<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
For the fiscal year ended September 30, 1998 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ____________
Commission File Number 1-10042
ATMOS ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
TEXAS AND VIRGINIA 75-1743247
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
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]
"continued"
<PAGE>
The aggregate market value of the voting stock held by non-affiliates of
the registrant was $884,271,000 as of November 25, 1998. On November 25, 1998
the registrant had 30,516,286 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to Shareholders for the year
ended September 30, 1998 are incorporated by reference into Parts I, II and IV
of this report.
Portions of the registrant's Definitive Proxy Statement to be filed for the
Annual Meeting of Shareholders on February 10, 1999 are incorporated by
reference into Part III of this report.
<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 may contain "forward-looking statements" within the meaning of Section
21E of the Securities Exchange Act of 1934. All statements other than statements
of historical facts included in this Report 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 and are intended to qualify for the safe harbor from liability
established by the Private Securities Litigation Reform Act of 1995. When used
in this Report or in any of the Company's other documents or oral presentations,
the words "anticipate," "expect," "estimate," "plans," "believes," "objective,"
"forecast," "goal" or other similar words are intended to identify forward-
looking statements. 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,
national, regional, and local economic and competitive conditions, regulatory
and business trends and decisions, technological developments, Year 2000 issues,
inflation rates, weather conditions, and other uncertainties, all of which are
difficult to predict and many of which are beyond the control of the Company.
Accordingly, while the Company believes that the expectations reflected in
the forward-looking statements are reasonable, there can be no assurance that
such expectations will be realized or will approximate actual results.
3
<PAGE>
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. Immediately following the transfer of such business, which
had been operated by Pioneer and its predecessors since 1906, Pioneer
distributed 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
1,042,000 residential, commercial, industrial, agricultural, and other
customers. The Company distributes and sells natural gas through approximately
1,005,000 meters 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 37,000 customers in Kentucky, North Carolina, and Tennessee.
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, 1998, the Company had 315,000 regulated and non-regulated meters in service
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, 1998, the Company had 81,000 meters in service 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, 1998, the Company had 176,000 meters in service in Kentucky.
4
<PAGE>
The Company's distribution systems in Colorado and parts of Kansas and
Missouri are operated through its Greeley Gas Company division (the "Greeley
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 Division include Greeley, Durango and Lamar, Colorado and Bonner
Springs, Herington and Ulysses, Kansas. At September 30, 1998 the Greeley
Division had 116,000 meters in service.
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 6.7 million 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, 1998, the United Cities Division had 316,000 meters in service.
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 Kansas, Tennessee, and other 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 Delaware limited liability company that
provides natural gas services. WMLLC provides gas marketing services to
industrial customers, municipalities and local distribution companies, including
the Trans La, Greeley, and United Cities Divisions.
5
<PAGE>
UCG Energy also owns Atmos Propane, Inc., which is engaged primarily in the
retail distribution of propane (LP) gas and the wholesale supply of LP gas. It
is exiting the transportation of certain products for other companies and the
direct merchandising and repair of propane gas appliances. The propane operation
has operation and storage centers and store front offices located in Tennessee,
Kentucky, and North Carolina, with a total company storage capacity of 2.3
million gallons. As of September 30, 1998, the propane operations served 37,400
customers. During the three-year period ended September 30, 1998, the propane
operations added approximately 13,600 customers through acquisitions of eight
propane distribution companies and a propane transport company.
The natural gas distribution industry is 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. The propane distribution business is also subject to
seasonality and competition with alternate fuels and other suppliers.
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 ("WKG") 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 in the Company's Annual
Report to Shareholders.
OPERATING STATISTICS
The table on the following page reflects the operating statistics of Atmos
for fiscal 1998 and 1997 and the restated operating statistics for the previous
three years on a pooled basis with UCGC. It is followed by two tables of utility
sales and operating statistics by business unit for 1998 and 1997, respectively.
6
<PAGE>
ATMOS ENERGY CORPORATION
CONSOLIDATED OPERATING STATISTICS
<TABLE>
<CAPTION>
Year ended September 30,
-----------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
METERS IN SERVICE, end of year
Residential 889,074 870,747 860,229 834,376 825,310
Commercial 94,302 92,703 91,960 90,093 93,250
Industrial(incl. agricultural) 16,322 17,217 19,403 19,762 20,219
Public authority and other 4,834 4,781 4,716 4,982 4,949
---------- ---------- ---------- -------- --------
Total utility meters 1,004,532 985,448 976,308 949,273 943,728
Propane customers 37,400 29,097 26,108 23,359 21,693
---------- ---------- ---------- -------- --------
Total 1,041,932 1,014,545 1,002,416 972,572 965,421
========== ========== ========== ======== ========
HEATING DEGREE DAYS (2)
Actual (weighted average) 3,799 3,909 4,043 3,706 3,855
Percent of normal 95% 98% 101% 93% 97%
SALES VOLUMES - MMcf (3)
Residential 73,472 75,215 77,001 69,666 72,561
Commercial 36,083 37,382 38,247 34,921 35,250
Industrial (incl. agricultural) 24,058 29,452 34,898 35,664 34,249
Public authority and other 4,937 5,195 5,182 4,779 5,242
---------- ---------- ---------- -------- --------
Total 138,550 147,244 155,328 145,030 147,302
Transportation volumes - MMcf (3) 56,224 48,800 44,146 47,647 47,882
---------- ---------- ---------- -------- --------
Total utility volumes 194,774 196,044 199,474 192,677 195,184
Storage/energy services volumes 20,823 16,964 22,965 21,626 23,389
---------- ---------- ---------- -------- --------
TOTAL THROUGHPUT - MMcf (3) 215,597 213,008 222,439 214,303 218,573
========== ========== ========== ======== ========
PROPANE - Gallons (000's) 33,676 32,975 40,723 28,854 23,175
========== ========== ========== ======== ========
OPERATING REVENUES (000's)
Gas sales revenues
Residential $ 410,538 $ 452,864 $ 409,039 $337,768 $375,450
Commercial 184,046 193,302 186,032 150,949 165,883
Industrial (incl. agricultural) 97,472 115,203 128,776 110,437 120,567
Public authority and other 20,504 23,898 21,738 18,185 22,463
---------- ---------- ---------- -------- --------
Total gas sales revenues 712,560 785,267 745,585 617,339 684,363
Transportation revenues 23,971 19,885 18,872 19,813 21,325
Other gas revenues 8,121 6,385 13,751 9,374 6,879
---------- ---------- ---------- -------- --------
Total utility revenues 744,652 811,537 778,208 646,526 712,567
Non-utility revenues
Propane revenues 29,091 33,194 38,372 24,651 20,788
Leasing/rental revenues 3,977 4,005 4,204 5,959 6,449
Storage/energy services revenues 70,488 58,099 65,907 72,419 86,498
---------- ---------- ---------- -------- --------
Total non-utility revenues 103,556 95,298 108,483 103,029 113,735
---------- ---------- ---------- -------- --------
Total operating revenues $ 848,208 $ 906,835 $ 886,691 $749,555 $826,302
========== ========== ========== ======== ========
AVERAGE SALES PRICE/Mcf $4.87 $5.11 $4.51 $4.07 $4.41
AVERAGE COST OF GAS/Mcf SOLD 3.24 3.51 3.15 2.70 3.10
AVERAGE TRANSPORTATION REVENUES/Mcf .43 .41 .43 .42 .45
</TABLE>
See footnotes on page 10.
7
<PAGE>
UTILITY SALES AND STATISTICAL DATA BY BUSINESS UNIT - 1998 (1)
<TABLE>
<CAPTION>
Year ended September 30, 1998
----------------------------------------------------------------
Western United Total
Energas Trans La Kentucky Greeley Cities Utility
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
METERS IN SERVICE,
at end of year
Residential 272,190 74,522 156,107 101,532 284,723 889,074
Commercial 25,982 5,526 18,000 13,674 31,120 94,302
Industrial (incl.
agricultural) 14,753 123 442 384 620 16,322
Public authority
and other 2,278 977 1,579 - - 4,834
-------- ------- -------- -------- -------- ---------
Total 315,203 81,148 176,128 115,590 316,463 1,004,532
======== ======= ======== ======== ======== =========
HEATING DEGREE DAYS(2)
Actual 3,669 1,725 3,771 5,937 3,784 3,799
Normal 3,531 1,771 4,333 6,272 4,070 3,989
Percent of normal 104% 97% 87% 95% 93% 95%
SALES VOLUMES-MMcf(2)
Residential 23,594 3,670 12,413 10,027 23,768 73,472
Commercial 7,754 1,433 5,530 6,893 14,473 36,083
Industrial (incl.
agricultural) 2,076 1,801 3,415 1,652 15,114 24,058
Public authority
and other 2,559 917 1,461 - - 4,937
-------- ------- -------- -------- -------- ---------
Total 35,983 7,821 22,819 18,572 53,355 138,550
TRANSPORTATION
VOLUMES-MMcf(3) 5,526 949 25,813 3,555 20,381 56,224
-------- ------- -------- -------- -------- ---------
TOTAL THROUGHPUT-MMcf(3) 41,509 8,770 48,632 22,127 73,736 194,774
======== ======= ======== ======== ======== =========
OTHER STATISTICS
Operating
revenues (000's) $156,774 $41,928 $123,588 $ 84,955 $337,407 $744,652
Miles of pipe 13,217 2,248 3,647 3,537 7,459 30,108
Employees(4) 401 134 267 193 621 1,616
Communities served 92 41 163 123 383 802
</TABLE>
See footnotes on page 10.
8
<PAGE>
UTILITY SALES AND STATISTICAL DATA BY BUSINESS UNIT - 1997 (1)
<TABLE>
<CAPTION>
Year ended September 30, 1997
----------------------------------------------------------------
Western United Total
Energas Trans La Kentucky Greeley Cities Utility
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
METERS IN SERVICE,
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 (incl.
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 101% 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 (incl.
agricultural) 2,120 1,872 6,128 1,907 17,425 29,452
Public authority
and other 2,689 951 1,555 - - 5,195
-------- ------- -------- -------- -------- --------
Total 37,013 7,764 27,296 18,865 56,306 147,244
TRANSPORTATION VOLUMES -
MMcf(3) 4,479 624 22,398 3,275 18,024 48,800
-------- ------- -------- -------- -------- --------
TOTAL THROUGHPUT-MMcf(3) 41,492 8,388 49,694 22,140 74,330 196,044
======== ======= ======== ======== ======== ========
OTHER STATISTICS
Operating
revenues(000's) $181,127 $51,866 $144,139 $ 91,341 $343,064 $811,537
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>
See footnotes on page 10.
9
<PAGE>
NOTES:
- ------
(1) These tables present data for Atmos' five utility business units. Their
operations include the regulated local distribution companies and certain
unregulated gas marketing subsidiaries located in their respective service
areas.
(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 are based on 30-year average National Weather
Service data for selected locations.
(3) Volumes are reported as metered in million cubic feet ("MMcf").
(4) The number of employees excludes 391 and 218 Atmos shared services
employees and 186 and 162 non-utility employees in 1998 and 1997, respectively.
10
<PAGE>
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 as of and for the period ended September 30, 1998. Prior periods have been
restated to reflect the pooling of interests with UCGC on July 31, 1997.
Utility Non-utility Total
---------- ----------- ----------
(In thousands)
1998
Operating revenues $ 744,652 $103,556 $ 848,208
Net income 42,147 13,118 55,265
Identifiable assets 1,041,817 99,573 1,141,390
1997
Operating revenues $ 811,537 $ 95,298 $ 906,835
Net income 16,991 6,847 23,838
Identifiable assets 1,001,455 86,856 1,088,311
1996
Operating revenues $ 778,208 $108,483 $ 886,691
Net income 31,905 9,246 41,151
Identifiable assets 926,935 83,675 1,010,610
The utility business is comprised of the Company's five utility divisions:
Energas Division, Greeley Division, Trans La Division, United Cities Division
and Western Kentucky Division. It includes regulated as well as certain non-
regulated utility businesses such as transportation and gas marketing activities
in the utility divisions' respective service areas.
The non-utility business includes storage and energy services operations
which include UCG Storage, Atmos Energy Services, the non-regulated irrigation
and industrial gas sales of EnerMart, Inc. and EGASCO in West Texas and the
Company's 45% interest in WMLLC (a provider of natural gas services); the
propane operations; and the leasing/rental operations of UCG Energy.
11
<PAGE>
The non-utility net income for the years ended September 30, 1998, 1997 and
1996 is recapped below:
1998 1997 1996
------- ------ ------
(In thousands)
Non-utility net income:
Propane $ (66) $ (90) $1,276
Leasing/Rental 3,272 1,117 1,237
Storage and Energy Services 9,912 5,820 6,733
------- ------ ------
Total $13,118 $6,847 $9,246
======= ====== ======
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 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 believes that it 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
generally offset the loss to gross profit.
12
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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 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.
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 1998,
WKG sought and was granted approval by the Kentucky Public Service Commission
for a Performance Based Rate (PBR) program. This three-year supply and asset
management program commenced in July 1998. Noram Energy Services, a division of
Houston Industries, was selected to procure supply and manage WKG's pipeline and
storage assets.
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 1998, the United Cities
Division purchased its supply from various producers and marketers including
TransCanada, Texaco Gas Marketing, WMLLC, 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 Division's requirements. Additionally, the Greeley Division
purchased substantial volumes from producers that are connected directly to its
distribution system. During 1998, the Greeley Division's primary suppliers were
Union Pacific Fuels, Williams Energy Service Company, Duke Energy, KN Energy and
WESTAR.
The Energas Division receives sales and transportation service from various
KN affiliates. Also, the Energas Division 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 1998,
other major suppliers included Texaco Gas Marketing, KN Energy, and Public
Service of New Mexico.
13
<PAGE>
Louisiana Intrastate Gas Company ("LIG"), Acadian Pipeline, Koch Gateway
and Texas Gas Transmission Company pipelines deliver 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 WMLLC.
The Company also 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 liquified 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.
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
markets.
14
<PAGE>
REGULATION AND RATES
Regulation
- ----------
Energas Division
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 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.
Trans La Division
The Trans La Division is regulated by the Louisiana Public Service
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 in manufacturing
processes and sales of natural gas for vehicle fuel are exempt from regulation.
Western Kentucky Division
The Western Kentucky Division is regulated by the Kentucky Public Service
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
15
<PAGE>
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.
Greeley Division
The Greeley Division is regulated by the Colorado Public Utilities
Commission, the Kansas Corporation Commission, and the Missouri Public Service
Commission 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 Division's
wholesale gas suppliers are regulated by various federal and state commissions.
United Cities Division
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. 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 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.
16
<PAGE>
Rates
- -----
Approximately 88% of the Company's revenues in fiscal 1998 was derived from
sales at rates set by or subject to approval by local or state authorities. The
method of determining 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 Public Service 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 $682,000, $2,643,000 and $(2,612,000) in 1998, 1997 and 1996, respectively.
17
<PAGE>
The following table sets forth the major rate requests made by the Company
or other parties during the most recent five years and the action taken on such
requests:
Effective Amount Amount
Jurisdiction Date Requested Received
------------ --------- ----------- -----------
(In thousands)
Texas
West Texas System 11/18/94 $2,581 $ 1,702 (a)
11/01/96 7,676 5,800 (a)
Louisiana 03/01/93 (b) 730 (b)
03/01/94 (b) 1,058 (b)
03/01/95 (b) 1,071 (b)
Kentucky 11/01/95 7,665 2,300 (c)
03/01/96 1,000 (c)
Colorado 05/01/94 4,527 3,246
01/21/98 - (1,600) (f)
Kansas 12/01/93 2,604 2,088 (d)
09/01/95 4,230 2,700 (e)
Missouri 10/14/95 1,100 903
South Carolina 02/07/95 341 253
Tennessee 11/15/95 3,951 2,227
Iowa 05/17/96 750 410
Georgia 12/02/96 5,003 3,160
Illinois 07/09/97 1,234 428
Virginia 09/29/95 810 103
10/01/98 - (248) (g)
(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%.
The Trans La Division has a hearing scheduled in April 1999 for the
Louisiana Public Service Commission to consider its rate of return.
18
<PAGE>
(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 Division.
(e) This increase is applicable to the service area of the United Cities
Division.
(f) Rate reduction as a result of settlement in a case initiated by the
Colorado Consumer Counsel.
(g) Rate reduction as a result of a settlement with the Virginia State
Corporation Commission staff regarding investigation of earnings.
