conduct set
forth above in clauses (i) or (ii) of this Subparagraph 2(e) and
specifying the particulars thereof in detail.
3. Change in Control.
(a) Notwithstanding anything expressly or impliedly to the
contrary contained in this Agreement or the Plan, if, [to be inserted
where appropriate: at any time during the three (3)-year period
immediately] following a Change in Control of the Employer,
Participant's employment is involuntarily terminated by the Employer,
or he is demoted or reassigned to a position that causes him to cease
to be an Eligible Employee, for any reason other than for Cause (as
defined in Subparagraph 2(e) above), Participant shall nevertheless be
entitled to receive a Supplemental Pension at such time as he becomes
entitled to receive a benefit under the Pension Plan regardless of
whether Participant has been an Eligible Employee for at least two
years or has five years of vesting service under the Pension Plan at
the time of such termination, demotion, or reassignment. If a
Participant's employment is involuntarily terminated by the Employer
for any reason other than for Cause, or his participation in the Plan
is terminated by the Employer for any reason other than for Cause,
prior to a Change in Control (whether or not a Change in Control ever
occurs) and such termination either (A) was at the request or
direction of a person who has entered into an agreement with the
Employer, the consummation of which would constitute a Change in
Control, or (B) was otherwise in connection with or in anticipation of
a Change in Control (whether or not a Change in Control ever occurs),
then such Participant's termination of employment or participation
shall be deemed to have followed a Change in Control of the Employer.
Such Supplemental Pension shall be calculated in the same manner as
set forth in Subparagraph 2(c) above for benefits payable in the event
of a termination of the Plan.
(b)(i) As used in this Agreement, except as provided
herein, a "Change in Control" of the Employer shall be
<PAGE>
deemed to have occurred if:
(A) Any "Person" (as defined in subparagraph (ii)
below), other than (1) the Employer or any of its
subsidiaries, (2) a trustee or other fiduciary holding
securities under an employee benefit plan of the
Employer or any of its Affiliates, (3) an underwriter
temporarily holding securities pursuant to an offering
of such securities, or (4) a corporation owned,
directly or indirectly, by the shareholders of the
Employer in substantially the same proportions as their
ownership of stock of the Employer, is or becomes the
"beneficial owner" (as defined in subparagraph (ii)
below), directly or indirectly, of securities of the
Employer (not including in the securities beneficially
owned by such person any securities acquired directly
from the Company or its Affiliates) representing 33-
1/3% or more of the combined voting power of the
Employer's then outstanding securities, or 33-1/3% or
more of the then outstanding common stock of the
Employer, excluding any Person who becomes such a
beneficial owner in connection with a transaction
described in subparagraph (C)(1) below.
(B) During any period of two consecutive years (the
"Period"), individuals who at the beginning of the
Period constitute the Board of Directors of the
Employer and any "new director" (as defined in
subparagraph (ii) below) cease for any reason to
constitute a majority of the Board of Directors.
(C) There is consummated a merger or consolidation of
the Employer or any direct or indirect subsidiary of
the Employer with any other corporation, except if:
(1) the merger or consolidation would result in
the voting securities of the Employer outstanding
immediately prior thereto continuing to represent
(either by remaining outstanding or by being
converted into voting securities of the surviving
entity or any parent thereof) at least 60% of the
combined voting power of the voting securities of
the Employer or such surviving entity or any
parent thereof outstanding immediately after such
merger or consolidation; or
(2) the merger or consolidation is effected to
implement a recapitalization of the Employer (or
similar transaction) in which no Person is or
becomes the beneficial owner, directly or
indirectly, of securities of the Employer (not
including in the securities beneficially owned by
such Person any securities acquired directly from
the Employer or its Affiliates other than in
<PAGE>
connection with the acquisition by
the Employer or its Affiliates of a
business) representing 60% or more
of the combined voting power of the
Employer's then outstanding
securities;
(D) The shareholders of the Employer approve a plan of
complete liquidation or dissolution of the Employer or
an agreement for the sale or disposition by the
Employer of all or substantially all the Employer's
assets, other than a sale or disposition by the
Employer of all or substantially all of the Employer's
assets to an entity, at least 60% of the combined
voting power of the voting securities of which are
owned by the stockholders of the Employer in
substantially the same proportions as their ownership
of the Employer immediately prior to such sale.
