<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
For the fiscal year ended September 30, 1997 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)
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.)
Three Lincoln Centre, Suite 1800
5430 LBJ Freeway, Dallas, Texas 75240
(Address of principal executive offices (Zip code)
Registrant's telephone number, including area code: (972) 934-9227
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
Common stock, No Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
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 [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
<PAGE>
The aggregate market value of the voting stock held by non-affiliates
of the registrant was $738,585,541 as of November 25, 1997. On November 25,
1997 the registrant had 29,770,088 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement filed for the
annual meeting of shareholders on February 11, 1998 are incorporated by
reference into Part III.
<PAGE>
Cautionary Statement under the Private Securities Litigation Reform Act of 1995
The matters discussed or incorporated by reference in this Annual
Report on Form 10-K contain "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. All statements other than statements of historical facts
included in this Report including, but not limited to, those contained in the
following sections, Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations", and Notes 2, 5, and 11 of notes to
consolidated financial statements, regarding the Company's financial position,
business strategy and plans and objectives of management of the Company for
future operations, are forward-looking statements made in good faith by the
Company. Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
expectations will prove to have been correct. Such 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 operations, markets, services, rates, recovery of costs, availability
of gas supply, and other factors. These risks and uncertainties include, but are
not limited to, economic, competitive, governmental, weather, technological and
other factors.
PART I
ITEM 1. BUSINESS
Atmos Energy Corporation (the "Company") was organized under the laws
of the State of Texas in 1983 as a subsidiary of Pioneer Corporation ("Pioneer")
for the purposes of owning and operating Pioneer's natural gas distribution
business in Texas. Immediate ly following the transfer of such business, which
had been opera ted by Pioneer and its predecessors since 1906, Pioneer distrib
uted the outstanding stock of the Company, then known as Energas Company, to
Pioneer shareholders. In September 1988, the Company changed its name from
Energas Company to Atmos Energy Corporation. As a result of its merger with
United Cities Gas Company in July 1997, the Company became incorporated in the
Commonwealth of Virginia as well as the State of Texas.
The Company distributes and sells natural gas and propane to
approximately 1.02 million residential, commercial, industrial, agricultural,
and other customers. The Company distributes and sells natural gas to
approximately 985,000 customers in 802 cities, towns, and communities in service
areas located in Texas, Louisiana, Kentucky, Colorado, Kansas, Illinois,
Tennessee, Iowa, Virginia, Georgia, South Carolina and Missouri. The Company
also transports gas for others through parts of its distribution system. It
also distributes propane to approximately 29,000 customers in Kentucky, North
Carolina, Tennessee and Virginia.
<PAGE>
The Company's Texas distribution system is operated through its
Energas Company division (the "Energas Division") and covers an area having a
population of approximately 950,000 people. The economy of the area is based
primarily on oil and gas production and agriculture. The principal cities
served by the Energas Division include Amarillo, Lubbock, Midland, and Odessa.
At September 30, 1997, the Company served 311,571 customers in Texas.
The Company's Louisiana distribution system is operated through its
Trans Louisiana Gas Company division (the "Trans La Division") and covers an
area having a population of approximately 250,000 people. The economy of the
area is based primarily on oil and gas production, agriculture, and food
processing. The principal cities served by the Trans La Division are Lafayette,
Pineville, and Natchitoches. At September 30, 1997, the Company served 80,053
customers in Louisiana.
The Company's Kentucky distribution system is operated through its
Western Kentucky Gas Company division (the "Western Kentucky Division") and
covers an area having a population of approximately 680,000 people. The economy
of the area is based primarily on industry and agriculture. The principal
cities served by the Western Kentucky Division include Bowling Green, Owensboro,
and Paducah. At September 30, 1997, the Company served 173,958 customers in
Kentucky.
The Company's distribution systems in Colorado and parts of Kansas and
Missouri are operated through its Greeley Gas Company division (the "Greeley Gas
Division") and covers an area having a combined population of approximately
228,000 people. The economies of the areas served are based on oil and gas
production, agriculture and resort business. The principal cities served by the
Greeley Gas Division include Greeley, Durango and Lamar, Colorado and Bonner
Springs, Herington and Ulysses, Kansas. At September 30, 1997 the Greeley Gas
Division served 113,185 customers.
The Company operates natural gas distribution systems in Georgia,
Illinois, Iowa, South Carolina, Tennessee, Virginia, Kansas and Missouri through
its United Cities Gas Company division (the "United Cities Division") and covers
an area having a combined population of approximately 6,695,000 people. The
economies of the areas served include customers engaged in the manufacture of
asphalt, automobiles, auto parts, chemicals, electronics, food products, metals,
textiles and wire, among others. The division also serves several colleges and
a major army base. The principal cities and counties served by the United
Cities Division include Franklin and Murfreesboro, Tennessee; Wyandotte and
Johnson Counties in Kansas; Hannibal, Missouri; and Gainesville and Columbus,
Georgia. At September 30, 1997, the United Cities Division served 306,681
natural gas customers.
2
<PAGE>
The Company also operates certain non-utility businesses through
various wholly-owned subsidiaries. One subsidiary, United Cities Gas Storage
Company ("UCG Storage"), provides natural gas storage services. It owns natural
gas storage fields in Kentucky and Kansas to supplement natural gas used by
customers in those states.
Another subsidiary, UCG Energy Corporation ("UCG Energy"), leases
appliances, real estate and equipment, and vehicles to the United Cities
Division and others, and owns a small interest in a partnership engaged in
exploration and production activities. UCG Energy also owns a 45% interest in
Woodward Marketing, L.L.C. ("WMLLC"), a gas marketing business incorporated in
Texas. WMLLC provides gas marketing services to industrial customers,
municipalities and local distribution companies, including the United Cities
Division. UCG Energy utilized equity accounting, effective January 1, 1995, for
this acquisition. The excess of the purchase price over the value of the net
tangible assets, amounting to approximately $5,400,000, was allocated to
intangible assets consisting of customer contracts and goodwill, which are being
amortized over ten and twenty years, respectively. In accordance with the
purchase agreement, if certain earnings targets are met, an additional payment
of up to $1,000,000 may be paid over a five-year period.
UCG Energy also owns United Cities Propane Gas of Tennessee, Inc. (the
"Propane Division"), which is engaged in the retail distribution of propane (LP)
gas, the wholesale supply and transportation of LP gas, the transportation of
certain products for other companies and the direct merchandising and repair of
propane gas appliances. Each of approximately 15 town operations has its own
storage facility with a total company storage capacity of 2,119,000 gallons. As
of September 30, 1997, the Propane Division served 29,097 customers in
Tennessee, Kentucky, North Carolina and Virginia. During the three-year period
ended September 30, 1997, the Propane Division added approximately 8,000
customers through acquisitions of four propane distribution companies and a
propane transport company.
The natural gas and propane distribution industries are subject to a
number of factors, many of which affect the Company from time to time. These
include (i) the ongoing need to obtain adequate and timely rate relief from
regulatory authorities to recover costs of service and earn a fair return on
invested capital; (ii) inherent seasonality of the business; (iii) competition
with alternate fuels; (iv) competition with other gas sources for industrial
customers, including the ability of some customers to bypass the Company's
facilities, which could result in loss of revenues and reduction in the
Company's net income; and (v) possible volatility in the supply and price of
natural gas and propane.
3
<PAGE>
ACQUISITIONS AND MERGERS
Since its organization in 1983, the Company has sought to expand its
customer base and to diversify the weather patterns, local economic conditions,
and regulatory environments to which its operations are subject. As part of
this strategy, the Company acquired Trans Louisiana Gas Company, Inc. ("TLG") in
January 1986, Western Kentucky Gas Utility Corporation in December 1987, Greeley
Gas Company ("GGC") in December 1993, Oceana Heights Gas Company of Thibodaux,
Louisiana in November 1995 and United Cities Gas Company ("UCGC") in July 1997.
The Company continues to consider and pursue, where appropriate, additional
acquisitions of natural gas distribution properties and other business
opportunities. For further information regarding the UCGC merger, see Note 2 of
notes to consolidated financial statements.
UTILITY AND NON-UTILITY DATA
The following table summarizes certain information regarding the
operation of the utility and non-utility businesses of the Company for each of
the three years in the period ended September 30, 1997. Prior periods have been
restated to reflect the pooling of interests with UCGC on July 31, 1997.
<TABLE>
<CAPTION>
Utility Non-utility Total
---------- ----------- ----------
<S> <C> <C> <C>
(In thousands)
1997
Operating revenues $ 864,720 $42,115 $ 906,835
Net income 20,463 3,375 23,838
Identifiable assets 1,015,818 72,493 1,088,311
1996
Operating revenues $ 837,125 $49,566 $ 886,691
Net income 36,740 4,411 41,151
Identifiable assets 926,935 83,675 1,010,610
1995
Operating revenues $ 707,680 $41,875 $ 749,555
Net income 24,618 4,190 28,808
Identifiable assets 829,849 71,099 900,948
</TABLE>
The utility business is comprised of the Company's five utility
divisions: Energas Division, Greeley Gas Division, Trans La Division, United
Cities Division and Western Kentucky Division. It includes regulated as well as
certain nonregulated utility businesses such as irrigation, transportation and
gas marketing activities in the utility divisions' respective service areas.
4
<PAGE>
The non-utility business includes the operations of UCG Storage and
UCG Energy, which includes a 45% interest in WMLLC (a gas marketer), the propane
business and leasing of real estate, vehicles and appliances.
OPERATING STATISTICS
The table on the following page reflects the pooled operating
statistics of Atmos and the United Cities Division for fiscal 1997 and the
restated operating statistics for the previous four years on a pooled basis. It
is followed by two tables of utility sales and operating statistics by business
unit for 1997 and 1996, respectively. These two tables are followed by tables
of non-utility net income and propane statistics for 1997, 1996 and 1995.
5
<PAGE>
ATMOS ENERGY CORPORATION
FIVE-YEAR OPERATING STATISTICS
<TABLE>
<CAPTION>
Year ended September 30,
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
NUMBER OF CUSTOMERS, at
end of year
Residential 870,747 860,229 834,376 825,310 789,360
Commercial 92,703 91,960 90,093 93,250 86,124
Industrial (including agricultural) 17,217 19,403 19,762 20,219 9,564
Public authority and other 4,781 4,716 4,982 4,949 3,267
---------- -------- -------- -------- ----------
Total natural gas customers 985,448 976,308 949,213 943,728 888,315
Propane 29,097 26,108 23,359 21,693 20,498
---------- --------- -------- -------- ----------
Total Customers 1,014,545 1,002,416 972,572 965,421 908,813
========== ========= ======== ======== ==========
HEATING DEGREE DAYS, (2)
Actual 3,909 4,043 3,706 3,855 4,080
Percent of normal 98% 101% 93% 97% 102%
SALES VOLUMES - MMcf (3)
Residential 75,214 77,001 69,666 72,561 74,818
Commercial 37,382 38,247 34,921 35,250 36,307
Industrial (including agricultural) 46,417 57,863 57,290 57,638 50,537
Public authority and other 5,195 5,182 4,779 5,242 4,403
---------- --------- -------- -------- ----------
Total 164,208 178,293 166,656 170,691 166,065
TRANSPORTATION VOLUMES - MMcf (3) 48,800 44,146 47,647 47,882 51,665
---------- --------- -------- -------- ----------
TOTAL VOLUMES DELIVERED - MMcf (3) 213,008 222,439 214,303 218,573 217,730
========== ========= ======== ======== ==========
PROPANE - Gallons (000's) 32,975 40,723 28,854 23,175 20,180
========== ========= ======== ======== ==========
OPERATING REVENUES (000's)
Gas Revenues
Residential $ 452,864 $ 409,039 $337,768 $375,450 $ 372,770
Commercial 193,302 186,032 150,949 165,883 165,611
Industrial (including agricultural) 168,386 187,693 171,591 188,791 160,410
Public authority and other 23,898 21,738 18,185 22,463 18,315
---------- --------- -------- -------- ----------
Total gas revenues 838,450 804,502 678,493 752,587 717,106
Transportation Revenues 19,885 18,872 19,813 21,325 21,937
Other Revenue 6,385 13,751 9,374 6,879 8,014
---------- --------- -------- -------- ----------
Total utility revenues 864,720 837,125 707,680 780,791 747,057
Non-utility revenues
Propane revenues 33,194 34,730 22,124 18,510 16,506
Other revenues 8,921 14,836 19,751 27,001 31,330
---------- --------- -------- -------- ----------
Total non-utility revenues 42,115 49,566 41,875 45,511 47,836
---------- --------- -------- -------- ----------
Total operating revenues $ 906,835 $ 886,691 $749,555 $826,302 $ 794,893
========== ========= ======== ======== ==========
AVERAGE SALES PRICE/Mcf
Residential $ 6.02 $ 5.31 $ 4.85 $ 5.17 $ 4.98
Commercial 5.17 4.86 4.32 4.71 4.56
Industrial (including agricultural) 3.63 3.24 3.00 3.28 3.17
Public authority and other 4.60 4.19 3.81 4.29 4.16
Total 5.11 4.51 4.07 4.41 4.32
AVERAGE COST OF GAS/Mcf SOLD 3.51 3.15 2.70 3.10 3.04
AVERAGE TRANSPORTATION REVENUES/Mcf .41 .43 .42 .45 .42
</TABLE>
See footnotes on page 7.
6
<PAGE>
UTILITY SALES AND STATISTICAL DATA BY BUSINESS UNIT - 1997(1)
<TABLE>
<CAPTION>
Year ended September 30, 1997
--------------------------------------------------------------------
Western Greeley United Total
Energas Trans La Kentucky Gas Cities Utility
--------- --------- -------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
UTILITY CUSTOMERS, at end of year
Residential 268,518 73,546 154,219 99,472 274,992 870,747
Commercial 25,234 5,409 17,706 13,328 31,026 92,703
Industrial (including agricultural) 15,589 120 460 385 663 17,217
Public authority and other 2,230 978 1,573 - - 4,781
-------- -------- -------- -------- -------- ----------
Total 311,571 80,053 173,958 113,185 306,681 985,448
======== ======== ======== ======== ======== ==========
HEATING DEGREE DAYS, (2)
Actual 3,553 1,523 4,178 6,195 3,980 3,909
Normal 3,531 1,771 4,333 6,274 4,070 3,990
Percent of normal 100% 86% 96% 99% 98% 98%
SALES VOLUMES - MMcf (3)
Residential 24,292 3,558 13,543 10,227 23,595 75,215
Commercial 7,912 1,383 6,070 6,731 15,286 37,382
Industrial (including agricultural) 19,084 1,872 6,128 1,907 17,425 46,416
Public authority and other 2,689 951 1,555 - - 5,195
-------- -------- -------- -------- -------- ----------
Total 53,977 7,764 27,296 18,865 56,306 164,208
TRANSPORTATION VOLUMES - MMcf (3) 4,479 624 22,398 3,275 18,024 48,800
-------- -------- -------- -------- -------- ----------
TOTAL VOLUMES HANDLED - MMcf (3) 58,456 8,388 49,694 22,140 74,330 213,008
======== ======== ======== ======== ======== ==========
OTHER STATISTICS
Operating revenues (000's) $234,310 $ 51,866 $144,139 $ 91,341 $343,064 $ 864,720
Gross plant (000's) $322,774 $108,822 $175,793 $137,489 $501,972 $1,246,850
Net plant (000's) $208,289 $ 78,354 $105,393 $ 83,371 $314,591 $ 789,998
Miles of pipe 13,214 2,241 3,638 3,864 7,945 30,902
Employees (4) 534 154 330 250 1,031 2,299
Communities served 92 41 163 123 383 802
</TABLE>
(1) Atmos' utility business is comprised of the five utility divisions listed in
the table above. Their operations include the regulated local distribution
companies and certain unregulated gas marketing subsidiaries located in their
respective service areas. The Energas plant balances include certain shared
services utilty amounts.
(2) A heating degree day is equivalent to each degree that the average of the
high and the low temperatures for a day is below 65 degrees. The greater the
number of heating degree days, the colder the climate. Heating degree days are
used in the natural gas industry to measure the relative coldness of weather
experienced and to compare relative temperatures between one geographic area and
another. Normal degree days is based on 30-year average National Weather
Service data for selected locations.
(3) Volumes are reported as metered in million cubic feet ("MMcf").
(4) This excludes 218 and 235 Atmos shared services employees and 162 and 143
non-utility employees in United Cities in 1997 and 1996, respectively.
7
<PAGE>
UTILITY SALES AND STATISTICAL DATA BY BUSINESS UNIT - 1996 (1)
<TABLE>
<CAPTION>
Year ended September 30, 1996
--------------------------------------------------------------------
Western Greeley United Total
Energas Trans La Kentucky Gas Cities Utility
--------- --------- -------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
UTILITY CUSTOMERS, at end of year
Residential 266,805 73,414 151,798 97,653 270,559 860,229
Commercial 24,950 5,392 17,334 13,230 31,054 91,960
Industrial (including agricultural) 17,780 118 467 401 637 19,403
Public authority and other 2,219 956 1,541 - - 4,716
-------- -------- -------- -------- -------- ----------
Total 311,754 79,880 171,140 111,284 302,250 976,308
======== ======== ======== ======== ======== ==========
HEATING DEGREE DAYS, system average (2)
Actual 3,331 1,980 4,610 5,912 4,322 4,043
Normal 3,528 1,760 4,376 6,234 4,070 3,990
Percent of normal 94% 113% 105% 95% 106% 101%
SALES VOLUMES (2)
Residential 22,842 4,205 14,694 9,829 25,458 77,028
Commercial 7,426 1,490 6,351 6,252 16,706 38,225
Industrial (including agricultural) 24,978 1,707 10,726 1,028 18,207 56,646
Public authority and other 2,529 962 1,685 1,218 - 6,394
-------- -------- -------- -------- -------- ----------
Total 57,775 8,364 33,456 18,327 60,371 178,293
TRANSPORTATION VOLUMES (3) 5,694 562 16,936 3,342 17,612 44,146
-------- -------- -------- -------- -------- ----------
TOTAL VOLUMES HANDLED (3) 63,469 8,926 50,392 21,669 77,983 222,439
======== ======== ======== ======== ======== ==========
OTHER STATISTICS
Operating revenues (000's) $203,409 $ 53,288 $153,203 $ 73,844 $353,381 $ 837,125
Gross plant (000's) $278,180 $103,809 $158,918 $125,531 $476,855 $1,143,293
Net plant (000's) $168,014 $ 74,816 $ 96,252 $ 74,485 $301,699 $ 715,266
Miles of pipe 13,163 2,090 3,570 3,817 7,523 30,163
Employees (4) 609 167 373 268 1,068 2,485
Communities served 92 41 163 123 383 802
</TABLE>
See footnotes on page 7.
8
<PAGE>
The non-utility business is comprised of the operations of UCG Storage and UCG
Energy. Their net income for 1997, 1996 and 1995 is recapped below:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------ ------
<S> <C> <C> <C>
(In thousands)
Non-utility net income:
Propane $ (89) $1,276 $1,123
Rental 1,109 1,237 1,693
Interest in WMLLC and other 1,616 1,092 634
Storage 739 806 740
------ ------ ------
Total $3,375 $4,411 $4,190
====== ====== ======
</TABLE>
The Company's Propane Division sells and transports propane to both
wholesale and retail customers. Propane statistics for 1997, 1996 and 1995 are
shown below. The division sold 33 million gallons of propane in 1997 as
compared with 41 million gallons in 1996. The decrease in volume was the result
of winter weather that was 7% warmer than normal in 1997.
PROPANE STATISTICS:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Sales
Retail $19,201 $21,434 $15,932
Wholesale 10,349 13,296 6,192
------- ------- -------
29,550 34,730 22,124
Cost of sales 20,084 23,832 13,038
------- ------- -------
Gross profit $ 9,466 $10,898 $ 9,086
======= ======= =======
Gross margin % of sales 32.0% 31.4% 41.1%
Gallons 32,975 40,723 28,854
</TABLE>
GAS SALES
The Company's natural gas distribution business is seasonal and highly
dependent on weather conditions in the Company's service areas. Gas sales to
residential and commercial customers are greater during the winter months than
during the remainder of the year. The volumes of such sales during the winter
months will vary with the temperatures during such months. The seasonal nature
of the Company's sales to residential and commercial customers is offset
partially by the Company's sales in the
9
<PAGE>
spring and summer months to its agricultural customers in Texas, Colorado and
Kansas who utilize natural gas to operate irrigation equipment. The Company
also has weather normalization adjustments in its rate jurisdictions in
Tennessee and Georgia, which serve approximately 170,000 customers. The
Company's management believes that the Company has lessened its sensitivity to
weather risk by diversifying its operations into geographic areas having
different weather patterns.
In addition to weather, the Company's revenues are affected by the
cost of natural gas and economic conditions in the areas that the Company
serves. Higher gas costs, which the Company is generally able to pass through
to its customers under purchased gas adjustment clauses, may cause customers to
conserve, or, in the case of industrial customers, to use alternative energy
sources.
In recent years, natural gas market conditions have changed. Natural
gas prices to distributors have become more volatile and the number of competing
marketers of natural gas has increased. The Company's gas marketing subsidiaries
purchase gas to address requirements for large volume customers in certain
highly competitive markets.
In certain instances, customers purchase gas directly from others
instead of from the Company and the Company transports such gas through its
distribution systems to the customers' facilities for a fee. Although
transportation of customer-owned gas reduces the Company's operating revenues
and corresponding purchased gas cost, the transportation revenues received by
the Company may offset the loss to gross profit.
The Company's distribution systems have experienced aggregate peak day
deliveries of approximately 1.5 billion cubic feet ("Bcf") per day. The Company
has the ability to curtail deliveries to certain customers under the terms of
interruptible contracts and applicable state statutes or regulations which
enables it to maintain its deliveries to high priority customers. The Company
has not imposed curtailment in its Energas Division since the Company began
independent operations in 1983 or in its Trans La Division since the Company
acquired TLG in 1986. The Western Kentucky Division curtailed deliveries to
certain interruptible customers during exceptionally cold periods in December
1989, January 1994 and during the winter of 1996. Neither the Greeley Gas
Division nor its predecessor, GGC, have curtailed deliveries to its sales
customers since prior to 1980. The United Cities Division curtails interruptible
service customers from time to time each year in accordance with the
interruptible contracts and tariffs.
10
<PAGE>
GAS SUPPLY
The Western Kentucky Division's gas supply is delivered by the
following pipelines: Texas Gas, Tennessee Gas, Trunkline and ANR, except that a
small percentage of the requirements are being purchased directly from
intrastate producers that are connected directly to its distribution system.
During 1997, the Western Kentucky Division purchased its supply from various
producers and marketers including Texaco Gas Marketing, Union Pacific Fuels,
Vastar Gas Marketing, Duke Energy, LG&E Natural and Natural Gas Clearinghouse.
The United Cities Division is served by thirteen interstate pipelines.
The majority of the volumes are transported through East Tennessee Pipeline,
Southern Natural Gas and Williams Natural Gas. During 1997, the United Cities
Division purchased its supply from various producers and marketers including
TransCanada, Texaco Gas Marketing, Woodward Gas Marketing, and Williams Energy
Service Company.
Colorado Interstate Gas Company, Williams Natural Gas, Public Service
Company of Colorado, and Northwest Pipeline are the principal transporters of
the Greeley Gas Division's requirements. Additionally, the Greeley Gas Division
purchased substantial volumes from producers that are connected directly to its
distribution system. During 1997, the Greeley Gas Division's primary suppliers
were Union Pacific Fuels, Williams Energy Service Company, Duke Energy,
Interenergy and WESTAR.
The Energas Division receives sales and transportation service from
various KN affiliates. Also, the Company purchases a significant portion of its
supply from Pioneer Natural Resources (formerly Mesa) which is connected
directly to the Company's Amarillo, Texas distribution system. During 1997,
other major suppliers included Texaco Gas Marketing, Enron, and Natural Gas
Clearinghouse.
Louisiana Intrastate Gas Company ("LIG"), Acadian Pipeline, Koch
Gateway and Texas Gas Transmission Company pipelines delivered most of the Trans
La Division's requirements. The Trans La Division purchased its supply from
various producers and marketers including Acadiana Gas Marketing, Koch Gas
Marketing, LL&E and Engage Energy.
The Company owns and operates numerous natural gas storage facilities
in Kentucky and Kansas which are used to help meet customer requirements during
peak demand periods and to reduce the need to contract for additional pipeline
capacity to meet such peak demand periods. Additionally, the Company operates
various propane plants and a liquid natural gas ("LNG") plant for peak shaving
purposes. The Company also contracts for storage service in underground storage
facilities of many of the interstate pipelines serving it. See "Item 2.
Properties" for further information regarding the peak shaving facilities.
11
<PAGE>
The United Cities Division normally injects gas into pipeline storage
systems and UCG Storage's storage system during the summer months and withdraws
it in the winter months. At the present time, the underground storage
facilities of UCG Storage have a maximum daily output capability of
approximately 45,000 Mcf.
The United Cities Division has the ability to serve approximately 60%
of its peak day load through the use of company owned storage facilities,
storage contracts with its suppliers and peaking facilities throughout the
system. This ability provides the operational flexibility and security of
supply required to meet the needs of the highly weather sensitive residential
and commercial market.
REGULATION AND RATES
Regulation. In the Energas Division, the governing body of each
municipality served by the Company has original jurisdiction over all utility
rates, operations, and services within its city limits except with respect to
sales of natural gas for vehicle fuel and agricultural use. The Company
operates pursuant to non-exclusive franchises granted by the municipalities it
serves, which franchises are subject to renewal from time to time. The
franchises granted to the Company permit it to conduct natural gas distribution
within the municipalities' incorporated limits. The Railroad Commission of Texas
("Railroad Commission") has exclusive appellate jurisdiction over all rate and
regulatory orders and ordinances of the municipalities and exclusive original
jurisdiction over rates and services to customers not located within the limits
of a municipality. In Texas, rates for large industrial customers are routinely
set by contract negotiation between the Company and its customers pursuant to
statutory standards and are filed with and subject to the governmental authority
of the municipalities or the Railroad Commission, depending on whether the
customer is located inside or outside the limits of a municipality.
Historically, the Company's rates for large industrial customers have been
accepted as filed. Agricultural sales in Texas are not regulated, except that
prices for agricultural sales cannot exceed the prices the Company charges the
majority of its commercial or other similar large-volume users in Texas.
The Trans La Division is regulated by the Louisiana Public Service
Commission ("Louisiana Commission"), which regulates utility services, rates,
and other matters. In most of the parishes and incorporated areas in which the
Company operates in Louisiana, it does so pursuant to a non-exclusive franchise
granted by the governing authority of each parish or incorporated area. The
franchise gives the Company the general privilege to operate its gas
distribution business in, as well as the right to install its distribution lines
along the roadways of, the parish or the incorporated area. Direct sales of
natural gas to industrial customers in Louisiana who utilize the gas for fuel or
12
<PAGE>
in manufacturing processes and sales of natural gas for vehicle fuel are exempt
from regulation.
The Western Kentucky Division is regulated by the Kentucky Public
Service Commission ("Kentucky Commission"), which regulates utility services,
rates, issuances of securities, and other matters. The Company operates in the
various incorporated cities served by it in Kentucky pursuant to non-exclusive
franchises granted by such cities. The franchises grant to the Company the
right to operate its gas distribution business in the city and to install its
distribution lines and related equipment in and along the city's public rights-
of-way. Sales of natural gas for use as vehicle fuel in Kentucky are not
subject to regulation.
The Greeley Gas Division is regulated by the Colorado Public Utilities
Commission ("Colorado Commission"), the Kansas Corporation Commission, and the
Missouri Public Service Commis sion with respect to accounting, rates and
charges, operating matters, and the issuance of securities. The Company
operates in the various incorporated cities served by it in the states of
Colorado, Kansas and Missouri under terms of non-exclusive franchises granted by
the various cities. The franchises grant to the Company, among other things,
the right to install and operate its gas distribution system within the city
limits. Most of the Greeley Gas Division's wholesale gas suppliers are
regulated by various federal and state commissions.
In each state in which the United Cities Division operates, its rates,
services and operations as a natural gas distribution company are subject to
general regulation by the state public service commission. Its pipeline
suppliers, but not the United Cities Division or the other utility divisions,
are subject to regulation by the Federal Energy Regulatory Commission ("FERC").
The United Cities Division's rates, which vary in its different regulatory
jurisdictions, are determined by its cost of purchased gas, rate of return, type
of service and volume of use by the customer. In addition, the issuance of
securities by the Company is subject to approval by the state commissions,
except in South Carolina and Iowa. Missouri only regulates the issuance of
secured debt. The United Cities Division operates in each community, where
necessary, under a franchise granted by the municipality for a fixed term of
years. To date it has been able to renew franchises and expects to continue to
do so in the future.
The Company is also subject to regulation by the United States
Department of Transportation with respect to safety requirements in the
operation and maintenance of its gas distribution facilities. The Company's
distribution operations are also subject to various state and federal laws
regulating environmental matters. From time to time the Company receives
inquiries regarding various environmental matters. The Company believes that
its properties and operations substantially comply with and are operated in
substantial conformity with applicable
13
<PAGE>
safety and environmental statutes and regulations. There are no administrative
or judicial proceedings arising under environmental quality statutes pending or
known to be contemplated by governmental agencies which, if adversely
determined, would have a material adverse effect on the Company.
Rates. Approximately 89% of the Company's revenues in fis cal 1997
was derived from sales at rates set by or subject to approval by local or state
authorities. The method of determin ing regulated rates varies among the
twelve states in which the Company has utility operations. As a general rule,
the regulatory authority reviews the Company's rate request and establishes a
rate structure intended to generate revenue sufficient to cover the Company's
costs of doing business and provide a reasonable return on invested capital.
Substantially all of the sales rates charged by the Company to its
customers fluctuate with the cost of gas purchased by the Company. Rates
established by regulatory authorities are adjusted for increases and decreases
in the Company's purchased gas cost through automatic purchased gas adjustment
mechanisms. Therefore, while the Company's operating revenues may fluctuate,
gross profit (which is defined as operating revenues less purchased gas cost) is
generally not eroded or enhanced because of gas cost increases or decreases.
The Georgia Commission and Tennessee Regulatory Authority have
approved Weather Normalization Adjustments ("WNAs") that allow the United Cities
Division to increase the base rate portion of customers' bills when weather is
warmer than normal and decrease the base rate when weather is colder than
normal. The net effect of the WNAs was an increase (decrease) in revenues of
$2,643,000, $(2,612,000) and $1,030,000 in 1997, 1996 and 1995, respectively.
14
<PAGE>
The following table sets forth the major rate requests made by the
Company during the most recent five years and the action taken on such requests:
<TABLE>
<CAPTION>
Effective Amount Amount
Jurisdiction Date Requested Received
------------ ------------ ----------- ----------
<S> <C> <C> <C>
Texas
West Texas System 11/18/94 $2,581,000 $1,702,000(a)
11/01/96 7,676,000 5,800,000(a)
Amarillo 11/25/92 4,398,000 2,130,000
Louisiana 03/01/93 (b) 730,000(b)
03/01/94 (b) 1,058,000(b)
03/01/95 (b) 1,071,000(b)
Kentucky 11/01/95 7,665,000 2,300,000(c)
03/01/96 1,000,000(c)
Colorado 05/01/94 4,527,000 3,246,000
Kansas 12/01/93 2,604,000 2,088,000(d)
09/01/95 4,230,000 2,700,000(e)
Missouri 10/14/95 1,100,000 903,000
South Carolina 02/07/95 341,000 253,000
Tennessee 11/15/95 3,951,000 2,227,000
Iowa 05/17/96 750,000 410,000
Georgia 12/02/96 5,003,000 3,160,000
Illinois 07/09/97 1,234,000 428,000
Virginia 09/29/95 810,000 103,000
</TABLE>
(a) These increases include $200,000 and $500,000 applicable to areas outside
the city limits which became effective in January 1995 and April 1997,
respectively.
(b) A September 1992 rate order approved a Rate Stabilization Clause ("RSC") for
three years which provided for an annual adjustment of rates to reflect
changes in expenses and investment. The RSC provided the Company the
opportunity to earn a return on common equity between 11.75% and 12.25%.
(c) The Kentucky rate order provided an increase of $2,300,000, lowered
depreciation rates effective November 1, 1995 and provided an additional
$1,000,000 beginning March 1, 1996. The order also included a provision for
a pilot demand side management program which could cost up to $450,000
annually.
(d) This increase is applicable to the service area of the Greeley Gas Division.
(e) This increase is applicable to the service area of the United Cities
Division.
15
<PAGE>
COMPETITION
The Company is not currently in significant direct competition with
any other distributors of natural gas to residential and commercial customers
within its service areas. However, the Company does compete with other natural
gas suppliers and suppliers of alternate fuels for sales to industrial and
agricultural customers.
The Company competes in all aspects of its business with alternative
energy sources, including, in particular, electrici ty. Competition for the
residential and commercial customers is increasing. Promotional incentives,
improved equipment efficien cies, and promotional rates all contribute to the
acceptability of electric equipment. In the United Cities Division, #2 and #6
fuel oil are the primary competition for industrial customers. In addition,
certain customers, primarily industrial, may have the ability to by-pass the
Company's distribution system by connecting directly with a pipeline.
Beginning in 1985, changes in the federal regulatory environment
through FERC orders and conditions related to markets and gas supply in the
United States have brought increased competition into the natural gas industry.
In 1993, FERC Order 636 was implemented by the interstate pipelines that serve
the United Cities and Western Kentucky Divisions, but FERC policies have not had
a direct impact upon the Company's Energas, Greeley Gas and Trans La Divisions
which are primarily supplied by intrastate pipelines. However, competition for
large volume customers in the United Cities and Western Kentucky Divisions and
other service areas has increased as a result of FERC Order 636. The Company has
sought regulatory approvals for competitive pricing on a case by case basis.
The Company participates in the operation of public refueling
facilities for the sale of compressed natural gas ("CNG") for vehicular use.
The most recent of these were opened in Greeley, Colorado in September 1996, at
West Texas A&M University in Canyon, Texas in August 1995, and in Owensboro,
Kentucky in April 1995. Prior to that time, the Company provided CNG for
vehicular use only in limited situations (such as for school buses in certain
school districts and for the fleet vehicles of certain businesses). With the
opening of these public refueling stations the Company began competing with
gasoline for vehicular fuel sales. All of these facilities, except those in
Greeley, Colorado and at West Texas A&M, are located at existing local gasoline
stations.
The United Cities Division has received approval from all the
regulatory authorities in the states in which it operates, except Iowa, to place
into effect a negotiated tariff rate which allows the United Cities Division to
maintain industrial loads at lower margin rates. Iowa has rules which allow for
flexible rates. These rates are competitive with the price of alternative
fuels. In addition, certain industrial customers have changed
16
<PAGE>
from firm to interruptible rate schedules in order to obtain natural gas at a
lower cost. Additionally, the United Cities Division has received approval from
all state regulatory authorities to provide transportation service of customer-
owned gas.
UCG Energy's propane subsidiary is in competition with other suppliers
of propane, natural gas and electricity. Competition exists in the areas of
price and service. The wholesale cost of propane is subject to fluctuations
primarily based on demand, availability of supply and product transportation
costs.
UCG Energy, through its 45% interest in WMLLC, competes with other
natural gas brokers in obtaining natural gas supplies for customers. UCG Energy
also competes with other rental companies.
UCG Storage charges rates to the United Cities Division that are
subject to review by the various commissions in the states within which the
storage service is provided. Therefore, UCG Storage's rates must be competitive
with other storage facilities. UCG Storage also stores natural gas for WMLLC.
As a result, UCG Storage is in competition with other companies that store
natural gas as to rates charged and deliverability of natural gas. Storage
agreements between UCG Storage and the United Cities Division give it first
priority to any storage services.
Employees
At September 30, 1997, the Company employed 2,679 persons. See
"Utility Sales and Statistical Data by Business Unit - 1997" for the number of
employees by business unit. As discussed in Management's Discussion and
Analysis, the Company is in the process of downsizing and restructuring in
connection with the integration of UCGC and its Customer Service Initiative.
The projected complement at the end of fiscal 1998 is currently estimated at
2,223 persons.
ITEM 2. PROPERTIES
The Company owns an aggregate of 30,902 miles of underground
distribution and transmission mains throughout its gas distribution systems.
These mains are located on easements or right-of-ways granted to the Company,
which generally provide for perpetual use. The Company maintains its pipelines
through a program of continuous inspection and repair and believes that its
pipeline system is in good condition. The Company also owns and operates nine
peak shaving plants with a total capacity of approximately 1,050,000 gallons
that can produce an equivalent of 19,459 Mcf daily and an LNG storage facility
with a capacity of 500,000 Mcf which can inject a daily volume of 30,000 Mcf in
the system, as well as underground storage fields which are used to supplement
the supply of natural gas in periods of peak demand. It has seven underground
gas storage facilities in Kentucky and four in Kansas that have a total storage
capacity of
17
<PAGE>
approximately 21.1 Bcf. However, approximately 10.0 Bcf of gas in the storage
facilities must be retained as cushion gas to maintain reservoir pressure. The
maximum daily delivery capability of the storage facilities is approximately 154
MMcf.
Substantially all of the Company's properties in its Greeley Gas
Division and United Cities Division with recorded values of approximately $83.4
million and $314.6 million, respectively, are subject to liens under First
Mortgage Bonds assumed by the Company in its mergers with GGC and UCGC. At
September 30, 1997, the liens secured $17.0 million of outstanding 9.4% Series J
First Mortgage Bonds due May 1, 2021, and $113.0 million of outstanding Series
N, P, Q, R, S, T, U and V First Mortgage Bonds due at various dates from 2004
through 2022.
In 1996 the Company consolidated its administrative offices in Dallas,
Texas under one lease. The Company also maintains field offices throughout its
distribution system, substantially all of which are located in leased premises.
Net non-utility property at September 30, 1997 amounted to
approximately $19.5 million for propane equipment, $17.4 million for underground
storage facilities, and $19.7 million for rental buildings and equipment.
The Company holds franchises granted by the incorporated cities and
towns that it serves. At September 30, 1997, the Company held 413 such
franchises having terms generally ranging from five to 25 years. The Company
believes that each of its franchises will be renewed.
ITEM 3. LEGAL PROCEEDINGS
See Note 5 of notes to consolidated financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of fiscal 1997.
18
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information as of September 30,
1997, regarding the executive officers of the Company. It is followed by a
brief description of the business experience of each executive officer during
the past five years.
<TABLE>
<CAPTION>
Years of
Name Age Service Office Currently Held
---- --- -------- ---------------------
<S> <C> <C> <C>
Robert W. Best 50 - Chairman, President and Chief Executive Officer
Larry J. Dagley 49 - Executive Vice President and Chief Financial Officer
J. Charles Goodman 36 13 Executive Vice President of Operations
Donald E. James 50 16 Senior Vice President of Public Affairs
Mary S. Lovell 46 9 Senior Vice President of Utility Services
Glen A. Blanscet 40 12 Vice President, General Counsel and Corporate Secretary
Wynn D. McGregor 44 9 Vice President, Human Resources
</TABLE>
Robert W. Best was named Chairman, President and Chief Executive
Officer and was appointed to the Board of Directors in March 1997. He
previously served as Senior Vice President -regulated businesses, for
Consolidated Natural Gas Company of Pittsburgh, Pennsylvania, since January
1996, responsible for its transmission and distribution companies. He
previously served as President of Texas Gas Transmission Company of Owensboro,
Kentucky, and Houston, Texas, from 1985 to 1995, and from 1992 to 1995 he was
President of Transco Gas Pipeline.
Larry J. Dagley was named Executive Vice President and Chief Financial
Officer effective May 1, 1997. From August 1995 to May 1997, he served as
Senior Vice President and Chief Financial Officer of Pacific Enterprises, a Los
Angeles, California based utility holding company whose principal subsidiary is
Southern California Gas Co., the nation's largest gas distribution utility.
From 1985 until joining Pacific Enterprises, he served as Senior Vice President
and Controller (1985-1993) and Senior Vice President and Chief Financial Officer
(1993-1995) of Transco Energy Company, a Houston, Texas based natural gas
pipeline company. Prior to joining Transco, Mr. Dagley was an audit partner
with Arthur Andersen & Co., where he supervised audits and financial consulting
engagements in the energy industry.
J. Charles Goodman was named Executive Vice President, Operations in
April 1995. He previously served as President of the Company's Trans La Gas
Division from February 1993 until April 1995 and as Chief Engineer from February
1989 until February 1993.
19
<PAGE>
Donald E. James was named Senior Vice President - Public Affairs in
May 1995. He previously served as Senior Vice President and General Counsel
from January 1994 to May 1995, Senior Vice President - General Counsel and
Corporate Secretary from May 1993 until August 1993, and Senior Vice President
and General Counsel from May 1989 until May 1993.
Mary S. Lovell was named Senior Vice President, Utility Services in
May 1995. She previously served as Vice President, Rates and Regulatory Affairs
from August 1990 to May 1995.
Glen A. Blanscet was named Vice President, General Counsel and
Corporate Secretary in May 1995. He previously served as Assistant General
Counsel and Corporate Secretary from January 1994 to May 1995, and Assistant
General Counsel from July 1988 to December 1993.
Wynn D. McGregor was named Vice President, Human Resources in January
1994. He previously served the Company as Director of Human Resources from
February 1991 to December 1993 and as Manager, Compensation and Employment from
December 1987 to January 1991.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's stock trades on the New York Stock Exchange under the trading
symbol "ATO". The high and low sale prices and dividends paid per share of the
Company's common stock for fiscal 1997 and 1996 are listed below. Dividends
paid for 1997 and 1996 have been restated to reflect the merger of Atmos and
UCGC accounted for as a pooling of interests. Atmos' actual dividends paid in
fiscal 1997 were $.25 for each of the first three quarters and $.255 for the
fourth quarter, and $.24 per quarter for each quarter of fiscal 1996. The high
and low prices listed are the actual closing NYSE quotes for Atmos shares.