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, electricity. Competition for the residential
and commercial customers is increasing. Promotional incentives, improved
equipment efficiencies, 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 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 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, which are competitive with the price of alternative fuels. In
addition,
19
<PAGE>
certain industrial customers have changed 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 with respect to price and service. The
wholesale cost of propane is subject to fluctuations primarily based on demand,
availability of supply and product transportation costs. Through its 45%
interest in WMLLC, UCG Energy competes with other natural gas brokers in
obtaining natural gas supplies for customers. UCG Energy also competes with
other rental companies in the rental of real estate, transportation equipment,
office facilities and appliances.
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, 1998, the Company employed 2,193 persons. See "Utility
Sales and Statistical Data by Business Unit - 1998" for the number of employees
by business unit. As discussed in Note 2 of notes to consolidated financial
statements in the Company's Annual Report to Shareholders, the Company underwent
downsizing and restructuring in 1997 and 1998 in connection with the integration
of UCGC and the Company's Customer Service Initiative.
ITEM 2. PROPERTIES
The Company owns an aggregate of 30,108 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 mains through a program of
continuous inspection and repair and believes that its system of mains is in
good condition. The Company also owns and operates nine propane peak shaving
plants with a total capacity of approximately 1,050,000 gallons that can produce
an equivalent of 19,459 thousand cubic feet ("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 approximately 21.1 billion cubic feet ("Bcf").
However,
20
<PAGE>
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 Division and
United Cities Division with recorded values of approximately $88.3 million and
$324.7 million, respectively, are subject to liens under First Mortgage Bonds
assumed by the Company in its mergers with GGC and UCGC. At September 30, 1998,
the liens secured $17.0 million of outstanding 9.4% Series J First Mortgage
Bonds due May 1, 2021, and $108.9 million of outstanding Series N, P, Q, R, 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, the majority of which are located in leased premises.
Net non-utility property at September 30, 1998 included approximately $25.8
million for propane equipment, $17.2 million for underground storage facilities,
and $7.1 million for rental buildings and equipment.
The Company holds franchises granted by the incorporated cities and towns
that it serves. At September 30, 1998, the Company held 409 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
Incorporated by reference from the 1998 Annual Report to Shareholders, 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 1998.
21
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information as of September 30,
1998, 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.
Years of
Name Age Service Office Currently Held
- ------------------ --- -------- -----------------------------
Robert W. Best 52 1 Chairman, President and
Chief Executive Officer
Larry J. Dagley 50 1 Executive Vice President and
Chief Financial Officer
J. Charles Goodman 37 14 Executive Vice President,
Utility Operations
Glen A. Blanscet 41 13 Vice President, General
Counsel and Corporate
Secretary
Wynn D. McGregor 45 10 Vice President, Human
Resources
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, from January 1996 to March 1997, and was
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
Transcontinental Gas Pipe Line Corporation.
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 was
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.
Glen A. Blanscet was named Vice President, General Counsel and Corporate
Secretary in May 1995. He previously served as Assistant
22
<PAGE>
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 REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this item is set forth under the caption
"Market Price of Common Stock and Related Matters" in the Financial Review
section of Atmos' 1998 Annual Report to Shareholders filed as Exhibit 13 to this
Annual Report on Form 10-K. Such information is incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is set forth under the caption
"Selected Financial Data" in the Financial Review section of Atmos' 1998 Annual
Report to Shareholders filed as Exhibit 13 to this Annual Report on Form 10-K.
Such information is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this item is set forth under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Financial Review section of Atmos' 1998 Annual Report to
Shareholders filed as Exhibit 13 to this Annual Report on Form 10-K. Such
information is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
All of the Company's long-term debt is fixed-rate and, therefore, does not
expose the Company to the risk of earnings or cash flow loss due to changes in
market interest rates. At September 30, 1998, the Company is not engaged in
other contracts which would cause exposure to the risk of material earnings or
cash flow loss due to changes in market commodity prices, foreign currency
exchange rates, or interest rates.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this Item is submitted as a separate section of this Annual
Report on Form 10-K on page 30.
23
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding directors and compliance with Section 16(a)
of the Securities Exchange Act of 1934 is incorporated herein by reference from
the Company's Definitive Proxy Statement for the Annual Meeting of Shareholders
on February 10, 1999. Information regarding executive officers is included in
Part I of this Form 10-K
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference from the Company's Definitive Proxy
Statement for the Annual Meeting of Shareholders on February 10, 1999.
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 10, 1999.
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 10, 1999.
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 response to this portion of Item 14 is submitted as a separate section
of this Annual Report on Form 10-K on page 30.
3. Exhibits
The exhibits listed in the accompanying Exhibits Index are filed as part of
this Annual Report on Form 10-K. The exhibits numbered 10.21(a) through
10.33 are management contracts or compensatory plans or arrangements.
24
<PAGE>
(b) Reports on Form 8-K
(1) The Company filed a Form 8-K Current Report dated July 22, 1998 reporting
under Item 5, Other Events the following:
On July 22, 1998, Atmos, and Merrill Lynch & Co., NationsBanc Montgomery
Securities LLC and Edward D. Jones & Co., LP (collectively the
"Underwriters") executed a purchase agreement in connection with the sale
by Atmos to the Underwriters of a total of $150 million of Atmos'
debentures. On July 27, 1998, Atmos executed the global debenture
certificate representing a total of $150 million in 6 3/4% debentures due
July 15, 2028.
(2) The Company also filed a Form 8-K Current Report dated July 23, 1998
reporting under Item 5, Other Events the following:
On July 23, 1998 Atmos announced in a news release its earnings and other
related financial information for the quarter ended June 30, 1998. It also
announced in another news release its pricing of a $150 million debt
offering together with other information related to the offering.
25
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To United Cities Gas Company:
We have audited the consolidated statements of income and cash flows
of United Cities Gas Company (an Illinois corporation) and subsidiaries for the
year 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
presented fairly, in all material respects, the results of the operations of
United Cities Gas Company and subsidiaries and their cash flows for the year
ended December 31, 1996 in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Nashville, Tennessee
February 14, 1997
26
<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/ LARRY J. DAGLEY
----------------------------
Larry J. Dagley
Executive Vice President
and Chief Financial
Officer
Date: December 22, 1998
27
<PAGE>
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, President December 22, 1998
- ------------------------- and Chief Executive
Robert W. Best Officer
/s/ LARRY J. DAGLEY Executive Vice December 22, 1998
- ------------------------- President and Chief
Larry J. Dagley Financial Officer
/s/ TOM S. HAWKINS, JR. Vice President, December 22, 1998
- ------------------------- Planning and Budgeting
Tom S. Hawkins, Jr. and Interim Controller
(Principal Accounting
Officer)
28
<PAGE>
/s/ TRAVIS W. BAIN, II Director December 22, 1998
- -------------------------
Travis W. Bain, II
/s/ DAN BUSBEE Director December 22, 1998
- -------------------------
Dan Busbee
/s/ RICHARD W. CARDIN Director December 22, 1998
- -------------------------
Richard W. Cardin
/s/ THOMAS J. GARLAND Director December 22, 1998
- -------------------------
Thomas J. Garland
/s/ GENE C. KOONCE Director December 22, 1998
- -------------------------
Gene C. Koonce
/s/ VINCENT J. LEWIS Director December 22, 1998
- -------------------------
Vincent J. Lewis
/s/ THOMAS C. MEREDITH Director December 22, 1998
- -------------------------
Thomas C. Meredith
/s/ PHILLIP E. NICHOL Director December 22, 1998
-------------------------
Phillip E. Nichol
/s/ CARL S. QUINN Director December 22, 1998
-------------------------
Carl S. Quinn
/s/ CHARLES K. VAUGHAN Director December 22, 1998
- -------------------------
Charles K. Vaughan
/s/ RICHARD WARE II Director December 22, 1998
-------------------------
Richard Ware II
29
<PAGE>
INDEX TO FINANCIAL STATEMENTS
(Item 8, 14(a) 1 and 2)
Form 10-K
Page no.
---------
Financial statements:
Consolidated balance sheets at
September 30, 1998 and 1997
(Contained in Exhibit 13)
Consolidated statements of income for
the years ended September 30, 1998, 1997 and 1996
(Contained in Exhibit 13)
Consolidated statements of shareholders' equity for
the years ended September 30, 1998, 1997 and 1996
(Contained in Exhibit 13)
Consolidated statements of cash flows for
the years ended September 30, 1998, 1997 and 1996
(Contained in Exhibit 13)
Notes to consolidated financial statements
(Contained in Exhibit 13)
Supplementary Quarterly Financial Data (unaudited)
(Contained in Exhibit 13)
Independent Auditors' Reports
Ernst & Young LLP (Contained in Exhibit 13)
Arthur Andersen LLP 26
Consents of Independent Auditors
Ernst & Young LLP 27
Arthur Andersen LLP 28
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.
The financial statements and the independent auditors' report of Ernst &
Young LLP listed in the above index, which are included in the Financial Review
section of the Annual Report to Shareholders of Atmos Energy Corporation for the
year ended September 30, 1998, are incorporated herein by reference.
30
<PAGE>
Page Number or
Exhibit Incorporation by Reference
Number Description to
- ------- ------------------------------------- ---------------------------
Plan of Reorganization
----------------------
2.1 Agreement and Plan of Reorganization Exhibit 2.1 to Registration
dated July 19, 1996, by and between Statement on Form S-4
the Registrant and United Cities Gas filed October 4, 1996
Company (File No. 333-13429)
2.2 Amendment No. 1 to Agreement and Plan Exhibit 2.1(a) to
of Reorganization dated October 3, Registration Statement on
1996 Form S-4 filed October 4,
1996 (File No. 333-13429)
Articles of Incorporation and Bylaws
-------------------------------------
3.1 Restated Articles of Incorporation of Exhibit 3.1 of Form 10-K for
the Company, as Amended (as of July fiscal year ended September
31, 1997) 30, 1997 (File No. 1-10042)
3.2 Bylaws of the Company (Amended and Exhibit 3.2 of Form 10-K for
Restated as of November 12, 1997) fiscal year ended September
30, 1997 (File No. 1-10042)
Instruments Defining Rights of
Security Holders
------------------------------------
4.1 Specimen Common Stock Certificate Exhibit (4)(b) of Form 10-
(Atmos Energy Corporation) K for fiscal year ended
September 30, 1988 (File
No. 1-10042)
4.2 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. (File No. 1-10042)
9 Not Applicable
31
<PAGE>
Page Number or
Exhibit Incorporation by Reference
Number Description to
- ------- ------------------------------------- ---------------------------
Material Contracts
------------------
10.1(a) Note Purchase Agreement, dated as of Exhibit 10(c) of Form 8-K
December 21, 1987, by and between the filed January 7, 1988
Company and John Hancock Mutual Life (File No. 0-11249)
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 Agreement, Exhibit (10)(b)(ii) of
dated October 11, 1989, by and Form 10-K for fiscal year
between the Company and John Hancock ended September 30, 1989
Mutual Life Insurance Company (File No. 1-10042)
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.)
32
<PAGE>
Page Number or
Exhibit Incorporation by Reference
Number Description 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 Agreement, Exhibit 10(b)(iii) of Form
dated November 12, 1991, by and 10-K for fiscal year ended
between the Company and John Hancock September 30, 1991 (File
Mutual Life Insurance Company No. 1-10042)
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.)
10.1(d) Amendment to Note Purchase Agreement Exhibit 4.3(d) to
dated December 22, 1993, by and Registration Statement
between the Company and John Hancock on Form S-3 filed April
Mutual Life Insurance Company revising 20, 1998 (File No. 333-
Note Purchase Agreement dated December 50477)
21, 1987.
Amendment to Note Purchase Agreement,
dated December 22, 1993, by and
between the Company and Mellon Bank,
N.A., Trustee under Master Trust
Agreement of AT&T Corporation, dated
January 1, 1982, 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 and the amounts
thereof).
10.1(e) Amendment to Note Purchase Agreement, Exhibit 4.3(e) to
dated December 20, 1994, by and Registration Statement
between the Company and John Hancock on Form S-3 filed April
Mutual Life Insurance Company 20, 1998 (File No. 333-
revising Note Purchase Agreement 50477)
dated December 21, 1987
Amendment to Note Purchase Agreement,
dated December 20, 1994, 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).
10.1(f) Amendment to Note Purchase Agreement, Exhibit 4.3(f) to
dated July 29, 1997, by and between Registration Statement
the Company and John Hancock Mutual on Form S-3 filed April
Life Insurance Company revising Note 20, 1998 (File No. 333-
Purchase Agreement dated December 21, 50477)
1987
Amendment to Note Purchase Agreement,
dated July 29, 1997, 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 and the
amounts thereof).
10.2(a) Note Purchase Agreement, dated as of Exhibit 10(c) of Form 10-K
October 11, 1989, by and between the for fiscal year ended
Company and John Hancock Mutual Life September 30, 1989 (File
Insurance Company No. 1-10042)
33
<PAGE>
Page Number or
Exhibit Incorporation by Reference
Number Description to
- -------- -------------------------------------- ---------------------------
10.2(b) Amendment to Note Purchase Agreement, Exhibit 10(c)(ii) of Form
dated as of November 12, 1991, by and 10-K for fiscal year ended
between the Company and John Hancock September 30, 1991 (File
Mutual Life Insurance Company No. 1-10042)
revising Note Purchase Agreement
dated October 11, 1989
10.2(c) Amendment to Note Purchase Agreement, Exhibit 4.4(c) to
dated December 22, 1993, by and Registration Statement on
between the Company and John Hancock Form S-3 filed April 20,
Mutual Life Insurance Company revising 1998 (File No. 333-50477)
Note Purchase Agreement dated
October 11, 1989
10.2(d) Amendment to Note Purchase Agreement, Exhibit 4.4(d) to
dated December 20, 1994, by and Registration Statement on
between the Company and John Hancock Form S-3 filed April 20, 1998
Mutual Life Insurance Company revising (File No. 333-50477)
Note Purchase Agreement dated
October 11, 1989
10.2(e) Amendment to Note Purchase Agreement, Exhibit 4.4(e) to
dated July 29, 1997, by and between Registration Statement on
the Company and John Hancock Mutual Form S-3 filed April 20, 1998
Life Insurance Company revising Note (File No. 333-50477)
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 ended
Company and The Variable Annuity Life September 30, 1991 (File No.
Insurance Company 1-10042)
10.3(b) Amendment to Note Purchase Agreement, Exhibit 10(f)(ii) of Form
dated November 26, 1991, by and 10-K for fiscal year ended
between the Company and The Variable September 30, 1991
Annuity Life Insurance Company (File No. 1-10042)
revising Note Purchase Agreement
dated August 29, 1991
10.3(c) Amendment to Note Purchase Agreement, Exhibit 4.5(c) to
dated December 22, 1993, by and Registration Statement on
between the Company and The Variable Form S-3 filed April 20, 1998
Annuity Life Insurance Company revising (File No. 333-50477)
Note Purchase Agreement dated August 29,
1991
10.3(d) Amendment to Note Purchase Agreement, Exhibit 4.5(d) to
dated July 29, 1997, by and between Registration Statement on
the Company and The Variable Annuity Form S-3 filed April 20,
Life Insurance Company revising Note 1998 (File No. 333-
Purchase Agreement dated August 29, 50477)
1991
10.4(a) Note Purchase Agreement, dated as of Exhibit (10)(f) of Form 10-K
August 31, 1992, by and between the for fiscal year ended
Company and The Variable Annuity Life September 30, 1992 (File No.