[Can be dropped for any person who becomes an Eligible
Employee following consummation of the United Cities Merger:
Notwithstanding the foregoing provisions of this
subparagraph (b)(i), no actions or events related to the
merger of United Cities Gas Company ("United Cities") with
and into the Employer, as contemplated by the Agreement and
Plan of Reorganization, dated as of July 19, 1996, between
the Employer and United Cities (the "Merger"), including the
consummation of the Merger, shall constitute a Change in
Control of the Employer for purposes of this Agreement.]
(ii) For purposes of subparagraph (i) above,
(A) "Person" shall have the meaning given in Section
3(a)(9) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") as modified and used in
Sections 13(d) and 14(d) of the Exchange Act.
(B) "Beneficial owner" shall have the meaning provided
in Rule 13d-3 under the Exchange Act.
(C) "New director" shall mean an individual whose
election by the Employer's Board of Directors or
nomination for election by the Employer's shareholders
was approved by a vote of at least 2/3's of the
directors then still in office who either were
directors at the beginning of the Period or whose
election or nomination for election was previously so
approved or recommended. However, "new director" shall
not include a director whose initial assumption of
office is in connection with an actual or threatened
election contest, including but not limited to a
consent solicitation relating to the election of
directors of the Company.
<PAGE>
(D) "Affiliate" shall have the meaning set forth in
Rule 12b-2 promulgated under Section 12 of the Exchange
Act.
4. Limitations. Except as otherwise provided in Paragraph 3 of this
Agreement, Participant agrees that nothing in this Agreement or the Plan
shall entitle him, or be deemed to entitle him, to receive a Supplemental
Pension under the Plan if
(i) he has not met the requirements for a Supplemental
Pension as set forth in the Plan,
(ii) his employment with the Employer is terminated prior to
his reaching the age of eligibility for the immediate
commencement of his Pension Plan benefit due to resignation, or
(iii) his employment with the Employer or participation
in the Plan is terminated for Cause (as defined in Subparagraph
2(e) above).
5. Amendment or Termination. No amendment or termination of the
Plan by the Employer shall constitute an amendment or termination of this
Agreement. This Agreement may be amended or modified only by the written
agreement of the parties hereto, and will terminate only upon the
occurrence of the earlier of the following events: (i) the execution of a
written agreement to terminate this Agreement signed by all of the parties
hereto, (ii) the satisfaction of all of the Employer's obligations to
Participant under the Plan and this Agreement, (iii) the termination by
Participant of Participant's employment with the Employer by resignation
effective prior to Participant reaching age 55, unless such resignation
occurs after a Change in Control, (iv) the termination for Cause of
Participant's employment with the Employer, or (v) the breach by
Participant of any of the terms or provisions of the Noncompetition
Agreement executed by Participant in accordance with the Plan.
6. Funding. Not later than the time the Participant Retires or
becomes eligible to receive an unreduced Supplemental Pension under the
Plan, whichever occurs first, the Employer shall contribute to a trust or
other funding arrangement an amount necessary to fund 100% of the then-
present value of the Participant's accrued Supplemental Pension.
Notwithstanding the foregoing, immediately upon a Change in Control, the
Employer shall contribute to a trust or other funding arrangement an amount
necessary to fund 100% of the then-present value of all Supplemental
Pension benefits (vested and unvested) payable under this Agreement and/or
the Plan to the Participant, regardless of whether the Participant is then
eligible to Retire or to receive an unreduced Supplemental Pension. The
amount required to be funded by this Paragraph 6 shall be calculated in
accordance with Paragraph 7 hereof. The Employer shall review the funding
status of the trust or other funding arrangement established under this
Paragraph 6 on an annual basis and shall make contributions thereto as may
be required to maintain the value of the assets thereof at no less than
100% of the then-present value of all such Supplemental Pension benefits.