<TABLE>
<CAPTION>
1997 1996
----------------------------- --------------------------
Dividends Dividends
High Low paid High Low paid
Quarter ended: -------- ----- ---- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
December 31 $ 24 3/4 $ 22 5/8 $.251 $23 $18 $.245
March 31 26 1/4 22 1/8 .252 23 21 .245
June 30 25 1/2 22 1/2 .252 31 22 3/4 .245
September 30 27 7/8 24 1/2 .255 30 5/8 20 7/8 .245
----- -----
$1.01 $ .98
===== =====
</TABLE>
See Note 7 of notes to consolidated financial statements for
restriction on payment of dividends. The number of record holders of the
Company's common stock on September 30, 1997 was 29,867.
20
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data of the Company and
should be read in conjunction with the consolidated financial statements
included herein. Amounts for 1997 reflect the pooled operations of Atmos and
the United Cities Division. Prior year amounts have been restated for the
pooling.
<TABLE>
<CAPTION>
Year ended September 30,
----------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- -------- -------- -------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Operating revenues $ 906,835 $ 886,691 $749,555 $826,302 $794,893
========== ========== ======== ======== ========
Net income $ 23,838 $ 41,151 $ 28,808 $ 26,772 $ 29,694
========== ========== ======== ======== ========
Net income per share $ .81 $ 1.42 $ 1.06 $ 1.05 $ 1.21
========== ========== ======== ======== ========
Cash dividends per share $ 1.01 $ .98 $ .96 $ .91 $ .82
========== ========== ======== ======== ========
Total assets at end of year $1,088,311 $1,010,610 $900,948 $829,385 $786,739
========== ========== ======== ======== ========
Long-term debt at end of year $ 302,981 $ 276,162 $294,463 $282,647 $257,696
========== ========== ======== ======== ========
</TABLE>
21
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
This section provides management's discussion of Atmos Energy
Corporation's ("the Company" or "Atmos") financial condition, cash flows and
results of operations with specific information on liquidity, capital resources
and results of operations. It includes management's interpretation of such
financial results, the major factors expected to affect future operating
results, and future investment and financing plans. This discussion should be
read in conjunction with the Company's consolidated financial statements and
notes thereto. For financial and operating statistics, please see the tables of
restated and pooled data included herein.
Cautionary Statement under the Private Securities Litigation Reform Act of 1995
The matters discussed or incorporated by reference in this Annual
Report on Form 10-K contain "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. All statements other than statements of historical facts
included in this Report including, but not limited to, those contained in this
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of Operations", regarding the Company's financial position, business strategy
and plans and objectives of management of the Company for future operations, are
forward-looking statements made in good faith by the Company. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations will
prove to have been correct. Such 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
operations, markets, services, rates, recovery of costs, availability of gas
supply, and other factors. These risks and uncertainties include, but are not
limited to, economic, competitive, governmental, weather, technological and
other factors.
Organization
The Company distributes, sells and transports natural gas and propane
to residential, commercial, industrial and agricultural customers in thirteen
states. The natural gas distribution business is operated through its five
utility divisions, rather than as a holding company. Such utility 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.
22
<PAGE>
With the completion of the merger with United Cities Gas Company this
year, Atmos is the 12th largest natural gas distribution utility company in
terms of total customers in the country, and the fifth largest pure natural gas
utility. Since its organization in 1983, the Company has sought to expand its
customer base and to diversify the weather patterns, local economic conditions,
and regulatory environments in which it operates. As part of this strategy, the
Company has completed major acquisitions in 1986, 1987, 1993 and 1997. In
addition to growing through acquisitions, the Company's strategy includes
building the Atmos team, running the utility operations exceptionally well,
increasing the size and market share of the non-utility operations (gas
marketing and propane), and developing plans to participate in retail energy
services behind the meter.
In connection with its merger with United Cities Gas Company, as
discussed in Note 2 of notes to consolidated financial statements, the Company
acquired certain non-utility subsidiaries which contributed approximately 14% of
1997 net income and offer potential growth opportunities.
One non-utility subsidiary, UCG Storage, was formed in 1989 to provide
natural gas storage services. In 1989, a natural gas storage field was
purchased in Kentucky to supplement natural gas used by customers in Tennessee.
In addition, natural gas storage fields located in Kansas were sold to UCG
Storage and are used to supplement natural gas requirements of Kansas customers.
The other non-utility subsidiary, UCG Energy, incorporated in 1965,
leases appliances, real estate and equipment, and vehicles to the United Cities
Division and others. UCG Energy also owns a 45% interest in WMLLC of Houston,
Texas, which provides natural gas services to industrial customers,
municipalities and local distribution companies in the Southeast and Midwest,
including the United Cities Division. Management services include contract
negotiation and administration, load forecasting, nominations and scheduling,
storage acquisition, capacity utilization and pricing/risk management. WMLLC
was formed in 1995.
UCG Energy has two wholly-owned subsidiaries, United Cities Propane
Gas of Tennessee, Inc. and UCG Leasing, Inc. United Cities Propane Gas of
Tennessee, Inc. is engaged in the retail and wholesale distribution and
transportation of propane (LP) gas. As of September 30, 1997, the propane
operation served 29,097 customers in Kentucky, North Carolina, Tennessee and
Virginia. UCG Leasing, Inc. was incorporated under the laws of Georgia in 1987
and leases vehicles, equipment and real estate to the United Cities Division. A
table of non-utility net income for 1997, 1996 and 1995 appears on page 9
herein.
23
<PAGE>
Acquisitions and Mergers
The Company has expanded its customer base and sought to diversify the
regulations, weather patterns and local economic conditions to which it is
subject through acquisitions in fiscal years 1997, 1994, 1987, and 1986. The
Company plans to continue its acquisition strategy to add new customers and
service areas for both natural gas and propane. It has an excellent track record
of acquiring LDC operations that provide diversity in weather, regulatory
patterns, economies and markets. It has achieved synergies and benefits quickly,
while preserving brand equity.
Ratemaking Activity
Rates and regulatory initiatives are at the heart of Atmos' utility
operations and are important to both shareholders and customers. Atmos'
objective is to achieve rates that provide for fair returns for its shareholders
while having these rates at low, competitive levels for its customers. As the
energy environment and industry change, the process for setting rates in the
future may also need to change. In that regard, the Company is participating in
a performance-based rates experimental program in Tennessee, which is designed
to reward the Company for performing better than certain benchmarks relating to
purchased gas cost. A similar program is underway in Georgia. Atmos believes
that performance-based rate programs benefit customers and reward efficient
service providers like Atmos, and Atmos intends to seek gas cost incentive
arrangements and incentive rates in every jurisdiction possible.
The Company received rate increases totaling $9.4 million, $6.8 million,
and $5.8 million effective in fiscal 1997, 1996 and 1995, respectively. For
further information regarding these rate increases please see Note 3 "Rates" in
notes to consolidated financial statements.
Weather and Seasonality
The Company's natural gas and propane distribution businesses are seasonal
due to weather conditions in the Company's service areas. Sales are affected by
winter heating season requirements. Sales to agricultural customers (who use
natural gas as fuel in the operation of irrigation pumps) during the period from
April through September are affected by rainfall amounts. These factors
generally result in higher operating revenues and net income during the period
from October through March of each year and lower operating revenues and either
net losses or lower net income during the period from April through September of
each year. For further seasonality information, please see the Supplementary
Quarterly Financial Data following the notes to consolidated financial
statements herein.
24
<PAGE>
The Georgia Public Service Commission and the Tennessee Regulatory
Authority have approved Weather Normalization Adjustments ("WNAs"). The WNAs,
effective October through May each year in Georgia and November through April
each year in Tennessee, allow the United Cities Division to increase the base
rate portion of customers' bills when weather is warmer than normal and decrease
the base rate when weather is colder than normal. The net effect of the WNAs
was an increase/(decrease) in revenues of $2,643,000, ($2,612,000) and
$1,030,000 in 1997, 1996 and 1995, respectively.
The Company has not sought weather normalization clauses in its other rate
jurisdictions because of the effect of its geographical diversification strategy
and the potential for increased profits in unusually cold years.
Environmental Matters
The Company is involved in certain environmental matters as discussed in
Note 5 "Contingencies" of notes to consolidated financial statements.
RESULTS OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1997 COMPARED WITH YEAR ENDED SEPTEMBER 30, 1996
To assist in management's discussion of results of operations, the
following table presents the effects for fiscal years 1997, 1996 and 1995 of
certain non-recurring charges as well as weather which affected reported
results.
<TABLE>
<CAPTION>
1997 1996 1995
-------------- --------------- --------------
Per Per Per
Amount Share Amount Share Amount Share
------ ----- ------ ----- ------ -----
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Net income as
reported $23,838 $ .81 $41,151 $1.42 $28,808 $1.06
Non-recurring charges:
Management reorganization 2,800 .10 - - - -
Reserve for potential sharing of
merger and integration costs 12,630 .43 - - - -
------- ----- ------- ----- ------- -----
Normalized net income except for
effects of weather 39,268 1.34 41,151 1.42 28,808 1.06
Effects of weather 3,571 .12 (1,838) (.06) 5,000 .18
------- ----- ------- ----- ------- -----
Normalized net income $42,839 $1.46 $39,313 $1.36 $33,808 $1.24
======= ===== ======= ===== ======= =====
</TABLE>
25
<PAGE>
Net income as reported
The Company reported net income of $23.8 million, or $.81 per share,
on operating revenues of $906.8 million for the fiscal year ended September 30,
1997. The 1997 net income includes the effects of non-recurring after-tax
charges related to management reorganization ($2.8 million or $.10 per share)
and reserves related to the UCGC merger and integration ($12.6 million or $.43
per share). Excluding the effect of these charges, the Company's net income
would have been $39.3 million or $1.34 per share in 1997, compared with $41.2
million, or $1.42 per share for 1996. The 1997 results include United Cities Gas
Company, which merged with Atmos effective July 31, 1997, and prior year
operating results have been restated to reflect the pooling of interests
accounting which was used for the merger.
Non-recurring charges
The Company completed a management reorganization in 1997 and recorded
a charge of $4.4 million ($2.8 million after-tax) in related costs.
The cost of the UCGC merger and integration totaled approximately $17
million for the transaction costs and $32 million for the separation and other
costs. There are substantial longer term benefits to the Company's customers
and shareholders from the merger of the two companies, which the Company expects
to result in cost savings over the next 10 years totaling about $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. Therefore, the Company recorded as regulatory assets the
costs of the merger and integration of UCGC. However, the Company has
established a reserve of approximately $20 million ($12.6 million after-tax), to
account for costs that may not be recovered. The Company recorded these costs
in the fourth quarter of fiscal year 1997 when the merger was completed,
separation plans were approved by the board of directors and announcements were
made to employees. For further information regarding the merger please see Note
2 of notes to consolidated financial statements.
Effects of weather
Annual sales volumes and revenues vary in relation to winter heating
degree days and summer irrigation demand. The Company has weather normalization
adjustments in its rates in Georgia and Tennessee, but not in the other 10
states in which it has natural gas distribution operations. The estimated
effect on net income of weather different from 30-year normals is included in
the previous table. The decline in net income, excluding the charges and
reserves, was the result of the effects of warmer than normal weather during the
winter months, which negatively impacted gas throughput and sales as well as
propane sales. In addition, the spring months were wetter than normal, which
adversely impacted
26
<PAGE>
irrigation gas utilization. Normal weather conditions would have added $.12 per
share to net income.
Rates
The negative effects of weather were partially offset by rate
increases implemented in fiscal 1996 and 1997 in jurisdictions in Texas,
Kentucky, Illinois, Georgia, Iowa, Tennessee, Missouri and Virginia. Rate
increases contributed approximately $8 million to gross profit in 1997.
The following table summarizes heating degree days and
volumes delivered for 1997, 1996 and 1995.
<TABLE>
<CAPTION>
Year ended September 30,
--------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
HEATING DEGREE DAYS
Actual 3,909 4,043 3,706
Percent of normal 98% 101% 93%
SALES VOLUMES - MMcf
Residential 75,214 77,001 69,666
Commercial 37,382 38,247 34,921
Industrial (including agricultural) 46,417 57,863 57,290
Public authority and other 5,195 5,182 4,779
-------- -------- --------
Total 164,208 178,293 166,656
TRANSPORTATION VOLUMES - MMcf 48,800 44,146 47,647
-------- -------- --------
TOTAL VOLUMES DELIVERED - MMcf 213,008 222,439 214,303
======== ======== ========
PROPANE - Gallons (000's) 32,975 40,723 28,854
======== ======== ========
Total operating revenues (000's) $906,835 $886,691 $749,555
======== ======== ========
</TABLE>
Operating revenues increased approximately 2% to $906.8 million in
1997 from $886.7 million in 1996 due to an increase of 13% in the average sales
price per thousand cubic feet ("Mcf") of gas sold, which more than offset a 4%
decrease in total volumes delivered. The increase in sales price reflects an
increase in the commodity cost of gas which is passed through to end users and
rate increases implemented in 1996 and 1997. Average gas sales revenues per Mcf
increased by $.60 to $5.11 in 1997, while the average cost of gas per Mcf sold
increased $.36 to $3.51 in 1997. The number of meters in service increased to
985,448 at September 30, 1997 compared with 976,308 at September 30, 1996. Sales
to weather sensitive residential, commercial and public authority customers
decreased approximately 2.6 billion cubic feet ("Bcf") in 1997 while sales and
transportation volumes delivered to industrial and agricultural customers
decreased approximately 6.8 Bcf. Total sales and transportation volumes
delivered decreased 4.2% to 213.0 Bcf in 1997, as compared with 222.4 Bcf in
1996. The decrease was primarily due to lower
27
<PAGE>
irrigation demand as a result of cooler, wetter summer weather in West Texas.
Gross profit increased by approximately 2% to $329.7 million in 1997
from $324.4 million in 1996. The primary factor contributing to the higher
gross profit was annual rate increases totalling approximately $16.2 million
implemented in fiscal 1997 and 1996 in Texas, Kentucky, Tennessee, Iowa,
Missouri, Georgia, and Illinois. This was partially offset by a decrease of 9.4
Bcf or 4.2% due to the effect of warmer than normal weather and decreased
irrigation demand as a result of cooler, wetter summer weather in 1997.
Operating expenses, excluding income taxes, increased $31.2 million or 13% to
$263.0 million in 1997. The $25.5 million increase in operation expense was due
primarily to the non-recurring $20.0 million reserve for potential sharing of
merger and integration costs, and the $4.4 million charge for management
reorganization. The $3.6 million increase in depreciation was due to utility
plant additions placed in service in 1996 and 1997. Income taxes decreased to
$14.3 million for 1997 from $23.3 million for 1996. The primary reason for the
decrease was lower pre-tax profits. The effective tax rate increased slightly to
37.5% in 1997 from 36.2% in 1996. This was primarily due to increased state
income tax rates in 1997. Also, prior to the merger in 1997, UCGC's income was
subject to a slightly lower federal tax rate because of the graduated rate
structure. Operating income decreased in 1997 by approximately $17.0 million or
24% to $52.3 million. The decrease in operating income resulted primarily from
the non-recurring charges included in 1997 operating expenses as discussed
above.
Net income decreased in 1997 by approximately 42% to $23.8 million
from $41.2 million in the prior year. This $17.3 million decrease in net income
resulted from the $17.0 million decrease in operating income and a $1.9 million
increase in interest expense, which were partially offset by a $1.6 million
increase in other income. The increase in interest expense was due to higher
average debt outstanding in 1997 than in 1996. The $1.6 million increase in
other income for 1997 was primarily due to a $1.1 million increase in income
from the Company's investment in Woodward Marketing LLC, a Houston gas marketing
company. Net income per share decreased to $.81 for 1997 from $1.42 for 1996.
Average shares outstanding increased 1% to 29,409,000 shares in 1997 from 1996.
YEAR ENDED SEPTEMBER 30, 1996 COMPARED WITH YEAR ENDED SEPTEMBER 30, 1995
Operating revenues increased 18% to $886.7 million in 1996 from $749.6
million in 1995 due to weather that was 9% colder than in 1995 and an 11%
increase in the average sales price per Mcf sold. Average gas sales revenues
per Mcf increased from 1995 by $.44 to $4.51 in 1996, while the average cost of
gas per Mcf sold increased $.45 to $3.15 in 1996. The total number of natural
gas and propane customers increased to 1,002,416 at September 30, 1996 compared
with 972,572 at September 30, 1995.
28
<PAGE>
Sales to weather sensitive residential, commercial and public authority
customers increased approximately 11.0 Bcf in 1996 while sales and
transportation volumes delivered to industrial and agricultural customers
decreased 2.9 Bcf. Total volumes delivered increased 4% to 222.4 Bcf in 1996,
as compared with 214.3 Bcf in 1995. Revenues from gas sales to weather
sensitive customers increased $109.9 million to $616.8 million in fiscal 1996
due to an 11% increase in average sales price and a 10% increase in volumes sold
in 1996. The increase in volumes sold was due to weather 1% colder than normal
in 1996, as compared with 7% warmer than normal weather in 1995. Revenues from
gas sold and transported to industrial and agricultural customers increased
$15.2 million due to a $.24 per Mcf or 8% increase in sales price, despite a
slight decrease in volumes delivered.
Gross profit increased by approximately 8% to $324.4 million in 1996
from $300.2 million in 1995. The primary factor contributing to the higher
gross profit in 1996 was higher volumes sold to weather-sensitive customers due
to colder weather. The companywide average margin (sales price per Mcf less
cost of gas per Mcf) did not change significantly in 1996. Operating expenses,
excluding income taxes, increased only slightly to $231.8 million in 1996 from
$228.2 million in 1995. Income taxes increased to $23.3 million in 1996 from
$16.5 million in 1995. The primary reason for the increase was higher pre-tax
profits. The effective tax rate decreased slightly to 36.2% in 1996 from 36.5%
in 1995. Operating income increased in 1996 by approximately 25% to $69.3
million from $55.4 million in 1995. The increase in operating income resulted
primarily from the increase in 1996 gross profit, partially offset by increases
in operating expenses, primarily income taxes, as discussed above.
Net income increased in 1996 from 1995 by approximately 43% to $41.2
million from $28.8 million in the prior year. This increase in net income
resulted primarily from the increase in operating income, which was partially
offset by a $1.5 million increase in interest expense. This increase in
interest expense was caused by an increase in weighted average short-term debt
outstanding in 1996. Net income per share increased to $1.42 for 1996 from
$1.06 for 1995. Average shares outstanding increased 7% to 28,978,000 in 1996.
CAPITAL RESOURCES AND LIQUIDITY (See "Consolidated Statements of Cash Flows")
Because of the pooling of interests of Atmos, which has a September 30
fiscal year end, with UCGC, which had a December 31 year end, the activities of
UCGC for the quarter ended December 31, 1996 are included in the restated 1996
consolidated statement of cash flows and not the 1997 consolidated statement of
cash flows. As a result, amounts in the 1997 consolidated statement of cash
flows as reported are different than they would have been, had they included a
full 12 month's activity for UCGC.
29
<PAGE>
The following pro forma condensed consolidated statement of cash flows
reflects activities of both Atmos and UCGC for the full 12 months ended
September 30, 1997.
(In thousands)
Cash flows from operating activities:
Net income $ 23,838
Depreciation 47,494
Other (11,054)
---------
Net cash provided by operating
activities 60,278
Net cash used in investing activities (131,286)
Cash flows from financing activities:
Increase in notes payable, net 63,600
Issuance of long-term debt 40,000
Repayment of long-term debt (16,037)
Issuance of common stock 10,482
Cash dividends paid (29,778)
---------
Net cash provided by financing
activities 68,267
---------
Decrease in cash (2,741)
Cash at beginning of year 8,757
---------
Cash at end of year $ 6,016
=========
Cash Flows from Operating Activities
Cash flows from operating activities as reported in the consolidated
statement of cash flows totaled $68.7 million for 1997 compared with $91.7
million for 1996 and $79.1 million for 1995. Due to non-recurring charges
recorded in 1997 and deducting UCGC's net income for the quarter ended December
31, 1996, the Company reported lower net income for the 1997 Statement of Cash
Flows as compared with 1996 and 1995. Depreciation for the full 12 months of
fiscal 1997 was $2.2 million higher than for 1996 because of increasing utility
plant in service. Using 1997 beginning balances for UCGC as of December 31,
1996 resulted in large swings in certain seasonal asset and liability accounts
like accounts receivable and accounts payable. Gas stored underground increased
in 1996 because of higher gas cost, but was lower in 1997 and 1995 because of
substantially lower gas prices during the summers of 1997 and 1995 when the
storage reservoirs were being refilled. The changes in deferred charges and
other assets and other current liabilities in 1997 were related to merger and
integration costs accrued and the related regulatory assets recorded in the
fourth quarter of 1997. See "Consolidated
30
<PAGE>
Statements of Cash Flows" for other changes in assets and liabilities.
Cash Flows from Investing Activities
A substantial portion of the Company's cash resources is used to fund its
ongoing construction program in order to provide natural gas services to a
growing customer base. Net cash used in investing activities totaled $121.1
million in 1997 compared with $111.9 million in 1996 and $101.4 million in 1995.
During 1995, UCGC completed construction of a twenty-eight mile main which
connects two of its fastest growing distribution systems located in Middle
Tennessee and is designed to provide the Company's current customers with the
lowest possible priced gas through increased gas supply flexibility. Included
in the 1995 capital expenditures stated above is $5.7 million related to this
project. Capital expenditures in fiscal 1997 amounted to $122.3 million
(including $26.0 million for the Customer Service Initiative ("CSI")) compared
with $117.6 million in 1996 and $103.9 million in 1995. Currently budgeted
capital expenditures for 1998 total $109.1 million and include approximately
$41.5 million for completing CSI, as well as funds for additional mains,
services, meters, and vehicles. The CSI project includes application software,
related technology infrastructure and business process changes. Benefits
related to the CSI project include enabling the Company's ability to deliver its
vision by positioning for the future, using best practices in the industry,
timely integration of new acquisitions and resolution of Year 2000 issues.
Capital expenditures for fiscal 1998 are planned to be financed from internally
generated funds and financing activities, as discussed below.
31
<PAGE>
The following table reflects the Company's capitalization, including
short-term debt except for the portion related to current storage gas.
<TABLE>
<CAPTION>
1997 1996
--------------- ---------------
<S> <C> <C> <C> <C>
(In thousands)
Working capital
Short-term debt(1) $ 48,122 $ 43,350
======== ========
Short-term debt 119,178 15.6% 85,138 12.0%
Long-term debt 318,182 41.6% 292,841 41.4%
Shareholders' equity 327,260 42.8% 329,582 46.6%
-------- ---- -------- ----
Total capitalization $764,620 100% $707,561 100%
======== ==== ======== ====
</TABLE>
(1) Includes short-term borrowings associated with working gas inventories.
As of the end of fiscal 1997, the debt to capitalization ratio had
increased to 57.2% from 53.4% in 1996. The increase was primarily due to
increased cash requirements related to merger and integration costs and CSI
investments in 1997, as well as the effects of the charges and reserves
previously discussed. The Company plans to decrease the debt to capitalization
ratio to nearer its target of 50% over the next three years through cash flow
generated from operations, issuance of new common stock under its Direct Stock
Purchase Plan and ESOP, recovery of CSI and merger/integration costs and
possibly from the sale of certain real estate assets.
Future capital requirements
Short-term borrowings are expected to continue to increase somewhat in
fiscal 1998 due to budgeted capital expenditures discussed above and scheduled
maturities of long-term debt of $15.2 million. The Company has access to $35.0
million available under its committed lines of credit and $159.9 million
available under its uncommitted lines.
Forward looking cash requirements beyond fiscal 1998 include capital
expenditures and possible contingencies and environmental matters as discussed
in the notes to consolidated financial statements. The Company plans to fund
future requirements through internally generated cash flows, credit facilities
and its access to the public debt and equity capital markets.
Cash Flows from Financing Activities
Net cash provided by financing activities totaled $47.3 million for 1997
compared with $22.0 million for 1996 and $26.1 million for 1995. Financing
activities during these periods included issuance of common stock, dividend
payments, short-term
32
<PAGE>
borrowings from banks under the Company's credit lines, and issuance and
repayments of long-term debt.
Cash dividends paid. The Company paid $26.4 million in cash dividends
during 1997 (excluding dividends of $3.4 million paid by UCGC in the quarter
ended December 31, 1996) compared with $28.5 million in 1996 and $26.2 million
in 1995. Prior to the UCGC merger in July 1997, Atmos increased its actual
annual dividend rate by $.04 in each of the 3 years presented. Including fiscal
1998, the Company has increased its dividend rate for ten consecutive years.
Short-term financing activities. At September 30, 1997, the Company had
committed lines of credit totaling $187.0 million, $35.0 million of which was
unused, in order to provide for short-term cash requirements. These credit
facilities are negotiated at least annually. At September 30, 1997, the Company
also had uncommitted short-term credit lines of $170.0 million, of which $159.9
million was unused. During 1997, notes payable increased $38.8 million, after
the application of $40.0 million proceeds from the issuance of long-term debt to
reduce notes payable, compared with an increase of $62.7 million during 1996 and
a decrease of $38.5 million in 1995. The decrease in fiscal 1995 was primarily
due to repayment of short-term debt with most of the proceeds from the issuance
of $67.0 million of long-term debt.
Long-term financing activities. In November 1996, the Company issued $40.0
million of 6.09% unsecured notes due in November 1998 to a bank. The proceeds
were used to refinance short-term debt. Long-term debt payments totaled $14.7
million, $20.7 million, and $10.3 million for the years ended September 30,
1997, 1996 and 1995, respectively. The amount for 1997 excludes repayments of
$1.4 million by UCGC in the quarter ended December 31, 1996. Payments of long-
term debt in 1997 consisted of $9.0 million of installments on the Company's
various unsecured Senior Notes, a $2.0 million installment on the 8.69% Series N
First Mortgage Bonds, and installments on various term notes and other long-term
obligations totaling $3.7 million. Payments of long-term debt in 1996 and 1995
likewise consisted of annual installments under the various loan documents. No
long-term debt was issued in 1996. In the first quarter of 1995, the Company
entered into note purchase agreements totaling $40.0 million with two insurance
companies and issued $20.0 million of unsecured Senior Notes at 8.07% payable in
annual installments of $4.0 million beginning October 31, 2002 through October
31, 2006 with semiannual interest payments and $20.0 million of unsecured Senior
Notes at 8.26% payable in annual installments of $1,818,182 beginning October
31, 2004 through October 31, 2014 with semiannual interest payments. In 1995
UCGC issued $22.0 million of medium-term notes under a shelf registration
statement and a $5.0 million term note for its propane company. The $27.0
million proceeds of these notes were used by UCGC to repay short-term
borrowings, retire long-term debt, finance the Company's construction program
and for other corporate purposes.
33
<PAGE>
The loan agreements pursuant to which the Company's Senior Notes and
First Mortgage Bonds have been issued contain covenants by the Company with
respect to the maintenance of certain debt-to-equity ratios and cash flows, and
restrictions on the payment of dividends. Also see Note 7 of the accompanying
notes to consolidated financial statements.
UCG Energy and Woodward Marketing, Inc. ("WMI"), sole shareholders of
WMLLC, act as guarantors of a $12,500,000 credit facility for WMLLC with a bank.
No balance was outstanding on this credit facility at September 30, 1997. UCG
Energy and WMI also act as joint and several guarantors on certain purchases of
natural gas and transportation services from suppliers by WMLLC. These
outstanding obligations amounted to $12.2 million at September 30, 1997.
Issuance of common stock. The Company issued 400,578, 995,467 and
2,335,785 shares of common stock in 1997, 1996 and 1995, respectively, for its
Direct Stock Purchase Plan, Employee Stock Ownership Plans, Restricted Stock
Grant Plan, Outside Directors Stock-for-Fee Plan, a public offering in 1995,
acquisitions of Oceana Heights and Monarch Gas Company and an interest in
Woodward Marketing LLC. See the Consolidated Statements of Shareholders' Equity
for the number of shares issued under each of the plans and for other
transactions. Please see Note 9 of the accompanying notes to consolidated
financial statements for the number of shares registered and available for
future issuance under each of the Company's plans.
In November 1995 the Company exchanged 313,411 shares of its common
stock valued at approximately $6.4 million in exchange for privately held Oceana
Heights Gas Company of Thibodaux, Louisiana.
In June 1996, in connection with the acquisition of Monarch Gas
Company ("Monarch"), 207,366 shares of UCGC's common stock were exchanged for
the common stock of Monarch. The merger added approximately 2,900 natural gas
customers in the Vandalia, Illinois area. In May 1995, 320,512 shares of UCGC's
common stock valued at $5,000,000 were issued in connection with the purchase of
a 45% interest in Woodward Marketing, LLC ("WMLLC") by UCG Energy. In June 1995
UCGC issued 1,380,000 shares of common stock under a shelf registration
statement in an underwritten public offering with net proceeds from the sale
amounting to approximately $18.9 million.
The Company believes that internally generated funds, its credit facilities
and access to the public debt and equity capital markets will provide necessary
working capital and liquidity for capital expenditures and other cash needs for
1998.
34
<PAGE>
Inflation
The Company believes that inflation has caused and will continue to cause
increases in certain operating expenses and has required and will continue to
require assets to be replaced at higher costs. The Company continually reviews
the adequacy of its gas rates in relation to the increasing cost of providing
service and the inherent regulatory lag in adjusting those gas rates.
35
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page no.
Reports of independent auditors 37
Consolidated balance sheets 39
Consolidated statements of income 40
Consolidated statements of shareholders' equity 41
Consolidated statements of cash flows 43
Notes to consolidated financial statements 45
Supplementary data (unaudited) 74
36
<PAGE>
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
Board of Directors
Atmos Energy Corporation
We have audited the accompanying consolidated balance sheets of Atmos
Energy Corporation at September 30, 1997 and 1996, and the related consolidated
statements of income, shareholders' equity and cash flows for each of the three
years in the period ended September 30, 1997. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits. We did
not audit the financial statements of United Cities Gas Company, wholly owned by
Atmos Energy Corporation (see Note 2), which statements reflect total assets of
$513,649,000 as of December 31, 1996 and total revenues of $402,947,000 and
$313,735,000 for the years ended December 31, 1996 and 1995. Those statements
were audited by other auditors whose report has been furnished to us and our
opinion, insofar as it relates to data included for United Cities Gas Company is
based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Atmos Energy Corporation at September 30,
1997 and 1996, and its consolidated results of operations and its cash flows for
each of the three years in the period ended September 30, 1997 in conformity
with generally accepted accounting principles.
Ernst & Young LLP
Dallas, Texas
November 11, 1997
37
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To United Cities Gas Company:
We have audited the accompanying consolidated balance sheet and
consolidated statements of capitalization of United Cities Gas Company (an
Illinois corporation) and subsidiaries as of December 31, 1996, and the related
consolidated statements of income, retained earnings, capital surplus and common
stock and cash flows for each of the two years in the period ended December 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of United
Cities Gas Company and subsidiaries as of December 31, 1996, and the results of
their operations and their cash flows for each of the two years in the period
ended December 31, 1996 in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Nashville, Tennessee
February 14, 1997
38
<PAGE>
ATMOS ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
1997 1996
---------- ----------
ASSETS (In thousands, except share data)
<S> <C> <C>
Property, plant and equipment $1,301,004 $1,198,557
Construction in progress 31,668 21,217
---------- ----------
1,332,672 1,219,774
Less accumulated depreciation and amort. 483,545 449,563
---------- ----------
Net property, plant and equipment 849,127 770,211
Current assets
Cash and cash equivalents 6,016 11,134
Accounts receivable, less allowance for doubtful accounts
of $2,188 in 1997 and $2,462 in 1996 71,217 103,415
Inventories 12,333 13,895
Gas stored underground 48,122 43,350
Prepayments 6,017 2,809
---------- ----------
Total current assets 143,705 174,603
Deferred charges and other assets 95,479 65,796
---------- ----------
$1,088,311 $1,010,610
========== ==========
CAPITALIZATION AND LIABILITIES
Shareholders' equity
Common stock, no par value (stated at $.005 per share);
authorized 75,000,000 shares; issued and outstanding
1997 - 29,642,437 shares, 1996 - 29,241,859 shares $ 148 $ 146
Additional paid-in capital 251,174 241,658
Retained earnings 75,938 87,778
---------- ----------
Total shareholders' equity 327,260 329,582
Long-term debt 302,981 276,162
---------- ----------
Total capitalization 630,241 605,744
Current liabilities
Current maturities of long-term debt 15,201 16,679
Notes payable to banks 167,300 128,488
Accounts payable 62,626 80,321
Taxes payable 416 11,201
Customers' deposits 15,098 16,812
Other current liabilities 52,582 23,866
---------- ----------
Total current liabilities 313,223 277,367
Deferred income taxes 87,828 72,073
Deferred credits and other liabilities 57,019 55,426
---------- ----------
$1,088,311 $1,010,610
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
39
<PAGE>
ATMOS ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year ended September 30,
---------------------------------
1997 1996 1995
----------- ---------- --------
<S> <C> <C> <C>
(In thousands, except per share data)
Operating revenues $906,835 $886,691 $749,555
Purchased gas cost 577,181 562,279 449,397
-------- -------- --------
Gross profit 329,654 324,412 300,158
Operating expenses
Operation 173,683 148,196 146,624
Maintenance 11,974 11,719 11,350
Depreciation and amortization 45,257 41,666 40,597
Taxes, other than income 32,131 30,254 29,626
Income taxes 14,298 23,316 16,544
-------- -------- --------
Total operating expenses 277,343 255,151 244,741
-------- -------- --------
Operating income 52,311 69,261 55,417
Other income (expense)
Interest and
investment income 5,410 3,867 3,290
Other, net (288) (300) 287
-------- -------- --------
Total other income
(expense) 5,122 3,567 3,577
Interest charges 33,595 31,677 30,186
-------- -------- --------
Net income $ 23,838 $ 41,151 $ 28,808
======== ======== ========
Net income per share $.81 $1.42 $1.06
======== ======== ========
Cash dividends per share $1.01 $.98 $.96
======== ======== ========
Average shares outstanding 29,409 28,978 27,208
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
40
<PAGE>
ATMOS ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF
SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common stock
------------------- Additional
Number of Stated paid-in Retained
shares value capital earnings
---------- ------- -------- --------
(In thousands, except share data)
<S> <C> <C> <C> <C>
Balance, September 30, 1994 25,910,607 $130 $196,487 $ 70,967
Net income - - - 28,808
Cash dividends ($.96 per share) - - - (26,197)
Common stock issued:
Restricted stock grant plan 13,000 - 202 -
Direct stock purchase plans 388,484 2 5,832 -
ESOP/401(k) plans 233,789 1 4,173 -
Woodward Marketing acq. 320,512 2 4,998 -
Public offering 1,380,000 6 18,893 -
Other - - 45 -
---------- ---- -------- --------
Balance, September 30, 1995 28,246,392 141 230,630 73,578
Net income - - - 41,151
Cash dividends ($.98 per share) - - - (28,478)
Common stock issued:
Restricted stock grant plan 41,700 1 733 -
Direct stock purchase plans 268,124 1 4,563 -
Outside directors stock-for-fee plan 3,389 - 76 -
ESOP 161,477 1 3,641 -
Monarch Gas Co acq. 207,366 1 1,499 933
Oceana Heights acq. 313,411 1 304 594
Other - - 212 -
---------- ---- -------- --------
Balance, September 30, 1996 29,241,859 146 241,658 87,778
</TABLE>
(continued)
41
<PAGE>
ATMOS ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF
SHAREHOLDERS' EQUITY
(continued)
<TABLE>
<CAPTION>
Common stock
------------------- Additional
Number of Stated paid-in Retained
shares value capital earnings
---------- ------- -------- --------
(In thousands, except share data)
<S> <C> <C> <C> <C>
Balance, September 30, 1996 29,241,859 $146 $241,658 $ 87,778
Net income - - - 23,838
Cash dividends ($1.01 per share) - - - (26,415)
Common stock issued:
Restricted stock grant plan 100,000 1 2,443 -
Direct stock purchase plans 85,243 - 1,888 -
Outside directors stock-for-fee plan 3,008 - 72 -
ESOP/401(k) plans 212,327 1 5,113 -
Less: UCGC net income for the quarter
ended December 31, 1996 - - - (9,263)
---------- ------- -------- --------
Balance, September 30, 1997 29,642,437 $148 $251,174 $ 75,938
========== ======= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
42
<PAGE>
ATMOS ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended September 30,
--------------------------------
1997 1996 1995
-------- ---------- ----------
<S> <C> <C> <C>
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 14,575 $ 41,151 $ 28,808
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization:
Charged to depreciation and amortization 39,970 41,666 40,597
Charged to other accounts 2,237 3,580 3,601
Deferred income taxes 5,807 7,585 4,652
Other - (1,866) 293
Change in assets and liabilities:
(Increase) decrease in accounts receivable 32,198 (12,697) (9,199)
(Increase) decrease in inventories 1,562 (1,238) (827)
(Increase) decrease in gas stored underground (4,772) (15,949) 11,707
(Increase) decrease in prepayments (3,208) 1,966 (419)
Increase in deferred charges and other assets (29,683) (4,623) (10,832)
Increase (decrease) in accounts payable (17,695) 23,796 3,415
Increase (decrease) in taxes payable (837) 7,099 162
Increase (decrease) in customers' deposits (1,714) 592 1,235
Increase (decrease) in other current liabilities 28,716 (4,165) 5,096
Increase in deferred credits and other liabilities 1,593 4,836 854
--------- --------- ---------
Net cash provided by operating activities 68,749 91,733 79,143
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (122,312) (117,589) (103,904)
Retirements of property, plant and equipment 1,189 5,708 2,456
--------- --------- ---------
Net cash used in investing activities (121,123) (111,881) (101,448)
</TABLE>
- Continued -
43
<PAGE>
ATMOS ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
<TABLE>
<CAPTION>
Year ended September 30,
--------------------------------
1997 1996 1995
-------- ---------- ----------
<S> <C> <C> <C>
(In thousands)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in notes payable $ 38,812 $ 62,675 $(38,475)
Proceeds from issuance of long-term debt 40,000 - 67,000
Repayment of long-term debt (14,659) (20,734) (10,347)
Cash dividends paid (26,415) (28,478) (26,197)
Issuance of common stock 9,518 8,523 34,109
-------- -------- --------
Net cash provided by financing activities 47,256 21,986 26,090
-------- -------- --------
Net increase (decrease) in cash and cash equivalents (5,118) 1,838 3,785
Cash and cash equivalents at beginning of year 11,134 9,296 5,511
-------- -------- --------
Cash and cash equivalents at end of year $ 6,016 $ 11,134 $ 9,296
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
44
<PAGE>
ATMOS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Contents of Notes to Consolidated Financial Statements
1. Summary of significant accounting policies 45
2. Business combinations 48
3. Rates 50
4. Income taxes 52
5. Contingencies 54
6. Leases 59
7. Long-term debt and notes payable 60
8. Statement of cash flows supplemental disclosures 62
9. Common stock and stock options 62
10. Employee retirement and stock ownership plans 64
11. Other postretirement benefits 69
Supplementary Data - Quarterly Financial Data (Unaudited) 74
1. Summary of significant accounting policies
Description of business - Atmos Energy Corporation and its
subsidiaries ("Atmos" or the "Company") are in the business of distributing
natural gas to residential, commercial, industrial and agricultural customers
within service areas located in Texas, Louisiana, Kentucky, Colorado, Kansas,
Illinois, Tennessee, Iowa, Virginia, Georgia, South Carolina and Missouri. Such
business is subject to federal and state regulation and/or regulation by local
authorities in each of the twelve states in which the Company operates. In
connection with the acquisition of United Cities Gas Company (See Note 2), the
Company also acquired non-utility businesses operated through UCG Energy
Corporation ("UCG Energy") and United Cities Gas Storage Company ("UCG
Storage"). They are involved in propane sales and distribution, gas marketing,
rental of real estate, equipment and appliances, and natural gas storage
services. None of the non-utility operations constitute a material business
segment.
Principles of consolidation - The accompanying consolidated financial
statements include the accounts of Atmos Energy Corporation and its
subsidiaries. Each subsidiary is wholly-
45
<PAGE>
owned and all material intercompany items have been eliminated. Investments in
50%-or-less owned joint ventures or partnerships are accounted for by the equity
method or the cost method, as appropriate.
Restatement for pooling of interests - The consolidated financial
statements for all prior periods presented have been restated for the pooling of
interests of the Company with United Cities Gas Company in July 1997. Certain
changes in account classifications have been made to conform United Cities Gas
Company's classifications to Atmos' presentation.
Regulation - The Company's utility operations are subject to
regulation with respect to rates, service, maintenance of accounting records and
various other matters by the respective regulatory authorities in the states in
which it operates. The consolidated financial statements are based on generally
accepted accounting principles. Atmos' accounting policies recognize the
financial effects of the ratemaking and accounting practices and policies of the
various regulatory commissions.
Revenue recognition - Sales of natural gas are billed on a monthly
cycle basis; however, the billing cycle periods for certain classes of customers
do not necessarily coincide with ac counting periods used for financial
reporting purposes. The Company follows the revenue accrual method of
accounting for natural gas revenues whereby revenues applicable to gas delivered
to customers but not yet billed under the cycle billing method are estimated and
accrued and the related costs are charged to expense. Estimated losses due to
credit risk are reserved at the time revenue is recognized.