Insurance Company 1-10042)
10.4(b) Amendment to Note Purchase Agreement, Exhibit 4.6(b) to
dated December 22, 1993, by and between Registration Statement on
the Company and The Variable Annuity Form S-3 filed April 20, 1998
Life Insurance Company revising Note (File No. 333-50477)
Purchase Agreement dated August 31,
1992
10.4(c) Amendment to Note Purchase Agreement, Exhibit 4.6(c) to
dated July 29, 1997, by and between Registration Statement on
the Company and The Variable Annuity Form S-3 filed April 20, 1998
Life Insurance Company revising Note (File No. 333-50477)
Purchase Agreement dated August 31,
1992
10.5(a) Note Purchase Agreement, dated November Exhibit 10.1 of Form 10-Q for
14, 1994, by and among the Company and quarter ended December 31,
New York Life Insurance Company, New 1994 (File No. 1-10042)
York Life Insurance and Annuity
Corporation, The Variable Annuity
Life Insurance Company, American General
Life Insurance Company, and Merit
Life Insurance Company
10.5(b) Amendment to Note Purchase Agreement, Exhibit 4.7(b) to
dated July 29, 1997, by and among the Registration Statement on
Company and New York Life Insurance Form S-3 filed April 20, 1998
Company, New York Life Insurance and (File No. 333-50477)
Annuity Corporation, The Variable
Annuity Life Insurance Company,
American General Life Insurance
Company and Merit Life Insurance
Company revising Note Purchase
Agreement dated November 14, 1994
10.6(a) Indenture of Mortgage, dated as of Exhibit to Registration
July 15, 1959, from United Cities Statement of United Cities
Gas Company to First Trust of Gas Company on Form S-3
Illinois, National Association, and (File No. 33-56983)
M.J. Kruger, as Trustees, as amended
and supplemented through December 1,
1992 (the Indenture of Mortgage through
the 20th Supplemental Indenture)
34
<PAGE>
Page Number or
Exhibit Incorporation by Reference
Number Description to
- ------- -------------------------------------- -----------------------------
10.6(b) Twenty-First Supplemental Indenture Exhibit 10.7(a) of Form
dated as of February 5, 1997 by and 10-K for fiscal year
among United Cities Gas Company and ended September 30,
Bank of America Illinois and First 1997 (File No. 1-
Trust National Association and Russell 10042)
C. Bergman supplementing Indenture of
Mortgage dated as of July 15, 1959
10.6(c) Twenty-Second Supplemental Indenture Exhibit 10.7(b) of Form
dated as of July 29, 1997 by and among 10-K for fiscal year
the Company and First Trust National ended September 30,
Association and Russell C. Bergman 1997 (File No. 1-
supplementing Indenture of Mortgage 10042)
dated as of July 15, 1959
10.7(a) Form of Indenture between United Cities Exhibit to Registration
Gas Company and First Trust of Illinois, Statement of United
National Association, as Trustee dated Cities Gas Company on
as of November 15, 1995 Form S-3 (File No. 33-
56983)
10.7(b) First Supplemental Indenture between Exhibit 10.8(a) of Form
the Company and First Trust of Illinois, 10-K for fiscal year
National Association, as Trustee ended September 30,
dated as of July 29, 1997 1997 (File No. 1-10042)
10.8(a) Seventh Supplemental Indenture, dated Exhibit 10.1 of Form 10-Q
as of October 1, 1983 between Greeley for quarter ended
Gas Company ("Greeley Division") and June 30, 1994 (File No.
the Central Bank of Denver, N.A. 1-10042)
("Central Bank")
10.8(b) Ninth Supplemental Indenture, dated as Exhibit 10.2 of Form 10-Q
of April 1, 1991, between the Greeley for quarter ended
Division and Central Bank June 30, 1994 (File No.
1-10042)
10.8(c) Bond Purchase Agreement, dated as of Exhibit 10.3 of Form 10-Q
April 1, 1991, between the Greeley for quarter ended June 30,
Division and Central Bank 1994 (File No. 1-10042)
10.8(d) Tenth Supplemental Indenture, dated as Exhibit 10.4 of Form 10-Q
of December 1, 1993, between the for quarter ended
Company and Colorado National Bank, June 30, 1994 (File No.
formerly Central Bank 1-10042)
35
<PAGE>
Page Number or
Exhibit Incorporation by Reference
Number Description to
- ------- -------------------------------------- -----------------------------
10.9(a) Purchase Agreement for 6-3/4% Exhibit 99.1 of
Debentures due 2028 by and among Form 8-K dated July 22, 1998
Merrill Lynch Co., NationsBanc (File No. 1-10042)
Montgomery Securities LLC, Edward
D. Jones & Co., L.P. and Atmos
Energy Corporation dated July 22,
1998
10.9(b) Form of Indenture between Atmos Exhibit 4.1 to Registration
Energy Corporation and U.S. Bank Statement on Form S-3 filed
Trust National Association, April 20, 1998
Trustee (File No. 333-50477)
Gas Supply Contracts
--------------------
10.10(a) Firm Gas Transportation Agreement Exhibit 10.10(a) of Form
No. 123535 dated November 1, 1995 10-K for fiscal year ended
between Greeley Gas and Public September 30, 1997
Service Company of Colorado (File No. 1-10042)
10.10(b) Transportation Storage Service Exhibit 10.6(b) of Form 10-K
Agreement No. TA-0544 between Greeley for fiscal year ended
Gas and Williams Natural Gas September 30, 1994 (File
Company dated October 1, 1993 No. 1-10042)
10.10(c) No-Notice Storage and Transportion Exhibit 10.6(c) of Form 10-K
Service Agreement No. 31013, Rate for fiscal year ended
Schedule NNT-1, between Greeley Gas 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
Agreement, Rate Schedule TF-1,
between Colorado Interstate Gas
Company and Greeley Gas dated
July 1, 1998
10.10(e) No-Notice Storage and Transporation
Delivery Service Agreement, Rate
Schedule NNT-1, between Colorado
Interstate Gas Company and Greeley
Gas dated October 1, 1996
10.11 Amarillo Supply Agreement dated Exhibit 10.7(a) of
January 2, 1993 between Energas Form 10-K for fiscal
and Pioneer Natural Resources, year ended September 30, 1994
USA, Inc. (formerly Mesa Operating (File No. 1-10042)
Company)
10.12(a) Agreement for Firm Intrastate Exhibit 10.1 of Form 10-Q for
Transporation of Natural Gas in quarter ended March 31, 1998
the State of Louisiana between (File No. 1-10042)
Trans La and Louisiana Intrastate
Gas Company L.L.C. (LIG) dated
December 22, 1997, and effective
July 1, 1997
10.12(b) Agreement for Firm 311(a)(2) Exhibit 10.2 of Form 10-Q for
Transporation of Natural Gas in the quarter ended March 31, 1998
State of Louisiana between Trans La (File No. 1-10042)
and Louisiana Intrastate Gas Company
L.L.C. (LIG) dated December 22, 1997
and effective July 1, 1997
36
<PAGE>
Page Number or
Exhibit Incorporation by Reference
Number Description to
- ------- ------------------------------------- ---------------------------
10.13(a) Gas Transportation Agreement between Exhibit 10.3 of Form 10-Q
Texas Gas and Western Kentucky Gas for quarter ended December
dated November 1, 1993 (Contract no. 31, 1993 (File No. 1-
T3355, zone 3) 10042)
10.13(b) Gas Transportation Agreement between Exhibit 10.4 of Form 10-Q
Texas Gas and Western Kentucky Gas for quarter ended December
dated November 1, 1993 (Contract no. 31, 1993 (File No. 1-
T3819, zone 4) 10042)
10.13(c) Gas Transportation Agreement between Exhibit 10.5 of Form 10-Q
Texas Gas and Western Kentucky Gas for quarter ended December
dated November 1, 1993 (Contract no. 30, 1993 (File No. 1-
N0210, zone 2, Contract no. N0340, 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 1, 10-K for fiscal year ended
1993, between Tennessee Gas Pipeline September 30, 1993 (File
Company, a division of Tenneco, Inc. No. 1-10042)
("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 1, 10-K for fiscal year ended
1993, between Tennessee Gas and September 30, 1993 (File
Western Kentucky, Danville Service No. 1-10042)
Area
10.14(c) Gas Transportation Agreement, Exhibit 10.17(c) of Form
Contract No. 2385, dated September 1, 10-K for fiscal year ended
1993, between Tennessee Gas and September 30, 1993 (File
Western Kentucky, Greensburg et al No. 1-10042)
Service Area
10.14(d) Gas Transportation Agreement, Exhibit 10.17(d) of Form
Contract No. 2551, dated September 1, 10-K for fiscal year ended
1993, between Tennessee Gas and September 30, 1993 (File
Western Kentucky, Harrodsburg Service No. 1-10042)
Area
37
<PAGE>
Page Number or
Exhibit Incorporation by Reference
Number Description to
- ------- ------------------------------------- ---------------------------
10.14(e) Gas Transportation Agreement, Exhibit 10.17(e) of Form
Contract No. 2548, dated September 1, 10-K for fiscal year ended
1993, between Tennessee Gas and September 30, 1993 (File
Western Kentucky, Lebanon Service 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 December
and Westar Transmission Company dated 31, 1996 (File No. 1-
January 1, 1996 10042)
10.16 Gas Service Agreement (Service for Exhibit 10.7 of Form 10-Q
Firm Transportation) between Westar for quarter ended December
Transmission Company and EnerMart 31, 1996 (File No. 1-
dated January 1, 1996 (Irrigation) 10042)
10.17 Gas Service Agreement (Service for Exhibit 10.8 of Form 10-Q
Firm Transportation) between KN for quarter ended December
Westex and Enermart Trust dated 31, 1996 (File No. 1-
January 1, 1996 10042)
10.18 Gas Sales Agreement (Irrigation) Exhibit 10.11 of Form 10-Q
between KN Marketing and EnerMart for quarter ended December
Trust dated March 1, 1996 31, 1996 (File No. 1-
10042)
10.19 Gas Sales Agreement (Swing) between Exhibit 10.13 of Form 10-Q
Energas and KN Marketing, dated for quarter ended December
January 1, 1996 31, 1996 (File No. 1-
10042)
10.20(a) Operating Agreement between Energas Exhibit 10.15 of Form 10-Q
and Westar Transmission Company, for quarter ended December
effective December 1, 1996 31, 1996 (File No. 1-10042)
10.20(b) Gas Transportation Agreement Service Exhibit 10.4 of Form 10-Q
Package No. 4272 between United for quarter ended March
Cities Gas Company and East 31, 1998 (File No. 1-10042)
Tennessee Natural Gas Company dated
November 1, 1993
10.20(c) Gas Transportation Agreement Service Exhibit 10.5 of Form 10-Q
Package No. 4219 between United for quarter ended March
Cities Gas Company and Tennessee Gas 31, 1998 (File No. 1-10042)
Pipeline Company dated November 1,
1993
10.20(d) Transportation-Storage Contract Exhibit 10.6 of Form 10-Q
(Request 0180) between United Cities for quarter ended March
Gas Company and Williams Natural Gas 31, 1998 (File No. 1-10042)
Company dated October 1, 1993
10.20(e) Transportation-Storage Contract Exhibit 10.7 of Form 10-Q
(Request 0002) between United Cities for quarter ended March
Gas Company and Williams Natural Gas 31, 1998 (File No. 1-10042)
Company dated October 1, 1993
10.20(f) Service Agreement No. 867760 under Exhibit 10.8 of Form 10-Q
Rate Schedule FT between United for quarter ended March
Cities Gas Company and Southern 31, 1998 (File No. 1-10042)
Natural Gas Company dated November
1, 1993
10.20(g) Service Agreement No. 867761 under Exhibit 10.9 of Form 10-Q for
Rate Schedule FT-NN between United quarter ended March 31, 1998
Cities Gas Company and Southern (File No. 1-10042)
Natural Gas Company dated November
1, 1993
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 30,
Charles Goodman 1995 (File No. 1-10042)
10.21(b) *Form of Atmos Energy Corporation
Change in Control Severance
Agreement--Tier I
10.21(c) *Form of Atmos Energy Corporation
Change in Control Severance
Agreement--Tier II
38
<PAGE>
Page Number or
Exhibit Incorporation by Reference
Number Description to
- ------- ------------------------------------- ---------------------------
10.22(a) *Atmos Energy Corporation Mini-Med Exhibit 10.22 of Form 10-K
Plan, as restated effective July 1, for fiscal year ended
1996 September 30, 1996 (File
No. 1-10042)
10.22(b) *Amendment No. One to the Atmos
Energy Corporation Mini-Med Plan
10.23 *Atmos Energy Corporation Deferred Exhibit 10(x) of Form 10-K
Compensation Plan for Outside for fiscal year ended
Directors September 30, 1992 (File
No. 1-10042).
10.24(a) *Atmos Energy Corporation Retirement Exhibit 10(y) of Form 10-K
Plan for Outside Directors for fiscal year ended
September 30, 1992 (File
No. 1-10042)
10.24(b) *Amendment No. 1 to the Atmos Energy Exhibit 10.2 of Form 10-Q
Corporation Retirement Plan for for quarter ended December
Outside Directors 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 Exhibit 10.25(b) of Form
Planning Program 10-K for fiscal year ended
September 30, 1997 (File
No. 1-10042)
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)
39
<PAGE>
Page Number or
Exhibit Incorporation by Reference
Number Description to
- ------- -------------------------------------- -----------------------------
10.26 *Atmos Energy Corporation
Supplemental Executive Benefits
Plan, Amended and Restated in its
Entirety August 12, 1998
10.27 *Atmos Energy Corporation Exhibit 10.27 of Form 10-K
Restricted Stock Grant Plan for fiscal year ended
(Amended and Restated as of September 30, 1997 (File
November 12, 1997) No. 1-10042)
10.28 *Atmos Energy Corporation Outside Exhibit 10.28 of Form 10-K
Directors Stock-for-Fee Plan fiscal year ended
(Amended and Restated as of September 30, 1997 (File
November 12, 1997) No. 1-10042)
10.29 *Atmos Energy Corporation Exhibit 10.4 of Form 10-Q
Executive Annual Performance for quarter ended
Bonus Plan (Amended and Restated December 31, 1996
as of November 13, 1996) (File No. 1-10042)
10.30(a) *Consulting Agreement between the Exhibit 10.2 of Form 10-Q
Company and Charles K. Vaughan, for quarter ended June 30,
effective October 1, 1994 1997 (File No. 1-10042)
10.30(b) *Amendment No. 1 to Consulting Exhibit 10.3 of Form
Agreement between the Company and 10-Q for quarter ended
Charles K. Vaughan, dated May 14, June 30, 1997 (File No.
1997 1-10042)
10.30(c) *Amendment No. 2 to Consulting
Agreement between the Company and
Charles K. Vaughn, dated August 12,
1998
10.31(a) *Atmos Energy Corporation Exhibit 10.31 of Form
Executive Retiree Life Plan 10-K for fiscal year ended
September 30, 1997 (File
No. 1-10042)
40
<PAGE>
Page Number or
Exhibit Incorporation by Reference
Number Description to
- ------- ------------------------------------- ---------------------------
10.31(b) *Amendment No. 1 to The Atmos Energy Exhibit 10.31(a) of Form
Corporation Executive Retiree Life 10-K for fiscal year ended
Plan September 30, 1997 (File
No. 1-10042)
10.32 *Atmos Energy Corporation Performance-
Based Supplemental Executive
Benefits Plan, Effective Date
August 12, 1998.
10.33 *Atmos Energy Corporation Executive
Nonqualified Deferred Compensation
Plan.
11 Not applicable
12 Not applicable
13 Financial Review section of the
Company's 1998 Annual Report to
Shareholders (with exception of the
information incorporated by reference
included in Part I and Part II
hereof, the 1998 Annual Report to
Shareholders is not deemed filed or
part of this Form 10-K)
16 Not applicable
18 Not applicable
Other Exhibits, as indicated
----------------------------
21 Subsidiaries of the registrant
22 Not applicable
23.1 Consent of independent auditor,
Ernst & Young LLP
23.2 Consent of independent public
accountants, Arthur Andersen LLP
24 Power of Attorney Signature page of Form 10-K
for fiscal year ended
September 30, 1998
27 Financial Data Schedule for Atmos for
year ended September 30, 1998
-------------------------------------
*This exhibit constitutes a "management contract or compensatory plan,
contract, or arrangement."
41
<PAGE>
Exhibit 10.10(d)
Firm Transportation Service Agreement
Rate Schedule TF-1
between
COLORADO INTERSTATE GAS COMPANY
and
GREELEY GAS COMPANY,
a division of Atmos Energy Corporation
Dated: JULY 1, 1998
<PAGE>
FIRM TRANSPORTATION SERVICE AGREEMENT
RATE SCHEDULE TF-1
- --------------------------------------------------------------------------------
The Parties identified below, in consideration of their mutual promises,
agree as follows:
1. TRANSPORTER: COLORADO INTERSTATE GAS COMPANY
2. SHIPPER: GREELEY GAS COMPANY, A DIVISION OF ATMOS ENERGY CORPORATION
3. APPLICABLE TARIFF: Transporter's FERC Gas Tariff, First Revised Volume No.
1, as the same may be amended or superseded from time to time ("the
Tariff").
4. CHANGES IN RATES AND TERMS: Transporter shall have the right to propose to
the FERC changes in its rates and terms of service, and this Agreement
shall be deemed to include any changes which are made effective pursuant to
FERC Order or regulation or provisions of law, without prejudice to
Shipper's right to protest the same.
5. TRANSPORTATION SERVICE: Transportation Service at and between Primary
Point(s) of Receipt and Primary Point(s) of Delivery shall be on a firm
basis. Receipt and Delivery of quantities at Secondary Point(s) of Receipt
and/or Secondary Point(s) of Delivery shall be in accordance with the
Tariff.