7. Calculation of Funding Obligations. The Employer shall calculate
<PAGE>
its funding obligations under this Agreement and the Plan solely by using
the actuarial assumptions and methodology set forth in Exhibit D to the
Plan. Upon and after a Change in Control of the Employer which occurs at a
time when the Participant is an Eligible Employee, the actuarial
assumptions and methodology set forth in Exhibit D may be changed with
respect to the Participant or, if applicable, his Beneficiary, only with
the Participant's, or, if applicable, his Beneficiary's, written consent.
8. Annual Statements: As soon as practicable after the end of each
Plan Year, the Employer shall deliver to the Participant or, if applicable,
his Beneficiary, a statement containing (i) the present value of the
Employer's future benefit obligations to the Participant, or, if
applicable, his Beneficiary; (ii) the actuarial assumptions used to
calculate the present value of the Employer's future benefit obligations
under the Plan; and (iii) the current value of the assets, if any, held in
any trust or other funding arrangement for the benefit of the Participant,
or, if applicable, his Beneficiary.
9. No Guarantee of Employment. Nothing contained in this Agreement
shall be construed as a contract of employment between the Employer and
Participant, or as a right of Participant to be continued in the employment
of the Employer, or as a limitation of the right of the Employer to
discharge Participant with or without cause.
10. Legal Fees and Expenses. The Employer agrees to pay any and all
legal fees and expenses incurred by Participant in seeking to obtain or
enforce any right or benefit provided by this Agreement.
11. Capitalized Terms. Each capitalized term used in this Agreement
that is not otherwise defined herein shall have the same meaning attributed
to it in the Plan.
12. Agreement Binding on Successors to the Employer. Any successor
to the Employer hereunder, which successor continues or acquires any of the
business of the Employer, shall be bound by the terms of this Agreement in
the same manner and to the same extent as the Employer.
13. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Texas.
IN WITNESS WHEREOF, the parties hereto have executed this
Participation Agreement as of the date first written above.
PARTICIPANT: ATMOS ENERGY CORPORATION:
By:
- - ------------------------- ---------------------------
<PAGE>
EXHIBIT D
ATMOS ENERGY CORPORATION
SUMMARY OF ACTUARIAL ASSUMPTIONS AND METHODS
FOR
DETERMINING ANNUAL SEBP TRUST
FUNDING LIABILITIES
Actuarial Assumptions
Discount Rate 8%
Mortality
Prior to Age 62 None
After Age 62 IRS Applicable Table
(50/50 GAM83)
Salary Scale 0%
Method for Determining Liabilities
The liability determined is the present value as of the valuation date of
the projected age 62 SEBP benefit. The projected age 62 benefit is based
on SEBP compensation determined as the sum of (1), (2) and (3) as follows:
(1) The greater of (A) the Participant's annual base salary at the
date of his termination of employment, or (B) the average of the
Participant's annual base salary for the highest three (3)
calendar years (whether or not consecutive) of the Participant's
employment with the Employer.
(2) The greater of (A) the Participant's last Performance Award or
(B) the average of the highest three (3) Performance Awards
(whether or not consecutive).
(3) The Participant's annual car allowance amount at the date of his
termination of employment.
The qualified plan offset is the projected age 62 qualified plan
benefit with no salary scale or wage base projections.
<PAGE>
EXHIBIT 15
----------
Board of Directors
Atmos Energy Corporation
We are aware of the incorporation by reference in the Registra-
tion Statements (Form S-3 No. 33-37869, Form S-3 No. 33-70212,
Form S-3 No. 33-58220, Form S-3 No. 33-56915, Form S-3 No. 333-
03339, Form S-4 No. 333-13429, Form S-8 No. 33-57687, Form S-8
No. 33-68852, Form S-8 No. 33-57695 and Form S-8 No. 333-32343)
of Atmos Energy Corporation of our report dated August 6, 1997,
relating to the unaudited condensed consolidated interim
financial statements of Atmos Energy Corporation which are in-
cluded in its Form 10-Q for the quarter ended June 30, 1997.
Pursuant to Rule 436(c) of the Securities Act of 1933 our report
is not a part of the registration statement prepared or certified
by accountants within the meaning of Section 7 or 11 of the
Securities Act of 1933.