Property, plant and equipment - Property, plant and equipment is
stated at original cost net of contributions in aid of construction. The cost
of additions includes an allowance for funds used during construction and
applicable overhead charges. Major renewals and betterments are capitalized,
while the costs of maintenance and repairs are charged to expense as incurred.
Property, plant and equipment is depreciated at various rates on a straight-line
basis over the estimated useful lives of the assets. The composite rates were
3.9% and 3.7% for the years ended September 30, 1997 and 1996, respectively. At
the time property, plant and equipment is retired, the cost, plus removal
expenses and less salvage, is charged to accumulated depreciation.
Inventories - Inventories consist of materials and supplies and
merchandise held for resale. Inventories are stated at the lower of average
cost or market.
Gas stored underground - Net additions of inventory gas to underground
storage and withdrawals of inventory gas from storage are priced using the
average cost method for Atmos, except for the United Cities Division, where it
is priced on the first-in first-out method. Propane is priced at average cost.
Gas stored
46
<PAGE>
underground and owned by UCG Storage is priced on the last-in first-out ("LIFO")
method. In accordance with the United Cities Division's PGA clause, the
liquidation of a LIFO layer would be reflected in subsequent gas adjustments in
customer rates and does not affect the results of operations. Non-current gas in
storage is classified as property, plant and equipment and is priced at cost.
Income taxes - The Company provides deferred income taxes for
significant temporary differences in the recognition of revenues and expenses
for tax and financial reporting purposes.
Cash and cash equivalents - The Company considers all highly liquid
debt instruments purchased with a maturity of three months or less to be cash
equivalents.
Deferred charges and other assets - Deferred charges and other assets
at September 30, 1997 and 1996 include assets of the Company's qualified defined
benefit retirement plans in excess of the plans' obligations in the amounts of
$11,557,000 and $11,810,000, respectively, and Company assets related to the
nonqualified retirement plans at September 30, 1997 and 1996 of $21,210,000 and
$17,808,000, respectively.
Deferred credits and other liabilities - Deferred credits and other
liabilities include customer advances for construction of $10,072,000 and
$9,753,000 at September 30, 1997 and 1996, respectively; obligations under
capital leases of $3,047,000 and $2,769,000 at September 30, 1997 and 1996,
respectively; and obligations under the Company's nonqualified retirement plans
of $22,167,000 and $20,313,000 at September 30, 1997 and 1996, respectively.
Earnings per share - The calculation of primary earnings per share is
based on reported net income divided by weighted average common shares
outstanding. The Company does not have other classes of stock or dilutive
common stock equivalents.
Use of estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Recently Issued Accounting Standards Not Yet Adopted
The Company has not yet adopted Statement of Financial Accounting
Standards No. 128 "Earnings per Share." The Statement is effective for Atmos'
fiscal year 1998 and earlier adoption is not permitted. The Statement requires
restatement of all prior-period EPS data presented.
The Company has not yet adopted Statement of Financial Accounting
Standards No. 130 "Reporting Comprehensive Income." The Statement will be
effective for Atmos' fiscal year 1999. It establishes standards for reporting
and display of comprehensive income and its components (revenues, expenses,
gains, and losses) in a full set of general-purpose financial statements.
Reclassification of financial statements for earlier periods provided for
comparative purposes is required.
47
<PAGE>
The Company has not yet adopted Statement of Financial Accounting
Standards No. 131 "Disclosures about Segments of an Enterprise and Related
Information." The Statement will be effective for Atmos' fiscal year 1999. It
establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports issued to shareholders. In the initial year of
application, comparative information for earlier years is to be restated.
The Company believes that adoption of these Statements will not have a
material impact on its financial condition, results of operations, or cash
flows.
2. Business combinations
On July 31, 1997 Atmos acquired by means of a merger all of the assets
and liabilities of United Cities Gas Company ("UCGC") in accordance with the
terms and provisions of an Agreement and Plan of Reorganization dated July 19,
1996 and amended October 3, 1996. A total of 13,320,221 shares of Atmos common
stock were issued in a one-for-one exchange for all outstanding shares of UCGC
common stock. UCGC was a natural gas utility company engaged in the
distribution and sale of natural gas to approximately 306,000 customers in
Georgia, Illinois, Iowa, Kansas, Missouri, South Carolina, Tennessee, and
Virginia, and in the sale of propane to approximately 29,000 customers in
Kentucky, North Carolina, Tennessee, and Virginia. Its assets consisted of the
property, plant and equipment used in its natural gas and propane sales and
distribution businesses. With the completion of the merger, Atmos serves over
1,000,000 customers in 13 states.
UCGC was merged with and into Atmos by means of a tax-free
reorganization. The transaction was accounted for as a pooling of interests;
therefore, all historical financial statements and notes thereto have been
restated. UCGC prepared its financial statements on a December 31 fiscal year
end. UCGC's fiscal year has been changed to September 30 to conform to the
Company's year end. The restated September 30, 1996 balance sheet, as
presented, is the combined balance sheets of Atmos as of September 30, 1996 and
UCGC as of December 31, 1996. The restated consolidated statements of income
and cash flows for the years ended September 30, 1996 and 1995 include Atmos
operations for the years then ended and UCGC operations for the years ended
December 31, 1996 and 1995. The consolidated statement of income for the year
ended September 30, 1997 includes Atmos and UCGC operations for the twelve
months then ended. As a result, UCGC's 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 both the 1997 and 1996 consolidated statements of
income, the UCGC net income for this period has been deducted in calculating the
shareholders' equity balances at September 30, 1997 and cash flows for the year
then ended. Certain account
48
<PAGE>
reclassifications were made to conform UCGC's classifications to Atmos'
presentation.
Following the merger, UCGC's business has been operated as United
Cities Gas Company, a division of Atmos ("United Cities Division") and
integration of the companies has begun. The United Cities Division will be
structured like other divisions of Atmos. To achieve this structure,
approximately 560 utility positions in the United Cities Division will be
eliminated by September 1998. An additional 75 Atmos positions will be
eliminated as part of the integration, resulting in approximately 635 total
position reductions in the combined company by September 1998. 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, establishing a network of payment
centers and creating a customer support call center.
Atmos estimates the cost of the merger and integration will total
approximately $17,000,000 for the transaction costs and $32,000,000 for the
separation and other costs. The Company believes 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 $375,000,000. 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 recorded as regulatory assets the costs of the merger and
integration of the United Cities Division as discussed above, along with the
costs of the customer service initiative, which are primarily separation costs
and are estimated to be approximately $12,000,000 through September 30, 1997.
However, the Company established a general reserve of approximately $20,340,000
($12,630,000 after-tax), to account for costs that may not be recovered through
rates. Since the substantial portion of the costs are related to position
eliminations between July 31, 1997 and July 31, 1998 and fees payable at the
close of the merger, the Company recorded these costs in the fourth quarter of
fiscal year 1997 when the merger was completed, separation plans were approved
by the Board of Directors, and announcements were made to employees.
49
<PAGE>
Results of operations and net income for the previously separate
companies for the periods prior to the merger are as follows:
<TABLE>
<CAPTION>
10 Months ended Year ended
July 31, September 30,
1997 1996 1995
---------------- -------------- --------
(Unaudited) (In thousands)
<S> <C> <C> <C>
Operating revenues:
Atmos $474,069 $483,744 $435,820
UCGC 356,325 402,947 313,735
-------- -------- --------
$830,394 $886,691 $749,555
======== ======== ========
Net income:
Atmos $ 23,079 $ 23,949 $ 18,873
UCGC 19,434 17,202 9,935
-------- -------- --------
$ 42,513 $ 41,151 $ 28,808
======== ======== ========
Dividends per share:
Atmos $ .75 $ .96 $ .92
UCGC $ .76 $ 1.02 $ 1.02
</TABLE>
3. Rates
As of September 30, 1997, the Company did not have any rate cases
currently pending except for a "show cause" hearing scheduled to review rates in
Colorado before the Colorado Public Utility Commission in December 1997. Rate
cases completed during the three years ended September 30, 1997 are summarized
below.
In November 1996, UCGC filed to increase rates on an annual basis by
$1,234,000 to approximately 23,000 customers in the state of Illinois.
Effective July 9, 1997, the Illinois Commerce Commission granted a rate increase
of $428,000 in annual revenues. The increase will be followed by a rate
moratorium until June 2000. Effective December 2, 1996, UCGC received an annual
rate increase of $3,160,000 for approximately 70,000 customers in the state of
Georgia. UCGC had filed in May 1996 to increase rates by $5,003,000 on an
annual basis. Effective May 17, 1996, UCGC received an annual rate increase of
$410,000 in the state of Iowa. UCGC had filed to increase rates by $750,000 on
an annual basis. Included in the rate increase in Iowa was the recovery of
$1,787,000 over a ten-year period related to UCGC's agreement with Union
Electric Company ("Union Electric") whereby Union Electric agreed to assume
responsibility for UCGC's continuing investigation and environmental response
action obligations as outlined in the feasibility study pertaining to a
manufactured gas plant site in Keokuk, Iowa.
Effective November 15, 1995, UCGC received an annual rate increase of
$2,227,000 in the state of Tennessee. UCGC had filed
50
<PAGE>
to increase rates by $3,951,000 on an annual basis. Effective October 14, 1995,
UCGC received an annual rate increase of $903,000 in the state of Missouri.
UCGC had filed to increase rates by $1,100,000 on an annual basis. Effective
September 1, 1995, UCGC received an annual rate increase of $2,700,000 in the
state of Kansas. UCGC had filed to increase rates by $4,230,000 on an annual
basis. Effective February 7, 1995, UCGC received an annual rate increase of
$253,000 in the state of South Carolina. UCGC had filed to increase rates by
$341,000 on an annual basis.
The Georgia Public Service Commission and the Tennessee Regulatory
Authority have approved Weather Normalization Adjustments ("WNAs"). The WNAs,
effective October through May each year in Georgia and November through April
each year in Tennessee, allow the United Cities Division to increase the base
rate portion of customers' bills when weather is warmer than normal and decrease
the base rate when weather is colder than normal. The net effect of the WNAs
was an increase/(decrease) in revenues of $2,643,000, ($2,612,000) and
$1,030,000 in 1997, 1996 and 1995, respectively.
In April 1995, UCGC filed to increase rates on an annual basis by
$810,000 to approximately 18,000 customers in the state of Virginia. UCGC was
granted permission by the Virginia State Corporation Commission ("Virginia
Commission") to implement the proposed 3% rate increase, subject to refund,
effective September 29, 1995. In May 1997, the Virginia Commission issued an
order approving a rate increase of .4%, effective September 29, 1995, which is
expected to generate additional annual revenues of $103,000. Money over-
collected from customers under the interim rates was credited to customer
accounts with interest.
Effective April 1, 1995, and for an experimental two-year period, the
PGA clause in Tennessee was modified by an incentive rate program which compares
UCGC purchased gas prices to market prices. The gains or losses recognized by
UCGC as a result of the incentive program were limited to a maximum of $25,000
per month in the plan year ended March 31, 1996, and limited to a maximum of
$600,000 per year in the plan year ended March 31, 1997. UCGC recognized gains
related to the incentive programs in Tennessee of $675,000 and $213,000 for
fiscal 1996 and 1995, respectively. On March 5, 1997, the Tennessee Court of
Appeals (the "Court") issued a decision reversing and remanding the Tennessee
Regulatory Authority's order which approved the incentive rate program for the
plan year ending March 31, 1997. UCGC has filed to make the program permanent,
effective April 1, 1997 and a hearing has not been held as of this date. An
experimental incentive rate program similar to the Tennessee program has also
been approved in Georgia for a two-year period that began April 1, 1997.
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
51
<PAGE>
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. In fiscal 1997 the Company incurred costs of
approximately $218,000 on the demand-side management pilot program.
4. Income taxes
The components of income tax expense for 1997, 1996 and 1995 are as
follows:
1997 1996 1995
-------- -------- --------
(In thousands)
Current $ 8,917 $16,156 $12,319
Deferred 5,807 7,585 4,652
Investment tax credits (426) (425) (427)
------- ------- -------
$14,298 $23,316 $16,544
======= ======= =======
Included in the provision for income taxes are state income taxes of
$2,000,000, $2,801,000, and $1,552,000 for 1997, 1996, and 1995, respectively.
Deferred income taxes reflect the tax effect of differences between
the basis of assets and liabilities for book and tax purposes. The tax effect
of temporary differences that give rise to significant components of the
deferred tax liabilities and deferred tax assets at September 30, 1997 and 1996
are presented below:
52
<PAGE>
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
(In thousands)
Deferred tax assets
Costs expensed for book purposes and capitalized for
tax purposes $ 641 $ 1,087
Accruals not currently deductible for tax purposes 12,398 3,460
Customer advances 3,160 2,629
Nonqualified benefit plans 9,118 8,238
Postretirement benefits 5,757 3,819
Unamortized investment tax credit 1,723 1,593
Regulatory liabilities 3,117 3,035
Other, net 3,758 1,776
--------- --------
Total deferred tax assets 39,672 25,637
Deferred tax liabilities
Difference in net book value and net tax value
of assets (102,038) (87,604)
Pension funding (4,190) (4,734)
Gas cost adjustment (6,568) (655)
Regulatory assets (8,673) (1,529)
Other, net (6,031) (3,188)
--------- --------
Total deferred tax liabilities (127,500) (97,710)
--------- --------
Net deferred tax liabilities $ (87,828) $(72,073)
========= ========
SFAS No. 109 deferred accounts for rate regulated
entities (included in other deferred credits) $ 15,072 $ (3,904)
========= ========
</TABLE>
Reconciliations of the provisions for income taxes computed at the
statutory rate to the reported provisions for income taxes for 1997, 1996 and
1995 are set forth below:
<TABLE>
<CAPTION>
Liability Method
----------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
(In thousands)
Tax at statutory rate of 35% $13,348 $22,564 $15,873
Common stock dividends deductible for tax
reporting (706) (684) (619)
State taxes 1,300 2,000 951
Other, net 356 (564) 339
------- ------- -------
Provision for income taxes $14,298 $23,316 $16,544
======= ======= =======
</TABLE>
53
<PAGE>
5. Contingencies
Litigation
On March 15, 1991, suit was filed in the 15th Judicial District Court
of Lafayette Parish, Louisiana, by the "Lafayette Daily Advertiser" and others
against Trans Louisiana Gas Company ("Trans La Division"), 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 things, the lawsuit alleged that the defendants violated
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.
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 credited to customer bills along with interest that accrued after
October 1, 1995. The Company completed the refunds, refunding $533,000 under
the settlement for the twelve months ended September 30, 1997. Most of the
issues that generated the refunds arose before 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.
54
<PAGE>
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 Division
ratepayers for purposes of settlement and receipt of proceeds of 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, Greeley Gas Company ("Greely Gas Division") 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 Gas
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 appealed the judgment to the Colorado Court of Appeals.
The Company believes it has meritorious issues for such appeal but cannot
assess, at this time, the likelihood of success in the appeal. The Company has
adequate insurance to cover the compensatory damages awarded. The Company's
insurance carrier has also recently informed the Company that any punitive
damages which may be awarded against the Company would be covered by the
Company's insurance policy.
In March 1997, Western Kentucky Gas Company ("Western Kentucky
Division") was named as a defendant in a lawsuit in the District Court in
Danville, Kentucky, as a result of an explosion and fire at a residence in
Danville, Kentucky on March 4, 1997. The plaintiffs, Lisa Benedict, et al, who
were leasing the residence, suffered serious burns in the accident and have
alleged that the Western Kentucky Division was negligent in installing and
servicing gas lines at the residence. The plaintiffs, who are also suing the
landlord/owner of the house, have asked for punitive damages and compensatory
damages in the case. Discovery has just begun; accordingly, the Company cannot
assess, at this time, the likelihood of success in this case. However, the
Company has adequate insurance and reserves to cover any damages that may be
awarded.
In November 1997, a jury in Plaquemine, Louisiana awarded Brian L.
Heard General Contractor, Inc. ("Heard"), a total of $177,929 in actual damages
and $15 million in punitive damages resulting from
55
<PAGE>
a lawsuit by Heard against the Trans La Division, the successor in interest to
Oceana Heights Gas Company, which the Company acquired in November 1995. The
trial judge also awarded interest on the total judgment amount. The claims are
for events that occurred prior to the time Atmos acquired Oceana Heights Gas
Company. Heard claimed damages associated with delays he allegedly incurred in
constructing a sewer system in Iberville Parish, Louisiana. Heard filed the suit
against the Trans La Division and two other defendants, alleging that gas leaks
had caused delays in Heard's completion of a sewer project, resulting in lost
business opportunities for the contractor during 1994. The Company believes that
the gas leaks claimed in the lawsuit were minor leaks, common in normal
operations of gas systems, and were repaired in accordance with standard
industry practices and did not cause the damages claimed.
The jury awarded punitive damages under a prior Louisiana statute that
allowed punitive damages to be awarded in cases involving hazardous substances,
which, as defined in the statute, included natural gas. Although not
retroactive, the Louisiana legislature repealed the statute in 1996. The
Company does not believe that punitive damages are applicable in the case and
should not be awarded because there were no direct damages caused by natural
gas. The Company plans to immediately appeal the verdict and to aggressively
pursue obtaining reversal of the judgment. However, the Company cannot assess,
at this time, the likelihood of the judgment being reversed on appeal. The
Company is in the process of reviewing its insurance coverage with respect to
this case. Although Oceana Heights Gas Company was insured, it appears that a
claim of this nature will not be covered by such insurance. However, the
Company does not expect the final outcome of this case to have a material
adverse effect on the financial condition, the results of operations or the net
cash flows of the Company.
From time to time, other 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, liabilities, if any, arising from these
other claims and lawsuits are either covered by insurance, adequately reserved
for by the Company or would not have a material adverse effect on the financial
condition, results of operations, or cash flows of the Company.
Environmental Matters
UCGC is the owner or previous owner of manufactured gas plant sites
which were used to supply gas prior to the availability of natural gas.
Manufactured gas was an inexpensive source of fuel for lighting and heating
nationwide. As a result of the gas manufacturing process, certain by-products
and residual materials, including coal-tar, were produced and may have been
accumulated at the plant sites. This was an acceptable and satisfactory process
at the time such operations were being
56
<PAGE>
conducted. Under current environmental protection laws and regulations, the
Company may be responsible for response actions with respect to such materials,
if response actions are necessary.
In June 1995, UCGC entered into an agreement to pay $1,787,000 to
Union Electric whereby Union Electric agreed to assume responsibility for UCGC's
continuing investigation and environmental response action obligations as
outlined in the feasibility study related to a former manufactured gas plant
site in Keokuk, Iowa. At September 30, 1997, the Company had $714,600 accrued
for its remaining liability related to the agreement. This amount is to be paid
in equal annual payments over each of the next two years. UCGC deferred the
agreement amount of $1,787,000 and was granted recovery over a ten-year period
in the May 1996 Iowa rate increase.
The United Cities Division owns or owned former manufactured gas plant
sites in Johnson City and Bristol, Tennessee, Hannibal, Missouri and Americus,
Georgia. UCGC and the Tennessee Department of Environment and Conservation
entered into a consent order effective January 23, 1997, for the purpose of
facilitating the investigation, removal and remediation of the Johnson City
site. UCGC began the implementation of the consent order in the first quarter
of 1997. The Company is unaware of any information which suggests that the
Bristol site gives rise to a present health or environmental risk as a result of
the manufactured gas process or that any response action will be necessary. The
Missouri Department of Natural Resources ("MDNR") conducted a site
reconnaissance and sampling at the Hannibal site. In its most recent report the
MDNR concludes that hazardous substances and hazardous wastes are present on
site, and that a release of hazardous substances to soils has occurred; however,
the risk of human exposure appears to be minimal. Additional site work is
likely. As of September 30, 1997, the Company had incurred and deferred for
recovery $352,000, including $258,000 related to an insurance recoverability
study, and accrued and deferred for recovery an additional $750,000 associated
with the preliminary survey and invasive study of these three sites. The
Tennessee Regulatory Authority granted UCGC permission to defer, until its next
rate case, all costs incurred in Tennessee in connection with state and
federally mandated environmental control requirements. On May 14, 1997, the
Georgia Environmental Protection Division requested that UCGC enter into a
proposed voluntary consent order for the remediation of the Americus site.
Subsequently, the other responsible parties at the site advised UCGC that they
would be willing to enter into a "cashout" settlement for a one-time payment by
the Company of $250,000. The Company is willing to pay $250,000 for a "cashout"
settlement. The Company has provided its comments to the proposed settlement
agreement and expects to conclude those discussions shortly. As of September
30, 1997, the Company had accrued and deferred for recovery amounts related to
this site.
57
<PAGE>
Pursuant to the Tennessee Petroleum Underground Storage Tank Act, the
Company is required to upgrade or remove certain underground storage tanks
("USTs") situated in Tennessee. As of September 30, 1997, the Company had
identified a small number of USTs in this category in Tennessee and had incurred
and deferred for recovery $98,000 and, based on available current information,
accrued and deferred for recovery an additional $70,000 for the upgrade or
removal of these USTs. The Tennessee Regulatory Authority granted UCGC
permission to defer, until its next rate case, all costs incurred in connection
with state and federally mandated environmental control requirements. In
addition, the Company may be able to recover a portion of any corrective action
costs from the Tennessee Underground Storage Tank Fund for certain of the UST
sites in Tennessee.
In October 1995, UCGC received two Notices of Violation ("NOVs") from
the Tennessee Department of Environment and Conservation ("TDEC") concerning
historic releases from a UST in Kingsport, Tennessee. This UST was formerly
owned by Holston Oil Co., Inc. ("Holston"), which at one time was a wholly-owned
subsidiary of Tennessee-Virginia Energy Corporation ("TVEC"). Prior to TVEC's
merger with UCGC in 1986, TVEC sold the common stock of Holston to an unrelated
party. UCGC responded to the NOVs advising the TDEC that UCGC was not a
responsible party for any environmental contamination at the site. The Company
does not anticipate incurring any response action costs at this site.
The Kansas Department of Health and Environment ("KDHE") identified
the need to investigate gas industry activities which utilize mercury equipment
in Kansas. The Company and KDHE have signed a Consent Order for the
investigation and possible response action for mercury contamination at any gas
pipeline site which is identified as exceeding the KDHE's established acceptable
concentration levels. As of September 30, 1997, the Company had identified
approximately 720 meter sites where mercury may have been used and had incurred
and deferred for recovery $100,000 and, based on available current information,
accrued and deferred for recovery an additional $280,000 for the investigation
of these sites. UCGC has received an order from the Kansas Corporation
Commission ("KCC") allowing UCGC to defer and seek recovery in future rate
proceedings the reasonable and prudent costs and expenses associated with the
Consent Order. In the order, the Commission approved a Stipulation and
Agreement which provides a cap of $1,500,000 on amounts deferred with the
ability to exceed this cap if reasonable costs of response action are incurred.
Based on a decision by the KCC concerning the recovery of environmental response
action costs incurred by another company, the Company expects recovery of the
costs involved in the investigation and response action associated with the
mercury meter sites in Kansas.
The Company addresses other environmental matters from time to time in
the regular and ordinary course of its business. Management expects that future
expenditures related to response action at any site will be recovered through
rates or insurance,
58
<PAGE>
or shared among other potentially responsible parties. Therefore, the costs of
responding to these sites are not expected to materially affect the results of
operations, financial condition or cash flows of the Company.
6. Leases
The Company has entered into noncancelable leases involving office
space and warehouse space. The remaining lease terms range from one to 20 years
and generally provide for the payment of taxes, insurance and maintenance by the
lessee. Net property, plant and equipment included amounts for capital leases
of $2,327,000 and $2,511,000 at September 30, 1997 and 1996, respectively.
The related future minimum lease payments at September 30, 1997 were
as follows:
<TABLE>
<CAPTION>
Capital Operating
leases leases
------- ---------
<S> <C> <C>
1998 $ 699 $ 9,841
1999 699 9,583
2000 760 9,187
2001 568 8,607
2002 568 8,344
Thereafter 2,279 61,044
------- --------
Total minimum lease payments 5,573 $106,606
======= ========
Less amount representing interest (2,526)
-------
Present value of net minimum
lease payments $ 3,047
=======
</TABLE>
Consolidated rent expense amounted to $10,522,000, $9,710,000 and
$9,175,000 for fiscal 1997, 1996 and 1995, respectively. Rents for the
regulated business are expensed and the Company receives rate treatment as a
cost of service on a pay-as-you-go basis.
59
<PAGE>
7. Long-term debt and notes payable
Long-term debt at September 30, 1997 and 1996 consisted of the
following:
<TABLE>
<CAPTION>
1997 1996
-------- ---------
(In thousands)
<S> <C> <C>
Unsecured 7.95% Senior Notes, due 2006,
payable in annual installments of $1,000 $ 9,000 $ 10,000
Unsecured 9.57% Senior Notes, due 2006,
payable in annual installments of $2,000 18,000 20,000
Unsecured 9.76% Senior Notes, due 2004,
payable in annual installments of $3,000 24,000 27,000
Unsecured 11.2% Senior Notes, due 2002,
payable in annual installments of $2,000 12,000 14,000
Unsecured 10% Notes, due 2011 2,303 2,303
Unsecured 6.09% Note, due 1998 40,000 -
Unsecured 8.07% Senior Notes, due 2006,
payable in annual installments of $4,000
beginning 2002 20,000 20,000
Unsecured 8.26% Senior Notes, due 2014,
payable in annual installments of
$1,818 beginning 2004 20,000 20,000
Unsecured 9.75% Senior Notes, due 1996 - 1,000
First Mortgage Bonds
Series J, 9.40% due 2021 17,000 17,000
Series N, 8.69% due 2002 5,000 7,000
Series P, 10.43% due 2017 25,000 25,000
Series Q, 9.75% due 2020 20,000 20,000
Series R, 11.32% due 2004 15,000 15,000
Series T, 9.32% due 2021 18,000 18,000
Series U, 8.77% due 2022 20,000 20,000
Series V, 7.50% due 2007 10,000 10,000
Medium term notes
Series A, 1995-1, 6.67%, due 2025 10,000 10,000
Series A, 1995-2, 6.27%, due 2020 10,000 10,000
Series A, 1995-3, 6.20%, due 2000 2,000 2,000
Rental property, propane and other term notes
due in installments through 2013 20,879 24,538
-------- --------
Total long-term debt 318,182 292,841
Less current maturities (15,201) (16,679)
-------- --------
$302,981 $276,162
======== ========
</TABLE>
The Company may prepay most of the Senior Notes or First Mortgage
Bonds in whole at any time, subject to a prepayment
60
<PAGE>
premium. The note agreements provide for certain cash flow requirements and
restrictions on additional indebtedness, sale of assets and payment of
dividends. Under the most restrictive of such covenants, cumulative cash
dividends paid after December 31, 1988 may not exceed the sum of accumulated net
income for periods after December 31, 1988 plus $15,038,000. At September 30,
1997, approximately $37,489,000 of retained earnings was not so restricted.
As of September 30, 1997, all of the Greeley Gas Division utility
plant assets with a net book value of approximately $83,371,000 are subject to a
lien under the 9.4% Series J First Mortgage Bonds assumed by the Company in the
acquisition of GGC. Also, substantially all of the United Cities Division
utility plant assets, totaling approximately $314,591,000 are subject to a lien
under the Indenture of Mortgage of the Series N through V First Mortgage Bonds.
UCG Energy and Woodward Marketing, Inc. ("WMI"), sole shareholders of
WMLLC, act as guarantors of a $12,500,000 credit facility for WMLLC with a bank.
No balance was outstanding on this credit facility at September 30, 1997. UCG
Energy and WMI also act as joint and several guarantors on certain purchases of
natural gas and transportation services from suppliers by WMLLC. These
outstanding obligations amounted to $12,200,000 at September 30, 1997.
Based on the borrowing rates currently available to the Company for
debt with similar terms and remaining average maturities, the fair value of
long-term debt at September 30, 1997 and 1996 is estimated using discounted cash
flow analysis to be $348,261,000 and $329,811,000, respectively. It is not
currently advantageous for the Company to refinance its long-term debt because
of prepayment costs set forth in the various debt agreements.
Maturities of long-term debt are as follows (in thousands):
1998 $ 15,201
1999 56,578
2000 14,790
2001 14,141
2002 14,205
Thereafter 203,267
--------
$318,182
========
Notes payable to banks
The Company has committed short-term, unsecured bank credit facilities
totaling $187,000,000, $35,000,000 of which was unused at September 30, 1997.
One facility of $175,000,000 requires a commitment fee of .06% on the unused
portion. A second facility for $12,000,000 requires a commitment fee of 5/32 of
1% on the
61
<PAGE>
unused portion. The committed lines are renewed or renegotiated at least
annually.
The Company also had aggregate uncommitted credit lines of
$170,000,000, of which $159,900,000 was unused as of September 30, 1997. The
uncommitted lines have varying terms and the Company pays no fee for the
availability of the lines. Borrowings under these lines are made on a when and
as-available basis at the discretion of the banks.
The weighted average interest rates on short-term borrowings
outstanding at September 30, 1997 and 1996 were 6.1% and 6.3%, respectively.
8. Statement of cash flows supplemental disclosures
Supplemental disclosures of cash flow information for 1997, 1996 and
1995 are presented below:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
(In thousands)
Cash paid for
Interest $25,216 $32,778 $27,667
Income taxes 9,736 14,562 18,746
</TABLE>
9. Common stock and stock options
The Company issued 100,000 shares of its common stock in fiscal 1997
in connection with its Restricted Stock Grant Plan.
Atmos has an Employee Stock Ownership Plan ("ESOP") and the United
Cities Division has a 401(k) savings plan, as discussed in Note 10. Atmos
issued 200,482 shares under its ESOP in 1997. The Company has registered
1,600,000 shares for issuance under the ESOP, of which 512,871 shares were
available for future issuance on September 30, 1997.
The Company also has a Direct Stock Purchase Plan ("DSPP").
Participants in the DSPP may have all or part of their dividends reinvested at a
3% discount from market prices. DSPP participants may purchase additional shares
of Company common stock as often as weekly with voluntary cash payments of at
least $25, up to an annual maximum of $100,000. At September 30, 1997, 712,596
shares were available for future issuance under the plan.
On April 27, 1988, the Company adopted a Shareholders' Rights Plan and
declared a dividend of one right (a "Right") for each outstanding pre-split
share of common stock of the Company, payable to shareholders of record as of
May 10, 1988. Each Right will entitle the holder thereof, until the earlier of
May 10, 1998 or the date of redemption of the Rights, to buy one share of common
stock of the Company at an exercise price of $30 per share, subject to
adjustment by the Board of Directors upon the
62
<PAGE>
occurrence of certain events. The Rights will be represented by the common
stock certificates and are not exercisable or transferable apart from the common
stock until a "Distribution Date" (which is defined in the Rights Agreement
between the Company and the Rights Agent as the date upon which the Rights
become separate from the common stock).
At no time will the Rights have any voting rights. The exercise price
payable and the number of shares of common stock or other securities or property
issuable upon exercise of the Rights are subject to adjustment from time to time
to prevent dilution. Until the Distribution Date, the Company will issue one
Right with each share of common stock that becomes outstanding so that all
shares of common stock will have attached Rights. After a Distribution Date,
the Company may issue Rights when it issues common stock if the Board deems such
issuance to be necessary or appropriate.
The Rights have certain anti-takeover effects and may cause
substantial dilution to a person or entity that attempts to acquire the Company
on terms not approved by the Board of Directors except pursuant to an offer
conditioned upon a substantial number of Rights being acquired. The Rights
should not interfere with any merger or other business combination approved by
the Board of Directors because, prior to the time the Rights become exercisable
or transferable, the Rights may be redeemed by the Company at $.05 per Right.
In November 1997, the Board of Directors approved the adoption of new
shareholders' rights plan that will go into effect upon the expiration of the
existing shareholders' rights plan on May 10, 1998. The provisions of the new
rights plan are similar to those of the existing rights plan. However, the new
rights plan does differ from the existing plan in certain respects, including,
but not limited to the following: (i) the exercise price under the new plan will
be $80 per share vs. $30 per share under the existing plan; (ii) the rights
under the new plan may be redeemed by the Company prior to the time they become
exercisable or transferable at $.01 per right vs. $.05 per right under the
existing plan; and (iii) the nature of the events that will make the rights
exercisable has been modified to reflect new developments in the securities
markets since 1988.
The Company's Restricted Stock Grant Plan for management and key
employees of the Company, which became effective October 1, 1987 and was amended
and restated in November 1997, provides for awards of common stock that are
subject to certain restrictions. The plan is administered by the Board of
Directors. The members of the Board who are not employees of the Company make
the final determinations regarding participation in the plan, awards under the
plan, and restrictions on the restricted stock awarded. The restricted stock
may consist of previously issued shares purchased on the open market or shares
issued directly from the Company. The Company has registered 900,000 shares for
issuance under the plan. Compensation expense of $437,000, $795,000 and
63
<PAGE>
$1,015,000 was recognized in 1997, 1996 and 1995, respectively, in connection
with the issuance of shares under the plan. At September 30, 1997, 252,500
shares were available for future award under the plan.
In November 1994, the Board adopted the Outside Directors Stock-for-
Fee Plan, which plan was approved by the shareholders of the Company in February
1995 and was amended and restated in November 1997. The plan permits non-
employee directors to receive all or part of their annual retainer and meeting
fees in stock rather than in cash. The Company has registered 50,000 shares,
44,685 of which were available for future issuance under the plan as of
September 30, 1997.
In October 1995, the FASB issued Statement No. 123 ("SFAS 123"),
"Accounting for Stock-Based Compensation." This statement establishes a fair-
value-based method of accounting for employee stock options or similar equity
instruments and encourages, but does not require, all companies to adopt that
method of accounting for all of their employee stock compensation plans. SFAS
123 allows companies to continue to measure compensation cost for employee stock
options or similar equity instruments using the intrinsic value method of
accounting described in Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees." The Company has elected to remain with this
method. Because of the limited nature of the Company's stock-based compensation
plans, the adoption of SFAS 123 was immaterial.
10. Employee retirement and stock ownership plans
At September 30, 1997, the Company had four defined benefit pension
plans, covering the Western Kentucky Division employees, the Greeley Gas
Division employees, and the United Cities Division employees, while the fourth
covers all other Atmos employees. The plans provide essentially the same
benefits to all employees. Except for the United Cities Division, the plans'
benefits are based on years of service and the employee's compensation during
the highest paid five consecutive calendar years within the last 10 years of
employment. The United Cities Division plan provides benefits based on years of
service and final average salary. The Company's funding policy is to contribute
annually an amount in accordance with the requirements of the Employee
Retirement Income Security Act of 1974. Contributions are intended to provide
not only for benefits attributed to service to date but also for those expected
to be earned in the future.
64
<PAGE>
The following table sets forth the Atmos plan's funded status at
September 30, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
--------- --------
<S> <C> <C> <C>
(In thousands)
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefits of
$75,027 and $77,089 in 1997 and 1996, respectively $ (78,591) $(77,513)
========= ========
Projected benefit obligation $ (87,999) $(86,571)
Plan assets at fair value 102,865 90,157
--------- --------
Funded status 14,866 3,586
Unrecognized net asset being recognized over 15 years - (198)
Unrecognized prior service cost (1,217) (1,359)
Unrecognized net (gain) loss (15,273) (3,086)
--------- --------
Accrued pension cost $ (1,624) $ (1,057)
========= ========
</TABLE>
Net periodic pension cost for the Atmos plan for 1997, 1996 and 1995
included the following components:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Service cost $ 2,263 $ 2,235 $ 1,862
Interest cost on projected
benefit obligation 6,356 6,434 6,060
Actual return on plan assets (16,588) (11,342) (12,200)
Net amortization and deferral 8,322 3,298 5,007
-------- -------- --------
Net periodic pension cost $ 353 $ 625 $ 729
======== ======== ========
</TABLE>
65
<PAGE>
The following table sets forth the Western Kentucky Division
plan's funded status at September 30, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(In thousands)
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefits of
$31,877 and $30,984 in 1997 and 1996, respectively $(32,752) $(30,983)
======== ========
Projected benefit obligation $(36,293) $(35,673)
Plan assets at fair value 53,289 46,478
-------- --------
Funded status 16,996 10,805
Unrecognized prior service cost 3,976 4,829
Unrecognized net (gain) loss (10,065) (4,361)
-------- --------
Prepaid pension cost $ 10,907 $ 11,273
======== ========
</TABLE>
Net periodic pension cost for 1997, 1996 and 1995 included the
following components:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
(In thousands)
<S> <C> <C> <C>
Service cost $ 734 $ 672 $ 706
Interest cost 2,619 2,431 2,306
Actual return on plan assets (8,456) (5,771) (6,355)
Net amortization and deferral 5,081 2,356 3,399
------- -------- --------
Net periodic pension cost (benefit) $ (22) $ (312) $ 56
======== ======== ========
</TABLE>
The weighted-average discount rates used in determining the actuarial
present value of the projected benefit obligations of the Atmos and Western
Kentucky Division retirement plans was 7.5% at June 30, 1997 and 1996. The rate
of increase in future compensation levels reflected in such determination was
4.0% for the years ended September 30, 1997 and 1996. The expected long-term
rate of return on plan assets was 9.0%, 9.5% and 10.0% for the years ended
September 30, 1997, 1996 and 1995, respectively. The plan assets consist
primarily of investments in common stocks, interest bearing securities and
interests in commingled pension trust funds. Prepaid pension cost is included in
deferred charges and other assets.
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<PAGE>
The following table sets forth the Greeley Gas Division plan's funded
status at September 30, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
(In thousands)
Actuarial present value of benefit
obligations:
Accumulated benefit obligation,
including vested benefits of
$15,361 and $15,110 in 1997
and 1996, respectively $(16,033) $(15,252)
======== ========
Projected benefit obligation $(17,700) $(17,666)
Plan assets at fair value 17,535 16,086
-------- --------
Funded status (165) (1,580)
Unrecognized net asset being
recognized over 15 years (1,231) (1,521)
Unrecognized prior service cost 1,344 1,480
Unrecognized net (gain) loss (372) 1,375
-------- --------
Accrued pension cost $ (424) $ (246)
======== ========
</TABLE>
Net periodic pension cost (credit) for the Greeley Gas Division plan
for 1997, 1996 and 1995 included the following components:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
(In thousands)
Service cost $ 485 $ 453 $ 328
Interest cost on projected
benefit obligation 1,277 1,185 1,208
Actual return on plan assets (2,724) (2,390) (2,530)
Net amortization and deferral 1,167 810 1,217
------- ------- -------
Net periodic pension cost $ 205 $ 58 $ 223
======= ======= =======
</TABLE>
Accumulated plan benefits were computed using the Projected Unit
Credit funding method. The discount rate and rate of in crease in future
compensation levels used in determining the actuarial present value of the
projected benefit obligations were 7.5% and 4.0% in both 1997 and 1996. The
expected long-term rate of return on plan assets was 9.0%, 9.5% and 10.0% in
1997, 1996 and 1995, respectively. Plan assets consist primarily of corporate
bonds, equity securities, mutual funds, partnership interests, and other
miscellaneous investments.
67
<PAGE>
The following table sets forth the United Cities Division plan's
funded status at September 30, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
(In thousands)
Actuarial present value of benefit
obligations:
Accumulated benefit obligation,
including vested benefits of
$60,086 and $45,528 in 1997
and 1996, respectively $(66,873) $(54,130)
======== ========
Projected benefit obligation (75,159) (69,652)
Plan assets at fair value 86,162 71,978
-------- --------
Funded status 11,003 2,326
Unrecognized net asset being
recognized over 15 years 142 191
Unrecognized prior service cost 1,750 1,143
Unrecognized net (gain) loss (15,785) (1,819)
-------- --------
Prepaid (accrued) pension cost $ (2,890) $ 1,841
======== ========
</TABLE>
Net periodic pension cost (credit) for the United Cities Division plan
for 1997, 1996 and 1995 included the following components:
<TABLE>
<CAPTION>
1997 1996 1995
--------- -------- ---------
<S> <C> <C> <C>
(In thousands)
Service cost $ 3,157 $ 3,116 $ 3,451
Interest cost on projected
benefit obligation 5,050 4,720 4,296
Actual return on plan assets (17,461) (7,936) (10,365)
Net amortization and deferral 11,420 2,372 5,772
-------- ------- --------
Net periodic pension cost $ 2,166 $ 2,272 $ 3,154
======== ======= ========
</TABLE>
The weighted-average discount rates used in determining the actuarial
present value of the projected benefit obligations of the United Cities Division
retirement plan was 7.5% at September 30, 1997 and December 31, 1996. The rate
of increase in future compensation levels reflected in such determination was
5.5% for the years ended September 30, 1997 and December 31, 1996. The expected
long-term rate of return on plan assets was 9.0% for the years ended September
30, 1997, and December 31, 1996 and 1995. The plan assets consist primarily of
marketable equity securities, corporate and government debt securities, and
deposits with insurance companies. Prepaid pension cost is included in deferred
charges and other assets.
68
<PAGE>
Effective October 1, 1987, the Company adopted a nonquali fied
Supplemental Executive Benefits Plan ("Supplemental Plan") which provides
additional pension, disability and death benefits to the officers and certain
other employees of the Company. Expense recognized in connection with the
Supplemental Plan during fiscal 1997, 1996, and 1995 was $3,491,000, $2,708,000
and $2,158,000, respectively. The Supplemental Plan was amended and restated in
May 1997 and amended again in August 1997 and November 1997.