6. POINTS OF RECEIPT AND DELIVERY: Shipper agrees to Tender gas for
Transportation Service, and Transporter agrees to accept Receipt Quantities
at the Primary Point(s) of Receipt identified in Exhibit "A." Transporter
agrees to provide Transportation Service and Deliver gas to Shipper (or for
Shipper's account) at the Primary Point(s) of Delivery identified in
Exhibit "A."
7. RATES AND SURCHARGES: As set forth in Exhibit "B."
8. NEGOTIATED RATE AGREEMENT: N/A
9. PEAK MONTH MDQ: 6,121 Dth per Day.
10. TERM OF AGREEMENT: Beginning: July 1, 1998
Extending through: September 30, 2000
11. NOTICES, STATEMENTS, AND BILLS:
TO SHIPPER:
INVOICES FOR TRANSPORTATION:
Greeley Gas Company, a division of Atmos Energy Corporation
P.O. Box 650205
Dallas, Texas 75265-0205
Attention: Gas Supply Department
ALL NOTICES:
Greeley Gas Company, a division of Atmos Energy Corporation
P.O. Box 650205
Dallas, Texas 75265-0205
Attention: John Hack
<PAGE>
TO TRANSPORTER:
See Payments, Notices, Nominations, and Points of Contact sheets in
the Tariff.
12. SUPERSEDES AND CANCELS PRIOR AGREEMENT: When this Agreement becomes
effective, it shall supersede and cancel the following agreement between
the Parties: The Firm Transportation Service Agreement between Transporter
and Shipper dated October 1, 1996, referred to as Transporter's Agreement
No. 33180000.
13. ADJUSTMENT TO RATE SCHEDULE TF-1 AND/OR GENERAL TERMS AND CONDITIONS: N/A
14. INCORPORATION BY REFERENCE: This Agreement in all respects shall be subject
to the provisions of Rate Schedule TF-1 and to the applicable provisions of
the General Terms and Conditions of the Tariff as filed with, and made
effective by, the FERC as same may change from time to time (and as they
may be amended pursuant to Section 13 of the Agreement).
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
TRANSPORTER: SHIPPER:
COLORADO INTERSTATE GAS COMPANY GREELEY GAS COMPANY, A DIVISION OF
ATMOS ENERGY CORPORATION
By /s/Thomas L. Price By /s/Gordon J. Roy
------------------------ ------------------------
Thomas L. Price
Vice President Gordon J. Roy
---------------------------
(Print or type name)
Vice President
---------------------------
(Print or type title)
2
<PAGE>
Page 1 of 3
EXHIBIT "A"
Firm Transportation Service Agreement
between
COLORADO INTERSTATE GAS COMPANY
and
GREELEY GAS COMPANY,
A DIVISION OF ATMOS ENERGY CORPORATION
Dated: JULY 1, 1998
1. Shipper's Maximum Delivery Quantity ("MDQ") for the following months shall
be as follows:
November - March (Peak Month MDQ)......6,121 Dth per Day
April, May, September, October........4,285 Dth per Day
June - August.........................2,142 Dth per Day
<TABLE>
<CAPTION>
PRIMARY POINT(S) OF RECEIPT QUANTITY
(DTH PER DAY) (NOTE 2)
----------------------------------------
PRIMARY POINT(S) OF RECEIPT NOVEMBER APRIL, MAY, JUNE MAXIMUM RECEIPT
(NOTE 1) THROUGH SEPTEMBER, THROUGH PRESSURE
MARCH OCTOBER AUGUST P.S.I.G.
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NORTHERN SYSTEM
Echo Springs Master Meter 300 300 300 850
Lost Cabin 1,200 1,200 1,200 1,100
Uintah 593 593 593 300
---------------------------------------
TOTAL NORTHERN SYSTEM 2,093 2,093 2,093
---------------------------------------
CENTRAL SYSTEM
Lakin Master Meter 2,277 1,240 49 220
---------------------------------------
SOUTHERN SYSTEM
Big Canyon 491 267 0 955(4)
Mocane 1,260 685 0 65
---------------------------------------
TOTAL SOUTHERN SYSTEM 1,751 952 0
---------------------------------------
TOTAL................... 6,121 4,285 2,142
=======================================
</TABLE>
<PAGE>
Page 2 of 3
EXHIBIT "A"
<TABLE>
<CAPTION>
PRIMARY POINT(S) OF DELIVERY QUANTITY
(DTH PER DAY) (NOTE 3)
----------------------------------------
PRIMARY POINT(S) OF DELIVERY NOVEMBER APRIL, MAY, JUNE MAXIMUM DELIVERY
(NOTE 1) THROUGH SEPTEMBER, THROUGH PRESSURE
MARCH OCTOBER AUGUST P.S.I.G.
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CANON CITY GROUP (NOTE 5)
Canon City 4,231 2,962 1,481 (Note 6)
Colorado State Penintentiary 298 209 104 100
Engineering Station 476+78 5 4 2 Line Pressure
Florence City Gate 989 692 346 60
Fremont County Industrial Park 9 6 3 Line Pressure
Penrose City Gate 135 95 47 60
Penrose PBS-2 129 90 45 Line Pressure
Portland City Gate 35 25 12 100
Pritchett City Gate 35 25 12 150
---------------------------------------
Total Canon City Group 5,866 4,108 2,052
---------------------------------------
TOTAL CAPACITY RELEASE 4,814 3,369 1,684
---------------------------------------
EADS GROUP
Brandon Station 28 20 10 350
Eads City Gate 207 145 72 60
Highline Taps:
Neoplan (Bent County) 3 2 1 Line Pressure
Penrose South (Fremont County) 11 8 4 Line Pressure
The Piggery (Fremont County) 3 2 1 Line Pressure
L.J. Stafford (Baca County) 5 4 2 Line Pressure
---------------------------------------
TOTAL EADS GROUP 257 181 90
---------------------------------------
MCCLAVE DELIVERY 350 245 123 500
---------------------------------------
SPRINGFIELD 700 490 245 Line Pressure
---------------------------------------
TOTAL 6,121 4,285 2,142
=======================================
STORAGE INJECTION 2,814 2,015 1,714 N/A
</TABLE>
<PAGE>
Page 3 of 3
NOTES: (1) Information regarding Point(s) of Receipt and Point(s) of
Delivery, including legal descriptions, measuring parties, and
interconnecting parties, shall be posted on Transporter's
electronic bulletin board. Transporter shall update such
information from time to time to include additions, deletions, or
any other revisions deemed appropriate by Transporter.
(2) Each Point of Receipt Quantity may be increased by an amount equal
to Transporter's Fuel Reimbursement percentage. Shipper shall be
responsible for providing such Fuel Reimbursement at each Point of
Receipt on a pro rata basis based on the quantities received on
any Day at a Point of Receipt divided by the total quantity
Delivered at all Point(s) of Delivery under this Transportation
Service Agreement.
(3) The sum of the Delivery Quantities at Point(s) of Delivery shall
be equal to or less than Shipper's MDQ.
(4) Minimum pressure Shipper will deliver gas to Transporter is 350
p.s.i.g.
(5) For Capacity Release purposes, the aggregate of the Canon City
Group Point of Delivery Quantities is as designated (e.g., 4,814
Dth per Day for the Peak Month MDQ). To the extent that Shipper is
not utilizing a portion of its remaining Point of Delivery
Quantities at non-Canon City Group Points of Delivery, Shipper may
nominate up to the Canon City Group total (e.g., 5,866 Dth per Day
November through March), provided that total deliveries under this
Agreement do not exceed the monthly MDQ (e.g., 6,121 Dth per Day
November through March) unless an Authorized Overrun has been
granted to Shipper by Transporter.
(6) Line pressure but not less than 100 p.s.i.g.
<PAGE>
Page 1 of 2
EXHIBIT "B"
Firm Transportation Service Agreement
between
COLORADO INTERSTATE GAS COMPANY
and
GREELEY GAS COMPANY,
A DIVISION OF ATMOS ENERGY CORPORATION
Dated: JULY 1, 1998
<TABLE>
<CAPTION>
PRIMARY
PRIMARY POINT(S) POINT(S) OF R1 RESERVATION COMMODITY FUEL
OF RECEIPT DELIVERY RATE RATE TERM OF RATE REIMBURSEMENT SURCHARGES
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
As listed on As listed on (Note 1) (Notes 1 and 4) Through (Note 2) (Note 3)
Exhibit "A" Exhibit "A" 9/30/00
<CAPTION>
SECONDARY SECONDARY
POINT(S) OF POINT(S) OF R1 RESERVATION COMMODITY FUEL
RECEIPT DELIVERY RATE RATE TERM OF RATE REIMBURSEMENT SURCHARGES
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
All All (Note 1) (Note 1) Through (Note 2) (Note 3)
9/30/00
</TABLE>
NOTES: (1) Unless otherwise agreed by the Parties in writing, the rates for
service hereunder shall be Transporter's maximum rates for service
under Rate Schedule TF-1 or other superseding Rate Schedules, as
such rates may be changed from time to time.
(2) Fuel Reimbursement shall be as stated on Transporter's Schedule of
Surcharges and Fees in the Tariff, as they may be changed from
time to time, unless otherwise agreed between the Parties.
<PAGE>
Page 2 of 2
EXHIBIT "B"
NOTES: (3) Surcharges, If Applicable:
All applicable surcharges, unless otherwise specified, shall be
the maximum surcharge rate as stated in the Schedule of
Surcharges and Fees in The Tariff, as such surcharges may be
changed from time to time.
GQC:
The Gas Quality Control Surcharge shall be assessed pursuant to
Article 20 of the General Terms and Conditions as set forth in
The Tariff.
GRI:
The GRI Surcharge shall be assessed pursuant to Article 18 of
the General Terms and Conditions as set forth in The Tariff.
HFS:
The Hourly Flexibility Surcharge shall be assessed pursuant to
Article 20 of the General Terms and Conditions as set forth in
The Tariff .
ORDER NO. 636 TRANSITION COST MECHANISM:
Surcharge(s) shall be assessed pursuant to Article 21 of the
General Terms and Conditions as set forth in The Tariff.
ACA:
The ACA Surcharge shall be assessed pursuant to Article 19 of
the General Terms and Conditions as set forth in The Tariff.
(4) The Authorized Overrun Rate charged by Transporter shall be
determined pursuant to the Stipulation and Agreement in Docket No.
RP96-190, when applicable, while such Settlement is in effect.
<PAGE>
Exhibit 10.10(e)
No-Notice Storage and
Transportation Delivery Service Agreement
Rate Schedule NNT-1
between
COLORADO INTERSTATE GAS COMPANY
and
GREELEY GAS COMPANY,
A DIVISION OF ATMOS ENERGY CORPORATION
Dated: OCTOBER 1, 1996, OR THE EFFECTIVE DATE AUTHORIZED
BY THE FERC FOR CIG'S SERVICE CHANGES FILED IN
DOCKET NO. RP96-190, WHICHEVER IS LATER.
<PAGE>
NO-NOTICE STORAGE AND
TRANSPORTATION DELIVERY SERVICE AGREEMENT
RATE SCHEDULE NNT-1
- --------------------------------------------------------------------------------
The Parties identified below, in consideration of their mutual promises,
agree as follows:
1. TRANSPORTER: COLORADO INTERSTATE GAS COMPANY
2. SHIPPER: GREELEY GAS COMPANY, A DIVISION OF ATMOS ENERGY CORPORATION
3. APPLICABLE TARIFF: Transporter's FERC Gas Tariff First Revised Volume No.
1, as the same may be amended or superseded from time to time ("the
Tariff").
4. CHANGES IN RATES AND TERMS: Transporter shall have the right to propose to
the FERC changes in its rates and terms of service and this Agreement shall
be deemed to include any changes which are made effective pursuant to FERC
Order or regulation or provisions of law, without prejudice to Shipper's
right to protest the same.
5. TRANSPORTATION SERVICE: Transportation Service at and between Point of
Withdrawal and Primary Point(s) of Delivery shall be on a firm basis.
Delivery of quantities at Secondary Point(s) shall be in accordance with
the Tariff.
6. DELIVERY: Transporter agrees to transport and deliver Delivery Quantities
to Shipper (or for Shipper's account) at the Point(s) of Delivery
identified in the attached Exhibit "A."
7. RATES AND SURCHARGES: As set forth in Exhibit "B."
8. PEAK MONTH MDQ: 11,292 Dth per Day.
MAXIMUM AVAILABLE CAPACITY ("MAC"): 422,142 Dth.
MAXIMUM DAILY INJECTION QUANTITY ("MDIQ"): 2,814 Dth per Day.
MAXIMUM DAILY WITHDRAWAL QUANTITY ("MDWQ"): 11,292 Dth per Day.
Available Daily Withdrawal Quantity ("ADWQ") shall be subject to the
General Terms and Conditions of the Tariff and stated on CIG's Xpress(R)
system.
9. TERM OF AGREEMENT: Beginning: October 1, 1996, or the effective date
authorized by the FERC for Transporter's
service changes filed in Docket No. RP96-
190, whichever is later.
Extending through: April 30, 2000
10. NOTICES, STATEMENTS, AND BILLS:
TO SHIPPER:
INVOICES FOR TRANSPORTATION:
Greeley Gas Company,
a division of Atmos Energy Corporation
P.O. Box 650205
Dallas, Texas 75265-0205
Attention: Gas Supply Department
<PAGE>
ALL NOTICES:
Greeley Gas Company,
a division of Atmos Energy Corporation
P.O. Box 650205
Dallas, Texas 75265-0205
Attention: John Hack
TO TRANSPORTER:
See Payments, Notices, Nominations, and Points of Contact sheets in the
Tariff.
11. SUPERSEDES AND CANCELS PRIOR AGREEMENT: When this Agreement becomes
effective, it shall supersede and cancel the following contract(s) between
the Parties: The No-Notice Transportation Service Agreement between
Transporter and Shipper dated October 1, 1996, and any amendments thereto,
and referred to as Transporter's Agreement No. 31028000.
12. ADJUSTMENT TO RATE SCHEDULE NNT-1 AND/OR GENERAL TERMS AND CONDITIONS: N/A.
13. INCORPORATION BY REFERENCE: This Agreement in all respects shall be subject
to the provisions of Rate Schedule NNT-1 and to the applicable provisions
of the General Terms and Conditions of the Tariff as filed with, and made
effective by, the FERC as same may change from time to time (and as they
may be amended pursuant to Section 12 of the Agreement).
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
TRANSPORTER: SHIPPER:
COLORADO INTERSTATE GAS COMPANY GREELEY GAS COMPANY,
A DIVISION OF ATMOS ENERGY CORPORATION
By /s/ Thomas L. Price By /s/ Gordon J. Roy
--------------------------------- -----------------------------
Thomas L. Price Gordon J. Roy
Vice President ---------------------------------
(Print or type name)
Vice President
---------------------------------
(Print or type title)
2
<PAGE>
Page 1 of 2
EXHIBIT "A"
No-Notice Storage and
Transportation Delivery Service Agreement
between
COLORADO INTERSTATE GAS COMPANY
and
GREELEY GAS COMPANY,
A DIVISION OF ATMOS ENERGY CORPORATION
Dated: OCTOBER 1, 1996, OR THE EFFECTIVE DATE AUTHORIZED
BY THE FERC FOR CIG'S SERVICE CHANGES FILED IN
DOCKET NO. RP96-190, WHICHEVER IS LATER.
1. Shipper's Maximum Delivery Quantity ("MDQ") for the following months shall
be as follows:
January, December (Peak Month MDQ)......11,292 Dth per Day
February................................8,243 Dth per Day
March...................................4,856 Dth per Day
April...................................3,388 Dth per Day
May - October...........................0 Dth per Day
November................................7,904 Dth per Day
2. Shipper's Maximum Available Capacity ("MAC"): 422,142 Dth.
3. Shipper's Maximum Daily Injection Quantity ("MDIQ"): 2,814 Dth per Day.
4. Shipper's Maximum Daily Withdrawal Quantity ("MDWQ"): 11,292 Dth per Day.
<TABLE>
<CAPTION>
PRIMARY POINT(S) OF DELIVERY QUANTITY
(DTH PER DAY) (NOTE 1)
-----------------------------------------------------------------------
PRIMARY MAY DELIVERY
POINT(S) OF JANUARY THROUGH PRESSURE
DELIVERY DECEMBER FEBRUARY MARCH APRIL OCTOBER NOVEMBER P.S.I.G.