ERNST & YOUNG LLP
August 13, 1997
Dallas, Texas <PAGE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF ATMOS ENERGY CORPORATION
FOR THE NINE MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 449,801
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 66,630
<TOTAL-DEFERRED-CHARGES> 37,470
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 553,901
<COMMON> 81
<CAPITAL-SURPLUS-PAID-IN> 115,268
<RETAINED-EARNINGS> 72,820
<TOTAL-COMMON-STOCKHOLDERS-EQ> 188,169
0
0
<LONG-TERM-DEBT-NET> 157,303
<SHORT-TERM-NOTES> 38,700
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 8,000
0
<CAPITAL-LEASE-OBLIGATIONS> 2,373
<LEASES-CURRENT> 299
<OTHER-ITEMS-CAPITAL-AND-LIAB> 159,057
<TOT-CAPITALIZATION-AND-LIAB> 553,901
<GROSS-OPERATING-REVENUE> 444,226
<INCOME-TAX-EXPENSE> 14,050
<OTHER-OPERATING-EXPENSES> 393,865
<TOTAL-OPERATING-EXPENSES> 407,915
<OPERATING-INCOME-LOSS> 36,311
<OTHER-INCOME-NET> (21)
<INCOME-BEFORE-INTEREST-EXPEN> 36,290
<TOTAL-INTEREST-EXPENSE> 12,389
<NET-INCOME> 23,901
0
<EARNINGS-AVAILABLE-FOR-COMM> 23,901
<COMMON-STOCK-DIVIDENDS> 12,093
<TOTAL-INTEREST-ON-BONDS> 1,215
<CASH-FLOW-OPERATIONS> 53,831
<EPS-PRIMARY> 1.48
<EPS-DILUTED> 1.48
</TABLE>
EXHIBIT 10.2
------------
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") is entered into
effective as of the 1st day of October, 1994 (the "Effective
Date ), by and between ATMOS ENERGY CORPORATION, a Texas
corporation (the "Company") and CHARLES K. VAUGHAN (the
"Consultant").
RECITALS
A. Consultant is a former employee of the Company who has
retired from the employ of the Company.
B. Consultant was formerly chief executive officer of the
Company, and as such possesses certain experience, knowledge and
skills and certain historic information regarding the operation
of the Company which the Board of Directors of the Company
desires to retain the ability to use, as needed.
C. Consultant has agreed to act as a consultant for the
Company and to provide such consulting services as requested from
time to time by the Board of Directors of the Company during the
term of this Agreement.
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as
follows:
1. Consulting Relationship. The Board of Directors of the
Company (the "Board") hereby retains Consultant and Consultant
hereby agrees to be retained by the Board, as an independent
contractor and not as an employee. The Company and Consultant
understand and agree that each will take all actions and file all
appropriate tax returns and other forms consistent with
Consultant's status as an independent contractor.
2. Consulting Services. Consultant agrees that during
the term of this Agreement, he shall perform such consulting
services as requested by the Board from time to time, subject to
the following:
(a) Consultant shall not be obligated to render any
services under this Agreement during any period of temporary
illness or injury or if Consultant's doctor provides the
Board with written notice that Consultant cannot perform the
requested services at the time requested due to his
temporary disability. For purposes hereof, "temporary"
disability or illness shall mean a physical or mental
incapacity of such a nature that it prevents Consultant from
performing the consulting services requested by the Board on
a continuing and sustained basis for a period of not more
than six (6) substantially consecutive months.
(b) The consulting services to be performed by
Consultant shall not require skills which are inconsistent
with Consultant's qualifications and experience. Consultant
shall use his best skills and judgment to accomplish the
assigned tasks, and under no circumstances shall the Board
or the Company exercise any control over the manner in which
Consultant performs his services hereunder.
(c) Consultant shall be available to render consulting
services to the Company under this Agreement as the Board
shall request.
(d) The parties understand and agree that Consultant
shall report directly to the Board. Consultant may perform
the consulting services hereunder at places other than the
principal offices of the Company.
Consultant's failure to perform the requested consulting services
for any of the reasons set forth in subparagraphs (a) or (b)
above, shall not relieve or diminish the Company's obligation to
pay Consultant the fees provided in paragraph 3.