Atmos sponsors an Employee Stock Ownership Plan ("ESOP") for employees
other than those in the United Cities Division. Full time employees who have
completed one year of service, as defined in the plan, are eligible to
participate. Each participant enters into a salary reduction agreement with the
Company pursuant to which the participant's salary is reduced by an amount not
less than 2% nor more than 10%. Taxes on the amount by which the participant's
salary is reduced are deferred pursuant to Section 401(k) of the Internal
Revenue Code. The amount of the salary reduction is contributed by the Company
to the ESOP for the account of the participant. The Company may make a matching
contribution for the account of the participant in an amount determined each
year by the Board of Directors, which amount must be at least equal to 25% of
all or a portion of the participant's salary reduction. For the 1997 plan year,
the Board of Directors elected to match 100% of each participant's salary
reduction contribution up to 4% of the participant's salary. Matching
contributions to the ESOP amounted to $2,077,000, $1,944,000, and $1,977,000 for
1997, 1996 and 1995, respectively. The Directors may also approve discretionary
contributions, subject to the provisions of the Internal Revenue Code of 1986
and applicable regulations of the Internal Revenue Service. The Company recorded
a charge of $1,500,000 for a discretionary contribution in the year ended
September 30, 1996. Company contributions to the plan are expensed as incurred.
The Company sponsors a 401(k) savings plan for the United Cities
Division employees. The plan allows participants to make contributions toward
retirement savings. Each participant may contribute up to 15% of qualified
compensation. For employee contributions up to 6% of the participant's
qualified compensation, the Company will contribute 30% of the employee's
contribution. The Company may also contribute up to an additional 20% of the
employee's contribution based on certain criteria specified in the plan.
Effective January 1, 1995, any additional contribution made by the Company will
be through the issuance of the Company's common stock. The Company contributed
$694,000 for the nine months ended September 30, 1997, and $826,000 and $478,000
for the years ended December 31, 1996 and 1995, respectively.
11. Other postretirement benefits
Atmos sponsors two defined benefit postretirement plans other than
pensions. Each provides health care benefits to
69
<PAGE>
retired employees. One provides benefits to the United Cities Division. The
other Atmos plan offers medical benefits to all other retired Atmos employees.
Effective October 1, 1993, the Company adopted Financial Accounting
Standards No. 106 ("SFAS No. 106"), "Employers' Accounting for Postretirement
Benefits Other Than Pensions". SFAS No. 106 focuses principally on
postretirement health care benefits and significantly changed the practice of
accounting for postretirement benefits on a pay-as-you-go basis by requiring
accrual of such benefit costs on an actuarial basis from the date each employee
reaches age 45 until the date of full eligibility for such benefits. The
Company is amortizing on a straight line basis its initial transition
obligations over 20 years. The initial transition obligation of the United
Cities Division was $8,894,000. The initial transition obligation for all other
Divisions was $33,354,000.
Substantially all of the Company's employees other than the United
Cities Division become eligible for these benefits if they reach retirement age
while working for the Company and attain 10 consecutive years of service after
age 45. Participant contributions are required under these plans. Prior to
June 1994, the plans were not funded. In June 1994, the Company made its first
quarterly payment to the external trust set up to fund SFAS No. 106 costs in
excess of the pay-as-you-go cost in Kansas in accordance with an order of the
Kansas Corporation Commission. In April, 1995 it began external funding in
Colorado in accordance with an order of the Colorado Public Utility Commission.
The amount of funding will ultimately depend upon the ratemaking treatment
allowed in the Company's various rate jurisdictions.
The components of net periodic postretirement benefits cost for the
Atmos plans for each of the years ended September 30, 1997, 1996 and 1995 are as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
(In thousands)
Service cost $1,599 $1,469 $1,497
Interest cost 2,371 2,224 2,322
Actual return on plan assets (28) (39) (18)
Amortization of transition
obligation 1,550 1,550 1,549
Prior service cost 202 - -
Net amortization and deferral (217) (80) (150)
------ ------ ------
Net periodic postretirement
benefits cost $5,477 $5,124 $5,200
====== ====== ======
</TABLE>
70
<PAGE>
The following is a reconciliation of the funded status of the Atmos
plans to the net postretirement benefits liability on the balance sheet as of
September 30, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
(In thousands)
<S> <C> <C>
Accumulated postretirement
benefits obligation
Retirees $(22,575) $(19,849)
Fully eligible employees (721) (6,426)
Other employees (10,328) (4,644)
-------- --------
(33,624) (30,919)
Plan assets 1,278 927
-------- --------
Accumulated postretirement benefits
obligation in excess of plan assets (32,346) (29,992)
Unrecognized net gain (6,602) (4,775)
Unrecognized transition obligation 25,802 26,342
-------- --------
Accrued postretirement benefits liability $(13,146) $ (8,425)
======== ========
</TABLE>
In the latest actuarial calculation of the accrued postre tirement
benefits liability, the assumed health care cost trend rate used to estimate the
cost of postretirement benefits was 7.5% for 1997 and 1998 and is assumed to
decrease gradually to 5.0% by 2001 and remain at that level thereafter. The
trend for vision benefits is assumed to remain level for all years at 4.5%. The
effect of a 1% increase in the assumed health care cost trend rate for each
future year is $376,000 and $344,000 on the annual aggregate of the service and
interest cost components of net periodic postretirement benefit costs and
$2,760,000 and $2,377,000 on the accumulated postretirement benefits obligation
as of September 30, 1998 and 1997, respectively. The assumed discount rate, the
rate at which liabilities could be settled, was 7.5% as of September 30, 1997
and 1996. The expected long-term rate of return on plan assets was 5.3% for
1997 and 1996.
71
<PAGE>
The Company maintains a separate postretirement health care benefits
plan for the United Cities Division. Substantially all of its employees will
become eligible for these benefits if they reach the normal retirement age while
working for the Company.
The components of net periodic postretirement benefits cost for the
United Cities Division for each of the years ended September 30, 1997, 1996 and
1995 are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Service cost $ 86 $ 89 $ 120
Interest cost 926 897 1,051
Actual return on plan assets (274) (212) (107)
Amortization of transition
obligation 364 364 445
Net amortization and deferral 298 232 182
------ ------ ------
Net periodic postretirement
benefits cost $1,400 $1,370 $1,691
====== ====== ======
</TABLE>
The following is a reconciliation of the funded status of the United
Cities Division plan to the net postretirement benefits liability on the balance
sheet as of September 30, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
(In thousands)
<S> <C> <C>
Accumulated postretirement
benefits obligation
Retirees $(16,331) $(11,546)
Fully eligible employees (213) (1,007)
Other employees (750) (816)
-------- --------
(17,294) (13,369)
Plan assets 4,336 3,715
-------- --------
Accumulated postretirement benefits
obligation in excess of plan assets (12,958) (9,654)
Unrecognized net gain 7,837 5,186
Unrecognized transition obligation 5,280 5,821
-------- --------
Accrued postretirement benefits liability $ 159 $ 1,353
======== ========
</TABLE>
In the latest actuarial calculation of the accrued postre tirement
benefits liability for the United Cities Division, the assumed health care cost
trend rate used to estimate the cost of postretirement benefits was 7.5% for
1997 and 1998, and is
72
<PAGE>
assumed to decrease gradually to 5.0% by 2001 and remain at that level
thereafter. The effect of a 1% increase in the assumed health care cost trend
rate for each future year is $88,000 and $79,000 on the annual aggregate of the
service and interest cost components of net periodic postretirement benefit
costs and $1,732,000 and $1,099,000 on the accumulated postretirement benefits
obligation as of September 30, 1997 and December 31, 1996, respectively. The
assumed discount rate, the rate at which liabilities could be settled, was 7.5%
as of September 30, 1997 and December 31, 1996, respectively. The expected
long-term rate of return on plan assets was 4.3% for 1997 and 1996.
The Company is currently recovering other postretirement benefits
("OPEB") costs through its regulated rates under SFAS No. 106 accrual accounting
in Colorado, Kansas, the majority of its Texas service area and in Kentucky
(effective November 1, 1995). It receives rate treatment as a cost of service
item for OPEB costs on the pay-as-you-go basis in Louisiana. OPEB costs have
been specifically addressed in rate orders in each jurisdiction served by the
United Cities Division or have been included in a rate case and not disallowed.
However, the Company was required to recover the portion of the UCGC transition
obligation applicable to Virginia operations over 40 years, rather than 20
years, as in other states. Management believes that accrual accounting in
accordance with SFAS No. 106 is appropriate and will continue to seek rate
recovery of accrual-based expenses in its ratemaking jurisdictions that have not
yet approved the recovery of these expenses.
73
<PAGE>
SUPPLEMENTARY DATA
Quarterly Financial Data (Unaudited)
Summarized unaudited quarterly financial data are presented below. The sum of
net income per share by quarter may not equal the net income per share for the
year due to variations in the weighted average shares outstanding used in
computing such amounts. The Company's natural gas and propane distribution
businesses are seasonal due to weather conditions in the Company's service
areas. For further information on its effects on quarterly results, please see
the "Seasonality" discussion included in the "Management's Discussion and
Analysis of Financial Condition and Results of Operations" section herein.
<TABLE>
<CAPTION>
Quarter ended
-------------------------------------------------------------------------------------
December 31, March 31, June 30, September 30,
-------------------- -------------------- -------------------- -------------------
1996 1995 1997 1996 1997 1996 1997 1996
--------- -------- -------- -------- ------- --------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(In thousands, except per share data)
Operating revenues $280,624 $253,439 $362,636 $341,867 $143,714 $175,240 $119,861 $116,145
Gross profit 97,269 89,707 124,249 120,231 59,546 68,220 48,590 46,254
Operating income (loss) 25,968 24,365 37,075 41,216 4,599 6,853 (15,331) (3,173)
Net income (loss) 18,155 18,496 30,625 35,906 (3,018) (2,795) (21,924) (10,456)
Net income (loss) per share .62 .64 1.04 1.26 (.10) (.10) (.74) (.36)
</TABLE>
74
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF THE
REGISTRANT
Information regarding directors is incorporated herein by reference
from the Company's definitive proxy statement for the annual meeting of
shareholders on February 11, 1998.
Information regarding executive officers is included in Part I.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference from the Company's definitive proxy
statement for the annual meeting of shareholders on February 11, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference from the Company's definitive proxy
statement for the annual meeting of shareholders on February 11, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference from the Company's definitive proxy
statement for the annual meeting of shareholders on February 11, 1998.
75
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1 and 2. Financial statements and financial statement schedules.
The financial statements listed in the accompanying Index to Financial
Statements are filed as part of this annual report. No financial statement
schedules are required in this filing.
3. Exhibits
The exhibits listed in the accompanying Exhibits Index are filed as
part of this annual report. The exhibits numbered 10.21(a) through 10.31(a) are
management contracts or compensatory plans or arrangements.
(b) Reports on Form 8-K
The Company filed a Form 8-K Current Report dated June 10, 1997 reporting
under Item 5, Other Events 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.
The Company also filed a Form 8-K Current Report dated July 29, 1997
reporting under Item 2, Acquisition or Disposition of Assets, that the merger of
United Cities Gas Company with and into Atmos had closed effective July 31,
1997. It also incorporated by reference the Financial Statements of the
Business Acquired and the required Pro Forma Financial Information under Item 7
Financial Statements and Exhibits.
76
<PAGE>
INDEX TO FINANCIAL STATEMENTS
(Item 8, 14(a) 1 and 2)
<TABLE>
<CAPTION>
Page
<S> <C>
Number
Independent auditors' reports 37
Financial statements:
Consolidated balance sheets at September 30,
1997 and 1996 39
Consolidated statements of income for the
years ended September 30, 1997, 1996 and 1995 40
Consolidated statements of shareholders'
equity for the years ended September 30,
1997, 1996 and 1995 41
Consolidated statements of cash flows for the years
ended September 30, 1997, 1996 and 1995 43
Notes to consolidated financial statements 45-73
</TABLE>
All financial statement schedules are omitted because the required
information is not present, or not present in amounts sufficient to require
submission of the schedule, or because the information required is included in
the financial statements and accompanying notes thereto.
77
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
By /s/ David L. Bickerstaff
------------------------
David L. Bickerstaff
Vice President and Controller
Date: December 12, 1997
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Robert W. Best and Larry J.
Dagley, or either of them acting alone or together, as his true and lawful
attorney-in-fact and agent with full power to act alone, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this Form 10-K, and to
file the same, with all exhibits thereto, and all other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated:
/s/ Robert W. Best Chairman, December 12, 1997
- ------------------------- President and
Robert W. Best Chief Executive
Officer
78
<PAGE>
/s/ Larry J. Dagley Executive Vice December 12, 1997
- ------------------------- President and
Larry J. Dagley Chief Financial
Officer
/s/ David L. Bickerstaff Vice President December 12, 1997
- ------------------------- and Controller
David L. Bickerstaff (Principal
accounting officer)
/s/ Travis W. Bain, II Director December 12, 1997
- -------------------------
Travis W. Bain, II
/s/ Dan Busbee Director December 12, 1997
- -------------------------
Dan Busbee
/s/ Richard W. Cardin Director December 12, 1997
- -------------------------
Richard W. Cardin
/s/ Thomas J. Garland Director December 12, 1997
- -------------------------
Thomas J. Garland
/s/ Gene C. Koonce Director December 12, 1997
- -------------------------
Gene C. Koonce
/s/ Vincent J. Lewis Director December 12, 1997
- -------------------------
Vincent J. Lewis
79
<PAGE>
/s/ Thomas C. Meredith Director December 12, 1997
- -------------------------
Thomas C. Meredith
/s/ Phillip E. Nichol Director December 12, 1997
-------------------------
Phillip E. Nichol
/s/ Carl S. Quinn Director December 12, 1997
-------------------------
Carl S. Quinn
/s/ Lee E. Schlessman Director December 12, 1997
-------------------------
Lee E. Schlessman
/s/ Charles K. Vaughan Director December 12, 1997
- -------------------------
Charles K. Vaughan
/s/ Richard Ware II Director December 12, 1997
-------------------------
Richard Ware II
80
<PAGE>
EXHIBITS INDEX
Item 14. (a) (3)
Page Number or
Exhibit Incorporation by
Number Description Reference to
-------- ------------------------------------ -------------------------
Plan of Reorganization
----------------------
2.1 Agreement and Plan of Reorganization Exhibit 2.1 of Form S-4
dated July 19, 1996, by and between filed October 4, 1996
the Registrant and United Cities Gas
Company
2.2 Amendment No. 1 to Agreement and Exhibit 2.1(a) of Form S-
Plan of Reorganization dated October 4 filed October 4, 1996
3, 1996
Articles of Incorporation and Bylaws
3.1 Restated Articles of Incorporation
of the Company, as Amended (as of
July 31, 1997)
3.2 Bylaws of the Company (Amended and
Restated as of November 12, 1997)
Instruments Defining Rights of
Security Holders
4.1 Specimen Common Stock Certificate Exhibit (4)(b) of Form
(Atmos Energy Corporation) 10-K for fiscal year
ended September 30, 1988
(File No. 1-10042)
4.2(a) Rights Agreement, dated as of April Exhibit (1) of Form 8-K
27, 1988, between the Company and filed May 10, 1988 (File
Morgan Shareholder Services Trust No. 0-11249)
Company
4.2(b) Amendment No. 1 to Rights Agreement, Exhibit 4.3(b) of Form
dated August 10, 1994 10-K for fiscal year
ended September 30, 1994
(File No. 1-10042)
4.2(c) Certificate of Adjusted Price, dated Exhibit 4.3(c) of Form
August 15, 1994 10-K for fiscal year
ended September 30, 1994
(File No. 1-10042)
4.3 Rights Agreement, dated as of Exhibit 4.1 of Form 8-K
November 12, 1997, between the dated November 12, 1997
Company and BankBoston, N.A.
81
<PAGE>
Page Number or
Exhibit Incorporation by
Number Description Reference to
-------- ------------------------------------ -------------------------
9 Not applicable
Material Contracts
------------------
10.1(a) Note Purchase Agreement, dated as of Exhibit 10(c) of Form 8-K
December 21, 1987, by and between filed January 7, 1988
the Company and John Hancock Mutual (File No. 0-11249)
Life Insurance Company
Note Purchase Agreement, dated as of
December 21, 1987, by and between
the Company and John Hancock
Charitable Trust I (Agreement is
identical to Hancock Agreement
listed above except as to the
parties thereto.)
Note Purchase Agreement dated as of
December 21, 1987, by and between
the Company and Mellon Bank, N.A.,
Trustee under Master Trust Agreement
of AT&T Corporation, dated January
1, 1984, for Employee Pension Plans
- AT&T - John Hancock - Private
Placement (Agreement is identical to
Hancock Agreement listed above
except as to the parties thereto.)
10.1(b) Amendment to Note Purchase Exhibit (10)(b)(ii) of
Agreement, dated October 11, 1989, Form 10-K for fiscal year
by and between the Company and John ended September 30, 1989
Hancock Mutual Life Insurance (File No. 1-10042)
Company revising Note Purchase
Agreement dated December 21, 1987
Amendment to Note Purchase
Agreement, dated October 11, 1989,
by and between the Company and John
Hancock Charitable Trust I revising
Note Purchase Agreement dated
December 21, 1987. (Amendment is
identical to Hancock amendment
listed above except as to the
parties thereto.)
82
<PAGE>
Page Number or
Exhibit Incorporation by
Number Description Reference to
-------- ------------------------------------ -------------------------
Amendment to Note Purchase
Agreement, dated October 11, 1989,
by and between the Company and
Mellon Bank, N.A., Trustee under
Master Trust Agreement of AT&T
Corporation, dated January 1, 1984,
for Employee Pension Plans - AT&T -
John Hancock - Private Placement
revising Note Purchase Agreement
dated December 21, 1987 (Amendment
is identical to Hancock amendment
listed above except as to the
parties thereto.)
10.1(c) Amendment to Note Purchase Exhibit 10(b)(iii) of
Agreement, dated November 12, 1991, Form 10-K for fiscal year
by and between the Company and John ended September 30, 1991
Hancock Mutual Life Insurance (File No. 1-10042)
Company revising Note Purchase
Agreement dated December 21, 1987
Amendment to Note Purchase
Agreement, dated November 12, 1991,
by and between the Company and John
Hancock Charitable Trust I revising
Note Purchase Agreement dated
December 21, 1987. (Amendment is
identical to Hancock amendment
listed above except as to the
parties thereto.)
Amendment to Note Purchase
Agreement, dated November 12, 1991,
by and between the Company and
Mellon Bank, N.A., Trustee under
Master Trust Agreement of AT&T
Corporation, dated January 1, 1984,
for Employee Pension Plans - AT&T -
John Hancock - Private Placement
revising Note Purchase Agreement
dated December 21, 1987. (Amendment
is identical to Hancock amendment
above except as to the parties
thereto.)
10.2(a) Note Purchase Agreement, dated as of Exhibit 10(c) of Form 10-
October 11, 1989, by and between the K for fiscal year ended
Company and John Hancock Mutual Life September 30, 1989 (File
Insurance Company No. 1-10042)
83
<PAGE>
Page Number or
Exhibit Incorporation by
Number Description Reference to
-------- ------------------------------------ -------------------------
10.2(b) Amendment to Note Purchase Exhibit 10(c)(ii) of Form
Agreement, dated as of November 12, 10-K for fiscal year
1991, by and between the Company and ended September 30, 1991
John Hancock Mutual Life Insurance (File No. 1-10042)
Company revising Note Purchase
Agreement dated October 11, 1989
10.3(a) Note Purchase Agreement, dated as of Exhibit 10(f)(i) of Form
August 29, 1991, by and between the 10-K for fiscal year
Company and The Variable Annuity ended September 30, 1991
Life Insurance Company (File No. 1-10042)
10.3(b) Amendment to Note Purchase Exhibit 10(f)(ii) of Form
Agreement, dated November 26, 1991, 10-K for fiscal year
by and between the Company and The ended September 30, 1991
Variable Annuity Life Insurance (File No. 1-10042)
Company revising Note Purchase
Agreement dated August 29, 1991
10.4 Note Purchase Agreement, dated as of Exhibit (10)(f) of Form
August 31, 1992, by and between the 10-K for fiscal year
Company and The Variable Annuity ended September 30, 1992
Life Insurance Company (File No. 1-10042)
10.5 Note Purchase Agreement, dated Exhibit 10.1 of Form 10-Q
November 14, 1994, by and among the for quarter ended
Company and New York Life Insurance December 31, 1994 (File
Company, New York Life Insurance and No. 1-10042)
Annuity Corporation, The Variable
Annuity Life Insurance Company,
American General Life Insurance
Company, and Merit Life Insurance
Company
10.6 Loan Agreement by and between the Exhibit 10.1 of Form 10-Q
Company and NationsBank of Texas, for quarter ended
N.A. dated as of November 26, 1996 December 31, 1996 (File
No. 1-10042)
10.7 Indenture of Mortgage, dated as of Exhibit to Registration
July 15, 1959, from United Cities Statement of United
Gas Company to First Trust of Cities Gas Company on
Illinois, National Association, and Form S-3 (File No. 33-
M.J. Kruger, as Trustees, as amended 56983).
and supplemented through December 1,
1992 (the Indenture of Mortgage
through the 20th Supplemental
Indenture)
84
<PAGE>
Page Number or
Exhibit Incorporation by
Number Description Reference to
-------- ------------------------------------ -------------------------
10.7(a) Twenty-First Supplemental Indenture
dated as of February 5, 1997 by and
among United Cities Gas Company and
Bank of America Illinois and First
Trust National Association and
Russell C. Bergman supplementing
Indenture of Mortgage dated as of
July 15, 1959
10.7(b) Twenty-Second Supplemental Indenture
dated as of July 29, 1997 by and
among the Company and First Trust
National Association and Russell C.
Bergman supplementing Indenture of
Mortgage dated as of July 15, 1959
10.8 Form of Indenture between United Exhibit to Registration
Cities Gas Company and First Trust Statement of United
of Illinois, National Association, Cities Gas Company on
as Trustee dated as of November 15, Form S-3 (File No. 33-
1995 56983)
10.8(a) First Supplemental Indenture between
the Company and First Trust of
Illinois, National Association, as
Trustee dated as of July 29, 1997
10.9(a) Seventh Supplemental Indenture, Exhibit 10.1 of Form 10-Q
dated as of October 1, 1983 between for quarter ended June
Greeley Gas Company ("the Greeley 30, 1994 (File No. 1-
Gas Division") and the Central Bank 10042)
of Denver, N.A. ("Central Bank")
10.9(b) Ninth Supplemental Indenture, dated Exhibit 10.2 of Form 10-Q
as of April 1, 1991, between the for quarter ended June
Greeley Gas Division and Central 30, 1994 (File No. 1-
Bank 10042)
10.9(c) Bond Purchase Agreement, dated as of Exhibit 10.3 of Form 10-Q
April 1, 1991, between the Greeley for quarter ended June
Gas Division and Central Bank 30, 1994 (File No. 1-
10042)
10.9(d) Tenth Supplemental Indenture, dated Exhibit 10.4 of Form 10-Q
as of December 1, 1993, between the for quarter ended June
Company and Colorado National Bank, 30, 1994 (File No. 1-
formerly Central Bank 10042)
85
<PAGE>
Page Number or
Exhibit Incorporation by
Number Description Reference to
-------- ------------------------------------ -------------------------
Gas Supply Contracts
10.10(a) Firm Gas Transportation Agreement
No. 123535 dated November 1, 1995
between Greeley Gas Company and
Public Service Company of Colorado
10.10(b) Transportation Storage Service Exhibit 10.6(b) of Form
Agreement No. TA-0544 between 10-K for fiscal year
Greeley Gas Company and Williams ended September 30, 1994
Natural Gas Company dated October 1, (File No. 1-10042)
1993
10.10(c) No-Notice Transportation Service Exhibit 10.6(c) of Form
Agreement No. 31013, Rate Schedule 10-K for fiscal year
NNT-1, between Greeley Gas Company ended September 30, 1994
and Colorado Interstate Gas Company, (File No. 1-10042)
as amended, dated October 1, 1993
(term extended to April 30, 2000 by
letter dated January 2, 1996)
10.10(d) Firm Transportation Service Exhibit 10.6(d) of Form
Agreement No. 35009, Rate Schedule 10-K for fiscal year
TF-2, between Greeley Gas Company ended September 30, 1994
and Colorado Interstate Gas Company, (File No. 1-10042)
as amended, dated October 1, 1993
(term extended to April 30, 2000 by
letter dated January 2, 1996)
10.11 Amarillo Supply Agreement dated Exhibit 10.7(a) of Form
January 2, 1993 between Energas and 10-K for fiscal year
Pioneer Natural Resources , USA, ended September 30, 1994
Inc. (formerly Mesa Operating (File No. 1-10042)
Company)
10.12(a) Agreement for Natural Gas Service Exhibit 10(o)(ii) of Form
for Distribution and Resale between 10-K for fiscal year
Trans La and LIG dated October 28, ended September 30, 1991
1991 (File No. 1-10042)
10.12(b) Agreement for Intrastate Exhibit 10(o)(iii) of
Transportation of Natural Gas Form 10-K for fiscal year
between Trans La and LIG dated ended September 30, 1991
October 28, 1991 (File No. 1-10042)
10.13(a) Gas Transportation Agreement between Exhibit 10.3 of Form 10-Q
Texas Gas and Western Kentucky Gas for quarter ended
dated November 1, 1993 (Contract no. December 31, 1993 (File
T3355, zone 3) No. 1-10042)
86
<PAGE>
Page Number or
Exhibit Incorporation by
Number Description Reference to
-------- ------------------------------------ -------------------------
10.13(b) Gas Transportation Agreement between Exhibit 10.4 of Form 10-Q
Texas Gas and Western Kentucky Gas for quarter ended
dated November 1, 1993 (Contract no. December 31, 1993 (File
T3819, zone 4) No. 1-10042)
10.13(c) Gas Transportation Agreement between Exhibit 10.5 of Form 10-Q
Texas Gas and Western Kentucky Gas for quarter ended
dated November 1, 1993 (Contract no. December 31, 1993 (File
N0210, zone 2, Contract no. N0340, No. 1-10042)
zone 3, Contract no. N0435, zone 4)
10.14(a) Gas Transportation Agreement, Exhibit 10.17(a) of Form
Contract No. 2550, dated September 10-K for fiscal year
1, 1993, between Tennessee Gas ended September 30, 1993
Pipeline Company, a division of (File No. 1-10042)
Tenneco, Inc. ("Tennessee Gas"), and
Western Kentucky, Campbellsville
Service Area
10.14(b) Gas Transportation Agreement, Exhibit 10.17(b) of Form
Contract No. 2546, dated September 10-K for fiscal year
1, 1993, between Tennessee Gas and ended September 30, 1993
Western Kentucky, Danville Service (File No. 1-10042)
Area
10.14(c) Gas Transportation Agreement, Exhibit 10.17(c) of Form
Contract No. 2385, dated September 10-K for fiscal year
1, 1993, between Tennessee Gas and ended September 30, 1993
Western Kentucky, Greensburg et al (File No. 1-10042)
Service Area
10.14(d) Gas Transportation Agreement, Exhibit 10.17(d) of Form
Contract No. 2551, dated September 10-K for fiscal year
1, 1993, between Tennessee Gas and ended September 30, 1993
Western Kentucky, Harrodsburg (File No. 1-10042)
Service Area
10.14(e) Gas Transportation Agreement, Exhibit 10.17(e) of Form
Contract No. 2548, dated September 10-K for fiscal year
1, 1993, between Tennessee Gas and ended September 30, 1993
Western Kentucky, Lebanon Service (File No. 1-10042)
Area
10.15 Gas Service Agreement (Service for Exhibit 10.5 of Form 10-Q
Firm Transportation) between Energas for quarter ended
and Westar Transmission Company December 31, 1996 (File
dated January 1, 1996. No. 1-10042)
87
<PAGE>
Page Number or
Exhibit Incorporation by
Number Description Reference to
-------- ------------------------------------ -------------------------
10.16 Gas Service Agreement (Service for Exhibit 10.7 of Form 10-Q
Firm Transportation) between Westar for quarter ended
Transmission Company and EnerMart December 31, 1996 (File
dated January 1, 1996 No. 1-10042)
10.17 Gas Service Agreement (Service for Exhibit 10.8 of Form 10-Q
Firm Transportation) between KN for quarter ended
Westex and EnerMart Trust dated December 31, 1996 (File
January 1, 1996 No. 1-10042)
10.18 Gas Sales Agreement (Irrigation) Exhibit 10.11 of Form 10-
between KN Marketing and EnerMart Q for quarter ended
Trust dated March 1, 1996. December 31, 1996 (File
No. 1-10042)
10.19 Gas Sales Agreement (Swing) between Exhibit 10.13 of Form 10-
Energas and KN Marketing, dated Q for quarter ended
January 1, 1996. December 31, 1996 (File
No. 1-10042)
10.20 Operating Agreement between Energas Exhibit 10.15 of Form 10-
and Westar Transmission Company, Q for quarter ended
effective December 1, 1996. December 31, 1996 (File
No. 1-10042)
Executive Compensation Plans and
Arrangements
10.21(a) *Severance Agreement dated April 1, Exhibit 10.3 of Form 10-Q
1995 between the Company and J. for quarter ended June
Charles Goodman 30, 1995 (File No. 1-
10042)
10.21(b) *Severance Agreement amended and Exhibit 10(r)(iii) of
restated as of August 8, 1991, Form 10-K for fiscal year
between the Company and Don E. James ended September 30, 1991
(File No. 1-10042)
10.21(c) *Severance Agreement dated May 3, Exhibit 10.2 of Form 10-Q
1995 between the Company and Mary S. for quarter ended June
Lovell 30, 1995 (File No. 1-
10042)
10.21(d) *Severance Agreement dated August Exhibit 10.18(g) of Form
14, 1996, between the Company and 10-K for fiscal year
Glen A. Blanscet ended September 30, 1996
(File No. 1-10042)
88
<PAGE>
Page Number or
Exhibit Incorporation by
Number Description Reference to
-------- ------------------------------------ -------------------------
10.21(e) *Severance Agreement dated March 10, Exhibit 10.1 of Form 10-Q
1997, between the Company and Robert for quarter ended March
W. Best 31, 1997 (File No. 1-
10042)
10.21(f) *Severance Agreement dated May 10,
1997, between the Company and Larry
J. Dagley
10.22 *Atmos Energy Corporation Mini-Med Exhibit 10.22 of Form 10-
Plan, as restated effective July 1, K for fiscal year ended
1996 September 30, 1996 (File
No. 1-10042)
10.23 *Atmos Energy Corporation Deferred Exhibit 10(x) of Form 10-
Compensation Plan for Outside K for fiscal year ended
Directors September 30, 1992 (File
No. 1-10042)
10.24 *Atmos Energy Corporation Retirement Exhibit 10(y) of Form 10-
Plan for Outside Directors K for fiscal year ended
September 30, 1992 (File
No. 1-10042)
10.24(a) *Amendment No. 1 to the Atmos Energy Exhibit 10.2 of Form 10-Q
Corporation Retirement Plan for for quarter ended
Outside Directors December 31, 1996 (File
No. 1-10042)
10.25(a) *Description of Car Allowance Exhibit 10.26(a) of Form
Payments 10-K for fiscal year
ended September 30, 1993
(File No. 1-10042)
10.25(b) *Description of Financial and Estate
Planning Program
10.25(c) *Description of Sporting Events Exhibit 10.26(c) of Form
Program 10-K for fiscal year
ended September 30, 1993
(File No. 1-10042)
10.26 *Atmos Energy Corporation Exhibit 10.1 of Form 10-Q
Supplemental Executive Benefits Plan for quarter ended June
(Amended and Restated May 14, 1997) 30, 1997 (File No. 1-
10042)
10.26(a) *Amendment No. 1 to the Atmos Energy
Corporation Supplemental Executive
Benefits Plan
89
<PAGE>
Page Number or
Exhibit Incorporation by
Number Description Reference to
-------- ------------------------------------ -------------------------
10.26(b) *Amendment No. 2 to the Atmos Energy
Corporation Supplemental Executive
Benefits Plan
10.27 *Atmos Energy Corporation Restricted
Stock Grant Plan (Amended and
Restated as of November 12, 1997)
10.28 *Atmos Energy Corporation Outside
Directors Stock-for-Fee Plan
(Amended and Restated as of November
12, 1997)
10.29 *Atmos Energy Corporation Executive Exhibit 10.4 of Form 10-Q
Annual Performance Bonus Plan for quarter ended
(Amended and Restated as of November December 31, 1996 (File
13, 1996) No. 1-10042)
10.30 *Consulting Agreement between the Exhibit 10.2 of Form 10-Q
Company and Charles K. Vaughan, for quarter ended June
effective October 1, 1994 30, 1997 (File No. 1-
10042)
10.30(a) *Amendment No. 1 to Consulting Exhibit 10.3 of Form 10-Q
Agreement between the Company and for quarter ended June
Charles K. Vaughan, dated May 14, 30, 1997 (File No. 1-
1997 10042)
10.31 *The Atmos Energy Corporation
Executive Retiree Life Plan
10.31(a) *Amendment No. 1 to The Atmos Energy
Corporation Executive Retiree Life
Plan
11 Not applicable
12 Not applicable
13 Not applicable
16 Not applicable
18 Not applicable
90
<PAGE>
Page Number or
Exhibit Incorporation by
Number Description Reference to
-------- ------------------------------------ -------------------------
Other Exhibits, as indicated
21 Subsidiaries of the registrant
22 Not applicable
23.1 Consent of independent auditors,
Ernst & Young LLP
23.2 Consent of independent auditors,
Arthur Andersen LLP
24 Power of Attorney Signature page of Form
10-K for fiscal year
ended September 30, 1997
27 Financial Data Schedule for Atmos
for year ended September 30, 1997
28 Not applicable
- --------------------------
* This exhibit constitutes a "management contract or compensatory plan,
contract, or arrangement."
91
<PAGE>
Exhibit 3.1
RESTATED ARTICLES OF INCORPORATION
OF
ATMOS ENERGY CORPORATION
AS AMENDED
ARTICLE ONE
Atmos Energy Corporation, pursuant to the provisions of Article 4.07 of the
Texas Business Corporation Act, adopted Restated Articles of Incorporation,
which accurately copied the Articles of Incorporation and all amendments thereto
that were in effect to date and such Restated Articles of Incorporation
contained no change in any provision thereof.
ARTICLE TWO
Such Restated Articles of Incorporation were adopted by resolution of the
board of directors of the corporation on the 8th day of November, 1989.
ARTICLE THREE
The Restated Articles of Incorporation have been further amended pursuant
to that certain Plan of Merger by and between Atmos Energy Corporation and
United Cities Gas Company, an Illinois and Virginia corporation. The Articles
of Incorporation and all amendments and supplements thereto as superseded by the
Restated Articles of Incorporation and as amended pursuant to the Plan of Merger
are as follows:
ARTICLE I.
The name of the corporation shall be Atmos Energy Corporation (the
"Corporation").
1
<PAGE>
ARTICLE II.
The purposes for which the Corporation is organized are the transaction of
any or all lawful business for which corporations may be incorporated under the
Texas Business Corporation Act, including, but not limited to, the
transportation and distribution of natural gas by pipeline as a public utility,
except that with respect to the Commonwealth of Virginia, the Corporation may
only conduct such business as is permitted to be conducted by a public service
company engaged in the transportation and distribution of natural gas by
pipeline.
ARTICLE III.
The Corporation is incorporated in the State of Texas and the Commonwealth
of Virginia. The post office address of the registered office of this
Corporation in the State of Texas is Three Lincoln Centre, Suite 1800, 5430 LBJ
Freeway, Dallas, Texas 75240, and the registered agent for service of this
Corporation at the same address is Glen A. Blanscet. The post office address of
the registered office of this Corporation in the Commonwealth of Virginia is
Riverfront Plaza, East Tower, 951 East Byrd Street, Richmond, Virginia 23219-
4074, and the registered agent for service of this Corporation at the same
address is Allen C. Goolsby, III, such registered agent being a resident of the
Commonwealth of Virginia and a member of the Virginia State Bar.
ARTICLE IV.
The period of the Corporation's duration shall be perpetual.
ARTICLE V.
The Corporation shall not commence business until it has received for the
shares consideration of the value of One Thousand Dollars ($1,000) consisting of
money, labor done or property actually received.
ARTICLE VI.
1. Number of Directors. The number of directors constituting the present
board of directors is thirteen (13); however, thereafter the number of directors
constituting the Board of Directors shall be fixed by the Bylaws of the
Corporation. No director shall be removed during his term of office except for
cause and by the affirmative vote of the holders of seventy-five percent (75%)
of the shares then entitled to vote at an election of directors. The names and
addresses of the persons who are to serve as directors until the next annual
meeting of the shareholders or until their successors are duly elected and
qualified are as follows:
2
<PAGE>
Name Address
Travis W. Bain II 2001 Coit Road
Suite 130
Plano, TX 75075
Robert W. Best Three Lincoln Centre
Suite 1800
5430 LBJ Freeway
Dallas, Texas 75240
Dan Busbee 2200 Ross Avenue
Suite 2200
Dallas, TX 75201
Richard W. Cardin 107 Sheffield Court
Nashville, TN 37215
Thomas J. Garland Tusculum College
McCormick Hall, 1st Floor
Greeneville, TN 37743
Gene C. Koonce 5300 Maryland Way
Brentwood, TN 37027
Vincent Lewis Meadows Office Complex
301 Route #17, North
Rutherford, NJ 07070
Thomas C. Meredith Western Kentucky University
Bowling Green, KY 42101
Phillip E. Nichol 301 Commerce
Suite 2800
Ft. Worth, TX 76102
Carl S. Quinn 14 East 75th Street, #8B
New York, NY 10021
Lee E. Schlessman 1301 Pennsylvania Street
Penn Center
Suite 800
Denver, CO 80203
Charles K. Vaughan Three Lincoln Centre
Suite 1800
5430 LBJ Freeway
Dallas, TX 75240
Richard Ware II Plaza One/Box One
Amarillo, TX 79105
2. Election and Term. The directors shall be divided into
3
<PAGE>
three classes, designated Class I, Class II and Class III. Each class shall
consist, as nearly as may be possible, of one-third of the total number of
directors constituting the entire Board of Directors. At each annual meeting of
shareholders, successors to the class of directors whose term expires at that
annual meeting shall be elected for a three-year term. Directors shall be
elected by a majority vote of the shares of the Common Stock entitled to vote in
the election of directors and represented in person or by proxy at a meeting of
shareholders at which a quorum is present. If the number of directors is
changed, any increase or decrease shall be apportioned among the classes so as
to maintain the number of directors in each class as nearly equal as possible,
and any additional director of any class elected by the shareholders to fill a
vacancy resulting from an increase in such class shall hold office for a term
that shall coincide with the remaining term of that class, but in no case will a
decrease in the number of directors shorten the term of any incumbent director.
A director shall hold office until the annual meeting for the year in which his
term expires and until his successor shall be duly elected and qualified,
subject, however, to prior death, resignation, retirement, disqualification or
removal from office.
ARTICLE VII.
1. Capitalization.
The aggregate number of shares which the Corporation shall have the
authority to issue is Seventy-Five Million (75,000,000) shares of Common Stock
having no par value.
2. Designation and Statement of Preferences, Limitations and Relative
Rights of Common Stock.
2.01 Subject to the provisions of law, including the Texas Business
Corporation Act and the Virginia Stock Corporation Act and to the conditions set
forth in any law, including resolution of the Board of Directors of the
Corporation, such dividends (payable in cash, stock or otherwise) as may be
determined by the Board of Directors may be declared and paid on the Common
Stock from time to time out of any funds legally available therefor.
2.02 The holders of the Common Stock shall exclusively possess full voting
power for the election of directors and for all other purposes. In the exercise
of its voting power, the Common Stock shall be entitled to one vote for each
share held.
3. Provisions Applicable to All Classes of Stock.
3.01 Subject to applicable law, the Board of Directors may in its
discretion issue from time to time authorized but unissued shares for such
consideration as it may determine. The
4
<PAGE>
shareholders shall have no pre-emptive rights, as such holders, to purchase any
shares or securities of any class which may at any time be sold or offered for
sale by the Corporation.
3.02 At each election for directors every shareholder entitled to vote at
any meeting shall have the right to vote, in person or by proxy, the number of
shares owned by him for as many persons as there are directors to be elected.
Cumulative voting of shares of stock in the election of directors or otherwise
is hereby expressly prohibited.
3.03 The Corporation shall be entitled to treat the person in whose name
any share or other security is registered as the owner thereof, for all
purposes, and shall not be bound to recognize any equitable or other claim to or
interest in such shares or other security on the part of any other person,
whether or not the Corporation shall have notice thereof.
4. Provisions Applicable to Certain Business Combinations.
4.01 The affirmative vote of the holders of not less than seventy-five
percent (75%) of the outstanding shares of "Voting Stock" (as hereinafter
defined) held by stockholders other than a "Substantial Shareholder" (as
hereinafter defined) shall be required for the approval or authorization of any
"Business Combination" (as hereinafter defined) of the Corporation with any
Substantial Shareholder; provided, however, that the seventy-five percent (75%)
voting requirement shall not be applicable if either:
(i) The "Continuing Directors" (as hereinafter defined) of the
Corporation by the affirmative vote of at least a majority (a) have
expressly approved in advance the acquisition of the outstanding shares of
Voting Stock that caused such Substantial Shareholder to become a
Substantial Shareholder, or (b) have expressly approved such Business
Combination either in advance of or subsequent to such Substantial
Shareholder's having become a Substantial Shareholder; or
(ii) The cash or fair market value (as determined by at least a
majority of the Continuing Directors) of the property, securities or other
consideration to be received per share by holders of Voting Stock of the
Corporation in the Business Combination is not less than the "Highest Per
Share Price" or the "Highest Equivalent Price" (as these terms are
hereinafter defined) paid by the Substantial Shareholder in acquiring any
of its holdings of the Corporation's Voting Stock.