- -------------------------------------------------------------------------------------------------------------------
CANON CITY GROUP (NOTE 3)
<S> <C> <C> <C> <C> <C> <C> <C>
Canon City 7,799 5,639 3,354 2,340 0 5,459 (Note 2)
Colorado State Penitentiary 552 403 237 166 0 386 100
Engineer's Station 476+78 10 7 4 3 0 7 Line Pressure
Florence City Gate 1,823 1,331 10 547 0 1,276 60
Fremont County Industrial 16 12 7 5 0 11 Line Pressure
Park
Penrose City Gate 248 181 107 74 0 174 60
Penrose PBS-2 238 174 102 71 0 167 Line Pressure
Portland City Gate 65 47 28 20 0 46 100
Pritchett City Gate 65 47 28 20 0 46 150
-----------------------------------------------------------------
Total Canon City Group 10,816 7,841 3,877 3,246 0 7,572
=================================================================
CAPACITY RELEASE TOTAL 8,866 6,471 3,812 2,646 0 6,206
=================================================================
</TABLE>
<PAGE>
Page 2 of 2
EXHIBIT "A"
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
EADS GROUP
Brandon Station 52 38 22 15 0 36 350
Eads City Gate 383 280 165 130 0 268 60
Highline Taps: 7 5 3 2 0 5 Line Pressure
Nepolan (Bent County)
Penrose (Fremont County) 20 15 9 6 0 14 Line Pressure
Piggery (Fremont County) 7 5 3 2 0 5 Line Pressure
L.J. Stafford (Baca County) 7 5 3 2 0 5 Line Pressure
-----------------------------------------------------------------
TOTAL EADS GROUP 476 348 205 157 0 333
=================================================================
McClave Delivery 650 475 280 195 0 455 500
=================================================================
SPRINGFIELD 1,300 949 559 390 0 910 Line Pressure
=================================================================
TOTAL 11,292 8,243 4,856 3,388 0 7,904
=================================================================
</TABLE>
NOTES: (1) The sum of the Delivery Quantities at Point(s) of Delivery shall
not be greater than Shipper's MDQ.
(2) Line pressure but not less than 100 p.s.i.g.
(3) For Capacity Release purposes, the aggregate of the Canon City
Group Point of Delivery Quantities is as designated (e.g., 8,866
Dth per Day for the Peak Month MDQ). To the extent that Shipper is
not utilizing a portion of its remaining Point of Delivery
Quantities at non-Canyon City Group Points of Delivery, Shipper may
take up to the Canon City Group total (e.g., 10,816 Dth per Day for
January and December) provided that total deliveries under this
Agreement do not exceed the monthly MDQ (e.g., 11,292 Dth per Day
Peak Month MDQ) unless an Authorized Overrun has been granted to
Shipper by Transporter.
<PAGE>
Page 1 of 2
EXHIBIT "B"
No-Notice Storage and
Transportation Delivery Service Agreement
between
COLORADO INTERSTATE GAS COMPANY
and
GREELEY GAS COMPANY,
A DIVISION OF ATMOS ENERGY CORPORATION
Dated: OCTOBER 1, 1996, OR THE EFFECTIVE DATE AUTHORIZED
BY THE FERC FOR CIG'S SERVICE CHANGES FILED IN
DOCKET NO. RP96-190, WHICHEVER IS LATER.
<TABLE>
<CAPTION>
COMMODITY INJECTION RATE FUEL REIMBURSEMENT SURCHARGES
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Storage Injection.................. (Note 1) (Note 2) (Note 3)
</TABLE>
<TABLE>
<CAPTION>
PRIMARY POINT(S) R1 RESERVATION COMMODITY
OF DELIVERY RATE DELIVERY RATE TERM OF RATE SURCHARGES
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
As listed on (Notes 1 (Notes 1 and 5) Through 4/30/2000 (Note 3)
Exhibit "A" and 4)
</TABLE>
NOTES: (1) Unless otherwise agreed by the Parties in writing, the rates for
service hereunder shall be Transporter's maximum rates for service
under Rate Schedule NNT-1 or other superseding Rate Schedule, as
such rates may be changed from time to time.
(2) Fuel Reimbursement shall be as stated on Transporter's Schedule of
Surcharges and Fees in The Tariff, as they may be changed from time
to time, unless otherwise agreed between the Parties.
<PAGE>
Page 2 of 2
EXHIBIT "B"
NOTES: (3) Applicable Surcharges:
All applicable surcharges, unless otherwise specified, shall be the
maximum surcharge rate as stated in the Schedule of Surcharges and
Fees in The Tariff, as such surcharges may be changed from time to
time.
GQC:
The Gas Quality Control Surcharge shall be assessed pursuant to
Article 20 of the General Terms and Conditions as set forth in
The Tariff.
GRI:
The GRI Surcharge shall be assessed pursuant to Article 18 of
the General Terms and Conditions as set forth in The Tariff.
HFS:
The Hourly Flexibility Surcharge shall be assessed pursuant to
Article 20 of the General Terms and Conditions as set forth in
The Tariff.
ORDER NO. 636 TRANSITION COST MECHANISM:
Surcharge(s) shall be assessed pursuant to Article 21 of the
General Terms and Conditions as set forth in The Tariff.
ACA:
The ACA Surcharge shall be assessed pursuant to Article 19 of
the General Terms and Conditions as set forth in The Tariff.
(4) If Shipper releases any of its capacity (i.e., becomes a Releasing
Shipper under Transporter's Capacity Release Program) and the
Replacement Shipper is paying more than the Releasing Shipper,
Transporter shall be entitled to the difference, if any, between
the reservation charge(s), including all applicable surcharges,
being paid by the Replacement Shipper, and the reservation charges,
including all applicable surcharges, being paid by the Releasing
Shipper.
(5) The Authorized Overrun Rate charged by Transporter shall be
determined pursuant to the Stipulation and Agreement in Docket No.
RP96-190, when applicable, while such Settlement is in effect.
<PAGE>
EXHIBIT 10.21(b)
ATMOS ENERGY CORPORATION
CHANGE IN CONTROL SEVERANCE AGREEMENT
TIER I
THIS AGREEMENT made and entered into as of ____________, 199___, by and
between ATMOS ENERGY CORPORATION, a Texas and Virginia corporation (the
"Company"), and _______________________("Executive").
W I T N E S S E T H:
WHEREAS, the Company recognizes that the current business environment makes
it difficult to attract and retain highly qualified executives unless a certain
degree of security can be offered to such individuals against organizational and
personnel changes which frequently follow Changes in Control (as defined below)
of a corporation; and
WHEREAS, even rumors of acquisitions or mergers may cause executives to
consider major career changes in an effort to assure financial security for
themselves and their families; and
WHEREAS, the Company desires to assure fair treatment of its key executives
in the event of a Change in Control and to allow them to make critical career
decisions without undue time pressure and financial uncertainty, thereby
increasing their willingness to remain with the Company notwithstanding the
outcome of a possible Change in Control transaction; and
WHEREAS, the Company recognizes that its key executives will be involved in
evaluating or negotiating any offers, proposals or other transactions which
could result in Changes in Control of the Company and believes that it is in the
best interest of the Company and its stockholders for such key executives to be
in a position, free from personal financial and employment considerations, to be
able to assess objectively and pursue aggressively the interests of the Company
and its stockholders in making these evaluations and carrying on such
negotiations; and
WHEREAS, the Board of Directors of the Company (the "Board") believes it is
essential to provide the Executive with compensation arrangements upon a Change
in Control which provide the Executive with individual financial security and
which are competitive with those of other corporations, and in order to
accomplish these objectives, the Board has caused the Company to enter into this
Agreement.
<PAGE>
NOW, THEREFORE, in consideration of the mutual premises and conditions
contained herein, the parties hereto agree as follows:
1. TERM. This Agreement shall be effective immediately upon its
execution, but, anything in this Agreement to the contrary notwithstanding,
neither this Agreement nor any of its provisions shall be operative unless and
until there has been a Change in Control of the Company, as such term is defined
below. The term of this Agreement shall end on the third anniversary of the
date of execution of this Agreement; provided, however, that commencing on the
date one year after the date hereof, and on each annual anniversary of such date
(such date and each annual anniversary thereof is hereinafter referred to as the
"Renewal Date"), the term of this Agreement shall be automatically extended so
as to terminate three years from such Renewal Date, unless at least thirty (30)
days prior to the Renewal Date the Company shall give written notice that the
term of the Agreement shall not be so extended; and provided, further, that
after a Change in Control of the Company during the term of this Agreement, this
Agreement shall remain in effect until three years after the Change in Control
or until all of the obligations of the parties hereunder are satisfied,
whichever occurs later.
2. CHANGE IN CONTROL.
2.1 Change of Control Events. For purposes of this Agreement, a "Change
in Control" of the Company shall be deemed to have occurred if:
(a) Any "Person" (as defined in Section 2.2(a) below), other than (1)
the Company or any of its subsidiaries, (2) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any of
its Affiliates, (3) an underwriter temporarily holding securities pursuant
to an offering of such securities, or (4) a corporation owned, directly or
indirectly, by the shareholders of the Company in substantially the same
proportions as their ownership of stock of the Company, is or becomes the
"beneficial owner" (as defined in Section 2.2(b) 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
Directors of the Company and any "new director" (as defined in Section
2.2(c) below) cease for any reason to constitute a majority of the Board of
Directors.
(c) There is consummated a merger or consolidation of the Company or
any direct or indirect subsidiary of the Company with any other
corporation, except if:
2
<PAGE>
(1) 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 sixty percent (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
(2) 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.
2.2 Definitions. For purposes of Section 2.1 above,
(a) "Person" shall have the meaning given in Section 3(a)(9) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") as
modified and used in Sections 13(d) and 14(d) of the Exchange Act.
(b) "Beneficial owner" shall have the meaning provided in Rule 13d-3
under the Exchange Act.
(c) "New director" shall mean an individual whose election by the
Company's Board of Directors 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 or recommended. However, "new director" shall not include a
director whose initial assumption of office is in connection with an actual
or threatened election contest, including but not limited to a consent
solicitation relating to the election of directors of the Company.
(d) "Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under Section 12 of the Exchange Act.
3
<PAGE>
3. TERMINATION OF EMPLOYMENT FOLLOWING CHANGE IN CONTROL. If any of the
events described in Section 2.1 constituting a Change in Control of the Company
shall have occurred, the Executive shall be entitled to the benefits provided in
Section 4 upon the subsequent termination of his employment, provided that such
termination occurs within three years after a Change in Control of the Company,
unless such termination is (a) because of his death, his "Disability," or
"Retirement" (as defined in Section 3.1), (b) by the Company for "Cause" (as
defined in Section 3.2), or (c) by Executive other than for "Constructive
Termination" (as defined in Section 3.3) (any such termination qualifying for
benefits under Section 4 hereof being sometimes referred to herein as "CIC
Termination").
If Executive's employment with the Company is terminated by the Company for
any reason other than for "Cause" prior to the date on which a Change in Control
occurs (whether or not the Change in Control ever occurs), and such termination
either (1) was at the request or direction of a person who has entered into an
agreement with the Company, the consummation of which would constitute a Change
in Control, or (2) was otherwise in connection with or in anticipation of a
Change in Control (whether or not the Change in Control ever occurs), then for
all purposes hereof, such termination shall be deemed to have occurred
immediately following a Change in Control.
3.1 Disability; Retirement. The Executive's employment shall be
terminated due to "Disability" if the Executive is qualified for disability
benefits under the Atmos Energy Corporation Long-Term Disability Plan, as in
effect from time to time, or, if no such Long-Term Disability Plan is then in
existence, if because of ill health, physical or mental disability or any other
reason beyond his control, the Executive is unable to perform his duties of
employment for a period of six (6) continuous months, as determined in good
faith by the Company.
Termination by the Executive of his employment based on "Retirement"
shall mean termination in accordance with the Company's retirement policy
generally applicable to its salaried employees, or in accordance with any
retirement arrangement established with Executive's consent with respect to him.
3.2 Cause. For the purposes of this Agreement, the Company shall have
"Cause" to terminate Executive's employment hereunder upon (1) the willful and
continued failure by Executive to substantially perform his duties with the
Company (other than any such failure resulting from incapacity due to physical
or mental illness), after a written demand for substantial performance is
delivered to Executive by the Board which specifically identifies the manner in
which the Board believes that he has not substantially performed his duties, or
(2) the willful engaging by Executive in conduct materially and demonstrably
injurious to the Company, monetarily or otherwise. For purposes of this Section
3.2, no act, or failure to act, on Executive's part shall be considered
"willful" if, in the Executive's sole judgment, his action or omission was done,
or omitted to be done, in good faith and with a reasonable belief that his
action or omission was in the best interest of the Company. Notwithstanding the
foregoing, Executive shall not be deemed to have been terminated for Cause
unless and until
4
<PAGE>
there shall have been delivered to him a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters (3/4) of the entire
authorized membership of the Board at a meeting of the Board called and held for
the purpose (after reasonable notice to Executive and an opportunity for
Executive, together with counsel, to be heard before the Board), finding that in
the good faith opinion of the Board Executive was guilty of conduct set forth
above in clause (1) or (2) of the first sentence of this Section 3.2, and
specifying the particulars thereof in detail.
3.3 Constructive Termination. For purposes of this Agreement,
"Constructive Termination" shall mean:
(a) Without his express written consent, the assignment to Executive of
any duties inconsistent with his positions, duties, responsibilities and
status with the Company immediately prior to a Change in Control, or a
change in his reporting responsibilities, titles or offices as in effect
immediately prior to a Change in Control, or any removal of Executive from
or any failure to re-elect Executive to any of such positions, except in
connection with the termination of his employment for Cause, death,
Disability or Retirement or termination of employment by Executive for
reasons other than Constructive Termination;
(b) A reduction by the Company in Executive's base salary as in effect
on the date of a Change in Control or as the same may be increased from
time to time thereafter;
(c) A reduction by the Company in the bonus payable to Executive in any
year below a percentage of Executive's then base salary equal to the
average percentage of Executive's base salary represented by the bonuses
received by Executive for the three (3) years (or, if shorter, the years of
Executive's employment by the Company) immediately preceding the year in
which a Change in Control occurs as percentages of his base salaries in
each of such three (3) years (or shorter number of years). By way of
example, but not in limitation of the provisions of this paragraph (c),
assume a Change in Control occurs in 1998, and Executive received bonuses
for each of 1995, 1996 and 1997 as follows: 30% of his base salary for
1995; 50% of his base salary for 1996; and 50% of his base salary for 1997.
If Executive receives a bonus for 1998 which is less than 43.33% of his
1998 base salary, Executive may terminate his employment for "Constructive
Termination" under this Section 3.3. If Executive was only employed during
1996 and 1997, using the same facts as recited herein, Executive may
terminate his employment for "Constructive Termination" if his 1998 bonus
was less than 50% of his 1998 base salary;
(d) The Company's requiring Executive to be based anywhere other than
either the Company's offices at which he was based immediately prior to a
5
<PAGE>
Change in Control or the Company's offices which are no more than seventy-
five (75) miles from the offices at which the Executive was based
immediately prior to a Change in Control, except for required travel on the
Company's business to an extent substantially consistent with his business
travel obligations immediately prior to the Change in Control (excluding,
however, any travel obligations prior to the Change in Control that are
associated with or caused by the Change in Control events or
circumstances), or, in the event Executive consents to any relocation
beyond such seventy-five-mile radius, the failure by the Company to pay (or
reimburse Executive) for all reasonable moving expenses incurred by him
relating to a change of his principal residence in connection with such
relocation and to indemnify Executive against any loss (defined as the
difference between the actual sale price of such residence and the higher
of (a) his aggregate investment in such residence or (b) the fair market
value of such residence as determined by a real estate appraiser designated
by Executive and reasonably satisfactory to the Company) realized on the
sale of Executive's principal residence in connection with any such change
of residence;
(e) The failure by the Company to continue in effect any benefit or
compensation plan (including but not limited to any stock option plan,
pension plan, deferred compensation plan, life insurance plan, health and
accident plan or disability plan) in which Executive is participating at
the time of a Change in Control of the Company (or plans providing
substantially similar benefits), the taking of any action by the Company
which would adversely affect Executive's participation in, payment from, or
materially reduce his benefits under any of such plans or deprive him of
any material fringe benefit enjoyed by him at the time of the Change in
Control, or the failure by the Company to provide Executive with the number
of days of paid time off to which he is then entitled on the basis of years
of service with the Company in accordance with the Company's normal paid
time off or vacation policy in effect immediately prior to the Change in
Control;
(f) Any failure of the Company to obtain the assumption of, or the
agreement to perform, this Agreement by any successor as contemplated in
Section 5;
(g) Any purported termination of Executive's employment which is not
effected pursuant to a Notice of Termination satisfying the requirements of
Section 3.4 (and, if applicable, Section 3.2); and for purposes hereof, no
such purported termination shall be effective; or
(h) The failure of the Company otherwise to honor all the terms and
provisions of this Agreement.