3. Consulting Fees and Benefits.
(a) The Company agrees to pay Consultant for his
services under this Agreement an amount for the period
beginning on each October 1 and ending the following
September 30 (the "Consulting Year") during the term of this
Agreement as follows, whether or not services are actually
rendered under this Agreement:
Consulting Year Amount
October 1, 1994 - September 30, 1995 $320,000
October 1, 1995 - September 30, 1996 $280,000
October 1, 1996 - September 30, 1997 $240,000
October 1, 1997 - September 30, 1998 $160,000
October 1, 1998 - September 30, 1999 $100,000
Beginning on October 1, 1994, and thereafter on each April 1
and October 1, during the term of this Agreement, Consultant
shall be paid in a lump sum one-half of the annual amount
due him for the Consulting Year in which such October 1 or
April 1 occurs. Consultant also shall be entitled to
reimbursement for expenses incurred by Consultant in the
performance of his duties hereunder, so long as such
expenses would, if Consultant were the Chief Executive
Officer of the Company, be eligible for reimbursement or
payment under the Company's policies regarding such expenses
as in effect from time to time during the term of this
Agreement.
-2- <PAGE>
(b) Except as otherwise provided herein, Consultant
shall not be entitled to participate or receive benefits
under any Company programs maintained for its employees as a
result of the services rendered under this Agreement;
however, nothing contained in this Agreement shall affect
Consultant's coverage under any of the Company's benefit
programs as a result of his status as a former employee of
the Company or any other benefits Consultant may receive
under other agreements Consultant may have with the Company.
The Company also shall not provide worker's compensation
insurance coverage for Consultant.
4. Term of Agreement.
(a) Subject to subparagraph 4(b) hereof, the term of
this Agreement shall begin on the Effective Date of this
Agreement and shall end on September 30, 1999; however, by
mutual written agreement, the Board and Consultant may
extend the Agreement for additional one-year periods on such
terms and for such annual compensation as agreed to by said
parties. During the term of the Agreement the Board may
terminate this Agreement at any time and for any reason,
other than as set forth in subparagraph 4(b) hereof, upon 90
days' prior written notice delivered to Consultant; however,
in the event of such termination, the Company shall pay to
Consultant, within 15 days of such termination, a lump sum
amount equal to the remaining payments which would be owing
under subparagraph 3(a) hereof for the remainder of the term
of this Agreement as if this Agreement had not terminated.
(b) This Agreement shall terminate upon the death of
Consultant. In addition, if Consultant becomes totally
disabled (as hereinafter defined), the Board may, in its
discretion, at any time after such total disability, upon
five (5) days' prior written notice to Consultant, terminate
this Agreement. "Total disability" shall mean a physical or
mental incapacity of such a nature that it prevents
Consultant from performing the consulting services requested
by the Board on a continuing and sustained basis for a
period of more than six (6) substantially consecutive
months. The lump sum payment referred to in subparagraph
4(a) above shall not be owing upon the termination of this
Agreement pursuant to this subparagraph (b).
(c) Upon the termination of this Agreement, all the
liabilities and obligations of the Company and Consultant
under the Agreement shall cease, except as follows:
(i) Consultant shall remain subject to the
obligations imposed by paragraph 5; and
(ii) Subject to subparagraph 6(b) hereof, the
Company shall remain obligated to pay Consultant any
fees, expense reimbursements or other amounts owing for
-3- <PAGE>
periods prior to the date of termination of this
Agreement, including, if applicable, any lump sum
amount owing upon the Board's election to terminate
this Agreement pursuant to subparagraph 4(a) above and
any fee owing but not yet paid pursuant to subparagraph
3(a) above for the six-month portion of the Consulting
Year in which such termination occurs; and
(iii) Consultant shall not be obligated to
return any portion of the fee he was paid (or which is
owing to him), for the six-month portion of the
Consulting Year beginning on October 1 or April 1, as
the case may be, during which such termination occurs,
on account of the termination of this Agreement prior
to the end of said Consulting Year or six-month
portion, as the case may be.
5. Noncompetition Agreement.
(a) Consultant acknowledges that Consultant has
acquired, and in the course of providing the consulting
services hereunder, Consultant will acquire valuable
proprietary data and other confidential information with
respect to the Company's business, and will occupy a
position of trust and confidence with respect to the
Company's affairs, products and services.