5
<PAGE>
4.02 For purposes of this paragraph 4 of Article VII:
(i) The term "Business Combination" shall include, without limitation,
(a) any merger or consolidation of the Corporation, or any entity
controlled by or under common control with the Corporation, with or into
any Substantial Shareholder, or any entity controlled by or under common
control with the Substantial Shareholder, (b) any merger or consolidation
of a Substantial Shareholder, or any entity controlled by or under common
control with the Corporation, (c) any sale, lease, exchange, transfer or
other disposition of all or substantially all of the property and assets of
the Corporation, or any entity controlled by or under common control with
the Corporation, to a Substantial Shareholder, or any entity controlled by
or under common control with the Substantial Shareholder, (d) any purchase,
lease, exchange, transfer or other acquisition of all or substantially all
of the property and assets of a Substantial Shareholder or any entity
controlled by or under common control with the Corporation, (e) any
recapitalization of the Corporation that would have the effect of
increasing the voting power of a Substantial Shareholder, and (f) any
agreement, contract or other arrangement providing for any of the
transactions described in this definition of Business Combination.
(ii) The term "Substantial Shareholder" shall mean and include any
individual, corporation, partnership or other person or entity which,
together with its "Affiliates" and "Associates" (as those terms are defined
in Rule 12b-2 of the General Rules and Regulations promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act") as in effect at the
date of the adoption hereof), "Beneficially Owns" (as defined in Rule 13d-3
of the Exchange Act) an aggregate of 10 percent or more of the outstanding
Voting Stock of the Corporation, and any Affiliate or Associate of any such
individual, corporation, partnership or other person or entity.
6
<PAGE>
(iii) Without limitation, any share of Voting Stock of the
Corporation that any Substantial Shareholder has the right to acquire at
any time (notwithstanding that Rule 13d-3 of the Exchange Act deems such
shares to be beneficially owned only if such right may be exercised within
60 days) pursuant to any agreement, or upon exercise of conversion rights,
warrants or options, or otherwise, shall be deemed to be Beneficially Owned
by the Substantial Shareholder and to be outstanding for purposes of clause
(ii) above.
(iv) For the purposes of subparagraph 4.01(ii) of this paragraph 4 of
Article VII, the term "other consideration to be received" shall include,
without limitation, Common Stock or other capital stock of the Corporation
retained by its existing stockholders other than Substantial Shareholders
or other parties to such Business Combination in the event of a Business
Combination in which the Corporation is the surviving corporation.
(v) The term "Voting Stock" shall mean all of the outstanding shares
of Common Stock entitled to vote on each matter on which the holders of
record of Common Stock shall be entitled to vote, and each reference to a
proportion of shares of Voting Stock shall refer to such proposition of the
votes entitled to be cast by such shares.
(vi) The term "Continuing Director" shall mean a Director who was a
member of the Board of Directors of the Corporation immediately prior to
the time that the Substantial Shareholder involved in a Business
Combination became a Substantial Shareholder.
(vii) A Substantial Shareholder shall be deemed to have acquired a
share of the Voting Stock of the Corporation at the time when such
Substantial Shareholder became the Beneficial Owner thereof. With respect
to the shares owned by Affiliates, Associates or other persons whose
ownership is attributed to a Substantial Shareholder under the foregoing
definition of Substantial Shareholder, if the price is paid by such
Substantial Shareholder for such shares is not determinable by a majority
of the Continuing Directors, the price so paid shall be deemed to be the
higher of (a) the price paid upon the acquisition thereof by the Affiliate,
Associate or other person or (b) the market price of the shares in question
at the time when the Substantial Shareholder became the Beneficial Owner
thereof.
7
<PAGE>
(viii) The terms "Highest Per Share Price" and "Highest Equivalent
Price" as used in this paragraph 4 of Article VII shall mean the highest
price that can be determined to have been paid at any time by the
Substantial Shareholder for any share or shares of that class of capital
stock. If there is more than one class of capital stock of the Corporation
issued and outstanding, the Highest Equivalent Price shall mean with
respect to each class and series of capital stock of the Corporation the
amount determined by a majority of the Continuing Directors, on whatever
basis they believe is appropriate, to be the highest per share price
equivalent to the highest price that can be determined to have been paid at
any time by the Substantial Shareholder for any share or shares of any
class or series of capital stock of the Corporation. In determining the
Highest Per Share Price and Highest Equivalent Price, all purchases by the
Substantial Shareholder shall be taken into account regardless of whether
the shares were purchased before or after the Substantial Shareholder
became a Substantial Shareholder. The Highest Per Share Price and the
Highest Equivalent Price shall include any brokerage commissions, transfer
taxes and soliciting dealers' fees paid by the Substantial Shareholder with
respect to the shares of capital stock of the Corporation acquired by the
Substantial Shareholder. In the case of any Business Combination with a
Substantial Shareholder, the Continuing Directors shall determine the
Highest Per Share Price or the Highest Equivalent Price for each class and
series of the capital stock of the Corporation.
4.03 The provisions set forth in this paragraph 4 of Article VII may not be
amended, altered, changed or repealed in any respect unless such action is
approved by the affirmative vote of the holders of not less than seventy-five
percent (75%) of the outstanding shares of Voting Stock (as defined in this
Article VII) of the Corporation at a meeting of the shareholders duly called for
the consideration of such amendment, alteration, change or repeal; provided,
however, that if there is a Substantial Shareholder (as defined in this Article
VII), such action must also be approved by the affirmative vote of the holders
of not less than seventy-five percent (75%) of the outstanding shares of Voting
Stock held by the shareholders other than the Substantial Shareholder.
ARTICLE VIII.
The power to alter, amend or repeal the Corporation's bylaws, and to adopt
new bylaws, is hereby vested in the Board of Directors, subject, however, to
repeal or change by the affirmative vote of the holders of seventy-five percent
(75%) of
8
<PAGE>
the outstanding shares entitled to vote thereon.
ARTICLE IX.
The Corporation shall indemnify, to the fullest extent permitted by law,
any person who was, is, or is threatened to be made a named defendant or
respondent in any threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative, arbitrative, or investigative, any
appeal in such action, suit, or proceeding, and any inquiry or investigation
that could lead to such an action, suit, or proceeding, by reason of the fact
that such person is or was a director or officer of the Corporation, or, while
such person was a director of the Corporation, is or was serving at the request
of the Corporation as a director, officer, partner, venturer, proprietor,
trustee, employee, agent, or similar functionary of another corporation,
partnership, joint venture, sole proprietorship, trust, employee benefit plan,
or other enterprise, against judgments, penalties (including excise and similar
taxes), fines, settlements, and reasonable expenses (including attorney's fees)
actually incurred by such person in connection with such action, suit, or
proceeding. In addition to the foregoing, the Corporation shall, upon request
of any such person described above and to the fullest extent permitted by law,
pay or reimburse the reasonable expenses incurred by such person in any action,
suit, or proceeding described above in advance of the final disposition of such
action, suit, or proceeding.
ARTICLE X.
No director of the Corporation shall be personally liable to the
Corporation or its shareholders for monetary damages for an act or omission in
such director's capacity as a director, except for liability for (i) a breach of
the director's duty of loyalty to the Corporation or its shareholders; (ii) an
act or omission not in good faith or that involves intentional misconduct or a
knowing violation of the law; (iii) a transaction from which the director
received an improper benefit, whether or not the benefit resulted from an action
taken within the scope of the director's office; (iv) an act or omission for
which the liability of a director is expressly provided by statute; or (v) an
act related to an unlawful stock repurchase or payment of a dividend. If the
laws of the State of Texas or the Commonwealth of Virginia are hereafter amended
to authorize corporate action further eliminating or limiting the personal
liability of a director of the Corporation, then the liability of a director of
the Corporation shall thereupon automatically be eliminated or limited to the
fullest extent permitted by the laws of the State of Texas and the Commonwealth
of Virginia. Any repeal or modification of this Article X by the shareholders
of the Corporation shall not adversely affect any right or protection of a
director existing at the time of such repeal or modification
9
<PAGE>
with respect to such events or circumstances occurring or existing prior to such
time.
10
<PAGE>
EXHIBIT 3.2
BYLAWS
OF
ATMOS ENERGY CORPORATION
(Amended and Restated as of November 12, 1997)
----- *** -----
ARTICLE I
OFFICES
1.01 Registered Office. The registered office in the State of Texas shall
be located in the City of Dallas, County of Dallas, State of Texas. The
registered office in the Commonwealth of Virginia shall be located in the City
of Richmond, Commonwealth of Virginia.
1.02 Other Offices. The corporation also may have offices at such other
places both within and without the State of Texas or the Commonwealth of
Virginia as the Board of Directors may from time to time determine or as the
business of the corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
2.01 Place of Meetings. All meetings of shareholders for the election of
directors or for any other proper purposes shall be held at such place within or
without the State of Texas or the Commonwealth of Virginia as the Board of
Directors may from time to time designate, as stated in the notice of such
meeting or a duly executed waiver of notice thereof.
2.02 Annual Meeting. An annual meeting of shareholders shall be held at
11:00 a.m. on the second Wednesday of February of each year commencing in 1989,
unless such day is a legal holiday, in which case such meeting shall be held at
the specified time on the next full business day thereafter which is not a legal
holiday, or on such day and at such time as shall be determined by the Board of
Directors. At such meeting the shareholders entitled to vote thereat shall
elect a Board of Directors and may transact such other business as may properly
be brought before the meeting.
2.03 Special Meetings. Special meetings of shareholders may be called by
the Chairman of the Board of Directors, the President, a majority of the Board
of Directors, or as otherwise provided in the Articles of Incorporation, the
Texas Business Corporation Act, or the Virginia Stock Corporation Act.
2.04 Notice of Annual or of Special Meeting. Written or printed notice
stating the place, day and hour of the meeting and, in case of a special
meeting, the purpose or purposes for
<PAGE>
which the meeting is called, shall be delivered not less than ten (10) nor more
than sixty (60) days before the date of the meeting. However, notice of a
meeting of shareholders to act upon an amendment of the Articles of
Incorporation, a plan of merger or share exchange, a proposed sale of all or
substantially all of the assets, or the dissolution of the corporation shall be
given not less than twenty-five (25) nor more than sixty (60) days before the
meeting date. Notice may be given either personally or by mail, by or at the
direction of the Chairman of the Board, President, Secretary, or the officer or
person calling the meeting to each shareholder of record entitled to vote at
such meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, addressed to the shareholder at his address
as it appears on the stock transfer books of the corporation, with postage
thereon prepaid.
2.05 Notice of Shareholder Proposals. At any annual meeting, only such
business shall be conducted as shall have been brought before the annual meeting
by or at the direction of the Board of Directors or by any shareholder who
complies with the procedures set forth in this Section 2.05.
Except as otherwise provided by the Articles of Incorporation, the only
business which shall be conducted at any annual meeting of the shareholders
shall (i) have been specified in the written notice of the meeting (or any
supplement thereto) given as provided in Section 2.04 of the Bylaws, (ii) be
brought before the meeting at the direction of the Board of Directors or the
Chairman of the meeting or (iii) have been specified in a written notice (a
"Shareholder Proposal Notice") given to the corporation, in accordance with all
of the following requirements, by or on behalf of any shareholder who shall have
been a shareholder of record on the record date for such meeting and who shall
continue to be entitled to vote thereat. Each Shareholder Proposal Notice must
be delivered or mailed by first class United States mail, postage prepaid, to
and received by, the Secretary of the corporation, at the principal executive
offices of the corporation, not less than sixty (60) days nor more than eighty-
five (85) days prior to the annual meeting; provided, however, that if less than
seventy-five (75) days' notice or prior public disclosure of the date of the
annual meeting is given or made to shareholders, notice by the shareholder to be
timely must be received by the Secretary of the corporation not later than the
close of business on the tenth (10/th/) day following the day on which such
notice of the date of the annual meeting was mailed or such public disclosure
was made. To be included in the corporation's proxy statement for mailing to all
shareholders, a Shareholder Proposal Notice must be delivered or mailed by first
class United States mail, postage prepaid, to and received by, the Secretary of
the corporation, at the principal executive offices of the corporation, not less
than one hundred twenty (120) days in advance of the date of the corporation's
release of its proxy statement to shareholders in connection with the previous
year's annual meeting of
2
<PAGE>
shareholders.
Each Shareholder Proposal Notice shall set forth: (i) a description of each
item of business proposed to be brought before the meeting; (ii) the name and
address of the shareholder proposing to bring such item of business before the
meeting; (iii) the class and number of shares of stock held of record, owned
beneficially and represented by proxy by such shareholder as of the record date
for the meeting (if such date shall then have been made publicly available) and
as of the date of such Shareholder Proposal Notice; and (iv) all other
information which would be required to be included in a proxy statement filed
with the Securities and Exchange Commission if, with respect to any such item of
business, such shareholder were a participant in a solicitation subject to
Section 14 of the Securities Exchange Act of 1934. No business shall be brought
before any meeting of shareholders of the corporation otherwise than as provided
in this paragraph or the Articles of Incorporation.
2.06 Business at Special Meeting. The business transacted at any special
meeting of shareholders shall be limited to the purposes stated in the notice
thereof.
2.07 Quorum of Shareholders. Unless otherwise provided in the Articles of
Incorporation, the holders of a majority of the shares entitled to vote,
represented in person or by proxy, shall constitute a quorum at a meeting of
shareholders. If, however, a quorum shall not be present or represented at any
meeting of the shareholders, the shareholders present in person or represented
by proxy shall have the power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. If the date of the adjourned meeting is at least one hundred
twenty (120) days after the date of the original meeting, notice of such
adjourned meeting must be provided to shareholders as of the new record date.
At such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified.
2.08 Act of Shareholders' Meeting. With respect to any matter, other than
a matter for which the affirmative vote of the holders of a specified portion of
the shares may be required by the Texas Business Corporation Act or the Virginia
Stock Corporation Act, the affirmative vote of the holders of a majority of the
shares entitled to vote on a matter and represented in person or by proxy at a
meeting at which a quorum is present, shall be the act of the shareholders,
unless the vote of a greater number is required by law or the Articles of
Incorporation
2.09 Voting of Shares. Each outstanding share, regardless of class, shall
be entitled to one vote on each matter submitted to a vote at a meeting of
shareholders, except to the extent that
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the voting rights of the shares of any class are limited or denied by the
Articles of Incorporation or are otherwise provided by law. Cumulative voting in
the election of directors or otherwise is expressly prohibited by the Articles
of Incorporation. At each election for directors, every shareholder entitled to
vote at such election shall have the right to vote, in person or by proxy, the
number of shares owned by him for as many persons as there are directors to be
elected and for whose election he has the right to vote.
2.10 Proxies. At any meeting of the shareholders, each shareholder having
the right to vote shall be entitled to vote either in person or by proxy
executed in writing by the shareholder or by his duly authorized attorney-in-
fact. Any such proxy shall be delivered to the secretary of such meeting at or
prior to the time designated by the chairman of the meeting or in the order of
business for so delivering such proxies. No proxy shall be valid after eleven
(11) months from the date of its execution unless otherwise provided in the
proxy. Each proxy shall be revocable unless expressly provided therein to be
irrevocable and unless otherwise made irrevocable by law. Unless required by
statute or determined by the chairman of the meeting to be advisable, the vote
on any question need not be by ballot. On a vote by ballot, each ballot shall be
signed by the shareholder voting or by such shareholder's proxy, if there be
such proxy.
2.11 Voting List. The officer or agent having charge of the stock transfer
books for shares of the corporation shall make, at least ten (10) days before
each meeting of shareholders, a complete list of the shareholders entitled to
vote at such meeting or any adjournment thereof, arranged in alphabetical order,
with the address of and number of shares held by each shareholder, which list,
for a period of ten (10) days prior to such meeting, shall be kept on file at
the registered office of the corporation and shall be subject to the inspection
by any shareholder at any time during usual business hours. Such list shall
also be produced and kept open at the time and place of the meeting and shall be
subject to the inspection of any shareholder during the whole time of the
meeting. The original stock transfer books shall be prima facie evidence as to
who are the shareholders entitled to examine such list or transfer books or to
vote at any such meeting of shareholders.
2.12 Order of Business. The order of business of each meeting of the
shareholders of the corporation shall be determined by the chairman of the
meeting. The chairman of the meeting shall have the right and authority to
prescribe such rules, regulations, and procedures and to do all such acts and
things as are necessary or desirable for the conduct of the meeting, including,
without limitation, the establishment of the procedures for the dismissal of
business not properly presented, maintenance of order and safety, limitations on
the time allotted to questions or comments on the affairs of the corporation,
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restrictions on entry to such meetings after the time prescribed for
commencement thereof, and the opening and closing of the voting polls.
2.13 Action by Written Consent without a Meeting. Any action required or
permitted by law, the Articles of Incorporation or these Bylaws to be taken at a
meeting of the shareholders may be taken without a meeting if a consent in
writing, setting forth the action so taken, is signed by all of the shareholders
entitled to vote with respect to the subject matter thereof. Such consent shall
have the same force and effect as a unanimous vote of shareholders.
ARTICLE III
BOARD OF DIRECTORS
3.01 Powers. The business and affairs of the corporation shall be managed
under the direction of its Board of Directors which may exercise all such powers
of the corporation and do all such lawful acts and things as are not by law, the
Articles of Incorporation or these Bylaws directed or required to be exercised
and done by the shareholders.
3.02 Number of Directors. The number of directors of the corporation
constituting the Board of Directors shall be not less than three (3) or more
than fifteen (15). The number of directors shall be determined in accordance
with these Bylaws by resolution of the Board of Directors or of the
shareholders, but no decrease shall have the effect of shortening the term of
any incumbent director. Any change in the range for the size of the Board of
Directors or a change from a variable-range to a fixed size Board or vice versa
may be effected following shareholder approval.
3.03 Election and Term. The directors shall be divided into three
classes, designated Class I, Class II and Class III. Each class shall consist,
as nearly as may be possible, of one-third of the total number of directors
constituting the entire Board of Directors. At the 1989 annual meeting of
shareholders, Class I directors shall be elected for a one-year term, Class II
directors for a two-year term and Class III directors for a three-year term. At
each succeeding annual meeting of shareholders beginning in 1990, successors to
the class of directors whose term expires at that annual meeting shall be
elected for a three-year term. Directors shall be elected by a majority vote of
the outstanding shares entitled to vote in the election of directors and
represented in person or by proxy at a meeting of shareholders at which a quorum
is present. If the number of directors is changed, any increase or decrease
shall be apportioned among the classes so as to maintain the number of directors
in each class as nearly equal as possible, and any additional director of any
class elected to fill a vacancy resulting from an increase in such class shall
hold office for a
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term that shall coincide with the remaining term of that class, but in no case
will a decrease in the number of directors shorten the term of any incumbent
director. A director shall hold office until the annual meeting for the year in
which his term expires and until his successor shall be elected and shall
qualify, subject, however, to prior death, resignation, retirement,
disqualification or removal from office.
3.04 Nominations of Directors. Nominations for election to the Board of
Directors of the corporation at a meeting of shareholders may be made by the
Board of Directors, or by any shareholder of the corporation entitled to vote
for the election of directors at such meeting. Such nominations, other than
those made by the Board of Directors, shall be made by notice in writing
delivered or mailed by first class United States mail, postage prepaid, to and
received by the Secretary of the corporation, at the principal executive offices
of the corporation, not less than sixty (60) days nor more than eighty-five (85)
days prior to any meeting of shareholders called for the election of directors;
provided, however, that if less than seventy-five (75) days' notice or prior
public disclosure of the date of the meeting is given or made to shareholders,
such nomination shall have been received by the Secretary of the corporation not
later than the close of business on the tenth (10/th/) day following the day on
which the notice of meeting was mailed or such public disclosure was made. Such
notice shall set forth: (i) the name and address of the shareholder who
intends to make the nomination and of the person or persons to be nominated;
(ii) the class and number of shares of stock held of record, owned beneficially
and represented by proxy by such shareholder as of the record date for the
meeting (if such date shall then have been made publicly available) and of the
date of such notice; (iii) a representation that the shareholder is a holder of
record of stock of the corporation entitled to vote at such meeting and that the
shareholder intends to appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice; (iv) a description of all
arrangements or understandings between such shareholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by such shareholder; (v) such other
information regarding each nominee proposed by such shareholder as would be
required to be disclosed in solicitations for proxies for election of directors
pursuant to the proxy rules of the Securities and Exchange Commission; and (vi)
the consent of each nominee to serve as a director of the corporation if so
elected. The presiding officer of the meeting may refuse to acknowledge the
nomination of any person not made in compliance with the foregoing procedure.
3.05 Vacancies. Any vacancy occurring in the Board of Directors may be
filled by the affirmative vote of a majority of the remaining directors although
less than a quorum of the Board of Directors. The term of office of a director
elected to fill a vacancy shall continue only until the next succeeding election
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of one or more directors by the shareholders. Any directorship to be filled by
reason of an increase in the number of directors may be filled by election at an
annual meeting or special meeting of shareholders called for that purpose or may
be filled by the Board of Directors for a term of office continuing only until
the next election of one or more directors by the shareholders; provided,
however, that the Board of Directors may not fill more than two such
directorships during the period between any two successive annual meetings of
shareholders.
3.06 Resignation and Removal. Any director may resign at any time upon
giving written notice to the Board of Directors, Chairman of the Board,
President or Secretary of the corporation. No director shall be removed during
his term of office except for cause and by the affirmative vote of the holders
of seventy-five percent (75%) of the shares then entitled to vote at an election
of directors. A director may be removed by the shareholders only at a meeting
called for the purpose of removing him. The notice for such a meeting shall
state that the purpose, or one of the purposes of the meeting, is the removal of
the director.
3.07 Compensation of Directors. As specifically prescribed from time to
time by resolution of the Board of Directors, the directors of the corporation
may be paid their expenses of attendance at each meeting of the Board and may be
paid a fixed sum for attendance at each meeting of the Board or a stated salary
in their capacity as directors. This provision shall not preclude any director
from serving the corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
ARTICLE IV
MEETINGS OF THE BOARD
4.01 First Meeting. The first meeting of each newly elected Board of
Directors shall be held without further notice immediately following and at the
same place as the annual meeting of shareholders unless, by unanimous consent of
the directors then elected and serving, such time or place shall be changed.
4.02 Regular Meeting. Regular meetings of the Board of Directors may be
held with or without notice at such time and at such place either within or
without the State of Texas or the Commonwealth of Virginia as from time to time
shall be prescribed by resolution of the Board of Directors.
4.03 Special Meetings. Special meetings of the Board of Directors may be
called by the Chairman of the Board of Directors or the President, and shall be
called by the Chairman of the Board of Directors, the President or the Secretary
on the written request of two directors. Written notice of special meetings of
the Board of Directors shall be given to each director at least
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twenty-four (24) hours before the time of the meeting.
4.04 Business at Regular or Special Meeting. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors need be specified in the notice or waiver of notice of such
meeting.
4.05 Quorum of Directors. A majority of the Board of Directors shall
constitute a quorum for the transaction of business, unless a greater number is
required by law or the Articles of Incorporation. If a quorum shall not be
present at any meeting of the Board of Directors, the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement of the meeting, until a quorum shall be present.
4.06 Act of Directors' Meeting. The act of a majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors unless the act of a greater number is required by law, the Articles
of Incorporation, or these Bylaws.
4.07 Action by Written Consent without a Meeting. Any action required or
permitted by law, the Articles of Incorporation or these Bylaws to be taken at a
meeting of the Board of Directors or any committee thereof may be taken without
a meeting if a consent in writing, setting forth the action so taken, is signed
by all members of the Board of Directors or committee, as the case may be. Such
consent shall have the same force and effect as a unanimous vote at such
meeting. Action by written consent is effective when the last director signs
the consent unless the consent specifies a different effective date, in which
event the action taken is effective as of the date specified therein, provided
the consent states the date of execution of each director.
ARTICLE V
COMMITTEES
The Board of Directors, by resolution adopted by a majority of the full
Board of Directors, may designate from among its members an executive committee
and one or more other committees, each of which shall be comprised of two or
more members and, to the extent provided in such resolution or in the Articles
of Incorporation or in these Bylaws, shall have and may exercise all of the
authority of the Board of Directors, except that no such committee shall have
the authority of the Board of Directors in reference to (i) amending the
Articles of Incorporation, (ii) proposing to the shareholders a reduction in the
stated capital of the corporation, (iii) approving a plan of merger, share
exchange or conversion of the corporation, (iv) recommending to the shareholders
the sale, lease, or exchange of all or substantially all of the property and
assets of the corporation
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otherwise than in the usual and regular course of its business, (v) recommending
to the shareholders a voluntary dissolution of the corporation or a revocation
thereof, (vi) amending, altering, or repealing the Bylaws of the corporation or
adopting new Bylaws for the corporation, filling vacancies in the Board of
Directors or filling vacancies in or designating alternate members of any
committee, (vii) filling any directorship to be filled by reason of an increase
in the number of directors, (viii) electing or removing officers, members of the
Board of Directors or members of any committee, (ix) fixing the compensation of
any member of a committee, (x) altering or repealing any resolution of the Board
of Directors which by its terms provides that it shall not be so amendable or
repealable or (xi) approving, authorizing or recommending to shareholders any
other action that the Virginia Stock Corporation Act requires to be approved by
shareholders. No committee shall have the power or authority to declare a
dividend, authorize or approve any other type of distribution to shareholders,
or to authorize the issuance, sale or contract for sale of shares of the
orporation. The Board of Directors shall fill vacancies in the membership of
each committee at a regular or special meeting of the Board. Each committee
shall keep regular minutes of its proceedings and report the same to the Board
when required. The designation of each such committee and the delegation thereto
of authority shall not operate to relieve the Board of Directors, or any member
thereof, of any responsibility imposed upon it or him by law.
ARTICLE VI
NOTICES
6.01 Methods of Giving Notice. Whenever any notice is required to be given
to any shareholder or director under the provisions of any statute, the Articles
of Incorporation or these Bylaws, it shall be given in writing and delivered
personally or mailed to such shareholder or director at such address as appears
on the books of the corporation, and such notice shall be deemed to be given at
the time when the same shall be deposited in the United States mail with
sufficient postage thereon prepaid. Notice to directors may also be given by
telegram or electronic communication including facsimile transmission, and
notice given by such means shall be deemed given at the time it is delivered to
the telegraph office or transmitted by means of electronic communication.
6.02 Waiver of Notice. Whenever any notice is required to be given to any
shareholder or director under the provisions of any law, the Articles of
Incorporation or these Bylaws, a waiver thereof in writing signed by the person
or persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice.
6.03 Attendance as Waiver. Attendance of a director at or participation in
a meeting shall constitute a waiver of notice of
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such meeting, unless such director at the beginning of the meeting or promptly
upon his arrival, objects to holding the meeting or to the transaction of any
business at such meeting and who does not thereafter vote for or assent to
action taken at the meeting. Attendance of a shareholder at a meeting of
shareholders shall constitute a waiver of objection to lack of notice or
defective notice of such meeting, unless such shareholder at the beginning of
the meeting objects to holding the meeting or to transacting business at such
meeting.
ARTICLE VII
ACTION WITHOUT A MEETING BY USE OF
CONFERENCE TELEPHONE
OR SIMILAR COMMUNICATIONS EQUIPMENT
Subject to the provisions requiring or permitting notice of meeting, unless
otherwise restricted by the Articles of Incorporation or these Bylaws,
shareholders, members of the Board of Directors or members of any committee
designated by such Board may participate in and hold a meeting of such
shareholders, Board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in such a meeting shall
constitute presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting to the
transaction of any business, and in the case of a director, who does not
thereafter vote for or assent to action taken at the meeting.
ARTICLE VIII
OFFICERS
8.01 Executive Officers. The officers of the corporation shall consist of
a President, one or more Vice Presidents, a Secretary, and a Treasurer, and may
also include the Chairman of the Board if so designated as an officer by the
Board of Directors and such other officers as are provided for in Section 8.03
of this Article. Any Vice President of the corporation may, by the addition of
a number or a word or words before or after the title "Vice President", be
designated "Senior Executive", "Executive", "Senior", "Trust", "Second" or
"Assistant" Vice President. Each officer of the corporation shall be elected or
appointed by the Board of Directors as provided in Sections 8.02 and 8.03 of
this Article. Any two or more offices may be held by the same person.
8.02 Election and Qualification. The Board of Directors, at its first
meeting after each annual meeting of shareholders, shall choose a President, one
or more Vice Presidents, a Secretary, and a Treasurer, none of whom need be a
member of the Board. The Board also may elect one or more Assistant Secretaries
and Assistant Treasurers.
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8.03 Other Officers and Agents. The Board of Directors may elect or
appoint such other officers, assistant officers and agents as may be necessary,
who shall hold their offices for such terms and shall exercise such powers and
perform such duties as shall be determined from time to time by the Board.
8.04 Compensation. The compensation of all officers and agents of the
corporation shall be fixed by resolution of the Board of Directors.
8.05 Term, Removal and Vacancies. Each officer of the corporation shall
hold office until his successor is chosen and qualified or until his death,
resignation or removal. Any officer may resign at any time upon giving written
notice to the corporation which resignation will not affect the corporation's
contract rights, if any, with such officer. Any officer or agent or member of a
committee elected or appointed by the Board of Directors may be removed by the
Board of Directors whenever in its judgment the best interest of the corporation
will be served thereby, but such removal shall be without prejudice to such
removed person's contract rights, if any, with the corporation. Election or
appointment of an officer or agent or member of a committee shall not of itself
create contract rights. Any vacancy occurring in any office of the corporation
by death, resignation, removal or otherwise shall be filled by the Board of
Directors.
8.06 Chief Executive Officer. In the event such positions are held by
different individuals, the Board of Directors shall designate whether the
Chairman of the Board or the President shall be the chief executive officer of
the corporation. The chief executive officer shall have all of the powers and
duties as usually pertain to such position, including the power to make and sign
contracts and agreements in the name of and on behalf of the corporation and all
other powers and duties granted by these Bylaws to the President of the
corporation. In the event the Chairman of the Board is designated the chief
executive officer of the corporation, the Chairman of the Board shall have
supervisory powers over the President, all other officers of the corporation,
and the business activities of the corporation.
8.07 President. The President shall be the chief operating officer of the
corporation and shall have such powers and duties as usually pertain to such
office, except as the same may be modified by the Board of Directors. The
President shall have general powers of oversight, supervision and management of
the business and affairs of the corporation, shall see that all orders and
resolutions of the Board of Directors are carried into effect, and shall have
the power to make and sign contracts and agreements in the name and on behalf of
the corporation and to do or perform all other acts incident to the office of
President or that are authorized or required by law. In the event that
different persons hold such positions, the President shall preside at meetings
of the shareholders in the absence of the
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Chairman of the Board. If the President is also a member of the Board, he shall
be ex-officio a member of all committees of the Board and shall preside, in the
absence of the Chairman of the Board, at meetings of the Board, if the President
is not also serving as the Chairman of the Board at that time.
8.08 Vice President. Unless otherwise determined by the Board of
Directors, one of the Vice Presidents shall, in the absence or disability of the
President, perform the duties and exercise the powers of the President. The
various Vice Presidents shall perform such other duties and have such other
powers as the Board of Directors shall prescribe.
8.09 Secretary. The Secretary shall attend all meetings of the Board of
Directors and of the shareholders, record all the proceedings of the meetings of
the Board of Directors and of the shareholders in a book to be kept for that
purpose and shall perform like duties for the standing committees when required.
He shall give, or cause to be given, notice of all meetings of the shareholders
as may be prescribed by the Board of Directors, Chairman of the Board, or the
President. He shall keep in safe custody the seal of the corporation, and, when
authorized by the Board of Directors, affix the same to any instrument requiring
it, and, when so affixed, it shall be attested by his signature or by the
signature of the Treasurer or an Assistant Secretary.
8.10 Assistant Secretaries. An Assistant Secretary, unless otherwise
determined by the Board of Directors, shall, in the absence or disability of the
Secretary, perform the duties and exercise the powers of the Secretary. They
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
8.11 Treasurer. The Treasurer shall have the custody of the corporate
funds and securities, shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the Board of Directors. He shall
disburse the funds of the corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the Chairman of the Board (if he is the chief executive officer), President, and
the Board of Directors at its regular meetings, or when the Board of Directors
so requires, an account of all his transactions as Treasurer, and of the
financial condition of the corporation.
8.12 Assistant Treasurers. An Assistant Treasurer, unless otherwise
determined by the Board of Directors, shall, in the absence or disability of the
Treasurer, perform the duties and exercise the powers of the Treasurer. They
shall perform such other duties and have such other powers as the Board of
Directors from time to time may prescribe.
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8.13 Officer's Bond. If required by the Board of Directors, any officer so
required shall give the corporation a bond (which shall be renewed as the Board
may require) in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the corporation, in case of his
death, resignation, retirement or removal from office, of any and all books,
papers, vouchers, money and other property of whatever kind in his possession or
under his control belonging to the corporation.
ARTICLE IX
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Subject to any limitation which may be contained in the Articles of
Incorporation, the corporation shall indemnify, to the fullest extent permitted
by law, any person who was, is, or is threatened to be made a named defendant or
respondent in any threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative, arbitrative, or investigative, any
appeal in such action, suit, or proceeding, and any inquiry or investigation
that could lead to such an action, suit or proceeding, by reason of the fact
that such person is or was a director or officer of the corporation, or, such
person who, while a director or officer of the corporation, is or was serving at
the request of the corporation as a director, officer, partner, venturer,
proprietor, trustee, employee, agent, or similar functionary of another
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan, or other enterprise, against judgments, penalties (including
excise and similar taxes), fines, settlements, and reasonable expenses
(including attorney's fees) actually incurred by such person in connection with
such action, suit, or proceeding. In addition to the foregoing, the corporation
shall, upon request of any such person described above and to the fullest extent
permitted by law, pay or reimburse the reasonable expenses incurred by such
person in any action, suit, or proceeding described above in advance of the
final disposition of such action, suit, or proceeding.
ARTICLE X
CERTIFICATES FOR SHARES
10.01 Certificates Representing Shares. The corporation shall deliver
certificates representing all shares to which shareholders are entitled. Such
certificates shall be numbered and shall be entered in the books of the
corporation as they are issued, and shall be signed by the Chairman of the
Board, President, or a Vice President, and the Secretary or an Assistant
Secretary of the corporation, and may be sealed with the seal of the corporation
or a facsimile thereof. The signatures of the Chairman of the Board, President,
or Vice President, and the
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Secretary or Assistant Secretary, upon a certificate may be facsimiles, if the
certificate is countersigned by a transfer agent or registered by a registrar,
either of which is other than the corporation itself or an employee of the
corporation. In case any officer who has signed or whose facsimile signature has
been placed upon such certificate shall have ceased to be such officer before
such certificate is issued, it may be issued by the corporation with the same
effect as if he were such officer at the date of its issuance. If the
corporation is authorized to issue shares of more than one class, each
certificate representing shares issued by the corporation (1) shall
conspicuously set forth on the face or back of the certificate a full statement
of (a) all of the designations, preferences, limitations and relative rights of
the shares of each class authorized to be issued and, (b) if the corporation is
authorized to issue shares of any preferred or special class in series, the
variations in the relative rights and preferences of the shares of each such
series to the extent the same have been fixed and determined and the authority
of the Board of Directors to fix and determine the relative rights and
preferences of subsequent series; or (2) shall conspicuously state on the face
or back of the certificate that (a) such a statement is set forth in the
Articles of Incorporation on file in the office of the Secretary of State of
Texas and the State Corporation Commission of Virginia and (b) the corporaton
will furnish a copy of such statement to the record holder of the certificate
without charge on written request to the corporation at its principal place of
business or registered office. If the corporation has by its Articles of
Incorporation limited or denied the preemptive right of shareholders to acquire
unissued or treasury shares of the corporation, each certificate representing
shares issued by such corporation (1) shall conspicuously set forth on the face
or back of the certificate a full statement of the limitation or denial of
preemptive rights contained in the Articles of Incorporation, or (2) shall
conspicuously state on the face or back of the certificate that (a) such a
statement is set forth in the Articles of Incorporation on file in the office of
the Secretary of State of Texas and the State Corporation Commission of Virginia
and (b) the corporation will furnish a copy of such statement to the record
holder of the certificate without charge on request to the corporation at its
principal place of business or registered office. Each certificate representing
shares shall state upon the face thereof that the corporation is organized under
the laws of the State of Texas and the Commonwealth of Virginia, the name of the
person to whom issued, the number and class of shares and the designation of the
series, if any, which such certificate represents and the par value of each
share represented by such certificate or a statement that the shares are without
par value. No certificate shall be issued for any share until the consideration
therefor, fixed as provided by law, has been fully paid.
10.02 Restrictions on Transfer of Shares. If any restriction on the
transfer, or registration of the transfer, of
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shares shall be imposed or agreed to by the corporation, as permitted by law,
the Articles of Incorporation or these Bylaws, each certificate representing
shares so restricted (1) shall conspicuously set forth a full or summary
statement of the restrictions on the face of the certificate, or (2) shall set
forth such statement on the back of the certificate and conspicuously refer to
the same on the face of the certificate, or (3) shall conspicuously state on the
face or back of the certificate that such restrictions exist pursuant to a
specified document and (a) that the corporation will furnish to the record
holder of the certificate without charge upon written request to the corporation
at its principal place of business or registered office a copy of the specified
document, or (b) if such document is one required or permitted to be and has
been filed under applicable law, that such specified document is on file in the
Office of the Secretary of State of Texas or the State Corporation Commission of
Virginia and contains a full statement of such restrictions. Unless such
document was on file in the Office of the Secretary of State of Texas or the
State Corporation Commission of Virginia at the time of the request, as required
by applicable law, if the corporation fails within a reasonable time to furnish
the record holder of a certificate, upon such request and without charge, a copy
of the specified document, the corporation shall not be permitted thereafter to
enforce its rights under the restrictions imposed on the shares represented by
such certificate. Any restriction on the transfer, or registration of transfer,
of shares of the corporation, if reasonable and noted conspicuously on the
certificates representing such shares, may be enforced against the holder of the
restricted shares or any successor or transferee of the holder, including an
executor, administrator, trustee, guardian, or other fiduciary entrusted with
like responsiility for the person or estate of the holder. Unless noted
conspicuously on the certificates representing such shares, a restriction, even
though otherwise enforceable, is ineffective except against a person with actual
knowledge of the restriction.
10.03 Transfer of Shares. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate, and record the
transaction upon its books.
10.04 Lost, Stolen or Destroyed Certificates. The Board of Directors may
direct a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the corporation alleged to
have been lost, stolen or destroyed upon the making of an affidavit of that fact
by the person claiming the certificate of stock to be lost, stolen or destroyed.
When authorizing such issue of a new certificate or certificates, the Board of
Directors, in its discretion and as a condition precedent to the issuance
thereof, may require the
15
<PAGE>
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
10.05 Closing of Transfer Books and Fixing Record Date. For the purpose of
determining shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or entitled to receive payment of any
dividend, or in order to make a determination of shareholders for any other
proper purpose, the Board of Directors may provide that the stock transfer books
shall be closed for a stated period but not to exceed, in any case, sixty (60)
days. If the stock transfer books shall be closed for the purpose of
determining shareholders entitled to notice of or to vote at a meeting of
shareholders, such books shall be closed for at least ten (10) days immediately
preceding such meeting or such longer period as may be required by law. In lieu
of closing the stock transfer books, the Board of Directors may fix in advance a
date as the record date for any such determination of shareholders, such date in
any case to be not more than sixty (60) days and, in case of a meeting of
shareholders, not less than ten (10) days prior to the date on which the
particular action requiring such determination of shareholders is to be taken,
except with respect to a meeting of shareholders at which the shareholders will
be asked to act on an amendment of the Articles of Incorporation, a plan of
merger or share exchange, a proposed sale of all or substantially all of the
assets or the dissolution of the corporation, not less than twenty-five (25)
days prior to the date on which the particular action requiring such
determination of shareholders is to be taken. If the stock transfer books are
not closed and no record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders, or shareholders
entitled to receive payment of a dividend, the date prior to the day notice of
the meeting is mailed or the date on which the resolution of the Board of
Directors declaring such dividend is adopted, respectively, shall be the record
date for such determination of shareholders. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this Section 10.05, such determination shall apply to any
adjournment thereof, except where the determination has been made through the
closing of stock transfer books and the stated period of closing has expired.
However, if a meeting is adjourned to a date which is at least one hundred
twenty (120) days after the date fixed for the original meeting, the Board of
Directors shall fix a new record date and provide notice of such to
shareholders.
10.06 Registered Shareholders. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any
16
<PAGE>
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof,
except as otherwise provided by the laws of the State of Texas and the
Commonwealth of Virginia.
ARTICLE XI
GENERAL PROVISIONS
11.01 Dividends. The Board of Directors from time to time may declare, and
the corporation may pay, dividends on its outstanding shares in cash, in
property, or in its own shares, except if (i) after giving effect to the
distribution, the corporation would be insolvent, (ii) the distribution would
exceed the surplus of the corporation, (iii) the payment thereof would cause the
corporation's total assets to be less than the sum of its total liabilities
based on the application of accounting practices and principles that are
reasonable under the circumstances, (iv) the payment thereof would cause the
corporation to be unable to pay its debts as they become due in the usual course
of business, or (v) the declaration or payment thereof would be contrary to any
restrictions contained in the Articles of Incorporation. The corporation may
make a distribution of its own shares to shareholders, as allowed by applicable
law. Such dividends may be declared at any regular or special meeting of the
Board, and the declaration and payment thereof shall be subject to all
applicable provisions of law, the Articles of Incorporation and these Bylaws.