6
<PAGE>
For purposes of this Section 3.3, any good faith determination of "Constructive
Termination" made by the Executive shall be conclusive and binding on the
parties.
3.4 Notice of Termination. Any termination pursuant to the foregoing
provisions of this Section (including termination due to Executive's death)
shall be communicated by written Notice of Termination to the other party
hereto. For purposes hereof, a "Notice of Termination" shall mean a notice
which shall indicate the specific termination provision herein relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated. In the event that Executive seeks to terminate his employment with
the Company pursuant to Section 3.3, he must communicate his written Notice of
Termination to the Company within sixty (60) days of being notified of such
action or actions by the Company which constitute Constructive Termination.
3.5 Date of Termination. "Date of Termination" shall mean (i) if this
Agreement is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that Executive shall not have returned to the
performance of his duties on a full-time basis during such thirty (30)-day
period); (ii) if Executive's employment is terminated pursuant to Section 3.3,
the date specified in the Notice of Termination; and (iii) if Executive's
employment is terminated for any other reason, the date on which a Notice of
Termination is given.
4. COMPENSATION UPON TERMINATION.
4.1 Termination Without Cause or for Constructive Termination. If
Executive suffers a CIC Termination, then, subject to Section 4.2, Executive
shall be entitled, if such CIC Termination occurred within three (3) years of a
Change in Control, to the following benefits:
(a) The Company shall pay to Executive as severance pay in one lump sum
not later than the tenth (10th) day following the Date of Termination, an
amount equal to the product of (i) the Executive's Total Compensation (as
defined below) multiplied by (ii) the number two and one-half (2.5).
For purposes of this Section 4.1(a), the Executive's "Total Compensation"
shall mean the annual base salary being paid to the Executive at the Date
of Termination plus the Executive's "Average Bonus." The Executive's
"Average Bonus" shall mean the greater of (i) the bonus or incentive award
pursuant to any annual performance bonus or incentive compensation plan of
the Company (the "Bonus") last paid or awarded to Executive immediately
prior to his Date of Termination, or (ii) the average of the highest three
Bonuses (whether or not consecutive) paid or awarded to Executive.
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(b) The Company shall continue to provide Executive with (i) all
medical, dental, vision, accident, and other health benefits, (ii) life
insurance benefits, and (iii) disability benefits equal to or economically
equivalent to the benefits in effect for Executive at the time of the
Change in Control, and the Company shall provide such benefits at the same
cost to Executive as the cost, if any, charged to Executive for those
benefits prior to termination of employment. The Company shall provide the
foregoing benefits until three (3) years from Executive's Date of
Termination.
4.2 Gross-Up Payment. In the event it shall be determined that any
payment, distribution, or benefits of any type by the Company to or for the
benefit of the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise (the "Total
Payments"), would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code") or any interest or
penalties with respect to such excise tax (such excise tax, together with any
such interest and penalties, are collectively referred to as the "Excise Tax"),
then Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by Executive of all taxes
(including additional excise taxes under said Section 4999, and any interest and
penalties imposed with respect to any taxes) imposed upon the Gross-Up Payment,
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Total Payments. The Company shall pay the Gross-Up Payment to
Executive within thirty (30) business days after Executive's termination of
employment.
4.3 Determination By Accountant. All determinations required to be made
under this Section 4, including whether a Gross-Up Payment is required and the
amount of such Gross-Up Payment, shall be made by the independent accounting
firm retained by the Company on the date of Change in Control (the "Accounting
Firm"), which shall provide detailed supporting calculations both to the Company
and Executive within fifteen (15) business days of the Termination Date, if
applicable, or such earlier time as is requested by the Company. If the
Accounting Firm determines that no Excise Tax is payable by Executive, it shall
furnish Executive with an opinion that he has substantial authority not to
report any Excise Tax on his federal income tax return. Any determination by the
Accounting Firm shall be binding upon the Company and Executive. As a result of
the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 4.4 and Executive thereafter is required to make a payment of any Excise
Tax, the Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Company to or
for the benefit of Executive.
4.4 Notification Required. The Executive shall notify the Company in
writing of any claim by the Internal Revenue Service that, if successful, would
require the payment by the Company of the Gross-Up Payment. Such notification
shall be given as soon as practicable but no later than ten (10) business days
after Executive knows of such claim and
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shall apprise the Company of the nature of such claim and the date on which such
claim is requested to be paid. Executive shall not pay such claim prior to the
expiration of the thirty-day period following the date on which it gives such
notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Company notifies
Executive in writing prior to the expiration of such period that it desires to
contest such claim, Executive shall:
(a) give the Company any information reasonably requested by the
Company relating to such claim,
(b) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(c) cooperate with the Company in good faith in order to effectively
contest such claim,
(d) permit the Company to participate in any proceedings relating to
such claim, provided, however, that the Company shall bear and pay directly
all costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold
Executive harmless, on an after-tax basis, for any Excise Tax or income
tax, including interest and penalties with respect thereto, imposed as a
result of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 4.4, the Company
shall control all proceedings taken in connection with such contest and, at
its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect
of such claim and may, at its sole option, either direct Executive to pay
the tax claimed and sue for a refund, or contest the claim in any
permissible manner, and Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs Executive to pay
such claim and sue for a refund, the Company shall advance the amount of
such payment to Executive, on an interest-free basis and shall indemnify
and hold Executive harmless, on an after-tax basis, from any Excise Tax or
income tax, including interest or penalties with respect thereto, imposed
with respect to such advance or with respect to any imputed income with
respect to such advance; and further provided that any extension of the
statute of limitations relating to payment of taxes for the taxable year of
Executive with respect to which such contested amount is claimed to be due
is limited solely to such contested amount. Furthermore, the Company's
control of the contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and Executive shall be entitled
to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
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4.5 Repayment. If, after the receipt by Executive of an amount advanced
by the Company pursuant to Section 4.4, Executive becomes entitled to receive
any refund with respect to such claim, Executive shall (subject to the Company's
complying with the requirements of Section 4.4) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by Executive of an amount
advanced by the Company pursuant to Section 4.4, a determination is made that
Executive shall not be entitled to any refund with respect to such claim and the
Company does not notify Executive in writing of its intent to contest such
denial of refund prior to the expiration of thirty (30) days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
4.6 Mitigation or Set-off of Amounts Payable Hereunder. Executive 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 provided for in this Section 4 be reduced by any compensation earned by
Executive as the result of employment by another employer after the Date of
Termination, or otherwise. The Company's obligations hereunder also shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against Executive.
5. SUCCESSORS; BINDING AGREEMENT.
5.1 Successors of the Company. 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, by
agreement in form and substance satisfactory to Executive, expressly to 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 there had been a Change in
Control but no such succession had taken place. Failure of the Company to
obtain such agreement prior to the effectiveness of any such succession shall be
a breach hereof. As used herein, the "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which executes and delivers the agreement provided for in this Section
5 or which otherwise becomes bound by all the terms and provisions hereof by
operation of law.
5.2 Executive's Heirs, etc. This Agreement shall inure to the benefit
of and be enforceable by Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If Executive should die while any amounts would still be payable to
him hereunder as if he had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms hereof to his
designee or, if there be no such designee, to his estate.
6. NOTICE. For the purposes hereof, notices and all other communications
provided for herein shall be in writing and shall be deemed to have been duly
given when
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delivered or mailed by United States registered or certified mail, return
receipt requested, postage prepaid, addressed to the Company at its principal
place of business and to Executive at his address as shown on the records of the
Company, provided that all notices to the Company shall be directed to the
attention of the Chief Executive Officer of the Company with a copy to the
Secretary of the Company, or to such other in writing in accordance herewith,
except that notices of change of address shall be effective only upon receipt.
7. MISCELLANEOUS. No provisions hereof may be amended, modified, waived
or discharged unless such amendment, waiver, modification or discharge is agreed
to in writing signed by Executive and such officer as may be specifically
designated by the Board (which shall in any event include the Company's Chief
Executive Officer). 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
hereof 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 set forth expressly herein.
8. VALIDITY. The invalidity or unenforceability of any provisions hereof
shall not affect the validity or enforceability of any other provision hereof,
which shall remain in full force and effect.
9. NON-EXCLUSIVITY OF RIGHTS. Nothing herein shall prevent or limit the
Executive's continuing or future participation in any benefit, bonus, incentive
or other plans, practices, policies or programs provided by the Company and for
which the Executive may qualify, nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any stock option or other
agreements with the Company. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, practice, policy or
program of the Company at or subsequent to the Date of Termination shall be
payable in accordance with such plan, practice, policy or program.
Notwithstanding the foregoing provisions of this Section 9, this Agreement
contains the entire agreement of the parties regarding the change in control
severance benefits provided for herein and shall supersede and replace any
change in control severance agreements previously entered into by the parties,
and by execution of this Agreement, the parties understand and agree that any
other such agreement shall be and become null and void.
10. LEGAL EXPENSES. The Company agrees to pay, upon written demand
therefor by Executive, all legal fees and expenses which Executive may
reasonably incur as a result of any dispute or contest (regardless of the
outcome thereof) by or with the Company or others regarding the validity or
enforceability of, or liability under, any provision hereof (including as a
result of any contest about the amount of any payment pursuant to Section 4.2),
plus in each case interest at the "applicable Federal rate" (as defined in
Section 1274(d) of the Code). In any such action brought by Executive for
damages or to enforce any provisions hereof, he shall be entitled to seek both
legal and equitable relief and remedies,
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including, without limitation, specific performance of the Company's obligations
hereunder, in his sole discretion.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
12. GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Texas.
13. CAPTIONS AND GENDER. The use of captions and Section headings herein
is for purposes of convenience only and shall not effect the interpretation or
substance of any provisions contained herein. Similarly, the use of the
masculine gender with respect to pronouns herein is for purposes of convenience
and includes either sex who may be a signatory.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the
day and year first above written.
ATMOS ENERGY CORPORATION
By:
--------------------------------
Name:
Title:
EXECUTIVE
------------------------------------
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EXHIBIT 10.21(c)
ATMOS ENERGY CORPORATION
CHANGE IN CONTROL SEVERANCE AGREEMENT
TIER II
THIS AGREEMENT made and entered into as of ________________, 199___, by and
between ATMOS ENERGY CORPORATION, a Texas and Virginia corporation (the
"Company"), and ________________________________________________________________
("Executive").
W I T N E S S E T H:
WHEREAS, the Company recognizes that the current business environment makes
it difficult to attract and retain highly qualified executives unless a certain
degree of security can be offered to such individuals against organizational and
personnel changes which frequently follow Changes in Control (as defined below)
of a corporation; and
WHEREAS, even rumors of acquisitions or mergers may cause executives to
consider major career changes in an effort to assure financial security for
themselves and their families; and
WHEREAS, the Company desires to assure fair treatment of its key executives
in the event of a Change in Control and to allow them to make critical career
decisions without undue time pressure and financial uncertainty, thereby
increasing their willingness to remain with the Company notwithstanding the
outcome of a possible Change in Control transaction; and
WHEREAS, the Company recognizes that its key executives will be involved in
evaluating or negotiating any offers, proposals or other transactions which
could result in Changes in Control of the Company and believes that it is in the
best interest of the Company and its stockholders for such key executives to be
in a position, free from personal financial and employment considerations, to be
able to assess objectively and pursue aggressively the interests of the Company
and its stockholders in making these evaluations and carrying on such
negotiations; and
WHEREAS, the Board of Directors of the Company (the "Board") believes it is
essential to provide the Executive with compensation arrangements upon a Change
in Control which provide the Executive with individual financial security and
which are competitive with those of other corporations, and in order to
accomplish these objectives, the Board has caused the Company to enter into this
Agreement.
<PAGE>
NOW, THEREFORE, in consideration of the mutual premises and conditions
contained herein, the parties hereto agree as follows:
1. TERM. This Agreement shall be effective immediately upon its
execution, but, anything in this Agreement to the contrary notwithstanding,
neither this Agreement nor any of its provisions shall be operative unless and
until there has been a Change in Control of the Company, as such term is defined
below. The term of this Agreement shall end on the third anniversary of the
date of execution of this Agreement; provided, however, that commencing on the
date one year after the date hereof, and on each annual anniversary of such date
(such date and each annual anniversary thereof is hereinafter referred to as the
"Renewal Date"), the term of this Agreement shall be automatically extended so
as to terminate three years from such Renewal Date, unless at least thirty (30)
days prior to the Renewal Date the Company shall give written notice that the
term of the Agreement shall not be so extended; and provided, further, that
after a Change in Control of the Company during the term of this Agreement, this
Agreement shall remain in effect until three years after the Change in Control
or until all of the obligations of the parties hereunder are satisfied,
whichever occurs later.
2. CHANGE IN CONTROL.
2.1 Change of Control Events. For purposes of this Agreement, a
"Change in Control" of the Company shall be deemed to have occurred if:
(a) Any "Person" (as defined in Section 2.2(a) below), other than (1)
the Company or any of its subsidiaries, (2) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any of
its Affiliates, (3) an underwriter temporarily holding securities pursuant
to an offering of such securities, or (4) a corporation owned, directly or
indirectly, by the shareholders of the Company in substantially the same
proportions as their ownership of stock of the Company, is or becomes the
"beneficial owner" (as defined in Section 2.2(b) 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
Directors of the Company and any "new director" (as defined in Section
2.2(c) below) cease for any reason to constitute a majority of the Board of
Directors.
(c) There is consummated a merger or consolidation of the Company or
any direct or indirect subsidiary of the Company with any other
corporation, except if:
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(1) 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 sixty percent (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
(2) 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.
2.2 Definitions. For purposes of Section 2.1 above,
(a) "Person" shall have the meaning given in Section 3(a)(9) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") as
modified and used in Sections 13(d) and 14(d) of the Exchange Act.
(b) "Beneficial owner" shall have the meaning provided in Rule 13d-3
under the Exchange Act.
(c) "New director" shall mean an individual whose election by the
Company's Board of Directors 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 or recommended. However, "new director" shall not include a
director whose initial assumption of office is in connection with an actual
or threatened election contest, including but not limited to a consent
solicitation relating to the election of directors of the Company.
(d) "Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under Section 12 of the Exchange Act.
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3. TERMINATION OF EMPLOYMENT FOLLOWING CHANGE IN CONTROL. If any of the
events described in Section 2.1 constituting a Change in Control of the Company
shall have occurred, the Executive shall be entitled to the benefits provided in
Section 4 upon the subsequent termination of his employment, provided that such
termination occurs within three years after a Change in Control of the Company,
unless such termination is (a) because of his death, his "Disability," or
"Retirement" (as defined in Section 3.1), (b) by the Company for "Cause" (as
defined in Section 3.2), or (c) by Executive other than for "Constructive
Termination" (as defined in Section 3.3) (any such termination qualifying for
benefits under Section 4 hereof being sometimes referred to herein as "CIC
Termination").
If Executive's employment with the Company is terminated by the Company for
any reason other than for "Cause" prior to the date on which a Change in Control
occurs (whether or not the Change in Control ever occurs), and such termination
either (1) was at the request or direction of a person who has entered into an
agreement with the Company, the consummation of which would constitute a Change
in Control, or (2) was otherwise in connection with or in anticipation of a
Change in Control (whether or not the Change in Control ever occurs), then for
all purposes hereof, such termination shall be deemed to have occurred
immediately following a Change in Control.
3.1 Disability; Retirement. The Executive's employment shall be
terminated due to "Disability" if the Executive is qualified for disability
benefits under the Atmos Energy Corporation Long-Term Disability Plan, as in
effect from time to time, or, if no such Long-Term Disability Plan is then in
existence, if because of ill health, physical or mental disability or any other
reason beyond his control, the Executive is unable to perform his duties of
employment for a period of six (6) continuous months, as determined in good
faith by the Company.
Termination by the Executive of his employment based on "Retirement"
shall mean termination in accordance with the Company's retirement policy
generally applicable to its salaried employees, or in accordance with any
retirement arrangement established with Executive's consent with respect to him.
3.2 Cause. For the purposes of this Agreement, the Company shall have
"Cause" to terminate Executive's employment hereunder upon (1) the willful and
continued failure by Executive to substantially perform his duties with the
Company (other than any such failure resulting from incapacity due to physical
or mental illness), after a written demand for substantial performance is
delivered to Executive by the Board which specifically identifies the manner in
which the Board believes that he has not substantially performed his duties, or
(2) the willful engaging by Executive in conduct materially and demonstrably
injurious to the Company, monetarily or otherwise. For purposes of this Section
3.2, no act, or failure to act, on Executive's part shall be considered
"willful" if, in the Executive's sole judgment, his action or omission was done,
or omitted to be done, in good faith and with a reasonable belief that his
action or omission was in the best interest of the Company. Notwithstanding the
foregoing, Executive shall not be deemed to have been terminated for Cause
unless and until
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there shall have been delivered to him a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters (3/4) of the entire
authorized membership of the Board at a meeting of the Board called and held for
the purpose (after reasonable notice to Executive and an opportunity for
Executive, together with counsel, to be heard before the Board), finding that in
the good faith opinion of the Board Executive was guilty of conduct set forth
above in clause (1) or (2) of the first sentence of this Section 3.2, and
specifying the particulars thereof in detail.