(b) Consultant understands and agrees that, during the
term of this Agreement and for a period of five (5) years
after this Agreement terminates, Consultant shall not (1)
participate, directly or indirectly, as an employee,
consultant, agent, representative, officer, director,
stockholder, partner, joint venturer, or otherwise or (2)
have any direct or indirect financial interest in any form
in any business that sells or offers for sale, directly or
indirectly, any products or services that are competitive
with the products or services sold or offered for sale by
the Company in any state in the United States in which the
Company shall be doing business during the term of this
Agreement; provided, however, that the ownership by
Consultant of any stock listed on a national securities
exchange of any corporation conducting a competing business
shall not be deemed a violation of this Agreement if the
aggregate amount of such stock owned by Consultant does not
exceed one percent (1%) of the total outstanding stock of
such corporation.
(c) In the event of a breach or threatened breach of the
provisions of this paragraph 5 by Consultant, the Company
shall be entitled (as an absolute right and without the
necessity of proving irreparable injury or damages and in
addition to any other remedies available) to an injunction
restraining Consultant from such violation.
-4-<PAGE>
6. Miscellaneous Provisions.
(a) At Consultant's request, the Company shall, at its
expense, provide Consultant with appropriate and sufficient
assigned office space and secretarial services to allow
Consultant to perform his duties hereunder.
(b) Consultant shall be responsible to pay all
federal, state and local taxes (including but not limited to
income taxes and self-employment taxes) as may be imposed or
levied upon the income earned or derived by him under this
Agreement. It is expressly understood and agreed that the
Company shall not withhold any such taxes from the
compensation paid to Consultant.
(c) All tangible materials (whether original or
duplicates), other information in the possession or control
of Consultant and all knowledge acquired by Consultant which
in any way relate or pertain to the Company's business,
including the business of any subsidiaries or affiliates of
the Company, whether furnished to Consultant by the Company
or prepared, compiled or acquired by Consultant while an
employee of the Company or during the term of this Agreement
and which derive economic value from not being generally
known to the public or to people who can obtain economic
value from their use or development, shall be preserved by
Consultant as confidential material, information or
knowledge and shall not be disclosed to others, either
during the term of this Agreement or thereafter, without the
prior written consent of the Board.
(d) If any provision of this Agreement shall, for any
reason, be adjudged by any court of competent jurisdiction
to be invalid or unenforceable, such judgment shall not
affect, impair, or invalidate the remainder of this
Agreement but shall be confined in its operation to the
provisions of this Agreement directly involved in the
controversy in which such judgment shall have been rendered.
To the extent that the provisions of this Agreement are
adjudged to be invalid or unenforceable, this Agreement
shall be construed and (in the absence of such construction)
reformed so as to allow the maximum benefit of the
provisions of this Agreement permitted by law. If, however,
the provisions of paragraph 5 of this Agreement shall for
any reason be held by a court of competent jurisdiction to
be excessively broad as to time, duration, geographical
scope, activity, or subject matter, they shall be construed
by limiting and reducing them so as to be enforceable to the
extent compatible with the applicable laws as they shall
then appear.
(e) All notices and other communications hereunder
must be delivered in writing and shall be deemed to have
been given if delivered by hand or mailed by first class,
-5-<PAGE>
registered mail, return receipt requested, postage and
registered fees prepaid, and addressed as follows:
(i) if to the Company:
Atmos Energy Corporation
P. O. Box 650205
Dallas, Texas 75265-0205
Attention: General Counsel
(ii) if to Consultant:
Charles K Vaughan
5515 Cedar Creek Lane
Dallas, Texas 75252
-6- <PAGE>
(f) This Agreement embodies the entire understanding
between the parties hereto respecting the subject matter
hereof and no change, alteration or modification may be made
except by authorization of the Board and except in writing
signed by both parties hereto.
(g) This Agreement shall in all respects be construed
and enforced in accordance with the laws of the State of
Texas.
(h) The Company agrees to pay any and all legal fees
and expenses incurred by Consultant in seeking to obtain or
enforce any of the provisions of this Agreement.
(i) Any successor to the Company shall be bound by the
terms of this Agreement in the same manner and to the same
extent as the Company, and this Agreement shall be binding
upon Consultant, his heirs and legal representatives.