11.02 Reserves. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, deem proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall deem conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
11.03 Reports. The Board of Directors shall, when requested by the holders
of at least a majority of the outstanding shares of the corporation, present
full and clear written reports, not more often than quarterly, of the amount of
business and the financial condition of the corporation.
11.04 Checks. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors from time to time may designate.
11.05 Fiscal Year. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
11.06 Seal. The corporation may have a corporate seal and,
17
<PAGE>
if the Board of Directors adopts a corporate seal, the corporate seal shall have
inscribed thereon the name of the corporation and may be used by causing it or a
facsimile thereof to be impressed or affixed or in any other manner reproduced.
11.07 Opt-out of Certain Provisions of Virginia Law. The provisions of
Sections 13.1-728.1 through 13.1-728.9, "Control Share Acquisitions", of the
Virginia Stock Corporation Act shall not apply to the corporation or to
acquisitions of common stock of the corporation.
ARTICLE XII
AMENDMENTS
The initial Bylaws of the corporation shall be adopted by the Board of
Directors. The power to alter, amend, or repeal the Bylaws or adopt new Bylaws,
subject to repeal or change by action of the shareholders, is vested in the
Board of Directors. Thus, these Bylaws may be altered, amended, or repealed or
new Bylaws may be adopted at any regular or special meeting of the Board of
Directors by the affirmative vote of a majority of the Board of Directors,
subject to repeal or change at any regular or special meeting of shareholders at
which a quorum is present or represented by the affirmative vote of seventy-five
percent (75%) of the shares entitled to vote at such meeting and present or
represented thereat provided notice of the proposed repeal or change is
contained in the notice of such meeting of shareholders. The Bylaws may contain
any provision for the regulation and management of the affairs of the
corporation not inconsistent with applicable law or the Articles of
Incorporation.
18
<PAGE>
Exhibit 10.7(a)
Twenty-First Supplemental Indenture
Dated as of February 5, 1997
By and Among
United Cities Gas Company
and
Bank of America Illinois
and
First Trust National Association
and
Russell C. Bergman
Supplementing Indenture of Mortgage
Dated as of July 15, 1959
<PAGE>
This Twenty-First Supplemental Indenture, dated as of February 5, 1997,
made by and among United Cities Gas Company, a corporation organized under the
laws of the State of Illinois and the Commonwealth of Virginia (hereinafter
called the "Company"), whose address is 5300 Maryland Way, Brentwood, Tennessee
37027, Bank of America Illinois, an Illinois state bank having its office at 231
South LaSalle Street, Chicago, Illinois 60697, First Trust National Association,
a national banking association having its office at One Illinois Center, 111
East Wacker Drive, Suite 3000, Chicago, Illinois 60601 (hereinafter called
"First Trust"), and Russell C. Bergman, residing in the Village of Frankfort,
Illinois.
Recitals:
The background of this Twenty-First Supplemental Indenture is:
1. The Company heretofore executed and delivered to City National Bank
and Trust Company of Chicago and R. Emmett Hanley, as Trustees, its Indenture of
Mortgage dated as of July 15, 1959 (hereinafter sometimes referred to as the
"Original Indenture"), providing for the issuance thereunder from time to time
of First Mortgage Bonds of the Company, issuable in one or more series, and
wherein and whereby the Company did grant, convey, mortgage, warrant to, the
said Trustees, and each of them, and their respective successors and assigns,
and create a security interest in, certain property of the Company in said
Original Indenture as more particularly described therein for the security of
all First Mortgage Bonds issued and to be issued thereunder.
2. The Company has heretofore executed and delivered twenty supplemental
indentures to the Original Indenture, designated as First through Twenty (the
Original Indenture and all supplemental indentures, including this Twenty-First
Supplemental Indenture, being herein called the "Indenture"), for the purpose of
subjecting to the lien of the Indenture certain additional property heretofore
and hereafter acquired by the Company, creating additional series of First
Mortgage Bonds, and amending and supplementing the Indenture in certain
respects.
3. There have been issued under the Indenture various series of First
Mortgage Bonds designated as Series A through V, inclusive, of which
$115,000,000 in aggregate principal amount are outstanding as of December 31,
1996. The bonds of Series A, B, C, D, E, F, G, H, I, J, K, L, M, O and S have
been retired as of December 31, 1996.
4. On September 1, 1961, City National Bank and Trust Company of Chicago
was merged with Continental Illinois National Bank and Trust Company of Chicago,
formerly known as Continental Bank, National Association, a national banking
association, which changed from a national banking association to an Illinois
state bank on June 29, 1994, and is now known as Bank of America Illinois
("BAI"). BAI and certain of its affiliates entered into
2
<PAGE>
a Purchase and Assumption Agreement with First Bank National Association, the
parent company of First Trust, which provided that First Bank National
Association, or an affiliate, would purchase substantially all of the Illinois
trust and agency appointments of BAI, including the appointment under the
Indenture. First Trust and BAI thereupon entered into an Instrument of Transfer
and Assignment of certain Illinois Appointments from BAI to First Trust, which
provided for the succession by First Trust of substantially all of the Illinois
trust and agency appointments of BAI, including the Indenture.
5. Pursuant to Section 3-3 of the Corporate Fiduciary Act of the State of
Illinois, 205 ILCS 620, (the "Act"), and the No-Objection Letter No. 95-1021
dated July 21, 1995, from the Illinois Commissioner of Banks and Trust
Companies, title under the Indenture to all estate, properties, rights, powers
and trusts under the Indenture held by the Trustee is vested by law in First
Trust provided such succession is not prohibited by the Indenture. The sale by
BAI of its corporate trust business to First Trust resulted in automatic
succession by First Trust of the transferred accounts pursuant to the provisions
of the Act, as such succession is not prohibited by the Indenture and First
Trust is qualified and eligible to act as Trustee under the Indenture.
6. On October 15, 1966, Ray F. Myers became individual trustee under the
Indenture as successor to R. Emmett Hanley who resigned. On March 15, 1981, M.
J. Kruger became individual trustee under the Indenture as successor to Ray F.
Myers who resigned. Russell C. Bergman has agreed to become the individual
trustee under the Indenture as successor to M. J. Kruger, who has resigned,
pending the appointment of a new individual trustee by First Trust.
7. This Twenty-First Supplemental Indenture is executed, acknowledged and
recorded to give notice to all persons that all power to act as Trustee and all
right, title and interest of BAI to all estate, properties, rights, powers and
trusts under the Indenture is now vested in First Trust, and that Russell C.
Bergman has been appointed as the successor individual trustee under the
Indenture.
Article One
Section 1.01. Appointment of First Trust as Successor Trustee. BAI
hereby confirms the appointment of First Trust as Trustee under the Indenture
and the vesting of all estate, properties, rights, powers and trusts under the
Indenture in First Trust as Trustee under the Indenture.
Section 1.02. Acceptance of Appointment by First Trust. First Trust
hereby confirms its acceptance of all duties, obligations and powers as Trustee
under the Indenture and agrees to perform all duties and obligations of the
Trustee under the Indenture.
3
<PAGE>
Section 1.03. Ratification of Certain Actions Taken by BAI. First
Trust hereby ratifies any and all action taken by BAI at the direction of First
Trust after the effective time of the succession by First Trust of all duties
and obligations as Trustee under the Indenture, including, but not limited to,
any and all property releases made by BAI in accordance with the terms and
provisions of the Indenture.
Section 1.04. Appointment of Individual Trustee. First Trust hereby
appoints Russell C. Bergman, as Individual Trustee under the Indenture as the
successor to M. J. Kruger.
Section 1.05. Acceptance of Appointment by Individual Trustee.
Russell C. Bergman hereby confirms his acceptance as of February 5, 1997, of all
duties and powers as Individual Trustee under the Indenture.
In witness whereof, said United Cities Gas Company has caused its corporate
name to be hereunto subscribed by its Senior Vice President and Treasurer and
its corporate seal to be hereunto affixed and attested by its Secretary or by an
Assistant Secretary, and said Bank of America Illinois has caused its corporate
name to be hereunto subscribed by one of its Vice Presidents and its corporate
seal to be affixed and attested by and said First Trust
National Association, to evidence its acceptance of the trust hereby created and
in it reposed, has caused its corporate name to be hereunto subscribed by its
and its corporate seal to be affixed and attested by a ,
and said Russell C. Bergman, to evidence his acceptance of the trust hereby
created and in him reposed, has hereunto subscribed his name and affixed his
seal, all as of the day and year first above written.
United Cities Gas Company
[Corporate Seal]
By /s/ James B. Ford
-------------------------
James B. Ford,
Senior Vice President
and Treasurer
Attest:
Shirley Hawkins, Secretary
Witnesses as to United Cities Gas Company:
Bank of America Illinois,
as predecessor trustee
under the Indenture
[Corporate Seal]
By
Its
Attest:
Its
4
<PAGE>
Witnesses as to Bank of America Illinois:
First Trust National
Association, as successor
trustee under the
Indenture
[Corporate Seal]
By
Its
Attest:
Witnesses as to First Trust,National Association:
Russell C. Bergman,
Individual Trustee
Attest:
Witnesses to Russell C. Bergman:
5
<PAGE>
State of Tennessee )
) SS.
County of Williamson )
I, Debra S. Johnson, Notary Public in and for the County and State
aforesaid, do hereby certify that on this 6th day of February, 1997, personally
appeared before me James B. Ford and Shirley Hawkins, to me personally known,
and personally known to me to be the same persons whose names are subscribed to
the foregoing instrument, who, being by me duly sworn, did say that they are
Senior Vice President and Treasurer and Secretary, respectively, of United
Cities Gas Company, a corporation organized under the laws of the State of
Illinois and the Commonwealth of Virginia, that the seal affixed to the above
and foregoing instrument is the corporate seal of said corporation and that said
instrument was signed by them and sealed and delivered on behalf of said
corporation by authority of its Board of Directors duly given, and the said
Senior Vice President and Treasurer and Secretary acknowledged said instrument
to be their free and voluntary act and deed and the free and voluntary act and
deed of said corporation for the uses and purposes therein set forth.
In Witness Whereof, I have hereunto set my hand and official seal this 6th
day of February, 1997.
/s/ Debra S. Johnson
------------------------
Notary Public in and for
the County and State
aforesaid
[Notarial Seal]
My commission expires:
6
<PAGE>
State of California )
) SS.
County of San Francisco )
I, Kay Anderson-Wiebe, a Notary Public in and for the County and State
aforesaid, do hereby certify that on this 25th day of February, 1997, personally
appeared before me M. J. Kruger and Peet Saaret, to me personally known, and
personally known to me to be the same persons whose names are subscribed to the
foregoing instrument, who being by me duly sworn, did say that they are the Vice
President and the Vice President, respectively, of Bank of America Illinois, an
Illinois state bank, that the seal affixed to the above and foregoing instrument
is the corporate seal of said association and that said instrument was signed by
them and sealed and delivered on behalf of said association by authority of its
Board of Directors duly given, and the said Vice President and Vice President
acknowledged said instrument to be their free and voluntary act and deed and the
free and voluntary act and deed of said association for the uses and purposes
therein set forth.
In Witness Whereof, I have hereunto set my hand and official seal this 25th
day of February, 1997.
/s/ Kay Anderson-Webe
-----------------------
Notary Public in and for
the County and State
aforesaid
[Notarial Seal]
My commission expires:
7
<PAGE>
State of Illinois )
) SS.
County of Cook )
I, J.W. Jones, a Notary Public in and for the County and State aforesaid,
do hereby certify that on this 28th day of February, 1997, personally appeared
before me George N. Reaves and Brian King, to me personally known, and
personally known to me to be the same persons whose names are subscribed to the
foregoing instrument, who being by me duly sworn, did say that they are the Vice
President and the Asst. Vice President, respectively, of First Trust National
Association, a national banking association organized and existing under the
national banking laws of the United States of America, that the seal affixed to
the above and foregoing instrument is the corporate seal of said association and
that said instrument was signed by them and sealed and delivered in behalf of
said association by authority of its Board of Directors duly given, and the said
George N. Reaves and Brian King acknowledged said instrument to be their free
and voluntary act and deed and the free and voluntary act and deed of said
association for the uses and purposes therein set forth.
In Witness Whereof, I have hereunto set my hand and official seal this 28th
day of February, 1997.
/s/ J. W. Jones
------------------------
Notary Public in and for
the County and State
aforesaid
[Notarial Seal]
My commission expires:
8
<PAGE>
State of Illinois )
) SS.
County of Cook )
I, Stacy M. Coleman, a Notary Public in and for the County and State
aforesaid, do hereby certify that on this 27th day of February, 1997, personally
appeared before me Russell C. Bergman, personally known to me to be the person
described in and who executed and whose name is subscribed to the foregoing
instrument, and acknowledged that he signed and delivered the said instrument as
his free and voluntary act and deed for the uses and purposes therein set forth.
In Witness Whereof, I have hereunto set my hand and official seal this 27th
day of February, 1997.
/s/ Stacy M. Coleman
---------------------------
Notary Public in and for
the County and State
aforesaid
[Notarial Seal]
My commission expires:
State of Tennessee )
) SS.
County of Williamson )
Personally appeared before me Teresa Morris, who, being duly sworn, says
that she saw the corporate seal of United Cities Gas Company affixed to the
foregoing instrument and that she also saw James B. Ford, Senior Vice President
and Treasurer, and Shirley Hawkins, Secretary of said United Cities Gas Company,
sign and attest the same, and that she, with Pamela Todd witnessed the execution
and delivery thereof as the act and deed of said United Cities Gas Company.
/s/ Teresa Morris
--------------------------
Witness
[Notarial Seal]
Sworn to before me this day of , 1997.
Notary Public in and for the
County and State aforesaid
My commission expires:
9
<PAGE>
State of California )
) SS.
County of San Franciso )
Personally appeared before me Karen Mitani, who, being duly sworn, says
that she saw the corporate seal of the Bank of America Illinois affixed to the
foregoing instrument and that she also saw M. J. Kruger, Vice President, and
Peet Saaret, Vice President of said Bank of America Illinois, sign and attest
the same, and that she, with J. Savage, witnessed the execution and delivery
thereof as the act and deed of the said Bank of America Illinois.
/s/ Karen Mitani
--------------------------
[Notarial Seal] Karen Mitani,
Witness
Sworn to before me this 25th day of February, 1997.
Notary Public in and for the
County and State aforesaid
My commission expires: March 15, 2000
10
<PAGE>
State of Illinois )
) SS.
County of Cook )
Personally appeared before me M.T. Martin, who, being duly sworn, says that
she saw the corporate seal of the First Trust National Association affixed to
the foregoing instrument and that she also saw George N. Reaves, Vice President
and Brian King, Assistant Vice President of said First Trust National
Association, sign and attest the same, and that she, with S. Rhoden, witnessed
the execution and delivery thereof as the act and deed of the said First Trust
National Association.
/s/ M.T. Martin
-------------------------
[Notarial Seal] M.T. Martin,
Witness
Sworn to before me this 27th day of February, 1997.
Notary Public in and for the
County and State aforesaid
My commission expires: December 2, 2000
11
<PAGE>
State of Illinois )
) SS.
County of Cook )
Personally appeared before me Frank J. Layo, who, being duly sworn, says
that he saw the within named Russell Bergman sign, seal, and as his act and
deed, deliver the foregoing instrument and that he, with Thomas Tomaszewski,
witnessed the execution thereof.
/s/ Frank J. Layo
----------------------
Frank J. Layo, Witness
[Notarial Seal]
Sworn to before me this 27th day of February, 1997.
Notary Public in and for the
County and State aforesaid
My commission expires: May 2, 1998
This Document was Prepared by:
Kristi A. Maher, Esq.
Chapman and Cutler
111 West Monroe Street
Suite 1600
Chicago, IL 60603-4080
12
<PAGE>
Exhibit 10.7(b)
Twenty-Second Supplemental Indenture
Dated as of July 29, 1997
By and Among
Atmos Energy Corporation
and
First Trust National Association
and
Russell C. Bergman
Supplementing Indenture of Mortgage
Dated as of July 15, 1959
<PAGE>
This Twenty-Second Supplemental Indenture, dated as of July 29, 1997, is
made by and among Atmos Energy Corporation, a corporation organized under the
laws of the State of Texas (hereinafter sometimes referred to as "Atmos"), whose
address is 1800 Three Lincoln Center, 5430 LBJ Freeway, Dallas, Texas 75240,
First Trust National Association, a national banking association having its
offices at One Illinois Center, 111 East Wacker Drive, Suite 3000, Chicago,
Illinois 60601 (hereinafter sometimes referred to as "First Trust"), and
Russell C. Bergman, residing in the Village of Frankfort, Illinois.
Recitals:
The background of this Twenty-Second Supplemental Indenture is:
1. United Cities Gas Company, a corporation organized under the laws of
the State of Illinois and the Commonwealth of Virginia (hereinafter sometimes
referred to as "UCG"), heretofore executed and delivered to City National Bank
and Trust Company of Chicago and R. Emmett Hanley, as Trustees, its Indenture of
Mortgage dated as of July 15, 1959 (hereinafter sometimes referred to as the
"Original Indenture"), providing for the issuance thereunder from time to time
of First Mortgage Bonds of UCG, issuable in one or more series, and wherein and
whereby UCG did grant, convey, mortgage, warrant to, the said Trustees, and each
of them, and their respective successors and assigns, and create a security
interest in, certain property of UCG in said Original Indenture as more
particularly described therein for the security of all First Mortgage Bonds
issued and to be issued thereunder.
2. UCG has heretofore executed and delivered twenty-one supplemental
indentures to the Original Indenture, designated as First through Twenty-First
(the Original Indenture and all supplemental indentures, including this Twenty-
Second Supplemental Indenture, are hereinafter referred to as the "Indenture"),
for the purpose of subjecting to the lien of the Indenture certain additional
property heretofore and hereafter acquired by UCG, creating additional series of
First Mortgage Bonds, and amending and supplementing the Indenture in certain
respects.
3. There have been issued under the Indenture various series of First
Mortgage Bonds designated as Series A through V, inclusive, of which
$115,000,000 in aggregate principal amount are outstanding as of June 30, 1997.
The bonds of Series A, B, C, D, E, F, G, H, I, J, K, L, M, O and S have been
retired as of June 30, 1997.
4. On September 1, 1961, City National Bank and Trust Company of Chicago
was merged with Continental Illinois National Bank and Trust Company of Chicago,
formerly known as Continental Bank, National Association, a national banking
association, which changed from a national banking association to an Illinois
state
2
<PAGE>
bank on June 29, 1994, and is now known as Bank of America Illinois ("BAI"). BAI
and certain of its affiliates entered into a Purchase and Assumption Agreement
with First Bank National Association, the parent company of First Trust, which
provided that First Bank National Association, or an affiliate, would purchase
substantially all of the Illinois trust and agency appointments of BAI,
including the appointment under the Indenture. First Trust and BAI thereupon
entered into an Instrument of Transfer and Assignment of certain Illinois
appointments from BAI to First Trust, which provided for the succession by First
Trust of substantially all of the Illinois trust and agency appointments of BAI,
including the Indenture.
5. The Twenty-First Supplemental Indenture dated as of February 5, 1997,
was executed, delivered, acknowledged and recorded by UCG, First Trust and BAI,
to give notice to all persons that the power to act as Trustee and all right,
title and interest of BAI to all estate, properties, rights, powers and trusts
under the Indenture is now vested in First Trust.
6. On October 15, 1966, Ray F. Myers became individual trustee under the
Indenture as successor to R. Emmett Hanley who resigned. On March 15, 1981, M.
J. Kruger became individual trustee under the Indenture as successor to Ray F.
Myers who resigned. On February 5, 1997, Russell C. Bergman became individual
trustee under the Indenture as successor to M. J. Kruger who resigned.
7. Pursuant to an Agreement and Plan of Reorganization dated July 19,
1996, as amended by Amendment No. 1 to the Agreement and Plan of Reorganization
dated October 3, 1996, and the Plan of Merger provided for therein, UCG will be
merged with and into Atmos in a statutory merger to become effective under the
laws of the State of Illinois, the State of Texas and the Commonwealth of
Virginia, with Atmos to be the surviving corporation and the successor to UCG
(the "Merger"). Atmos agrees that at the effective time of the Merger (the
"Effective Time"), pursuant to the terms and provisions contained in the
Indenture, it will assume (i) the due and punctual payment of the principal and
interest of the First Mortgage Bonds secured by the Indenture, and (ii) the
performance of all covenants and conditions under the Indenture.
8. In addition, Atmos agrees that effective as of the Effective Time the
Indenture will be amended as hereinafter set forth and Atmos will not certify or
issue any additional First Mortgage Bonds under the Indenture as hereinafter set
forth.
9. UCG has obtained and filed with the Trustees the written consent of
the holders of the requisite percentage of the outstanding First Mortgage Bonds
to the amendments to the Indenture herein contained. All acts and things
necessary to make this Twenty-Second Supplemental Indenture a valid and binding
instrument effective as of the Effective Time in accordance with its terms and
for the purposes herein expressed,
3
<PAGE>
have been done and performed.
10. Atmos represents to the Trustees that at the time of the Merger and
after giving effect thereto, no "event of default" (as defined in Section 6.01
of the Indenture) shall or would exist.
Now, therefore, in consideration of the premises and of the sum of One
Dollar ($1.00) to Atmos duly paid by the Trustees at or before the ensealing and
delivery hereof and for other good and valuable considerations, the receipt
whereof is hereby acknowledged, Atmos hereby covenants to and with the Trustees
and their successors in the trusts under the Indenture, for the equal and pro
rata benefit of all present and future holders of all First Mortgage Bonds
issued, and of the coupons, if any, thereto appertaining, without any
preference, priority or distinction whatsoever, as follows:
Article One
Substitution of Successor Corporation
Section 1.01. Assumption of Indenture Obligations. Effective as of
the Effective Time, Atmos, as successor to UCG, assumes the due and punctual
payment of the principal of and interest and premium on the First Mortgage Bonds
secured by the lien of the Indenture and the performance of all the covenants
and conditions contained in the Indenture on the part of UCG.
Section 1.02. Mortgage of Property. Atmos, in order to better secure
the principal of and interest and premium on the First Mortgage Bonds at any
time outstanding under the Indenture according to their tenor and effect and the
performance of and compliance with the covenants and conditions contained in the
Indenture, does hereby mortgage, assign, grant, bargain, sell and convey unto
the Trustees and to their successors in said trust, forever, all of the
property, rights and franchises owned by UCG immediately prior to the Effective
Time which are subject to the lien of the Indenture including the properties
described in Schedule 1 attached hereto and hereby made a part hereof. The
Indenture shall not by reason of the Merger, or otherwise, constitute or become
a lien upon, and the term "mortgaged property" as used in the Indenture shall
not include or comprise:
(1) Any property or franchises owned prior to the Effective Time
by Atmos or which, prior to the Effective Time, were not subject to the
lien of the Indenture; and
(2) Any property or franchises which may be purchased, constructed
or otherwise acquired by Atmos after the Effective Time; excepting only
betterments, extensions, improvements, additions, repairs, renewals,
replacements, substitutions and alterations of, to, upon and for, and
comprising and constituting appurtenances of, or fixtures to, the property
subject to the lien of the Indenture immediately prior to the Effective
Time, and renewals, modifications or substitutions of or for contracts
mortgaged under the Indenture immediately prior to the Effective Time,
4
<PAGE>
which may be purchased, constructed, or otherwise acquired by Atmos from
and after the Effective Time, which shall be and become subject to the lien
and operation of the Indenture, notwithstanding the Merger.
Atmos pursuant to Section 8.02(2) of the Indenture does hereby mortgage, assign,
grant, bargain, sell and convey unto the Trustees and their successors the
following properties acquired by Atmos on or after the Effective Time, to wit:
all betterments, extensions, improvements, additions, repairs, renewals,
replacements, substitutions and alterations of, to, upon and for, and
comprising and constituting appurtenances of, or fixtures to, the property
subject to the lien of the Indenture immediately prior to the Effective
Time, and renewals, modifications or substitutions of or for contracts
mortgaged under the Indenture immediately prior to the Effective Time,
which may be purchased, constructed, or otherwise acquired by Atmos from
and after the Effective Time, which shall be and become subject to the lien
and operation of the Indenture, notwithstanding the Merger.
Subject to such liens and encumbrances as are of the character specified in
Section 3.09 of the Indenture, as amended by this Twenty-Second Supplemental
Indenture;
But Specifically Reserving and Excepting from the foregoing grant:
A. All cash, notes, bills and accounts receivable not specifically
pledged under the Indenture;
B. All stocks, bonds and securities not specifically pledged under the
Indenture;
C. All merchandise held for resale and consumable materials and supplies
(other than Cushion Gas as defined in clause (c) of Section 5.01 of the
Sixteenth Supplemental Indenture to the Original Indenture);
D. The last day of the term of each leasehold estate;
E. All automotive equipment; and
F. All inventory of pipe, meters and equipment (excluding any such
inventory constituting a part of the operating system).
To Have and to Hold all said properties, real, personal and mixed,
mortgaged and conveyed by Atmos, as aforesaid, or intended so to be, unto the
Trustees and their successors forever; subject, however, to the exclusions,
encumbrances, reservations, covenants, conditions, uses and trusts set forth in
the Indenture.
In Trust, Nevertheless, for the same purposes and upon the same conditions
as are set forth in the Indenture, without preference or priority of any series
of bonds or of any bonds within a series over any of the other bonds by reason
of priority of time of maturity or of the negotiation thereof or otherwise.
5
<PAGE>
Article Two
Amendments to Indenture
Section 2.01. Amendments to Section 3.09 of the Indenture. (a)
Section 3.09 of the Indenture is amended effective as of the Effective Time by
adding a new subsection (p) which shall read in its entirety as follows:
(p) any mortgage, pledge, encumbrance, lien or charge of any kind
on (i) properties or assets of any character owned by Atmos immediately
prior to the Effective Time, or (ii) any properties or assets of any
character acquired by the Company on or after the Effective Time, except
any after acquired properties or assets which constitute "mortgaged
property" subject to the lien of this Indenture.
(b) Subsection 3.09(n) is amended effective as of the Effective Time by
deleting the word "and" after the semicolon at the end of the Subsection.
(c) Subsection 3.09(o) is amended effective as of the Effective Time by
replacing the period (.) at the end of the Subsection with "; and.".
Section 2.02. Amendment to Section 3.13 of the Indenture. The figure
"$500" appearing in the first sentence of Section 3.13 of the Indenture is
amended effective as of the Effective Time to read "$200,000".
Section 2.03. Amendment to Section 3.14 of the Indenture. The figure
"$5,000" appearing twice in Section 3.14 of the Indenture is amended effective
as of the Effective Time in each place to read "$200,000".
Section 2.04. Amendment to Section 3.15 of the Indenture. (a) The
figure "$20,000" appearing in Section 3.15 of the Indenture is amended effective
as of the Effective Time to read "$2,000,000".
(b) The figure "$990,000" appearing in Section 3.15 of the Indenture is
amended effective as of the Effective Time to read "$5,000,000".
Section 2.05. Addition of Section 3.19. Effective as of the
Effective Time, the following provision shall be added to Article 3 of the
Indenture as Section 3.19 immediately following Section 3.18 of the Indenture
and shall read in its entirety as follows:
Section 3.19. The aggregate principal amount of all of the Company's
Secured Indebtedness outstanding shall not at any time exceed thirty
percent (30%) of the Net Property of the Company. For the purposes of this
Section 3.19, "Net Property" shall mean the aggregate amount of the assets
of the Company includible in the categories of "property, plant and
equipment" less the amount of accumulated depreciation and amortization
attributable to such assets, that is reflected on the Company's balance
sheet prepared in accordance with generally accepted accounting principles,
consistently applied, and "Secured Indebtedness" shall mean indebtedness of
the Company for money borrowed and secured by a lien upon the property of
the Company.
Section 2.06. Amendment to Section 7.02(d) of the Indenture. The
figure "$5,000" appearing twice in Section 7.02(d) of the Indenture is amended
effective as of the Effective Time in each place to read "$200,000".
Section 2.07. Amendments to Section 12.05 of the Indenture.
6
<PAGE>
Section 12.05 is amended effective as of the Effective Time as follows:
(a) Subsection (t) of Section 12.05 shall be restated in its
entirety to read as follows:
(t) "Prior Liens" means any mortgages or other instruments
constituting a lien upon property hereafter acquired by the Company
prior to the lien of this Indenture; provided, however, that Prior
Liens shall not include any liens on properties, (i) owned by Atmos
immediately prior to the Effective Time, or (ii) acquired by the
Company after the Effective Time, except any after acquired properties
which constitute "mortgaged property" subject to the lien of this
Indenture.
(b) The following new Subsections (v), (w), (x), (y) and (z) are
added to Section 12.05 following Subsection (u):
(v) "Atmos" means Atmos Energy Corporation, a corporation
organized under the laws of the State of Texas immediately prior to
the Effective Time and organized under the laws of the State of Texas
and Commonwealth of Virginia on and after the Effective Time.
(w) "Effective Time" shall have the meaning set forth in
Recital 7 of the Twenty-Second Supplemental Indenture.
(x) "Merger" shall have the meaning set forth in Recital 7 of
the Twenty-Second Supplemental Indenture.
(y) "Net Property" shall have the meaning set forth in Section
2.05 of the Twenty-Second Supplemental Indenture.
(z) "Secured Indebtedness" shall have the meaning set forth in
Section 2.05 of the Twenty-Second Supplemental Indenture.
Article Three
Agreement Not to Issue Additional
First Mortgage Bonds under the Indenture
On and after the Effective Time, Atmos hereby agrees not to certify or
issue any additional First Mortgage Bonds or series of First Mortgage Bonds
under the terms and provisions of the Indenture, including but not limited to,
Sections 1.01, 2.02 and 2.03, except as to transfers, substitutions and
exchanges of First Mortgage Bonds provided for in the Indenture with respect to
First Mortgage Bonds outstanding immediately prior to the Effective Time.
Article Four
Miscellaneous
Section 4.01. Incorporation of Original Indenture. This Twenty-
Second Supplemental Indenture shall be construed in connection with and as a
part of the Original Indenture and all terms used in this Twenty-Second
Supplemental Indenture which are defined in the Original Indenture shall, unless
the context
7
<PAGE>
otherwise requires, have the meanings set forth in the Original Indenture.
Section 4.02. Successors and Assigns. Whenever in this Twenty-Second
Supplemental Indenture any of the parties hereto is named or referred to, this
shall be deemed to include the successors or assigns of such party, and all the
covenants and agreements in this Twenty-Second Supplemental Indenture contained
shall bind and inure to the benefit of the respective successors and assigns of
such parties, whether so expressed or not.
Section 4.03. Multiple Counterparts. This Twenty-Second Supplemental
Indenture may be simultaneously executed in any number of counterparts and all
said counterparts executed and delivered, each as an original, shall constitute
but one and the same instrument.
IN WITNESS WHEREOF, said Atmos Energy Corporation has caused its corporate
name to be hereunto subscribed by its Vice President and its corporate seal to
be hereunto affixed and attested by an Assistant Secretary, and said First Trust
National Association, to evidence its acceptance of the trust hereby created and
in it reposed, has caused its corporate name to be hereunto subscribed by its
Vice President, and its corporate seal to be affixed and attested by an
Assistant Secretary, and said Russell C. Bergman, to evidence his acceptance of
the trust hereby created and in him reposed, has hereunto subscribed his name
and affixed his seal, all as of the day and year first above written.
Atmos Energy Corporation
[Corporate Seal]
By
Glen A. Blanscet
Vice President
Attest:
By
Its
Witnesses as to Atmos Energy Corporation:
First Trust National
Association, Trustee
[Corporate Seal]
By
Frank Sgaraglino, Vice President
Attest:
Witnesses as to First TrustNational Association:
Russell C. Bergman,
Individual Trustee
Attest:
Witnesses to Russell C. Bergman:
8
<PAGE>
State of Texas )
) SS.
County of Dallas )
I, , a Notary Public in and for the County and State aforesaid, do
hereby certify that on this day of , 1997, personally appeared
before me Glen A. Blanscet and , to me personally known, and personally
known to me to be the same persons whose names are subscribed to the foregoing
instrument, who being by me duly sworn, did say that they are the Vice President
and the Assistant Secretary, respectively, of Atmos Energy Corporation, a
corporation organized under the laws of the State of Texas, that the seal
affixed to the above and foregoing instrument is the corporate seal of said
corporation and that said instrument was signed by them and sealed and delivered
on behalf of said corporation by authority of its Board of Directors duly given,
and the said and acknowledged said instrument to be
their free and voluntary act and deed and the free and voluntary act and deed of
said corporation for the uses and purposes therein set forth.
In Witness Whereof, I have hereunto set my hand and official seal this
day of , 1997.
Notary Public in and for
the County and State
aforesaid
[Notarial Seal]
My commission expires:
9
<PAGE>
State of Illinois )
) SS.
County of Cook )
I, Remonia Jamison, a Notary Public in and for the County and State
aforesaid, do hereby certify that on this 23rd day of July, 1997, personally
appeared before me Frank Sgaraglino and Frank Layo, to me personally known, and
personally known to me to be the same persons whose names are subscribed to the
foregoing instrument, who being by me duly sworn, did say that they are the Vice
President and the Assistant Secretary, respectively, of First Trust National
Association, a national banking association organized and existing under the
national banking laws of the United States of America, that the seal affixed to
the above and foregoing instrument is the corporate seal of said association and
that said instrument was signed by them and sealed and delivered on behalf of
said association by authority of its Board of Directors duly given, and the said
Frank Sgaraglino and Frank Layo acknowledged said instrument to be their free
and voluntary act and deed and the free and voluntary act and deed of said
association for the uses and purposes therein set forth.
In Witness Whereof, I have hereunto set my hand and official seal this 23rd
day of July, 1997.
Notary Public in and for
the County and State
aforesaid
[Notarial Seal]
My commission expires:
10
<PAGE>
State of Illinois )
) SS.
County of Cook )
I, Remonia Jamison, a Notary Public in and for the County and State
aforesaid, do hereby certify that on this 23rd day of July, 1997, personally
appeared before me Russell C. Bergman, personally known to me to be the person
described in and who executed and whose name is subscribed to the foregoing
instrument, and acknowledged that he signed and delivered the said instrument as
his free and voluntary act and deed for the uses and purposes therein set forth.
In Witness Whereof, I have hereunto set my hand and official seal this 23rd
day of July, 1997.
Notary Public in and for
the County and State
aforesaid
[Notarial Seal]
My commission expires:
11
<PAGE>
State of Texas )
) SS.
County of Dallas )
Personally appeared before me , who, being duly sworn,
says that saw the corporate seal of Atmos Energy Corporation
affixed to the foregoing instrument and that also saw Glen A. Blanscet,
Vice President and , Assistant Secretary of said Atmos Energy
Corporation, sign and attest the same, and that , with ,
witnessed the execution and delivery thereof as the act and deed of said
Atmos Energy Corporation.
Witness
[Notarial Seal]
Sworn to before me this day of , 1997.
Notary Public in and for the County and
State aforesaid
My commission expires:
12
<PAGE>
State of Illinois )
) SS.
County of Cook )
Personally appeared before me Sandra Rhoden, who, being duly sworn, says
that she saw the corporate seal of the First Trust National Association affixed
to the foregoing instrument and that she also saw Frank Sgaraglino, Vice
President and Frank Layo, Assistant Secretary of said First Trust National
Association, sign and attest the same, and that she, with Pamela Burrows,
witnessed the execution and delivery thereof as the act and deed of the said
First Trust National Association.
[Notarial Seal] Witness
Sworn to before me this 23rd day of July, 1997.
Notary Public in and for the County and
State aforesaid
My commission expires:
13
<PAGE>
State of Illinois )
) SS.
County of Cook )
Personally appeared before me Pamela Burrows, who, being duly sworn, says
that she saw the within named Russell C. Bergman sign, seal, and as his act and
deed, deliver the foregoing instrument and that she, with Sandra Rhoden,
witnessed the execution thereof.
Witness
[Notarial Seal]
Sworn to before me this 23rd day of July, 1997.
Notary Public in and for the County and
State aforesaid
My commission expires:
This Document was Prepared by:
Kristi A. Maher, Esq.
Chapman and Cutler
111 West Monroe Street
Suite 1600
Chicago, IL 60603-4080
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<PAGE>
Schedule 1
To Twenty-Second Supplemental Indenture
Dated as of July 29, 1997
Descriptions of Additional Mortgaged Property
The following gas distribution systems acquired by the Company, together
with all pipelines, mains, connection, service pipes, fittings, meters,
regulators, regulator stations and buildings, tools, instruments, appliances,
apparatus, facilities, machinery and other property used or provided for use, in
the construction, maintenance, repair or operation thereof and together also
with all of the rights, privileges, rights-of-way, franchises, licenses,
easements, grants and permits with respect to the construction, maintenance,
repair and operation of such gas distribution systems:
1. The operating system of Stark Natural Gas acquired by the
Company located in the county of Neosho, Kansas.
2. The operating system of Palmyra Natural Gas System acquired
by the Company located in the county of Marion, Missouri.
3. The operating system of Monarch Gas Company acquired by the
Company by merger located in the counties of Fayette,
Illinois, and Effingham, Illinois.
15
<PAGE>
Exhibit 10.8(a)
Atmos Energy Corporation
(Successor by Merger to United Cities Gas Company)
to
First Trust National Association
as Trustee
First Supplemental Indenture
Dated as of July 29, 1997
<PAGE>
This First Supplemental Indenture, dated as of the 29th day of July, 1997,
by and between Atmos Energy Corporation, ("Atmos"), a corporation duly organized
and existing under and by virtue of the laws of the State of Texas (hereinafter
sometimes called the "Company"), and First Trust National Association, successor
to Bank of America Illinois, as Trustee, a national banking association
organized and existing under the laws of the United States, having its principal
place of business in Chicago, Illinois, as Trustee (hereinafter sometimes
referred to as "Trustee"),
Witnesseth
Whereas, United Cities Gas Company ("United Cities") has heretofore
executed and delivered to the Trustee an Indenture dated as of November 15,
1995;
Whereas, there are currently outstanding three tranches, all of the same
series, of medium-term notes under the Indenture designated, respectively,
"Medium-Term Notes, Series A 1995-1, 6.67% due December 15, 2025," "Medium-Term
Notes, Series A 1995-2, 6.27% due December 19, 2010," and "Medium-Term Notes,
Series A 1995-3, 6.20%, due December 19, 2000" (hereinafter referred to as the
"Medium-Term Notes" or the "Outstanding Securities").
Whereas, effective on the date hereinafter written, United Cities merged
with and into Atmos (the "Merger") and Atmos is the surviving company of the
Merger.
Whereas, as a result of the Merger, all property, rights, privileges,
powers and franchises of United Cities vested in Atmos, and all rights of the
Trustee and the holders of the Outstanding Securities were preserved unimpaired,
and are enforceable against Atmos to the same extent as if it had been named a
party to the Indenture.
Whereas, Article Eleven of the Indenture permits United Cities to merge
with and into another corporation provided that the surviving corporation
executes and delivers to the Trustee a supplemental indenture in and by which it
expressly assumes the due and punctual payment of the principal of and premium,
if any, and interest, if any, on all Outstanding Securities according to their
tenor, and the due and punctual performance of every covenant of the Indenture
to be performed or observed by United Cities.
Whereas, the execution and delivery of this First Supplemental Indenture
has been duly authorized by Atmos and all conditions precedent to the execution
and delivery hereof by Atmos and the Trustee provided for in the Indenture have
been complied with, and all acts and things necessary to constitute this First
Supplemental Indenture a valid indenture and agreement according to the terms
thereof have been done and performed.
Whereas, the Trustee has duly determined to execute this First Supplemental
Indenture and to be bound, insofar as lawful,
2
<PAGE>
by the provisions thereof;
Now, Therefore, in consideration of the premises, the covenants and
agreements hereinafter contained, and for other valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Atmos, for the equal
and proportionate benefit of the respective holders from time to time of the
Medium-Term Notes, has executed and delivered this First Supplemental Indenture;
and Atmos, for itself and its successors and assigns, does hereby covenant and
agree to and with the Trustee and its successors as follows:
Part I
Assumption of Obligations and Liabilities
Atmos (i) assumes and agrees to pay, duly and punctually, the principal of,
premium, if any, and interest, if any, on all Medium-Term Notes according to
their terms and the terms of the Indenture and (ii) agrees to perform and
observe, duly and punctually, all other terms, covenants and conditions of the
Indenture to be performed or observed by United Cities thereunder or in
connection therewith.
Part II
Concerning the Trustee
The Trustee accepts the trusts hereunder and agrees to perform the same but
only upon the terms and conditions set forth in the Indenture. Without limiting
the generality of the foregoing, the Trustee assumes no responsibility for the
correctness of the recitals of fact herein contained, which shall be taken as
the statements of Atmos. The Trustee makes no representations and shall have no
responsibility as to the validity of this First Supplemental Indenture.
Part III
Reaffirmation of Indenture
As supplemented by this First Supplemental Indenture, the Indenture is in
all respects ratified and confirmed, and the Indenture and the First
Supplemental Indenture shall be read, taken and construed as one and the same
instrument.
Part IV
Miscellaneous
This First Supplemental Indenture may be executed in several counterparts,
and all such counterparts, executed and delivered, each as an original, shall
constitute but one and the same instrument.