3.3 Constructive Termination. For purposes of this Agreement,
"Constructive Termination" shall mean:
(a) Without his express written consent, the assignment to Executive
of any duties inconsistent with his positions, duties, responsibilities and
status with the Company immediately prior to a Change in Control, or a
change in his reporting responsibilities, titles or offices as in effect
immediately prior to a Change in Control, or any removal of Executive from
or any failure to re-elect Executive to any of such positions, except in
connection with the termination of his employment for Cause, death,
Disability or Retirement or termination of employment by Executive for
reasons other than Constructive Termination;
(b) A reduction by the Company in Executive's base salary as in effect
on the date of a Change in Control or as the same may be increased from
time to time thereafter;
(c) A reduction by the Company in the bonus payable to Executive in
any year below a percentage of Executive's then base salary equal to the
average percentage of Executive's base salary represented by the bonuses
received by Executive for the three (3) years (or, if shorter, the years of
Executive's employment by the Company) immediately preceding the year in
which a Change in Control occurs as percentages of his base salaries in
each of such three (3) years (or shorter number of years). By way of
example, but not in limitation of the provisions of this paragraph (c),
assume a Change in Control occurs in 1998, and Executive received bonuses
for each of 1995, 1996 and 1997 as follows: 30% of his base salary for
1995; 50% of his base salary for 1996; and 50% of his base salary for 1997.
If Executive receives a bonus for 1998 which is less than 43.33% of his
1998 base salary, Executive may terminate his employment for "Constructive
Termination" under this Section 3.3. If Executive was only employed during
1996 and 1997, using the same facts as recited herein, Executive may
terminate his employment for "Constructive Termination" if his 1998 bonus
was less than 50% of his 1998 base salary;
(d) The Company's requiring Executive to be based anywhere other than
either the Company's offices at which he was based immediately prior to a
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Change in Control or the Company's offices which are no more than seventy-
five (75) miles from the offices at which the Executive was based
immediately prior to a Change in Control, except for required travel on the
Company's business to an extent substantially consistent with his business
travel obligations immediately prior to the Change in Control (excluding,
however, any travel obligations prior to the Change in Control that are
associated with or caused by the Change in Control events or
circumstances), or, in the event Executive consents to any relocation
beyond such seventy-five-mile radius, the failure by the Company to pay (or
reimburse Executive) for all reasonable moving expenses incurred by him
relating to a change of his principal residence in connection with such
relocation and to indemnify Executive against any loss (defined as the
difference between the actual sale price of such residence and the higher
of (a) his aggregate investment in such residence or (b) the fair market
value of such residence as determined by a real estate appraiser designated
by Executive and reasonably satisfactory to the Company) realized on the
sale of Executive's principal residence in connection with any such change
of residence;
(e) The failure by the Company to continue in effect any benefit or
compensation plan (including but not limited to any stock option plan,
pension plan, deferred compensation plan, life insurance plan, health and
accident plan or disability plan) in which Executive is participating at
the time of a Change in Control of the Company (or plans providing
substantially similar benefits), the taking of any action by the Company
which would adversely affect Executive's participation in, payment from, or
materially reduce his benefits under any of such plans or deprive him of
any material fringe benefit enjoyed by him at the time of the Change in
Control, or the failure by the Company to provide Executive with the number
of days of paid time off to which he is then entitled on the basis of years
of service with the Company in accordance with the Company's normal paid
time off or vacation policy in effect immediately prior to the Change in
Control;
(f) Any failure of the Company to obtain the assumption of, or the
agreement to perform, this Agreement by any successor as contemplated in
Section 5;
(g) Any purported termination of Executive's employment which is not
effected pursuant to a Notice of Termination satisfying the requirements of
Section 3.4 (and, if applicable, Section 3.2); and for purposes hereof, no
such purported termination shall be effective; or
(h) The failure of the Company otherwise to honor all the terms and
provisions of this Agreement.
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For purposes of this Section 3.3, any good faith determination of "Constructive
Termination" made by the Executive shall be conclusive and binding on the
parties.
3.4 Notice of Termination. Any termination pursuant to the foregoing
provisions of this Section (including termination due to Executive's death)
shall be communicated by written Notice of Termination to the other party
hereto. For purposes hereof, a "Notice of Termination" shall mean a notice
which shall indicate the specific termination provision herein relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated. In the event that Executive seeks to terminate his employment with
the Company pursuant to Section 3.3, he must communicate his written Notice of
Termination to the Company within sixty (60) days of being notified of such
action or actions by the Company which constitute Constructive Termination.
3.5 Date of Termination. "Date of Termination" shall mean (i) if this
Agreement is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that Executive shall not have returned to the
performance of his duties on a full-time basis during such thirty (30)-day
period); (ii) if Executive's employment is terminated pursuant to Section 3.3,
the date specified in the Notice of Termination; and (iii) if Executive's
employment is terminated for any other reason, the date on which a Notice of
Termination is given.
4. COMPENSATION UPON TERMINATION.
4.1 Termination Without Cause or for Constructive Termination. If
Executive suffers a CIC Termination, then, subject to Section 4.2, Executive
shall be entitled, if such CIC Termination occurred within three (3) years of a
Change in Control, to the following benefits:
(a) The Company shall pay to Executive as severance pay in one lump
sum not later than the tenth (10th) day following the Date of Termination,
an amount equal to the product of (i) the Executive's Total Compensation
(as defined below) multiplied by (ii) the number one and one-half (1.5).
For purposes of this Section 4.1(a), the Executive's "Total Compensation"
shall mean the annual base salary being paid to the Executive at the Date
of Termination plus the Executive's "Average Bonus." The Executive's
"Average Bonus" shall mean the greater of (i) the bonus or incentive awards
pursuant to any annual performance bonus or incentive compensation plan of
the Company (the "Bonus") last paid or awarded to Executive immediately
prior to his Date of Termination, or (ii) the average of the highest three
Bonuses (whether or not consecutive) paid or awarded to Executive.
7
<PAGE>
(b) The Company shall continue to provide Executive with (i) all
medical, dental, vision, accident, and other health benefits, (ii) life
insurance benefits, and (iii) disability benefits equal to or economically
equivalent to the benefits in effect for Executive at the time of the
Change in Control, and the Company shall provide such benefits at the same
cost to Executive as the cost, if any, charged to Executive for those
benefits prior to termination of employment. The Company shall provide the
foregoing benefits for the period from Executive's termination of
employment until eighteen (18) months from the Executive's Date of
Termination.
4.2 Limitation on Payments.
(a) Anything in Section 4.1 to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution made, or benefit
provided, by the Company to or for the benefit of Executive (whether paid or
payable or distributed or distributable or provided pursuant to the terms hereof
or otherwise) would constitute a "parachute payment" as defined in Section 280G
of the Internal Revenue Code of 1986, as amended (the "Code"), then the lump sum
severance payment payable pursuant to Section 4.1(a) shall be reduced so that
the aggregate present value of all payments in the nature of compensation to (or
for the benefit of) Executive which are contingent on a change in control (as
defined in Code Section 280G(b)(2)(A)) is one dollar ($1.00) less than the
amount which Executive could receive without being considered to have received
any parachute payment (the amount of this reduction in the lump sum severance
payment is referred to herein as the "Excess Amount"). The determination of the
amount of any reduction required by this Section 4.2 shall be made by an
independent accounting firm (other than the Company's independent accounting
firm) selected by the Company and acceptable to Executive, and such
determination shall be conclusive and binding on the parties hereto.
8
<PAGE>
(b) Notwithstanding the provisions of Section 4.2(a), if it is
established pursuant to a final determination of a court or an Internal
Revenue Service proceeding which has been finally and conclusively resolved,
that an Excess Amount was received by Executive from the Company, then such
Excess Amount shall be deemed for all purposes to be a loan to Executive
made on the date Executive received the Excess Amount and Executive shall
repay the Excess Amount to the Company on demand (but no less than ten (10)
days after written demand is received by Executive) together with interest
on the Excess Amount at the "applicable Federal rate" (as defined in Section
1274(d) of the Code) from the date of Executive's receipt of such Excess
Amount until the date of such repayment.
4.3 Mitigation or Set-off of Amounts Payable Hereunder. Executive
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 provided for in this Section 4 be reduced by any compensation earned by
Executive as the result of employment by another employer after the Date of
Termination, or otherwise. The Company's obligations hereunder also shall not
be affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action which the Company may have against Executive.
9
<PAGE>
5. SUCCESSORS; BINDING AGREEMENT.
5.1 Successors of the Company. 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, by
agreement in form and substance satisfactory to Executive, expressly to 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 there had been a Change in
Control but no such succession had taken place. Failure of the Company to
obtain such agreement prior to the effectiveness of any such succession shall be
a breach hereof. As used herein, "the Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which executes and delivers the agreement provided for in this Section
5 or which otherwise becomes bound by all the terms and provisions hereof by
operation of law.
5.2 Executive's Heirs, etc. This Agreement shall inure to the benefit
of and be enforceable by Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If Executive should die while any amounts would still be payable to
him hereunder as if he had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms hereof to his
designee or, if there be no such designee, to his estate.
10
<PAGE>
6. NOTICE. For the purposes hereof, notices and all other communications
provided for herein shall be in writing and shall be deemed to have been duly
given when delivered or mailed by United States registered or certified mail,
return receipt requested, postage prepaid, addressed to the Company at its
principal place of business and to Executive at his address as shown on the
records of the Company, provided that all notices to the Company shall be
directed to the attention of the Chief Executive Officer of the Company with a
copy to the Secretary of the Company, or to such other in writing in accordance
herewith, except that notices of change of address shall be effective only upon
receipt.
7. MISCELLANEOUS. No provisions hereof may be amended, modified, waived
or discharged unless such amendment, waiver, modification or discharge is agreed
to in writing signed by Executive and such officer as may be specifically
designated by the Board (which shall in any event include the Company's Chief
Executive Officer). 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
hereof 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 set forth expressly herein.
8. VALIDITY. The invalidity or unenforceability of any provisions hereof
shall not affect the validity or enforceability of any other provision hereof,
which shall remain in full force and effect.
9. NON-EXCLUSIVITY OF RIGHTS. Nothing herein shall prevent or limit the
Executive's continuing or future participation in any benefit, bonus, incentive
or other plans, practices, policies or programs provided by the Company and for
which the Executive may qualify, nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any stock option or other
agreements with the Company. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, practice, policy or
program of the Company at or subsequent to the Date of Termination shall be
payable in accordance with such plan, practice, policy or program.
10. LEGAL EXPENSES. The Company agrees to pay, upon written demand
therefor by Executive, all legal fees and expenses which Executive may
reasonably incur as a result of any dispute or contest (regardless of the
outcome thereof) by or with the Company or others regarding the validity or
enforceability of, or liability under, any provision hereof (including as a
result of any contest about the amount of any payment pursuant to Section 4),
plus in each case interest at the "applicable Federal rate" (as defined in
Section 1274(d) of the Code). In any such action brought by Executive for
damages or to enforce any provisions hereof, he shall be entitled to seek both
legal and equitable relief and remedies, including, without limitation, specific
performance of the Company's obligations hereunder, in his sole discretion.
11
<PAGE>
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
12. GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Texas.
13. CAPTIONS AND GENDER. The use of captions and Section headings herein
is for purposes of convenience only and shall not effect the interpretation or
substance of any provisions contained herein. Similarly, the use of the
masculine gender with respect to pronouns herein is for purposes of convenience
and includes either sex who may be a signatory.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the
day and year first above written.
ATMOS ENERGY CORPORATION
By:
---------------------------------
Name:
Title:
EXECUTIVE
------------------------------------
12
<PAGE>
Exhibit 10.22(b)
AMENDMENT NO. ONE
TO THE
ATMOS ENERGY CORPORATION MINI-MED PLAN
WHEREAS, Atmos Energy Corporation (the "Company") adopted the Atmos Energy
Corporation Mini-Med Plan (as restated effective July 1, 1995) (the "Plan"), and
thereafter amended the Plan; and
WHEREAS, in accordance with Section 6.1 of the Plan, the Company desires to
amend the Plan further as hereinafter set forth;
NOW, THEREFORE, the Plan shall be and the same hereby is amended, effective
as of August 12, 1998, as follows:
1. Section 2.1(c) is amended by adding the following at the end of said
Section:
Notwithstanding the foregoing provisions of this paragraph (c), effective
from and after January 1, 1999, all Employees, and all former Employees who
were not designated as participants in the Plan on August 12, 1998 (and
their dependents), shall be removed from the list of designated
participants, and no new Employees or former Employees may be designated by
the President/Chief Executive Officer as participants in the Plan; any
former Employees designated as participants on August 12, 1998 (and their
dependents) shall remain as participants in the Plan until such time as
their participation would otherwise end.
2. Section 2.1(k) is amended by adding the following at the end of said
Section:
Effective for the Plan Year commencing April 1, 1998, the nine (9)-month
period ending December 31, 1998, and thereafter the calendar year.
IN WITNESS WHEREOF, the Company has caused this Amendment No. One to the
Atmos Energy Corporation Mini-Med Plan to be executed in its name and on its
behalf as of the 12th day of August, 1998.
ATMOS ENERGY CORPORATION
By: /s/ Robert W. Best
------------------------------
Robert W. Best
Chairman of the Board, President
and Chief Executive Officer
<PAGE>
Exhibit 10.26
ATMOS ENERGY CORPORATION
------------------------
SUPPLEMENTAL EXECUTIVE BENEFITS PLAN
------------------------------------
Amended and Restated in its Entirety: August 12, 1998
------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I Purpose and Effective Date
--------------------------
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 8
------------
Section 2.3. Governing Law 8
-------------
ARTICLE III Eligibility and Participation 8
-----------------------------
Section 3.1. Employees Eligible to Participate 8
---------------------------------
ARTICLE IV Assets Used for Benefits 8
------------------------
Section 4.1. Amounts Provided by the Employer 8
--------------------------------
Section 4.2. Funding 9
-------
ARTICLE V Supplemental Pension Benefits 10
-----------------------------
Section 5.1. Eligibility for Supplemental Pension 10
-------------------------------------
Section 5.2. Amount of Supplemental Pension 11
------------------------------
Section 5.3. Form of Payment of Supplemental Pension 13
---------------------------------------
Section 5.4. Commencement of Supplemental Pension 13
------------------------------------
Section 5.5. Supplemental Pensions After a Change in Control 13
-----------------------------------------------
ARTICLE VI Disability Benefits 15
------------------
Section 6.1. Eligibility For Disability Benefits 15
-----------------------------------
Section 6.2. Amount of Disability Benefits 15
-----------------------------
Section 6.3. Payment of Disability Benefits 16
------------------------------
Section 6.4. Payment of Supplemental Pension to Disabled Participants 16
--------------------------------------------------------
ARTICLE VII Death Benefits 17
--------------
Section 7.1. Eligibility For Death Benefits 17
------------------------------
Section 7.2. Amount of Death Benefit 17
-----------------------
Section 7.3. Form of Payment of Death Benefit 18
--------------------------------
Section 7.4. Commencement of Death Benefits 19
------------------------------
ARTICLE VIII Administration 20
--------------
Section 8.1. Plan Administration 20
-------------------
Section 8.2. Powers of Plan Administrator 20
----------------------------
Section 8.3. Calculation of Funding Obligations 20
----------------------------------
Section 8.4. Annual Statements 21
-----------------
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
ARTICLE IX Miscellaneous Provisions 21
------------------------
Section 9.1. Amendment or Termination of the Plan 21
------------------------------------
Section 9.2. Nonguarantee of Employment 24
--------------------------
Section 9.3. Nonalienation of Benefits 24
-------------------------
Section 9.4. Liability 24
---------
Section 9.5. Noncompetition Agreement 24
------------------------
Section 9.6. Participation Agreement 25
-----------------------
Section 9.7. Successors to the Employer 25
--------------------------
</TABLE>
ii
<PAGE>
ARTICLE I
---------
Purpose and Effective Date
--------------------------
Section 1.1. Purpose: The purpose of this Plan is to provide supplemental
-------
retirement income, death and disability benefits to certain executive employees
of Atmos Energy Corporation.