IN WITNESS WHEREOF, the Company and Consultant have each
duly executed this Agreement the 11th day of May, 1994, effective
as of the date and year first written above.
COMPANY:
ATMOS ENERGY CORPORATION
By: /s/ Dewey G. Williams
--------------------------------
Chairman, Human Resources Committee
of the Board of Directors
CONSULTANT:
/s/Charles K. Vaughan
----------------------------
CHARLES K. VAUGHAN
-7-<PAGE>
EXHIBIT 10.3
------------
AMENDMENT NO. 1 TO
CONSULTING AGREEMENT
THIS AMENDMENT NO. 1 TO CONSULTING AGREEMENT (the
Amendment ) is made and entered into this 14th day of May, 1997,
by and between ATMOS ENERGY CORPORATION, a Texas corporation (the
Company ), and CHARLES K. VAUGHAN ( Consultant ).
WHEREAS, the Company and Consultant entered into that
certain Consulting Agreement dated October 1, 1994 (the
Agreement ); and
WHEREAS, the Company and Consultant desire to amend the
Agreement in certain respects due to Consultant s increased
responsibilities as a result of the recent change in the
Company s Chairman, President and Chief Executive Officer and the
pending merger of United Cities Gas Company with and into the
Company, with such amendments to the Agreement as reflected in
this Amendment No. 1 to Consulting Agreement (the Amendment ) to
take effect upon the approval of this Amendment by the Board of
Directors of the Company.
NOW, THEREFORE, for and in consideration of the premises and
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. Definitions. All capitalized terms used and not
otherwise defined herein shall have the meanings given such terms
in the Agreement.
Amendment of Subparagraph 3(a). Subparagraph 3(a) of the
Agreement is hereby amended to read in its entirety as follows:
(a) The Company agrees to pay Consultant for his
services under this Agreement an amount for the period
beginning on each October 1 and ending the following
September 30 (the Consulting Year ) during the term of
this Agreement as follows, whether or not services are
actually rendered under this Agreement:
Consulting Year Amount
October 1, 1994 - September 30, 1995 $320,000
October 1, 1995 - September 30, 1996 $280,000
October 1, 1996 - September 30, 1997 $240,000
October 1, 1997 - September 30, 1998 $300,000
October 1, 1998 - September 30, 1999 $130,000
Beginning on October 1, 1994, and thereafter on each
April 1 and October 1, during the term of this
Agreement, Consultant shall be paid in a lump sum one-
half of the annual amount due him for the Consulting<PAGE>
Year in which such October 1, or April 1 occurs. In
addition, upon approval by the Board of Directors of
the Company of this Amendment, Consultant shall be paid
a one time sum of $105,000. Consultant also shall be
entitled to reimbursement for expenses incurred by
Consultant in the performance of his duties hereunder,
so long as such expenses would, if Consultant were the
Chief Executive Officer of the Company, be eligible for
reimbursement or payment under the Company s policies
regarding such expenses as in effect from time to time
during the term of this Agreement.
3. No Other Amendment. Except as expressly amended hereby,
all of the other terms, provisions and conditions of the
Agreement are hereby ratified and confirmed and shall remain
unchanged and in full force and effect. To the extent any terms
or provisions of this Amendment conflict with those of the
Agreement, the terms and provisions of the Agreement shall
control. This Amendment shall be deemed a part of, and is hereby
incorporated into the Agreement. The Agreement and any and all
other documents heretofore, now or hereafter executed and
delivered pursuant to the terms of the Agreement are hereby
amended so that any reference to the Agreement shall mean a
reference to the Agreement as amended hereby.
4. Governing Law. This Amendment shall be governed by, and
construed in accordance with the laws of the State of Texas.
5. Counterparts. This Amendment 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, the parties hereto have executed this
Amendment effective as of the date and year first above written.
COMPANY
ATMOS ENERGY CORPORATION
By: /s/ Robert W. Best
-------------------
Robert W. Best
Chairman of the Board,
President, and
Chief Executive Officer
CONSULTANT
/s/ Charles K. Vaughan
--------------------------
CHARLES K. VAUGHAN
Consulting Agrmt Amendment 1-Vaughan.doc 2 <PAGE>