In Witness Whereof, Atmos Energy Corporation has caused this First
Supplemental Indenture to be signed and acknowledged by its President or one of
its Vice Presidents, and its corporate seal to be affixed hereunto, and the same
to be attested by its
3
<PAGE>
Secretary or one of its Assistant Secretaries, and First Trust National
Association has caused this First Supplemental Indenture to be signed and
acknowledged by one of its Vice Presidents, and its corporate seal to be affixed
hereunto, and the same to be attested by one of its Assistant Secretaries, all
as of the day and year first above written
Signature Page
Atmos Energy Corporation
By
President
(Seal)Attest:
Secretary
First Trust National
Association, as Trustee
By:
Vice President and
Assistant Secretary
(Seal) Attest:
Assistant Secretary
State of Texas )
) SS:
County of )
On the day of , 1997, before me personally came to me known,
who, being by me duly sworn, did depose and say that he is the of
Atmos Energy Corporation, a Texas and Virginia corporation, one of the
corporations described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporation's seal; that it was so affixed by authority of the Board of
Directors of said corporation; and that he signed his name thereto by like
authority.
Notary Public
(Notarial Seal)
4
<PAGE>
State of Illinois )
) SS:
County of Cook )
On the day of , 1997, before me personally came
to me known, who, being by me duly sworn, did depose and say that he is the Vice
President and Assistant Secretary of First Trust National Association, one of
the corporations described in and which executed the foregoing instrument; that
he knows the seal of said corporation; that the seal affixed to said instrument
is such corporation's seal; that it was so affixed by authority of the Board of
Directors of said corporation; and that he signed his name thereto by like
authority.
Notary Public
(Notarial Seal)
5
<PAGE>
EXHIBIT 10.10(a)
Contract No.123535
FIRM GAS TRANSPORTATION SERVICE AGREEMENT
THIS SERVICE AGREEMENT (Agreement), made and entered into as of this 1st
day of November, 1995, by and between Public Service Company of Colorado
(Company), a Colorado corporation, having a mailing address of P.O. Box 840,
Denver, Colorado, 80202, and Greeley Gas Company, a Division of Atmos Energy
Corporation (Shipper), a Texas corporation, having a mailing address of 700
Three Lincoln Centre, 5430 LBJ Freeway, P.O. Box 650205, Dallas, Texas 75265-
0205. Company and Shipper are collectively referred to as the "Parties."
THE PARTIES REPRESENT:
Shipper has by separate agreement acquired supplies of natural gas,
hereinafter referred to as "Shipper's Gas";
Shipper has made the necessary arrangements and/or has entered into
separate agreements to cause Shipper's Gas to be delivered to Company's Receipt
Point(s) as specified in Exhibit(s)"A-1"-"C-2";
Shipper has requested and Company agrees to receive and transport Shipper's
Gas from the Receipt Point(s) to the Delivery Point(s), as specified in
Exhibit(s) "A-1"-"C-2", on a firm capacity basis and, if applicable, to sell gas
to Shipper on a firm supply reservation basis; and
Shipper assumes responsibility for the installation and maintenance costs
for a communication line necessary for electronic metering for the facility(s)
specified in Exhibit(s) "A-1", "B-1" and "C-1".
THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. Shipper acknowledges and agrees that gas transportation service
provided hereunder is subject to the terms and conditions of Company's
applicable gas transportation tariff as on file and in effect from time to time
with the Public Utilities Commission of the State of Colorado (Commission) and
such terms and conditions are incorporated herein as part of this Agreement.
2. Rates and Payment: Transportation service, Firm Capacity service and
Firm Supply Reservation service provided by Company under this Service Agreement
shall be paid for by Shipper at the charges under the standard rate set forth in
Company's gas transportation tariff unless otherwise specified in Exhibit(s) "A-
1"-"C-2". Applicable facility charges shall be paid at the
<PAGE>
rate set forth in Company's Gas Transportation Tariff unless otherwise specified
in Exhibit(s) "A-1"-"C-2".
3. Back-up Supply Sales Service: In the event that adequate supplies of
Shipper's gas are not available for receipt by Company, Company shall sell to
Shipper sufficient quantity(s) of natural gas as necessary to meet Shipper's
backup natural gas supply needs, up to the Total Peak Day Quantity for the Firm
Supply Reservation Service (if any) as specified in Exhibit(s) "A-1"-"C-2", but
in no event greater at any Delivery Point than the Firm Capacity Peak Day
Quantity at such Delivery Point as specified in Exhibit(s) "A-1"-"C-2", except
as provided for in paragraph 10 hereof. To the extent that the Shipper does not
purchase Firm Supply Reservation Service or exceeds the Firm Capacity Peak Day
Quantity at any Delivery Point, Company will provide Back-up Supply Sales
Service on an interruptible basis, as available.
All natural gas sold by Company to Shipper shall be at the Back-up Supply
Sales Charge specified in Company's gas transportation tariff.
4. Quality: Gas delivered by the Shipper or for the Shipper's account at
the Receipt Point(s) as specified in Exhibit(s) "A-1"-"C-2" shall conform to
the specifications for gas as specified in Exhibit "D" and Exhibit "E".
5. Term - Effective Date: This Agreement shall be effective November 1,
1995, and shall continue in full force and effect until the Service Termination
Date(s) specified on Exhibit(s) "A-1"-"C-2" or October 1, 1996, and from year to
year thereafter, until terminated by either party effective upon such Service
Termination Date(s) or October 1 of any suceeding year upon thirty (30) days
prior written notice.
6. Notices: Except as otherwise provided, any notice or information that
either party may desire to give to the other regarding this agreement shall be
in writing to the following address, or to such other address as either of the
parties shall designate in writing.
COMPANY: SHIPPER:
Payments Only: Invoices only
Public Service Company of Colorado Greeley Gas Company, a
P.O. Box 17230 Division of Atmos
Denver, Colorado 80217-0230 Energy Corporation
(303) 623-1234 Attn: IntraState Gas
SupplyFax: (303) 294-2136 P.O. Box 650205
Dallas, Texas 75265-0205
Phone: (214) 788-3747
Fax: (214) 788-3773
2
<PAGE>
All Others
Public Service Company Greeley Gas Company, a
of Colorado Division of
Seventeenth Street Plaza Atmos Energy Corporation
1225 17th Street, Suite 1100 Attn: IntraState Gas Supply
Denver, Colorado 80202-5533 P.O. Box 650205
Attn: Unit Manager, Gas Dallas, Texas 75265-0205
Transportation Phone: (214) 788-3749
Phone: (303) 294-2012 Fax: (214) 788-3773
Fax: (303) 294-2757
Routine communications, including monthly statements and payments, shall be
considered as duly delivered or furnished three (3) days after being mailed or
when transmitted electronically.
7. Assignment - Consent: This Service Agreement shall not be assigned by
either party hereto, without the prior written consent of the other party.
Consent for assignment of Service Agreement shall not be unreasonably withheld
by or from either party.
8. Cancellation of Prior Agreement: This Service Agreement supersedes,
cancels and terminates, as of the date of this Service Agreement, the following
agreements and any amendments thereto:
Gas Transportation Service Agreement, dated 6/29/92 (Document No.123535),
between Greeley Gas Company and Western Gas Supply Company (predecessor to
Company).
Gas Transportation Service Agreement, dated 7/16/92 (Document No.123530),
between Greeley Gas Company and Western Gas Supply Company (predecessor to
Company).
Gas Transportation Service Agreement, dated 6/29/92 (Document No.124252),
between Greeley Gas Company and Western Gas Supply Company (predecessor to
Company).
Gas Transportation Service Agreement, dated 7/16/92 (Document No.122111),
between Greeley Gas Company and Western Gas Supply Company (predecessor to
Company).
Service Agreement, dated 10/02/92 (Document No.50772), between Greeley Gas
Company and Western Gas Supply Company (predecessor to Company).
Service Agreement, dated 10/21/83 (Document No.7926), (Document No. 7926),
between Greeley Gas Company and Western Gas Supply Company (predecessor to
Company).
Service Agreement, dated 10/21/83 (Document 7846),
3
<PAGE>
between Greely Gas Company and Western Gas Supply Company (predecessor
to Company).
Service Agreement, dated 11/08/84 (Document No.7954), between Greeley Gas
Company and Western Gas Supply Company (predecessor to Company).
9. Cancellation of this Service Agreement: Shipper may cancel this
Service Agreement upon thirty (30) days' written notice. If Receiving Party(s)
then chooses to return to full firm natural gas service from Company, Company
will, at Receiving Party's request, subject to availability of sufficient
volumes of firm natural gas from Company's suppliers, reinstate Receiving Party
with full firm service under the appropriate tariffs as they may be filed with
the Commission. Shipper shall be responsible for costs, if any, which may be
incurred by Company due to such termination.
In the event Shipper no longer desires Firm Transportation Service and
Receiving Party(s) obtains interruptible sales or interruptible transportation
service or converts to an alternate fuel prior to the end of the Contract Period
or any subsequent Contract Period, Shipper may terminate this Agreement by
paying Company a termination charge. The termination charge shall equal the
Firm Capacity Charge and the Firm Supply Reservation Charge, if applicable,
multiplied by the Receiving Party(s) Peak Day Quantity(s), as described on
Exhibit(s) "A-1"-"C-2", multiplied by the number of months remaining in the
Contract Period. The parties agree that Shipper shall owe no termination charge
in the event the Agreement is terminated in accordance with paragraph 5 above.
Either party shall have the further right to terminate this Agreement if
the other party, within ten days following receipt of written notification of a
claim of a material breach hereunder, fails to remedy such material breach and
to indemnify such party for the consequences thereof. Such termination shall
become effective on the eleventh day following such notification or, if the
notification provides for a different termination date which is later than the
ten-day notification period, on the date specified in such notification.. For
purposes of this paragraph, "material breach" shall include, but not be limited
to, a continuing or repeated failure to perform a basic obligation under this
Agreement and shall not include periodic or isolated failures to perform or
other liquidated claims which can be resolved pursuant to monetary or volume
adjustments.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Colorado.
10. Delivery Point Peak Day Quantity: Peak day volumes identified in the
attached Exhibits represent Shipper's current
4
<PAGE>
and best information of delivery point peaking volumes. Shipper and Company
agree that the parties will reevaluate these volumes on a periodic basis, but at
least once annually, to determine if and at what level any adjustments to the
individual delivery point peaking volumes are needed.
On a monthly basis, Company will review the actual deliveries made to these
points and, provided the total volumes delivered do not exceed the total
contracted-for volume available for that Exhibit area, Company will authorize
any volume exceeding the delivery point Peak Day quantity as authorized overrun
gas. Should delivered volumes at any point consistently exceed the Peak Day
quantity for that point, Shipper will request and Company will accept, subject
to available capacity, an increase in the contracted-for peak day quantity at
the specified delivery point. In increasing the contracted volume at a receipt
point, Shipper may shift volumes from other points within the same Exhibit area
if volumes at such other points do not exceed maximum peak day quantities in
which case Shipper may request an increase in the overall Contract Maximum Peak
Day quantity, as necessary.
11. Maximum capacity by Exhibit: Administrative circumstances require the
separation of electronically metered and non-electronically metered volumes into
two separate Exhibits covering the same regional area, such as Exhibit "A-1"
Electronically Metered Front Range and Exhibit "A-2" Non-Electronically Metered
Front Range, Exhibit "B-1" Electronically Metered Southern and Exhibit "B-2"
Non-Electronically Metered Southern, and Exhibit "C-1" Electronically Metered
Western and Exhibit "C-2" Non-Electronically Metered Western. This agreement is
intended to make available firm transportation service up to the maximum
contracted volume by Exhibit area, i.e., the Front Range Area (Exhibits "A-1"
and "A-2"), the Southern Area (Exhibit "B-1" and "B-2"), and the Western Area
(Exhibits"C-1" and "C-2"). Therefore, in instances where the total delivered
volumes under any Electronically Metered or Non-Electronically Metered Exhibit
exceed the Maximum Daily Contract quantity for that Exhibit, the parties agree
that transportation will be authorized provided available capacity exists on the
corresponding Electronically Metered or Non-Electronically Metered Exhibit area.
12. For all Delivery Points listed on Exhibits "A-2", "B-2", and "C-2",
Shipper will nominate transportation volumes based on a percentage volume
provided by Company, therefore, the balancing provisions of Company's Tariff as
they would apply to this Agreement, are waived.
13. Exhibit(s) and Addendums: All exhibits attached hereto are
incorporated into the terms of this Agreement.
5
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Firm Gas Transportation
Service Agreement as of the day and year first above written.
Contract No.: 123535
COMPANY: SHIPPER:
PUBLIC SERVICE COMPANY OF COLORADO GREELEY GAS COMPANY,
A DIVISION OF
ATMOS ENERGY CORPORATION
By: /s/ Merciu Arizone By: /s/ Toby A. Priolo
----------------------------- ----------------------------
Title: Mgr, Gas Plng, Mktg & Sply Title: Vice President
-------------------------- ------------------------
Taxpayer I.D. No. 84-0296600 Taxpayer I.D. No.
---------------
Witness/Attest: Witness/Attest:
- --------------------------------- --------------------------------
(please type name) (please type name)
6
<PAGE>
Contract No.: 123535
Effective Date Of Agreement: 11/01/95
Effective Date of Exhibit: 4/1/96
EXHIBIT "A-1" ELECTRONICALLY METERED FRONT RANGE
TO THE FIRM TRANSPORTATION SERVICE AGREEMENT
BETWEEN
GREELEY GAS COMPANY, A DIVISION OF
ATMOS ENERGY CORPORATION (Shipper)
AND
PUBLIC SERVICE COMPANY OF COLORADO (Company)
1. PRIMARY RECEIPT POINT(S)
Receipt Point Peak Day Quantity Utilization Curve
Dth/Day
Associated Natural Gas, Inc. 22,058 General
Mewborn Residue Plant
Associated Natural Gas, Inc. 4,598 General
Eaton Residue Plant
Associated Natural Gas, Inc. 9,196 General
Roggen Residue Plant
Associated Natural Gas, Inc. 4,598 General
Spindle Residue Plant
2. FIRM CAPACITY SERVICE - DELIVERY POINT(S)
<TABLE>
<CAPTION>
Firm Service Transpor-
Capacity and Specific tation Term Date Of Effective Termin-
Receiving Load Peak Day Facility Facility Commodity of First Date Of ation
Party Point Quantity Charge Charge Charge Rate Delivery Service Date of
& Service (Dth) Service
Address
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ault #1 306412692 800 1st $185 TF 1yr. 08/26/90 11/1/95 9/30/96
meter
Eaton #1 206412763 500 add'l $125 TF 1yr. 08/26/90 11/1/95 9/30/96
meter
Kersey Group 706412713 1,000 add'l $125 TF 1yr. 08/26/90 11/1/95 9/30/96
meter
Lasalle 406412719 900 add'l $125 TF 1yr. 08/26/90 11/1/95 9/30/96
meter
Lucerne #1 606412723 200 add'l $125 TF 1yr. 08/26/90 11/1/95 9/30/96
meter
Monfort 706412727 500 add'l $125 TF 1yr. 08/26/90 11/1/95 9/30/96
Measuring meter
Station
North Greeley 106412730 14,000 add'l $125 TF 1yr. 08/26/90 11/1/95 9/30/96
meter
Platteville 906412745 1000 add'l $125 TF 1yr. 08/26/90 11/1/95 9/30/96
meter
</TABLE>
7
<PAGE>
Contract No.: 123535
Effective Date Of Agreement: 11/01/95
Effective Date of Exhibit: 4/1/96
EXHIBIT "A-1" ELECTRONICALLY METERED FRONT RANGE
(cont'd.)
2. FIRM CAPACITY SERVICE - DELIVERY POINT(S)
<TABLE>
<CAPTION>
Firm Service Transpor-
Capacity and Specific tation Term Date Of Effective Termin-
Receiving Load Peak Day Facility Facility Commodity of First Date Of ation
Party Point Quantity Charge Charge Charge Rate Delivery Service Date of
& Service (Dth) Service
Address
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
South Greeley 106412754 2,000 addt'l. $125 TF 1yr. 08/26/90 11/1/95 9/30/96
meter
West Greeley 606412761 18,715 addt'l. $125 TF 1yr. 08/26/90 11/1/95 9/30/96
meter
</TABLE>
Total Firm Capacity Reservation Peak Day Quantity: 39,615Dth
3. FIRM SUPPLY RESERVATION SERVICE
Front Range Effective Date Termination Date
Peak Day Quantity Of Service Of Service
Dth/Day
31,684 11/01/95 May 31, 1996
Total Firm Supply Reservation Peak Day Quantity: 31,684 Dth
8
<PAGE>
Contract No.: 123535
Effective Date Of Agreement: 11/01/95
Effective Date of Exhibit: 4/1/96
EXHIBIT "A-2" NON-ELECTRONICALLY METERED FRONT RANGE
TO THE FIRM TRANSPORTATION SERVICE AGREEMENT
BETWEEN
GREELEY GAS COMPANY, A DIVISION OF
ATMOS ENERGY CORPORATION (Shipper)
AND
PUBLIC SERVICE COMPANY OF COLORADO (Company)
1. PRIMARY RECEIPT POINT(S)
Receipt Point Peak Day Utilization
Quantity Curve
Dth/Day
Associated Natural Gas, Inc. 1928 General
Mewborn Residue Plant
Associated Natural Gas, Inc. 402 General
Eaton Residue Plant
Associated Natural Gas, Inc. 804 General
Roggen Residue Plant
Associated Natural Gas, Inc. 401 General
Spindle Residue Plant
2. FIRM CAPACITY SERVICE - DELIVERY POINT(S)
<TABLE>
<CAPTION>
Firm Service Transpor-
Capacity and Specific tation Term Date Of Effective Termin-
Receiving Load Peak Day Facility Facility Commodity of First Date Of ation
Party Point Quantity Charge Charge Charge Rate Delivery Service Date of
& Service (Dth) Service
Address
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Corsey Group 906412694 20 1st $185 TF 1yr. 08/26/90 11/1/95 9/30/96
meter
East 606412695 50 addt'l. $125 TF 1yr. 08/26/90 11/1/95 9/30/96
Keenesburg meter
Gilcrest 506412766 425 addt'l. $125 TF 1yr. 08/26/90 11/1/95 9/30/96
meter
Hill-N-Park 206412697 360 addt'l. $125 TF 1yr. 08/26/90 11/1/95 9/30/96
meter
Hudson 406412700 375 addt'l. $125 TF 1yr. 08/26/90 11/1/95 9/30/96
meter
Keenesburg 306412710 340 addt'l. $125 TF 1yr. 08/26/90 11/1/95 9/30/96
meter
Nunn 206412739 175 addt'l. $125 TF 1yr. 08/26/90 11/1/95 9/30/96
meter
</TABLE>
9
<PAGE>
Contract No.: 123535
Effective Date Of Agreement: 11/01/95
Effective Date of Exhibit: 4/1/96
EXHIBIT "A-2" NON-ELECTRONICALLY METERED FRONT RANGE
(cont'd.)
2. FIRM CAPACITY SERVICE - DELIVERY POINT(S)
<TABLE>
<CAPTION>
Firm Service Transpor-
Capacity and Specific tation Term Date Of Effective Termin-
Receiving Party Load Peak Day Facility Facility Commodity of First Date Of ation
& Service Point Quantity Charge Charge Charge Rate Delivery Service Date of
Address (Dth) Service
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pierce 606412742 400 addt'l. $125 TF 1yr. 08/26/90 11/1/95 9/30/96
meter
Roggen 706412751 70 addt'l. $125 TF 1yr. 08/26/90 11/1/95 9/30/96
meter
South Gate 106412768 50 addt'l. $125 TF 1yr. 08/26/90 11/1/95 9/30/96
Trailer meter
South Roggen 106412773 15 addt'l. $125 TF 1yr. 08/26/90 11/1/95 9/30/96
meter
West Hudson 306412705 300 addt'l. $125 TF 1yr. 08/26/90 11/1/95 9/30/96
meter
West LaSalle 506412771 35 addt'l. $125 TF 1yr. 08/26/90 11/1/95 9/30/96
Group meter
Prospect Valley 306412748 55 addt'l. $125 TF 1yr. 08/26/90 11/1/95 9/30/96
meter
Miscellaneous 1,700 TF 1yr. 08/26/90 11/1/95 9/30/96
Farmtaps
</TABLE>
Total Firm Capacity Reservation Peak Day Quantity: 4,370 Dth
10
<PAGE>
Contract No.: 123535
Effective Date Of Agreement: 11/01/95
Effective Date of Exhibit: 4/1/96
EXHIBIT "B-1" ELECTRONICALLY METERED SOUTHERN
TO THE FIRM TRANSPORTATION SERVICE AGREEMENT
BETWEEN
GREELEY GAS COMPANY, A DIVISION OF
ATMOS ENERGY CORPORATION (Shipper)
AND
PUBLIC SERVICE COMPANY OF COLORADO (Company)
1. PRIMARY RECEIPT POINT(S)
Receipt Point Peak Day Utilization Curve
Quantity
Dth/Day
Outlet of Tiffany 6,500 Stabilized
Compressor Station
2. FIRM CAPACITY SERVICE - DELIVERY POINT(S)
<TABLE>
<CAPTION>
Firm Service Transpor-
Capacity and Specific tation Term Date Of Effective Termination
Receiving Load Peak Day Facility Facility Commodity of First Date Of Date of
Party Point Quantity Charge Charge Charge Rate Delivery Service Service
& Service (Dth)
Address
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Crested Butte 406412639 700 addt'l $125 TF 1yr. 11/28/90 11/1/95 9/30/96
Town meter
Border Station
East Gunnison 306412687 2,500 addt'l $125 TF 1yr. 05/06/87 11/1/95 9/30/96
Town meter
Border Station
Salida Town 206412701 2,600 addt'l $125 TF 1yr. 05/06/87 11/1/95 9/30/96
Border Station meter
</TABLE>
Total Firm Capacity Reservation Peak Day Quantity: 5,800 Dth
11
<PAGE>
Contract No.: 123535
Effective Date Of Agreement: 11/01/95
Effective Date of Exhibit: 4/1/96
EXHIBIT "B-2" NON-ELECTRONICALLY METERED SOUTHERN
TO THE FIRM TRANSPORTATION SERVICE AGREEMENT
BETWEEN
GREELEY GAS COMPANY, A DIVISION OF
ATMOS ENERGY CORPORATION (Shipper)
AND
PUBLIC SERVICE COMPANY OF COLORADO (Company)
1. PRIMARY RECEIPT POINT(S)
Receipt Point Peak Day Quantity Utilization Curve
Dth/Day
Outlet of Tiffany Compressor 1,115 Stabilized
Station
2. FIRM CAPACITY SERVICE - DELIVERY POINT(S)
<TABLE>
<CAPTION>
Firm Service Transpor-
Capacity and Specific tation Term Date Of Effective Termin-
Receiving Party Load Peak Day Facility Facility Commodity of First Date Of ation
& Service Point Quantity Charge Charge Charge Rate Delivery Service Date of
Address (Dth) Service
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Poncha Springs 706412690 100 addt'l. $125 TF 1yr. 11/28/90 11/1/95 9/30/96
meter
Chalk Creek 206412678 85 addt'l. $125 TF 1yr. 05/06/87 11/1/95 9/30/96
meter
Tomichi Village 106412706 40 addt'l. $125 TF 1yr. 05/06/87 11/1/95 9/30/96
meter
West Gunnison 906412707 375 addt'l. $125 TF 1yr. 05/06/87 11/1/95 9/30/96
Town Border meter
Micellaneous 800 TF 1yr. 05/06/87 11/1/95 9/30/96
Farmtaps
</TABLE>
Total Firm Capacity Reservation Peak Day Quantity: 1,400 Dth
12
<PAGE>
Contract No.: 123535
Effective Date Of Agreement: 11/01/95
Effective Date of Exhibit: 4/1/96
EXHIBIT "C-1" ELECTRONICALLY METERED WESTERN
TO THE FIRM TRANSPORTATION SERVICE AGREEMENT
BETWEEN
GREELEY GAS COMPANY, A DIVISION OF
ATMOS ENERGY CORPORATION (Shipper)
AND
PUBLIC SERVICE COMPANY OF COLORADO (Company)
1. PRIMARY RECEIPT POINT(S)
Receipt Point Peak Day Quantity Utilization Curve
Dth/Day
KNGWRD 680 General
MOFRRO 575 General
LONGCA 266 General
NF1GCA 1,770 General
NF1GHC 3,540 General
NF2GCA 3,540 General
ROSGCA 89 General
TERGCA 22 General
TWIGCA 66 General
2. FIRM CAPACITY SERVICE - DELIVERY POINT(S)
<TABLE>
<CAPTION>
Firm Service Transpor-
Capacity and Specific tation Term Date Of Effective Termin-
Receiving Load Peak Day Facility Facility Commodity of First Date Of ation
Party Point Quantity Charge Charge Charge Rate Delivery Service Date of
& Service (Dth) Service
Address
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Craig 206412744 4,648 addt'l $125 TF 1yr. 10/20/86 11/1/95 9/30/96
meter
Meeker 706413010 1,000 addt'l $125 TF 1yr. 10/20/86 11/1/95 9/30/96
meter
Hayden Town 506412747 700 addt'l $125 TF 1yr. 10/20/86 11/1/95 9/30/96
Border Station meter
Mt. Werner #1 506412752 2,600 addt'l $125 TF 1yr. 10/20/86 11/1/95 9/30/96
meter
Steamboat Town 306412772 1,215 addt'l $125 TF 1yr. 10/20/86 11/1/95 9/30/96
Border Station meter
</TABLE>
Total Firm Capacity Reservation Peak Day Quantity: 10,163 Dth
13
<PAGE>
Contract No.: 123535
Effective Date Of Agreement: 11/01/95
Effective Date of Exhibit: 4/1/96
EXHIBIT "C-2" NON-ELECTRONICALLY METERED WESTERN
TO THE FIRM TRANSPORTATION SERVICE AGREEMENT
BETWEEN
ATMOS ENERGY CORPORATION (Shipper)
AND
GREELEY GAS COMPANY, A DIVISION OF
PUBLIC SERVICE COMPANY OF COLORADO (Company)
1. PRIMARY RECEIPT POINT(S)
Receipt Point Peak Day Quantity Utilization Curve
Dth/Day
KNGWRD 88 General
MOFRRO 75 General
LONGCA 34 General
NF1GCA 230 General
NF1GHC 460 General
NF2GCA 460 General
ROSGCA 11 General
TERGCA 3 General
TWIGCA 9 General
2. FIRM CAPACITY SERVICE - DELIVERY POINT(S)
<TABLE>
<CAPTION>
Firm Service Transpor-
Capacity and Specific tation Term Date Of Effective Termin-
Receiving Load Peak Day Facility Facility Commodity of First Date Of ation
Party Point Quantity Charge Charge Charge Rate Delivery Service Date of
& Service (Dth) Service
Address
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Thompson Hill 406412762 45 addt'l. $125 TF 1yr. 10/20/86 11/1/95 9/30/96
meter
Milner Town 106412749 65 addt'l. $125 TF 1yr. 10/20/86 11/1/95 9/30/96
Border meter
Steamboat II 206412758 200 addt'l. $125 TF 1yr. 10/20/86 11/1/95 9/30/96
West meter
Brooklyn Group 606412737 627 addt'l. $125 TF 1yr. 10/20/86 11/1/95 9/30/96
meter
Miscellaneous 1,233 TF 1yr. 10/20/86 11/1/95 9/30/96
Farmtaps
</TABLE>
Total Firm Capacity Reservation Peak Day Quantity: 2,170 Dth
14
<PAGE>
Contract No.: 123535
Effective Date Of Agreement: 11/01/95
Effective Date of Exhibit: 11/01/95
EXHIBIT "D"
GAS UTILIZATION CURVES
Stabilized Utilization Curve
A graph depicting PSCo's stabilized utilization curve appeared here in the
original document.
The Utilization Curve is a general representation of the natural gas quality
which is acceptable from a utilization standpoint. However, the gas composition
must be known in order to determine if a supply is acceptable and can be
interchanged with supplies in a pipeline system. PSCo reserves the right in all
instances to evaluate gas composition to determine system compatibility and to
refuse any gas which is unacceptable from a utilization basis.
15
<PAGE>
Contract No.: 123535
Effective Date Of Agreement: 11/01/95
Effective Date of Exhibit: 11/01/95
EXHIBIT "E"
GAS UTILIZATION CURVES
General Utilization Curve
A graph depicting PSCo's general utilization curve appeared here in the original
document.
The Utilization Curve is a general representation of the natural gas quality
which is acceptable from a utilization standpoint. However, the gas composition
must be known in order to determine if a supply is acceptable and can be
interchanged with supplies in a pipeline system. PSCo reserves the right in all
instances to evaluate gas composition to determine system compatibility and to
refuse any gas which is unacceptable from a utilization basis.
16
<PAGE>
EXHIBIT 10.21(f)
May 14, 1997
Mr. Larry J. Dagley
Atmos Energy Corporation
P.O. Box 650205
Dallas, Texas 75265
Dear Mr. Dagley:
Atmos Energy Corporation (the "Company") considers it essential to the best
interests of its shareholders to foster the continuous employment of key
management personnel. In this connection, the Board of Directors of the Company
(the "Board") recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its shareholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Company's management, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a change in control of the Company.
In order to induce you to remain in the employ of the Company and in
consideration of your agreement set forth in Subsection 2(ii) hereof, the
Company agrees that you shall receive the severance benefits set forth in this
letter agreement ("Agreement") in the event your employment with the Company is
terminated subsequent to a "change in control of the Company" (as defined in
Section 2 hereof) under the circumstances described below.
1. Term of Agreement. This Agreement shall commence on the date hereof
and shall continue in effect through December 31, 1997; provided, however, that
commencing on January 1, 1998 and each January 1 thereafter, the term of this
Agreement shall automatically be extended for one additional year unless, not
later than July 1 of the preceding year, the Company shall have given notice
that it does not wish to extend this Agreement; provided, further, if a change
in control of the Company shall have occurred during the original or extended
term of this Agreement, this Agreement shall continue in effect for a period of
thirty-six (36) months beyond the month in which such change in control
occurred.
<PAGE>
Change in Control. (i) No benefits shall be payable hereunder unless
there shall have been a change in control of the Company, as set forth below.
For purposes of this Agreement, a "change in control of the Company" shall be
deemed to have occurred if (A) any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Company, is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 33 1/3% or more of the
combined voting power of the Company's then outstanding securities; or (B)
during any period of two consecutive years (not including any period prior to
the execution of this Agreement), individuals who at the beginning of such
period constitute the Board and any new director (other than a director
designated by a person who has entered into an agreement with the Company to
effect a transaction described in clauses (A) or (C) of this Subsection) whose
election by the Board or nomination for election by the Company's shareholders
was approved by a vote of at least two-thirds (2/3) 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, cease for any
reason to constitute a majority thereof; or (C) the shareholders of the Company
approve a merger or consolidation of the Company with any other corporation,
other than a merger or consolidation which would result in the voting securities
of the Company 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 Company or such surviving entity outstanding immediately after
such merger or consolidation, or the shareholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all the Company's assets.
(ii) For purposes of this Agreement, a "potential change in control
of the Company" shall be deemed to have occurred if (A) the Company enters into
an agreement, the consummation of which would result in the occurrence of a
change in control of the Company, (B) any person (including the Company)
publicly announces an intention to take or to consider taking actions which if
consummated would constitute a change in control of the Company; (C) any person,
other than a trustee or other fiduciary holding securities under an employee
benefit plan of the Company, who is or becomes the beneficial owner, directly or
indirectly, of securities of the Company representing 9.5% or more of the
combined voting power of the Company's then outstanding securities, increases
his beneficial ownership of such securities by 5% or more over the percentage so
owned by such person on the date hereof; or (D) the Board adopts a resolution to
the effect that, for purposes of this Agreement, a potential change in control
of the Company has occurred. You
2
<PAGE>
agree that, subject to the terms and conditions of this Agreement, in the event
of a potential change in control of the Company, you will remain in the employ
of the Company until the earliest of (i) a date which is six (6) months after
the occurrence of such potential change in control of the Company, (ii) the
termination by you of your employment by reason of Disability or Retirement (at
your normal retirement age), as defined in Subsection 3(i), or (iii) the
occurrence of a change in control of the Company.
(iii) Notwithstanding any other provision of this Agreement, the
definitions set forth in Sections 2(i) and (ii) above regarding "change in
control of the Company" and "potential change in control of the Company" do not
include, and shall not be deemed to include or be applicable to, the merger, or
approval by the Company's shareholders of the merger, contemplated by the
Agreement and Plan of Reorganization dated July 19, 1996, executed by and
between the Company and United Cities Gas Company.
3. Termination Following Change in Control. If any of the events
described in Subsection 2(i) hereof constituting a change of control shall have
occurred, you shall be entitled to the benefits provided in Subsection 4(iii)
hereof upon the subsequent termination of your employment during the term of
this Agreement unless such termination is (A) because of your death, Disability
or Retirement, (B) by the Company for Cause, or (C) by you other than for Good
Reason.
(i) Disability; Retirement. If, as a result of your incapacity due
to physical or mental illness, you shall have been absent from the full-time
performance of your duties with the Company for twelve (12) consecutive months,
and within thirty (30) days after written Notice of Termination (as defined in
Subsection (iv) below) is given you shall not have returned to the full-time
performance of your duties, your employment may be terminated for "Disability."
Termination by the Company or you of your employment based on "Retirement" shall
mean termination in accordance with the Company's retirement policy, including
early retirement, generally applicable to its salaried employees or in
accordance with any retirement arrangement established with your consent with
respect to you.
(ii) Cause. Termination by the Company of your employment for
"Cause" shall mean termination upon (A) the willful and continued failure by you
to substantially perform your duties with the Company (other than any such
failure resulting from your incapacity due to physical or mental illness or any
such actual or anticipated failure after the issuance of a Notice of Termination
by you for Good Reason, as defined in Subsections 3(iv) and 3(iii),
respectively) after a written demand for substantial performance is delivered to
you by the Board, which demand specifically identifies the manner in which the
Board believes that you have not substantially performed your
3
<PAGE>
duties, or (B) the willful engaging by you in conduct which is demonstrably and
materially injurious to the Company, monetarily or otherwise. For purposes of
this Subsection, no act, or failure to act, on your part shall be deemed
"willful" unless done, or omitted to be done, by you not in good faith and
without reasonable belief that your action or omission was in the best interest
of the Company. Notwithstanding the foregoing, you shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered to
you 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 at a meeting of the
Board called and held for such purpose (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard before the Board),
finding that in the good faith opinion of the Board you were guilty of conduct
set forth above in clauses (A) or (B) of the first sentence of this Subsection
and specifying the particulars thereof in detail.
(iii) Good Reason. You shall be entitled to terminate your
employment for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean, without your express written consent, the occurrence after a change in
control of the Company of any of the following circumstances unless, in the case
of Paragraphs (A), (E), (F), (G), or (H), such circumstances are fully corrected
prior to the Date of Termination specified in the Notice of Termination, as
defined in Subsections 3(v) and 3(iv), respectively, given in respect thereof:
(A) the assignment to you of any duties inconsistent with your
status as a senior executive officer of the Company or a substantial and
adverse alteration in the nature or status of your responsibilities from
those in effect immediately prior to the change in control of the Company;
(B) a reduction by the Company in your annual base salary as in
effect on the date hereof or as the same may be increased from time to time
except for across-the-board salary reductions similarly affecting all
senior executives of the Company and all senior executives of any person in
control of the Company;
(C) the Company's requiring you to be based anywhere other than
the offices at which you were based immediately prior to the change in
control of the Company except for required travel on the Company's business
to an extent substantially consistent with your present business travel
obligations;
(D) the failure by the Company, without your consent, to pay to
you any portion of your current compensation except pursuant to an across-
the-board compensation deferral similarly affecting all senior executives
of the Company and all senior executives of any
4
<PAGE>
person in control of the Company, or to pay to you any portion of an
installment of deferred compensation under any deferred compensation
program of the Company, within seven (7) days of the date such compensation
is due;
(E) the failure by the Company to continue in effect any
compensation plan, in which you participate immediately prior to the change
in control of the Company which is material to your total compensation,
including, but not limited to, the Company's Retirement Plan, Employee
Stock Ownership Plan, Supplemental Executive Benefits Plan and Excess
Medical Expense Insurance Plan or any substitute plans adopted prior to the
change in control, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to such plan, or
the failure by the Company to continue your participation therein (or in
such substitute or alternative plan) on a basis not materially less
favorable, both in terms of the amount of benefits provided and the level
of your participation relative to other participants, as existed at the
time of the change in control;
(F) the failure by the Company to continue to provide you with
benefits substantially similar to those enjoyed by you under any of the
Company's pension, life insurance, medical, health and accident, or
disability plans in which you were participating at the time of the change
in control of the Company, the taking of any action by the Company which
would directly or indirectly materially reduce any of such benefits or
deprive you of any material fringe benefit enjoyed by you at the time of
the change in control of the Company, or the failure by the Company to
provide you with the number of paid vacation days to which you are entitled
on the basis of years of service with the Company in accordance with the
Company's normal vacation policy in effect at the time of the change in
control of the Company;
(G) the failure of the Company to obtain a satisfactory agreement
from any successor to assume and agree to perform this Agreement; or
(H) any purported termination of your employment which is not
effected pursuant to a Notice of Termination satisfying the requirements of
Subsection (iv) below (and, if applicable, the requirements of Subsection
(ii) above); for purposes of this Agreement, no such purported termination
shall be effective.
Your right to terminate your employment pursuant to this Subsection shall not be
affected by your incapacity due to physical or mental illness. Your continued
employment shall not constitute consent to, or a waiver of rights with respect
to, any circumstance constituting Good Reason hereunder.
5
<PAGE>
(iv) Notice of Termination. Any purported termination of your
employment by the Company or by you shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 7 hereof. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the provision so
indicated.
(v) Date of Termination, Etc. "Date of Termination" shall mean (A) if
your employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that you shall not have returned to the full-time
performance of your duties during such thirty (30) day period), and (B) if your
employment is terminated for any reason other than Disability, thirty (30) days
after Notice of Termination is given.
4. Compensation Upon Termination or During Disability. Following a change
in control of the Company, as defined by Subsection 2(i), upon termination of
your employment or during a period of disability you shall be entitled to the
following benefits:
(i) During any period that you fail to perform your full-time duties
with the Company as a result of incapacity due to physical or mental illness,
you shall continue to receive your base salary at the rate in effect at the
commencement of any such period, together with all compensation payable to you
under any disability plan of the Company until this Agreement is terminated
pursuant to Subsection 3(i) hereof. Thereafter, or in the event your employment
shall be terminated by the Company or by you for Retirement, or by reason of
your death, your benefits shall be determined under the Company's retirement,
insurance and other compensation programs then in effect in accordance with the
terms of such programs.
(ii) If your employment shall be terminated by the Company for Cause
or by you other than for Good Reason, Disability, death or Retirement, the
Company shall pay you your full base salary, and continue to provide you with
life, disability, accident, health insurance and other benefits, through the
Date of Termination at the rate in effect at the time Notice of Termination is
given, plus all other amounts to which you are entitled under any compensation
plan of the Company at the time such payments are due, and the Company shall
have no further obligations to you under this Agreement.
(iii) If your employment by the Company shall be terminated (a) by
the Company other than for Cause, Retirement, death or Disability or (b) by you
for Good Reason, then you shall be entitled to the benefits provided below
(A) the Company shall pay you your full base
6
<PAGE>
salary, and continue to provide you with life, disability, accident, health
insurance and other benefits, through the Date of Termination at the rate
in effect at the time Notice of Termination is given, plus all other
amounts to which you are entitled under any compensation plan of the
Company, at the time such payments are due, except as otherwise provided
below;
(B) in lieu of any further salary payments to you for period
subsequent to the Date of Termination, the Company shall pay as severance
pay to you a lump sum severance payment (the "Severance Payment") equal to
2.99 times your "Base Amount", as defined in Section 280G of the Internal
Revenue Code of 1986 as amended (the "Code").
(C) Notwithstanding any other provision of this Agreement, in the
event that any payment or benefit received or to be received by you in
connection with a change in control of the Company (whether pursuant to the
terms of this Agreement or any other plan, arrangement or agreement with
(i) the Company, (ii) any person whose actions result in a change in
control of the Company, or (iii) any person affiliated with the Company or
such person) (all such payments and benefits including the Severance
Payment, being hereinafter called "Total Payments") would be subject (in
whole or part), to the excise tax imposed under Section 4999 of the Code
(the "Excise Tax"), then the Severance Payment shall be reduced to the
extent necessary so that no portion of the Total Payments is subject to the
Excise Tax if, and only in the event that, the amount of such Total
Payments, as so reduced, (and after deduction of the net amount of federal,
state and local income tax on such reduced Total Payments) is greater than
the excess of (i) the amount of such Total Payments, without reduction (but
after deduction of the net amount of federal, state and local income tax on
such Total Payments), over (ii) the amount of Excise Tax to which you would
be subject in respect of such Total Payments. For purposes of determining
whether and the extent to which the Total Payments will be subject to the
Excise Tax, (i) no portion of the Total Payments the receipt or enjoyment
of which you shall have effectively waived in writing prior to the date of
payment of the Severance Payment shall be taken into account; (ii) no
portion of the Total Payments shall be taken into account which in the
opinion of tax counsel selected by the Company's independent auditors does
not constitute a "parachute payment" within the meaning of Section
280G(b)(2) of the Code, (including by reason of Section 280G(b)(4)(A) of
the Code); (iii) in calculating the Excise Tax, no portion of such Total
Payments shall be taken into account which constitutes reasonable
compensation for services actually rendered, within the meaning of Section
280G(b)(4)(B) of the Code, in excess of your base amount (as defined in
Section 280G(b)(3) of the Code) allocable to such reasonable compensation;
and (iv) the value of any non-cash benefit or any deferred
7
<PAGE>
payment or benefit included in the Total Payments shall be determined by
the Company in accordance with the principles of Sections 280G(d)(3) and
(4) of the Code; and
(D) the Company also shall pay to you all legal fees and expenses
incurred by you as a result of such termination (including all such fees
and expenses, if any, incurred in contesting or disputing any such
termination or in seeking to obtain or enforce any right or benefit
provided by this Agreement or in connection with any tax audit or
proceeding to the extent attributable to the application of Section 4999 of
the Code to any payment or benefit provided hereunder) except to the extent
that the payment of such fees and expenses would not be, or would cause any
other portion of the Total Payments not to be, deductible by reason of
Section 280G of the Code.
(iv) You shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or otherwise, nor
shall the amount of any payment or benefit provided for in this Section 4 be
reduced by any compensation earned by you as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by you to the Company, or otherwise except as specifically provided in this
Section 4.
(v) In addition to all other amounts payable to you under this Section
4, you shall be entitled to all rights and benefits provided to you under the
terms of any other plan or agreement between you and the Company.
5. Letter of Credit Preceding Termination. In the event a potential
change in control of the Company shall have occurred, the Company will promptly
(and in no event more than seven (7) days thereafter) establish an irrevocable
letter of credit (the "Letter of Credit") in your favor in an amount equal to
the amount which would be payable to you pursuant to Subsection 4(iii) hereof as
if you were immediately entitled to payment pursuant thereto, such Letter of
Credit to be issued by a commercial bank which is not an affiliate of the
Company, but which is a national banking association or established under the
laws of one of the states of the United States, and which has equity in excess
of $100 million (the "Bank"). The Letter of Credit shall be in form and
substance reasonably satisfactory to you and the Company and will provide that
the Bank shall pay you the amount of your draft, at sight, on presentation to
the Bank of a statement, signed by you or your authorized representative,
setting forth (i) a statement that pursuant to Subsection 4(iii) of this
Agreement, you are entitled to payments of not less than the amount of such
draft, and (ii) the Date of Termination of your employment. Each time you shall
draw on the Letter of Credit, you shall provide the Company with a copy of such
draft and the accompanying statement referred to above. The Company shall
maintain the Letter of Credit in effect for a period of two
8
<PAGE>
years from the date on which it is issued; provided, however, that (i) if during
any such two-year period any event shall occur which, pursuant to this Section
5, would have required the Company to establish a Letter of Credit had none then
existed, then the Company shall maintain the Letter of Credit in effect for a
period of two years following such event, unless further extended pursuant to
this provision, and (ii) if a change in control of the Company shall occur, then
the Company shall maintain the Letter of Credit in effect for a period of three
years following such change in control. During the period in which a Letter of
Credit is required to be maintained, the Company shall, at six-month intervals
commencing with the date the Letter of Credit is established, calculate the
amount which would be payable to you pursuant to Subsection 4(iii) hereof as if
you were immediately entitled to payment pursuant thereto. If the amount exceeds
the amount available to be drawn upon under the Letter of Credit then in effect,
the Company shall promptly (and in no event later than seven (7) days
thereafter) cause the amount payable under the Letter of Credit to be increased
by the amount of such excess.
The payment by the Bank of the amount of your draft in accordance with the
terms hereof and of the Letter of Credit shall not constitute a waiver by the
Company of, or in any way preclude the Company from asserting, any claim against
you that you are not entitled to some or all of such payment. In addition, your
drawing upon the Letter of Credit shall not constitute a waiver by you, or in
any way preclude you from asserting, any claim against the Company that you are
entitled to amounts pursuant to this Agreement which were not paid by amounts
received under the Letter of Credit.
6. Successors; Binding Agreement. (i) The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle you to compensation from the
Company in the same amount and on the same terms as you would be entitled to
hereunder if you terminate your employment for Good Reason following a change in
control of the Company, except that for purposes of implementing the foregoing,
the date on which any such succession becomes effective shall be deemed the Date
of Termination. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives,
9
<PAGE>
executors, administrators, successors, heirs, distributees, devisees and
legatees. If you should die while any amount would still be payable to you
hereunder if you had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
your devisee, legatee or other designee or, if there is no such designee, to
your estate.
7. Notice. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notice to the Company shall be directed to the attention of the Board
with a copy to the Secretary of the Company, or to such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon receipt.
8. Miscellaneous. No provision of this Agreement may be modified,
waived, or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by you and such officer as may be specifically designated
by the Board. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Texas. All references to sections of the Exchange
Act or the Code shall be deemed also to refer to any successor provisions to
such sections. Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law. The
obligations of the Company under Section 4 shall survive the expiration of the
term of this Agreement.
9. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
10. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
11. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively
10
<PAGE>
by arbitration in Dallas, Texas in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that you
shall be entitled to seek specific performance of your right to be paid until
the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter which
will then constitute our agreement on this subject.
Sincerely,
ATMOS ENERGY CORPORATION
By /s/ Robert W. Best
----------------------
Robert W. Best
Chairman of the Board, President and
Chief Executive Officer
Agreed to this 14th
day of May, 1997.
/s/ Larry J. Dagley
- -----------------------
Larry J. Dagley
11
<PAGE>
Exhibit 10.25(b)
Date Revised:
August 13, 1997
ATMOS ENERGY CORPORATION
FINANCIAL PLANNING PROGRAM
I. ELIGIBILITY
This financial planning program is available to all Corporate Officers and
operating company Presidents.
II. PROVISIONS
A. The firm of Ernst and Young has been selected to provide all financial
planning activities, and income tax preparation services.
B. The company will pay all fees associated with the financial planning
activities described below.
C. The company will pay all fees associated with the preparation of the
individual's federal and state income tax return up to a maximum of
$2,000 per individual per year.
D. Fees for services rendered to a specific individual are includable as
income. However, most all fees would be deductible subject to IRS
limitations for itemized deductions.
E. Billing for services rendered will be sent to the Vice President,
Human Resources for recordkeeping and payment.
F. The company will not pay for financial planning or income tax
preparation services rendered by any firm except Ernst and Young.
<PAGE>
Exhibit 10.26(a)
AMENDMENT NO. 1 TO
THE ATMOS ENERGY CORPORATION
SUPPLEMENTAL EXECUTIVE BENEFITS PLAN
THIS AMENDMENT NO. 1 TO THE ATMOS ENERGY CORPORATION SUPPLEMENTAL EXECUTIVE
BENEFITS PLAN (the "Amendment") is effective this 13th day of August, 1997.
WHEREAS, ATMOS ENERGY CORPORATION (the "Company") has heretofore adopted
The Atmos Energy Corporation Supplemental Executive Benefits Plan (the "Plan")
which was last amended and restated in its entirety on May 14, 1997; and
WHEREAS, pursuant to Section 9.1 of the Plan which permits the Company to
amend the Plan from time to time, the Company desires to amend the Plan in
certain respects as hereinafter provided.
NOW, THEREFORE, the Company does hereby amend the Plan in the following
respects:
Section 2.1(e)(iii) of the Plan which defines one component of the term
"Compensation" for purposes of the Plan is hereby amended to read in its
entirety as follows:
"(iii) The Participant's annual car allowance at the date of his
termination of employment, or in the event the Participant is provided a
Company car in lieu of an annual car allowance, that amount equivalent to
the annual car allowance provided by the Company to a person who is a Vice
President of the Company at the time of the Participant's termination of
employment."
IN WITNESS WHEREOF, the Company has caused this AMENDMENT NO. 1 TO THE
ATMOS ENERGY CORPORATION SUPPLEMENTAL EXECUTIVE BENEFITS PLAN to be executed in
its name and on its behalf this 13th day of August, 1997.
ATMOS ENERGY CORPORATION
By: /s/ Robert W. Best
-----------------------
Robert W. Best,
Chairman, President and CEO
<PAGE>
Exhibit 10.26(b)
AMENDMENT NO. 2
TO
THE ATMOS ENERGY CORPORATION
SUPPLEMENTAL EXECUTIVE BENEFITS PLAN
Amended and Restated in its Entirety: May 14, 1997
This Amendment No. Two to The Atmos Energy Corporation Supplemental
Executive Benefits Plan Amended and Restated in its Entirety (the "Plan"),
effective as of May 14, 1997, amends the Plan pursuant to the provisions of
Section 9.1 of the Plan as follows:
Section 7.1 is amended by striking the introductory sentence of said
Section and substituting the following:
"A Participant shall be entitled to a Death Benefit if he meets the
requirements of either (a) or (b) or (c) as follows:"
Section 7.1 is further amended by adding a new subsection (c) as follows:
"(c) He is entitled to a Supplemental Pension pursuant to the
provisions of Subsection 5.1(b) or Subsection 5.5(a) of this Plan, but
dies before the commencement of his Supplemental Pension."
Section 7.2 is amended by adding a new subsection (c) as follows:
"(c) Deferred Retirement Death. In the case of a Participant who
dies as provided in Subsection 7.1(c), a Death Benefit will be paid as
provided in (i) or (ii) as follows:
In the case of a Participant who dies prior to reaching age 55,
to the beneficiary (determined as of the Participant's date of
death) and in the amount that would have been applicable had the
Participant lived to age 55, commenced his Supplemental Pension
in the month immediately following the month in which he reached
age 55 and died immediately after his Supplemental Pension
commenced.
In the case of a Participant who dies after reaching age 55, 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 7.4 is amended by striking said Section and substituting in lieu
thereof the following:
<PAGE>
"Section 7.4. Commencement of Death Benefits:
The Death Benefits payable pursuant to Subsection 7.2(a) 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.
The Death Benefits payable pursuant to Subsections 7.2(b) and (c)
shall commence as of the first day of the month next following the
Participant's death, except in the case of the Death Benefit payable
pursuant of Subsection 7.2(c)(i) which, unless earlier commencement is
elected as provided below, shall commence as of the first day of the
month following the month in which the Participant would have reached
age 55. At the beneficiary's option, the Death Benefit payable under
Subsection 7.2(c)(i) may commence on the first day of any month
following the Participant's death. The earlier benefit to be paid
shall be the actuarial equivalent of the benefit that would have been
payable at the Participant's attainment of age 55, as determined under
Subsection 7.2(c)(i). For purposes of this paragraph, an "actuarial
equivalent" benefit shall be determined based upon an interest rate of
8.0% per annum and the 'IRS Applicable Table" as prescribed under
Internal Revenue Code Section 417(e)(3)(A)(ii)(I).
If the beneficiary entitled to receive the Death Benefits payable
pursuant to Sections 7.2(b) or (c) is the Participant's surviving
spouse and such spouse dies before commencement of the payment of
these Death Benefits as provided in paragraph (b) above, then no Death
Benefits shall be payable under Subsection 7.2(b) or (c)."
Executed this 12th day of November, 1997, effective as of the date set
forth herein.
ATMOS ENERGY CORPORATION
By: /s/ Robert W. Best
-------------------------
Robert W. Best,
Chairman, President and CEO
2
<PAGE>
Exhibit 10.27
Atmos Energy Corporation
Restricted Stock Grant Plan
Effective October 1, 1987
Amended and Restated as of November 12, 1997
<PAGE>
ATMOS ENERGY CORPORATION
RESTRICTED STOCK GRANT PLAN
(Amended and Restated as of November 12, 1997)
I. Purpose of Plan
The Atmos Energy Corporation Restricted Stock Grant Plan (the "Plan") has
been established to align the interests of its participants more directly
with those of the Company's shareholders, to retain and attract managerial
and professional personnel of exceptional ability and to encourage strong
commitment to corporate objectives.
II. Plan Definitions
All rights and conditions under the Plan are specified in the following
paragraphs subject to compliance with applicable laws and regulations. As
used in the Plan, the following terms and phrases shall have the meanings
ascribed to them below:
A. "Board" or "Board of Directors" shall mean the Board of Directors of
Atmos Energy Corporation.
B. "Common Stock" shall mean the common stock of Atmos Energy
Corporation.
C. "Company" shall mean Atmos Energy Corporation.
D. "Disability" shall mean such total and permanent disability as
qualifies the participant for benefits under the Company's Long-Term
Disability Plan covering the participant at the time.
E. "Exchange Act" shall mean the Securities Exchange Act of 1934.
F. "Fair Market Value" with regard to the Restricted Stock on a
particular date shall mean the closing price of a share of Common
Stock as reported by the New York Stock Exchange-Composite
Transactions on that date. However, if no trading in the Common Stock
occurs on the New York Stock Exchange on that date, the "Fair Market
Value" shall mean the closing price as reported on the immediately
preceding date. In the event the Common Stock is traded on an
exchange other than the New York Stock Exchange, the Board of
Directors shall select a suitable substitute published stock quotation
system, which system shall be in compliance with all relevant
regulatory provisions.
G. "Subsidiary" shall mean any direct or indirect subsidiary of Atmos
Energy Corporation.
III. Eligibility
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<PAGE>
The participants in the Plan shall be such employees of the Company or any
Subsidiary as may be selected from time to time by the Board in its discretion.
Directors of the Company who are not also employees of the Company shall not be
eligible to participate in the Plan. In order to receive Restricted Stock,
participants must not, at the time the grant of Restricted Stock is made, be
subject to any agreement with the Company that restricts the acquisition of
shares of Common Stock.
IV. Stock Subject to Plan
The stock subject to the Plan shall consist of shares of Common Stock to
which the restrictions specified in Section V.F. are attached. This stock is
hereafter referred to as "Restricted Stock". The total number of shares of
Restricted Stock, subject to adjustment as provided in Section XII, that may be
awarded by the Company under the Plan shall not be more than 900,000 shares.
Restricted Stock awarded under the Plan shall, in the sole discretion of the
Board of Directors, consist of either previously issued shares purchased on the
open market or shares purchased from the Company as original issue shares or
treasury shares.
V. Terms and Conditions of Restricted Stock Awards
Each share of Restricted Stock awarded under the Plan shall be subject to
the following restrictions:
A. Shares of Restricted Stock awarded to a Plan participant may not be
sold, transferred, pledged, hypothecated, encumbered, or otherwise
alienated in any manner, whether voluntarily, by operation of law, or
otherwise, until the restrictions on such shares are removed pursuant
to the Plan and said shares are delivered to the participant.
B. Shares of Restricted Stock awarded to a Plan participant will be
forfeited if, prior to the removal of restrictions on the Restricted
Stock awarded hereunder, the recipient terminates employment for any
reason other than death, disability, or retirement.
C. At the time and on the date of a participant's death, disability, or
retirement (upon or after attaining the age of 62) while employed by
the Company or Subsidiary, all restrictions placed on each share of
Restricted Stock awarded to that participant shall be removed and such
shares shall be delivered to the participant or to his legal
representatives, beneficiaries, or heirs. From and after such date,
the participant or the participant's estate, personal representative
or beneficiary, as the case may be, shall have full rights of transfer
or resale with respect to such stock subject to applicable state and
federal regulations. The restrictions on shares of
3
<PAGE>
Restricted Stock awarded to a participant shall not be removed due to
the participant's retirement prior to attaining the age of 62, unless
such removal is expressly approved by the Board of Directors.
D. Stock certificates representing the number of shares of Restricted
Stock granted to an employee of the Company or Subsidiary shall be
registered in the employee's name, but the certificates representing
any shares of Restricted Stock shall be held in the custody of the
Company for the participant's account. All dividends and
distributions (other than stock dividends and distributions) on shares
held in the custody of the Company shall be paid to the participant,
however, regardless of the fact that the shares are being held in
behalf of the participant. Any new, additional, or different shares
or securities issued (due to a stock split, stock dividend, or other
stock distribution) with respect to Restricted Stock previously
awarded under the Plan shall be held by the Company as Restricted
Stock for the participant's account and shall have the same
restrictions as the underlying Restricted Stock with respect to which
such new, additional, or different shares or securities were issued.
At such time as restrictions are removed from any portion of the
Restricted Stock held by the Company for the participant, certificates
representing such shares shall be delivered free of all restrictions
to the participant or to the participant's legal representatives,
beneficiaries, or heirs.
E. Additional grants of Restricted Stock to a participant after the
initial grant to such participant may have restriction provisions
different from those provided in Section VI. If such is the case, the
award of such stock will be conditioned upon the acceptance by the
participant of such different provisions.
F. Each certificate issued in respect of shares of Restricted Stock
granted to a participant under the Plan shall bear the following, or
similar legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions
(including forfeitures) contained in the Atmos Energy Corporation
Restricted Stock Grant Plan. A copy of the Plan is on file in the
office of Atmos Energy Corporation, 1800 Three Lincoln Centre,
5430 LBJ Freeway, Dallas, Texas 75240."
VI. Removal of Restrictions
4
<PAGE>
A participant who receives a Restricted Stock award pursuant to the Plan
shall be entitled to delivery of shares free and clear of all restrictions, if
such participant is an employee of the Company or Subsidiary at the time
(subject to the provisions of Sections V.C. and V.E. herein), according to the
following schedule:
Percentage of Original
Completed Years of Service Grant Delivered
After Date of Grant to Participant
3 25%
4 25%
5 25%
6 25%
Notwithstanding the foregoing provisions, each participant shall, in the
event of a Change of Control of the Company, receive free of restriction all
Restricted Stock granted to the participant on or before the effective date of
such Change of Control. As used in the Plan, a "Change in Control" of the
Company shall be deemed to have occurred if:
(A) Any "Person" (as defined in subparagraph (ii) below), other than (1)
the Company or any Subsidiary, (2) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or
any of its affiliates, as defined in Rule 12b-2 promulgated under
Section 12 of the Exchange Act ("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 Company, in substantially the same proportions as
their ownership of stock of the Company, who is or becomes the
"beneficial owner" (as defined in subparagraph (ii) below), directly
or indirectly, of securities of the Company (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 Company's then outstanding
securities, or 33-1/3% or more of the then outstanding common stock of
the Company, 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 the Company
and any "new director" (as defined in subparagraph (ii) below) cease
for any reason to constitute a majority of the Board.
(C) There is consummated a merger or consolidation of the Company or any
Subsidiary with any other corporation, except if:
5
<PAGE>
(i) the merger or consolidation would result in the voting securities
of the Company 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 Company or such surviving entity or any
parent thereof outstanding immediately after such merger or
consolidation; or
the merger or consolidation is effected to implement a
recapitalization of the Company (or similar transaction) in which
no Person is or becomes the beneficial owner, directly or
indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities
acquired directly from the Company or its Affiliates other than
in connection with the acquisition by the Company or its
Affiliates of a business) representing 60% or more of the
combined voting power of the Company's then outstanding
securities.
(D) The shareholders of the Company approve a plan of complete liquidation
or dissolution of the Company or an agreement for the sale or
disposition by the Company of all or substantially all the Company's
assets, other than a sale or disposition by the Company of all or
substantially all of the Company'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 Company in substantially the same
proportions as their ownership of the Company immediately prior to
such sale.
(ii) For purposes of subparagraph (i) above,
(A) "Person" shall have the meaning given in Section 3(a)(9) of
the Exchange Act, as modified and used in Sections 13(d) and
14(d) of the Exchange Act.
"Beneficial owner" shall have the meaning provided in Rule 13d-3
under the Exchange Act.
"New director" shall mean an individual whose election by the
Company's Board or nomination for election by the Company'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
6
<PAGE>
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.
VII. Stock Withholding Requirement
Upon the removal or lapse of the restrictions on any Restricted Stock
awarded to a participant, the number of shares issuable by the Company to the
participant shall be subject to applicable withholding requirements for income
and employment taxes arising from the removal or lapse of the restrictions on
the Restricted Stock.
VIII. Forfeited Shares
If shares of Restricted Stock are forfeited according to the terms of the
Plan, the number of shares forfeited may be added back to the number of shares
available for issuance under the Plan. Any shares of Restricted Stock that are
forfeited according to the terms of the Plan shall be held by the Company as
treasury shares and shall be available for reissuance under the Plan.
IX. Rights of Recipients as Shareholders
Except as otherwise provided in the Plan, a recipient of a Restricted Stock
grant under the Plan shall have all of the rights of a shareholder of the
Company with respect to such shares of Restricted Stock, including the right to
vote such shares and receive the dividends and other distributions paid or made
with respect to such shares in accordance with Section V.D. above.
X. Administration of the Plan
The Board shall have full authority to manage and control the operation and
administration of the Plan. Any action taken by the Board with respect to the
Plan shall be taken upon the affirmative vote of a majority of the directors.
The Board shall have the power to construe and interpret the Plan in accordance
with its terms and to establish and amend the rules and regulations for its
administration. All determinations of the Board shall be final and shall not be
subject to appeal. The Board shall designate those employees of the Company and
its Subsidiaries who are eligible to participate in the Plan subject to the
provisions of Section III and shall designate the amounts of Restricted Stock to
be granted.
XI. Amendment and Termination
The Board in its discretion may terminate the Plan at any time with respect
to any shares of Restricted Stock which have not theretofore been granted. The
Board shall have the right to
7
<PAGE>
alter or amend the Plan or any part thereof from time to time; provided, that no
change in any Restricted Stock theretofore granted may be made which would
impair the rights of the grantee without the consent of such grantee; and
provided, further, that the Board may not make any alteration or amendment which
would materially increase the benefits accruing to participants under the Plan,
materially increase the aggregate number of shares which may be issued pursuant
to the provisions of the Plan, change the class of employees eligible to receive
grants under the Plan, withdraw the administration of the Plan from the Board or
permit any non-employee member of the Board to be eligible to receive a grant
under the Plan without the approval of the stockholders of the Company.
XII. Adjustment Upon Changes in Stock
If there shall be any change in the number of shares of Common Stock
subject to the Plan or to any Restricted Stock granted thereunder, through
subdivision, combination, or reclassification of shares, or through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split or
other change in the corporate structure, appropriate adjustment shall be made by
the Board in the aggregate number of shares subject to the Plan.
XIII. No Employment Rights
The adoption of the Plan does not confer upon any employee of the Company
or a Subsidiary any right to continue employment with the Company or Subsidiary,
as the case may be, nor does it interfere in any way with the right of the
Company or a Subsidiary to terminate the employment of any of its employees at
any time.
IN WITNESS WHEREOF, and as conclusive evidence of its adoption of this
Amended and Restated Restricted Stock Grant Plan, the Company has caused this
Plan to be duly executed on this 12/th/ day of November, 1997.
ATMOS ENERGY CORPORATION
By: /s/ Robert W. Best
-----------------------------
Robert W. Best
Chairman, President and
Chief Executive Officer
8
<PAGE>
Exhibit 10.28
Atmos Energy Corporation
Outside Directors Stock-for-Fee Plan
Effective February 8, 1995
Amended and Restated as of November 12, 1997
<PAGE>
Atmos Energy Corporation
Outside Directors Stock-for-Fee Plan
(Amended and Restated as of November 12, 1997)
I. Plan Purpose
Section 1.1. Atmos Energy Corporation ("Atmos" or the "Company") hereby
establishes the Atmos Energy Corporation Outside Directors Stock-for-Fee
Plan (the "Plan"), which provides the non-employee directors of Atmos the
option to receive all or part of their Fees (as defined below) in Atmos
common stock. The purpose of this Plan is to increase the proprietary
interest of the Outside Directors in the Company's long-term prospects and
the strategic growth of its business.
II. Definitions
Section 2.1. "Board" or "Board of Directors" shall mean the Board of
Directors of Atmos Energy Corporation.
Section 2.2. "Common Stock" means the Company's no par value common
stock.
Section 2.3. "Election" means an Outside Director's delivery of
written notice of election to the Corporate Secretary of the Company
electing to receive his or her Fees or a portion thereof in the form of
Common Stock.
Section 2.4. "Fair Market Value" means, as of any specified date, the
closing price of a share of Common Stock of the Company as reported by the
New York Stock Exchange-Composite Transactions on that date. However, if
no trading in the Common Stock occurs on the New York Stock Exchange on
that date, the "Fair Market Value" shall mean the closing price as
reported on the immediately preceding date. In the event the Common Stock
is traded on an exchange other than the New York Stock Exchange, the Board
of Directors shall select a suitable substitute published stock quotation
system, which system shall be in compliance with all relevant regulatory
provisions.
Section 2.5. "Fees" means the annual retainer (paid in quarterly
installments) and meeting fees earned by an Outside Director for his or
her service as a member of the Atmos Board of Directors during a Fiscal
Year or portion thereof.
2
<PAGE>
Section 2.6. "Fiscal Year" means the 12-month period beginning October
1/st/ of any year and ending September 30th of the next year.
Section 2.7. "Outside Director" means a member of the Company's Board of
Directors who is not an employee of the Company.
Section 2.8. "Quarter" means the 3-month period beginning October 1,
January 1, April 1, or July 1 of each Fiscal Year.
III. Shares Authorized for Issuance
Section 3.1. A maximum of 50,000 shares of Common Stock may be issued
under the Plan. The Common Stock issued under the Plan may, at the option
of the Board of Directors, be either original issue by the Company or
purchased on the open market. In the event of any change in the number of
shares outstanding of Common Stock by reason of a stock split, stock
dividend, merger, consolidation, reorganization, or other similar change
in capitalization, the number or kind of shares that may be issued under
the Plan shall be automatically adjusted so that the proportionate
interest of the shares issuable under the Plan is maintained as before the
occurrence of such event.
IV. Administration
Section 4.1. Each Outside Director may elect to receive all or a portion
(in 25% increments) of his or her Fees in shares of Common Stock by
executing and delivering an election form to the Corporate Secretary of
the Company at least two weeks prior to the beginning of the Quarter in
order to be effective for Fees earned in that Quarter. Each Outside
Director must execute the election form previously approved by the
Corporate Secretary in order for such Election to be effective. The
election form is deemed delivered when received by the Corporate
Secretary.
Section 4.2. An Outside Director making an Election may designate a
beneficiary or beneficiaries who will receive any shares of Common Stock
owed to such Outside Director hereunder in the event of the Outside
Director's death.
Section 4.3. Each Outside Director may revoke or modify his or her
Election that is then currently in effect by executing and delivering a
written revocation/modification form, which must be delivered to the
Corporate Secretary at least two weeks prior
3
<PAGE>
to the beginning of the immediately succeeding Quarter, in order to be
effective for Fees earned in that Quarter. This form is deemed delivered
when received by the Corporate Secretary. In addition, each Outside
Director may make changes in the designation of a beneficiary at any time.
Section 4.4. An Election shall result in the deferral of the Common Stock
portion of the payment of the Fees earned in each Quarter for which the
Election is effective until the end of each such Quarter. Shares of
Common Stock shall be issued to the Outside Director as soon as possible
following the last business day of each such Quarter. The number of
shares of Common Stock issued in accordance with an Election shall be
equal to the amount of Fees that would have been paid to the Outside
Director during a Quarter divided by the Fair Market Value on the last
business day of such Quarter. Only whole numbers of shares of Common
Stock shall be issued; fractional shares shall be paid in cash. If the
Election is for only a portion of the Fees, the remaining portion of the
Fees to be paid in cash shall be paid at the time the cash payment would
normally be paid by the Company to the Outside Director.
Section 4.5. The Board of Directors shall be responsible for the
administration of the Plan. The Board of Directors, by majority action of
its members, is authorized to interpret the Plan, prescribe, amend, and
rescind rules and regulations relating to the Plan, provide for conditions
and assurances deemed necessary or advisable to protect the interests of
the Company, and make all other determinations necessary or advisable for
the administration of the Plan, but only to the extent not contrary to the
express provisions of the Plan. No member of the Board of Directors shall
be liable for any action or determination made in good faith. The
determinations, interpretations, and other actions of the Board of
Directors pursuant to the provisions of the Plan shall be binding and
conclusive for all purposes and on all persons.
V. Effective Date
Section 5.1. The Plan, as originally drafted, was approved and adopted by
a vote of the shareholders of the Company on February 8, 1995 and became
effective immediately upon such approval.
4
<PAGE>
VI. Amendment and Termination
Section 6.1. The Board of Directors of the Company may at any time
terminate, and from time to time may amend or modify the Plan, provided,
however, that no amendment or modification may become effective without
approval by the shareholders of the Company if shareholder approval is
required to enable the Plan to satisfy any applicable statutory or
regulatory requirements or if the Board of Directors, on advice of
counsel, determines that shareholder approval is otherwise necessary or
advisable.
IN WITNESS WHEREOF and as conclusive evidence of its adoption of this
Amended and Restated Directors Stock-for-Fee Plan, the Company has caused this
Plan to be duly executed this 12th day of November, 1997.
ATMOS ENERGY CORPORATION
By: /s/ Robert W. Best
-----------------------
Robert W. Best
Chairman, President and
Chief Executive Officer
5
<PAGE>
Exhibit 10.31
THE ATMOS ENERGY CORPORATION
EXECUTIVE RETIREE LIFE PLAN
Effective Date: November 9, 1994
<PAGE>
TABLE OF CONTENTS
Article Page
ARTICLE I Purpose and Effective Date 1
Section 1.1. Purpose 1
Section 1.2. Effective Date 1
ARTICLE II Definitions and Construction 1
Section 2.1. Definitions 1
Section 2.2. Construction 2
Section 2.3. Governing Law 2
ARTICLE III Eligibility and Participation 2
Section 3.1. Employees Eligible
to Participate 2
ARTICLE IV Assets Used for Benefits 2
Section 4.1. Amounts Provided
by the Employer 2
ARTICLE V Death Benefits 3
Section 5.1. Eligibility For
Death Benefits 3
Section 5.2. Amount of Death Benefit 3
Section 5.3. Form of Payment and
Beneficiary of Death Benefit 4
Section 5.4. Payment of Death Benefits 4
ARTICLE VI Administration 4
Section 6.1. Plan Administrator 4
Section 6.2. Powers of Plan
Administrator 4
ARTICLE VII Miscellaneous Provisions 5
Section 7.1. Amendment or Termination
of the Plan 5
Section 7.2. Nonguarantee of Employment 5
Section 7.3. Nonalienation of Benefits 6
Section 7.4. Liability. 6
Section 7.5. Successors to the Employer 6
2
<PAGE>
THE ATMOS ENERGY CORPORATION
EXECUTIVE RETIREE LIFE PLAN
ARTICLE I
Purpose and Effective Date
Section 1.1. Purpose: The purpose of this Plan is to provide death
benefits for retired corporate officers of Atmos Energy Corporation.
Section 1.2. Effective Date: The Plan shall become effective on November
9, 1994.
ARTICLE II
Definitions and Construction
Section 2.1. Definitions:
(a) Beneficiary: The person or persons entitled to receive the Death
Benefit in accordance with Section 5.3 of this Plan.
(b) Death Benefit: The benefit provided under Article V of this Plan upon
the death of a Participant, which benefit is calculated in this Plan
on a pre-tax basis.
(c) Employer: Atmos Energy Corporation.
(d) Life Plan: The Group Life Insurance Plan for Employees of Atmos Energy
Corporation, as in effect from time to time.
(e) Participant: An eligible corporate officer of the Employer who retires
and meets the requirements to participate in the Plan in accordance
with the provisions of Article III hereof.
(f) Plan: The Atmos Energy Corporation Executive Retiree Life Plan, as set
forth herein and as amended from time to time.
(g) Plan Administrator: The Vice President, Human Resources of the
Employer.
(h) Plan Year: Each twelve (12) month period beginning on January 1 and
ending on December 31, except that the first Plan Year shall be a
short year beginning on November 9, 1994 and ending on December 31,
1994.
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.
3
<PAGE>
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: Any employee who retires
from the employ of the Employer on or after September 30, 1994 and on or after
attaining age 55 and who, immediately prior to his retirement, is a corporate
officer of the Employer shall be eligible to participate in this Plan and shall
become a Participant upon his retirement.
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, but is not obligated to establish
a trust, the assets of which shall at all times before actual payment of
benefits to a Participant's Beneficiary remain subject to the claims of general
creditors of the Employer. Nothing herein, however, shall be construed to
create or require the creation of a trust for the purpose of paying benefits
owing under this Plan. The Employer also may, but is not obligated to purchase
one or more life insurance policies or contracts to provide for its obligations
hereunder. Any such policies or contracts may, but shall not be required to name
the Employer or any trust as beneficiary and sole owner, with all incidents of
ownership therein, including (but not limited to) the right to cash and loan
values, dividends (if any), death benefits, and the right of termination. Any
such policies or contracts purchased hereunder shall remain a general
unrestricted asset of the Employer (or of any trust). Neither the Participant
nor any Beneficiary shall have any right, title or interest in or to, or any
claim, preferred or otherwise, in or to any particular assets of the Employer or
any trust that the Employer may establish hereunder, as a result of
participation in this Plan.
ARTICLE V
Death Benefits
Section 5.1. Eligibility For Death Benefits: A Participant shall be
entitled to a Death Benefit if he dies prior to attaining age 70.
4
<PAGE>
Section 5.2. Amount of Death Benefit: The Death Benefit shall be
determined as follows:
(a) If, at the time of the Participant's death, he is at least age 55 but
less than age 65, the Death Benefit shall equal fifty percent (50%) of
the Participant's Basic Life Insurance Amount in effect under the Life
Plan immediately prior to his retirement from the employ of the
Employer.
(b) If, at the time of the Participant's death, he is at least age 65 but
less than age 70, the Death Benefit shall equal twenty-five percent
(25%) of the Participant's Basic Life Insurance Amount in effect under
the Life Plan immediately prior to his retirement from the employ of
the Employer.
Section 5.3. Form of Payment and Beneficiary of Death Benefit: The Death
Benefit shall be paid in a lump sum to the person or persons designated by the
Participant for this purpose, and, if applicable, shall be divided in such
manner, as specified by the Participant, on the appropriate form supplied by the
Employer.
Section 5.4. Payment of Death Benefits: The Death Benefits payable to a
deceased Participant's Beneficiary or Beneficiaries shall be paid as soon as
administratively possible following the Participant's death.
ARTICLE VI
Administration
Section 6.1. Plan Administrator: The Plan shall be administered by the
Plan Administrator.
Section 6.2. 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. Any decision of the Plan
Administrator relating to any question concerning or involving the
interpretation of the Plan, however, shall be subject to the approval of the
President or Chief Executive Officer of the Company, whose decision in such
regard shall be final and conclusive.
ARTICLE VII
Miscellaneous Provisions
Section 7.1. Amendment or Termination of the Plan:
5
<PAGE>
(a) In General. Subject to the remaining provisions of this Section 7.1,
the Employer, by appropriate resolution of its Board of Directors,
may, in its absolute discretion, from time to time, amend, suspend, or
terminate any or all of the provisions of the Plan. Any amendment to
the Plan shall be effectuated by a written instrument signed by the
President, Chief Executive Officer or any Vice President of the
Company.
(b) Amendment That Decreases Death Benefits. If the Employer amends the
Plan and the amendment decreases the Death Benefit otherwise payable
to a Participant at the time of the amendment, that Participant shall
receive the Death Benefit, determined without regard to the amendment,
if he thereafter dies while still entitled to a Death Benefit.
If the Employer terminates the Plan and the termination adversely affects
the Death Benefits payable at the time of such termination, a Participant shall
receive the Death Benefit determined without regard to the termination, if he
thereafter dies while still entitled to a Death Benefit.
Section 7.2. 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 to be continued as an officer of the Employer, or as a limitation of
the right of the Employer to discharge any of its employees, with or without
cause.
Section 7.3. 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 7.4. 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 7.5. 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
6
<PAGE>
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
Retired Officer Life Plan, the Employer has caused this Plan to be duly executed
on this day of , 1995, to be effective as of the date set forth in
Section 1.2 above.
ATMOS ENERGY CORPORATION
By: /s/ Robert F. Stephens
------------------------
Robert F. Stephens
President and Chief
Operating Officer
7
<PAGE>
Exhibit 10.31(a)
AMENDMENT NO. 1 TO
THE ATMOS ENERGY CORPORATION
EXECUTIVE RETIREE LIFE PLAN
THIS AMENDMENT NO. 1 TO THE ATMOS ENERGY CORPORATION EXECUTIVE RETIREE LIFE
PLAN (the "Amendment") is executed and effective this 13th day of August, 1997.
WHEREAS, ATMOS ENERGY CORPORATION (the "Company") heretofore adopted The
Atmos Energy Corporation Executive Retiree Life Plan (the "Plan") which became
effective on November 9, 1994; and
WHEREAS, pursuant to Section 7.1 of the Plan which permits the Company to
amend the Plan from time to time, the Company desires to amend the Plan to
include operating company presidents of the Company in the Plan, as hereinafter
provided.
NOW, THEREFORE, the Company does hereby amend the Plan in the following
respects:
1. Definitions. All capitalized terms used and not otherwise defined
herein shall have the meanings given such terms in the Plan.
2. Amendment of Section 1.1. Section 1.1 of the Plan describing the
purpose of the Plan is hereby amended to read in its entirety as follows:
"Section 1.1. Purpose: The purpose of this Plan is to provide death
benefits for retired corporate officers and operating company
presidents of Atmos Energy Corporation."
3. Amendment of Section 2.1(e). Subsection (e) of Section 2.1,
"Definitions", in which a "Participant" of the Plan is defined, is hereby
amended to read in its entirety as follows:
"(e) Participant: An eligible corporate officer or operating company
president of the Employer who retires and meets the requirements to
participate in the Plan in accordance with the provisions of Article
III hereof."
4. Amendment of Section 3.1. Section 3.1, describing employees eligible
to participate in the Plan, is hereby amended to read in its entirety as
follows:
"Section 3.1. Employees Eligible to Participate: Any employee who
retires from the employ of the Employer on or after September 30,
1994 and on or
<PAGE>
after attaining age 55 and who, immediately prior to his retirement,
is a corporate officer or operating company president of the Employer,
shall be eligible to participate in this Plan and shall become a
Participant upon his retirement."
5. Amendment of Section 7.2. Section 7.2, concerning nonguarantee of
employment, is hereby amended to read in its entirety as follows:
"Section 7.2. 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 to be continued as a corporate officer
or operating company president of the Employer, or as a limitation of
the right of the Employer to discharge any of its employee, with or
without cause."
IN WITNESS WHEREOF, the Company has caused this AMENDMENT NO. 1 TO THE
ATMOS ENERGY CORPORATION EXECUTIVE RETIREE LIFE PLAN to be executed in its name
and on its behalf this 13/th/ day of August, 1997.
ATMOS ENERGY CORPORATION
By: /s/ Robert W. Best
---------------------
Robert W. Best
Chairman, President and CEO
2
<PAGE>
Exhibit 21
SUBSIDIARIES OF ATMOS ENERGY CORPORATION
State of Percent of
Name Incorporation Stock
Atmos Energy Services, Inc. Delaware 100%
EGASCO, Inc. Texas 100%
ENERMART, INC Delaware 100%
ENERMART TRUST (a Pennsylvania Pennsylvania 100%
Business Trust and a wholly-owned
subsidiary of Enermart, Inc.)
Trans Louisiana Industrial Gas Louisiana 100%
Company, Inc
UCG Energy Corporation Delaware 100%
UCG Leasing, Inc. (wholly-owned Georgia 100%
subsidiary of UCG Energy Corporation)
United Cities Gas Storage Company Delaware 100%
United Cities Propane Gas of Tennessee 100%
Tennessee, Inc. (wholly-owned
subsidiary of UCG Energy Corporation)
Western Kentucky Gas Resources Delaware 100%
Company d/b/a NRG, Inc.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITOR
We consent to the incorporation by reference in the Registration 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-3 No. 333-32475, 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 and in the related
Prospectuses of our report dated November 11, 1997, with respect to the
consolidated financial statements of Atmos Energy Corporation included in this
Annual Report (Form 10-K) for the year ended September 30, 1997.
ERNST & YOUNG LLP
Dallas, Texas
December 19, 1997
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated February 14, 1997 on the consolidated financial statements of United
Cities Gas Company, Inc. and subsidiaries included in Atmos Energy Corporation's
Form 10-K for the fiscal year ended September 30, 1997.
ARTHUR ANDERSEN LLP
Nashville, Tennessee
December 19, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF ATMOS ENERGY CORPORATION FOR THE YEAR ENDED
SEPTEMBER 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 849,127
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 143,705
<TOTAL-DEFERRED-CHARGES> 95,479
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,088,311
<COMMON> 148
<CAPITAL-SURPLUS-PAID-IN> 251,174
<RETAINED-EARNINGS> 75,938
<TOTAL-COMMON-STOCKHOLDERS-EQ> 327,260
0
0
<LONG-TERM-DEBT-NET> 302,981
<SHORT-TERM-NOTES> 167,300
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 15,201
0
<CAPITAL-LEASE-OBLIGATIONS> 2,665
<LEASES-CURRENT> 382
<OTHER-ITEMS-CAPITAL-AND-LIAB> 272,522
<TOT-CAPITALIZATION-AND-LIAB> 1,088,311
<GROSS-OPERATING-REVENUE> 906,835
<INCOME-TAX-EXPENSE> 14,298
<OTHER-OPERATING-EXPENSES> 840,226
<TOTAL-OPERATING-EXPENSES> 854,524
<OPERATING-INCOME-LOSS> 52,311
<OTHER-INCOME-NET> 5,122
<INCOME-BEFORE-INTEREST-EXPEN> 57,433
<TOTAL-INTEREST-EXPENSE> 33,595
<NET-INCOME> 23,838
0
<EARNINGS-AVAILABLE-FOR-COMM> 23,838
<COMMON-STOCK-DIVIDENDS> 26,415
<TOTAL-INTEREST-ON-BONDS> 12,569
<CASH-FLOW-OPERATIONS> 68,749
<EPS-PRIMARY> 1.01
<EPS-DILUTED> 1.01
</TABLE>