Section 1.2. Effective Date: The Plan initially became effective on
--------------
October 1, 1987, was amended and restated as of November 11, 1992, was amended
as of November 8, 1995, was amended as of May 8, 1996, was amended and restated
as of November 13, 1996, was amended and restated as of May 14, 1997, and has
been amended and restated as of August 12, 1998.
ARTICLE II
----------
Definitions and Construction
----------------------------
Section 2.1. Definitions: The following words and phrases used in this
-----------
Plan shall have the respective meanings set forth below, unless the context in
which they are used clearly indicates a contrary meaning:
(a) Beneficiary: The individual or individuals described in
-----------
Section 7.3 of this Plan who are receiving any benefit payments hereunder.
(b) Board of Directors: The Board of Directors of the Employer.
------------------
(c) Cause: The termination of employment by the Employer upon the
-----
happening of either (i) or (ii) as follows:
(i) The willful and continued failure by the Participant to
substantially perform his duties with the Employer (other than any
such failure resulting from the Participant's incapacity due to
physical or mental illness) after a written demand for substantial
performance is delivered to the Participant by the Employer that
specifically identifies the manner in which the Employer believes that
the Participant has not substantially performed his duties.
1
<PAGE>
(ii) The Participant's willful engagement in conduct that is
demonstrably and materially injurious to the Employer, monetarily or
otherwise.
For purposes of this paragraph, no act, or failure to act, on the
Participant's part shall be deemed "willful" if done, or omitted to be
done, by the Participant in good faith and with a reasonable belief that
the action or omission was in the best interests of the Employer.
Notwithstanding the foregoing, Participant shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to
Participant a copy of a resolution duly adopted by the affirmative vote of
not less than three-quarters (3/4) of the entire membership of the Board of
Directors of the Employer at a meeting of such Board of Directors called
and held for such purpose (after reasonable notice to Participant and an
opportunity for Participant, together with Participant's counsel, to be
heard before the Board of Directors), finding that in the good faith
opinion of the Board of Directors that Participant was guilty of conduct
set forth above in clauses (i) or (ii) of this Paragraph and specifying the
particulars thereof in detail.
(d) Change in Control:
-----------------
(i) For periods prior to November 13, 1996, the occurrence of
any of the following:
(A) Any "person" (as defined in subparagraph (ii) below),
other than a trustee or other fiduciary holding securities under
an employee benefit plan of the Employer, is or becomes the
"beneficial owner" (as defined in subparagraph (ii) below),
directly or indirectly, of securities of the Employer
representing 33-1/3% or more of the combined voting power of the
Employer's then outstanding securities.
(B) During any period of two consecutive years (the
"Period"), individuals who at the beginning of the Period
constitute the Board of Directors of the Employer and any "new
director" (as defined in subparagraph (ii) below) cease for any
reason to constitute a majority of the Board of Directors.
(C) The shareholders of the Employer approve a merger or
consolidation of the Employer with any other corporation, except
if:
(1) the merger or consolidation would result in the
voting securities of the Employer outstanding immediately
prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting
2
<PAGE>
securities of the surviving entity) at least 60% of the
combined voting power of the voting securities of the
Employer or such surviving entity outstanding immediately
after such merger or consolidation; or
(2) the merger or consolidation occurs in connection
with the approval by the shareholders of the Employer of a
plan of complete liquidation of the Employer or an
agreement for the sale or disposition by the Employer of
all or substantially all the Employer's assets.
(ii) For purposes of subparagraph (i) above,
(A) "Person" shall have the meaning provided in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
(B) "Beneficial owner" shall have the meaning provided in
Rule 13d-3 under the Exchange Act.
(C) "New director" shall mean an individual whose election
by the Employer's Board of Directors or nomination for election
by the Employer's shareholders was approved by a vote of at least
2/3's of the directors then still in office who either were
directors at the beginning of the Period or whose election or
nomination for election was previously so approved. However,
"new director" shall not include a director designated by a
person who has entered into an agreement with the Employer to
effect a transaction described in subparagraphs (i)(A) or (B)
above.
(iii) For periods from and after November 13, 1996, except as
provided herein, the occurrence of any of the following:
(A) Any "Person" (as defined in subparagraph (iv) below),
other than (1) the Employer or any of its subsidiaries, (2) a
trustee or other fiduciary holding securities under an employee
benefit plan of the Employer or any of its Affiliates, (3) an
underwriter temporarily holding securities pursuant to an
offering of such securities, or (4) a corporation owned, directly
or indirectly, by the shareholders of the Employer in
substantially the same proportions as their ownership of stock of
the Employer, is or becomes the "beneficial owner" (as defined in
subparagraph (iv) below), directly or indirectly, of securities
of the Employer (not including in the securities beneficially
owned by such person any securities acquired directly from the
Company or its Affiliates) representing 33-1/3% or more of the
combined voting power of the
3
<PAGE>
Employer's then outstanding securities, or 33-1/3% or more of the
then outstanding common stock of the Employer, excluding any
Person who becomes such a beneficial owner in connection with a
transaction described in subparagraph (C)(1) below.
(B) During any period of two consecutive years (the
"Period"), individuals who at the beginning of the Period
constitute the Board of Directors of the Employer and any "new
director" (as defined in subparagraph (iv) below) cease for any
reason to constitute a majority of the Board of Directors.
(C) There is consummated a merger or consolidation of the
Employer or any direct or indirect subsidiary of the Employer
with any other corporation, except if:
(1) the merger or consolidation would result in the
voting securities of the Employer outstanding immediately
prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity or any parent thereof) at least 60% of
the combined voting power of the voting securities of the
Employer or such surviving entity or any parent thereof
outstanding immediately after such merger or consolidation;
or
(2) the merger or consolidation is effected to
implement a recapitalization of the Employer (or similar
transaction) in which no Person is or becomes the beneficial
owner, directly or indirectly, of securities of the Employer
(not including in the securities beneficially owned by such
Person any securities acquired directly from the Employer or
its Affiliates other than in connection with the acquisition
by the Employer or its Affiliates of a business)
representing 60% or more of the combined voting power of the
Employer's then outstanding securities.
(D) The shareholders of the Employer approve a plan of
complete liquidation or dissolution of the Employer or an
agreement for the sale or disposition by the Employer of all or
substantially all the Employer's assets, other than a sale or
disposition by the Employer of all or substantially all of the
Employer's assets to an entity, at least 60% of the combined
voting power of the voting securities of which are owned by the
stockholders of the Employer in substantially the same
proportions as their ownership of the Employer immediately prior
to such sale.
4
<PAGE>
Notwithstanding the foregoing provisions of this subparagraph (iii),
no actions or events related to the merger of United Cities Gas
Company ("United Cities") with or into the Employer as contemplated by
the Agreement and Plan of Reorganization, dated as of July 19, 1996,
between the Employer and United Cities (the "Merger"), including the
consummation of the Merger, shall constitute a Change in Control of
the Employer for any of the purposes in this Plan that a Change in
Control as defined under this subparagraph (iii) applies.
(iv) For purposes of subparagraph (iii) above,
(A) "Person" shall have the meaning given in Section 3(a)(9)
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") as modified and used in Sections 13(d) and 14(d) of the
Exchange Act.
(B) "Beneficial owner" shall have the meaning provided in
Rule 13d-3 under the Exchange Act.
(C) "New director" shall mean an individual whose election
by the Employer's Board of Directors or nomination for election
by the Employer's shareholders was approved by a vote of at least
2/3's of the directors then still in office who either were
directors at the beginning of the Period or whose election or
nomination for election was previously so approved or
recommended. However, "new director" shall not include a
director whose initial assumption of office is in connection with
an actual or threatened election contest, including but not
limited to a consent solicitation relating to the election of
directors of the Company.
(D) "Affiliate" shall have the meaning set forth in Rule
12b-2 promulgated under Section 12 of the Exchange Act.
(e) Compensation: Except as otherwise provided in the Participant's
------------
Participation Agreement, the sum of (i), (ii) and (iii) as follows:
(i) The greater of (A) the Participant's annual base salary at
the date of his termination of employment, or (B) the average of the
Participant's annual base salary for the highest three (3) calendar
years (whether or not consecutive) of the Participant's employment
with the Employer.
(ii) The greater of (A) the Participant's last Performance Award,
or (B) the average of the highest three (3) Performance Awards
(whether or not consecutive).
5
<PAGE>
(iii) The Participant's annual car allowance amount 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.
(f) Death Benefit: The total benefit provided under this Plan upon
-------------
the death of a Participant, which benefit is calculated in this Plan on a
pre-tax basis.
(g) Disability: The termination of a Participant's employment with
----------
the Employer on account of disability as determined under the Group Long-
Term Disability Plan.
(h) Disability Benefit: The monthly benefit provided under this Plan
------------------
to a Participant who suffers a Disability, which benefit is calculated in
this Plan on a pre-tax basis.
(i) Eligible Employee: An employee who is a Participant in the Plan
-----------------
on August 12, 1998. From and after August 12, 1998, no employee who is not
a Participant in the Plan on August 12, 1998 shall be or become an Eligible
Employee. From and after January 1, 1999, any Participant who elected in
writing to cease his participation in the Plan and to become an eligible
employee under the Atmos Energy Corporation Performance-Based Supplemental
Executive Benefits Plan as of January 1, 1999 shall no longer be an
Eligible Employee (and shall cease to be a Participant).
(j) Employer: Atmos Energy Corporation.
--------
(k) Group Long-Term Disability Plan: The Atmos Energy Corporation
-------------------------------
Group Long-Term Disability Plan, as amended from time to time.
(l) Involuntary Termination: The termination of a Participant's
-----------------------
participation in the Plan due to either (i) or (ii) as follows:
(i) The Participant's employment with the Employer is terminated
involuntarily by the Employer for any reason other than Cause or
Disability.
(ii) Any reason other than for Cause by the Employer prior to his
termination of employment with the Employer.
6
<PAGE>
Notwithstanding the foregoing provisions of subparagraph (ii) hereof, any
Participant who terminates his participation in the Plan on January 1, 1999
as provided for in Section 2.1(i) above shall not be deemed to have
suffered an Involuntary Termination.
(m) Operating Division: Energas Company, Greeley Gas Company, Trans
------------------
Louisiana Gas Company, Western Kentucky Gas Company, and any other division
of the Employer that the Employer may hereafter establish.
(n) Participant: An Eligible Employee of the Employer who meets the
-----------
requirements to participate in the Plan in accordance with the provisions
of Article III hereof.
(o) Participation Agreement: The agreement between the Employer and a
-----------------------
Participant described in Section 9.6 of this Plan, executed in the form
attached hereto as Exhibit C-1 in the case of Participants who commenced
participation in the Plan prior to November 13, 1996 and Exhibit C-2 in the
case of all other Participants in the Plan, or in such other form as the
Board of Directors, in its sole discretion, may establish from time to
time.
(p) Plan: The Atmos Energy Corporation Supplemental Executive
----
Benefits Plan, as set forth herein and as amended from time to time.
(q) Pension Plan: Any defined benefit pension plan adopted,
------------
established or maintained by the Employer, whichever is applicable, as
amended from time to time. Any amount payable to or with respect to a
Participant from any group annuity contract maintained in connection with
the Pension Plan shall be deemed part of the benefit applicable to the
Participant under the Pension Plan.
(r) Performance Awards: Except as otherwise provided in the
------------------
Participant's Participation Agreement, any amount paid, or authorized to be
paid, to a Participant pursuant to any annual performance bonus or
incentive compensation plan adopted or established by the Employer, or,
upon and after a Change in Control, any amount paid, or authorized to be
paid, to a Participant as a performance related cash bonus in addition to
his base cash compensation.
(s) Plan Administrator: The Board of Directors.
------------------
(t) Plan Year: Each twelve (12) month period beginning on January 1
---------
and ending on December 31.
(u) Retired Participant: A Retired employee of the Employer who
-------------------
receives benefits under this Plan.
7
<PAGE>
(v) Retirement or Retire: A Participant's voluntary termination from
--------------------
employment with the Employer after he is vested in his retirement benefits
under the Pension Plan and (i) prior to January 1, 1999, has reached the
age when he is eligible for the immediate commencement of those benefits
from the Pension Plan, and (ii) from and after January 1, 1999, has met the
age and service requirements to be eligible to commence retirement benefit
under the Pension Plan.
(w) Supplemental Pension: A Participant's monthly pension benefit
--------------------
provided under this Plan, which benefit is calculated in this Plan on a
pre-tax basis.
Section 2.2. Construction: The masculine gender, whenever appearing in
------------
this Plan, shall be deemed to include the feminine gender; the singular may
include the plural; and vice versa, unless the context clearly indicates to the
contrary.
Section 2.3. Governing Law: This Plan shall be construed in accordance
-------------
with and governed by the laws of the State of Texas, except to the extent
otherwise preempted by the Employee Retirement Income Security Act of 1974, as
amended, or any other Federal law.
ARTICLE III
-----------
Eligibility and Participation
-----------------------------
Section 3.1. Employees Eligible to Participate: Each Eligible Employee
---------------------------------
shall participate in this Plan, provided he complies with the provisions of
Sections 9.5 and 9.6 hereof. Any Participant who ceases being an Eligible
Employee during his employment with the Employer shall immediately cease
participation in this Plan and shall no longer be a Participant, except as
otherwise set forth herein.
ARTICLE IV
----------
Assets Used for Benefits
------------------------
Section 4.1. Amounts Provided by the Employer: Benefits payable under
--------------------------------
this Plan shall constitute general obligations of the Employer in accordance
with the terms of
8
<PAGE>
this Plan. The Employer may, in its sole discretion, establish a trust or other
funding arrangement that is subject to the claims of the Employer's general
creditors for the purpose of funding a Participant's accrued benefit payable
under this Plan. Any such trust or other funding arrangement may also provide
for the distribution to the Participant of an amount equal to any federal or
state income taxes that are incurred by the Participant in the event the
establishment of such trust or other funding arrangement constitutes the
constructive receipt by the Participant of any benefits payable hereunder prior
to the actual receipt of such benefits. The Employer shall make appropriate
adjustments to the amount of the Participant's Supplemental Pension payable each
month in order to reflect the effect upon such Supplemental Pension of the
distribution described in the foregoing sentence. The Employer also may, but
shall not be obligated to, purchase one or more life insurance policies or
contracts to provide for the payment of the Death Benefits. Any such policies or
contracts purchased hereunder shall remain a general asset of the Employer or of
any trust established hereunder.
Section 4.2. Funding: Not later than the time each Participant Retires or
-------
becomes eligible to receive an unreduced Supplemental Pension under this Plan,
whichever occurs first, the Employer shall contribute to a trust or other
funding arrangement an amount necessary to fund 100% of the then-present value
of such Participant's accrued Supplemental Pension. The amount required to be
funded by this Section 4.2 shall be calculated in accordance with Section 8.3
hereof. Notwithstanding the foregoing, immediately upon a Change in Control, the
Employer shall contribute to a trust or other funding arrangement an amount
necessary to fund 100% of the then-present value of all Supplemental Pension
benefits (vested and unvested) payable hereunder to each
9
<PAGE>
Participant and Retired Participant, regardless of whether any such person is
then eligible to Retire or to receive an unreduced Supplemental Pension. The
Employer shall review the funding status of each such trust or other funding
arrangement required to be established under this Section 4.2 on an annual basis
and shall make such contributions thereto as may be required to maintain the
value of the assets thereof at no less than 100% of the then-present value of
all such Supplemental Pension benefits. For purposes of this Section 4.2 only,
notwithstanding the foregoing, no actions or events related to the merger of
United Cities Gas Company ("United Cities") with and into the Employer, as
contemplated by the Agreement and Plan of Reorganization, dated as of July 19,
1996, between the Employer and United Cities (the "Merger"), including
shareholder approval of the Merger or the consummation of the Merger, shall
constitute a Change in Control of the Employer that requires the Employer to
make any contributions pursuant to this Section 4.2.
ARTICLE V
---------
Supplemental Pension Benefits
-----------------------------
Section 5.1. Eligibility for Supplemental Pension:
------------------------------------
(a) Upon Retirement. Except as otherwise provided elsewhere in this
---------------
Plan or in a Participation Agreement, a Participant who has been an Eligible
Employee for at least two years and Retires shall be entitled to receive a
Supplemental Pension.
(b) Upon Involuntary Termination Prior to a Change in Control. A
---------------------------------------------------------
Participant who suffers an Involuntary Termination prior to a Change in Control
shall be entitled to receive a Supplemental Pension, subject to the provisions
of Section 5.1(c) of this Plan, so long as he is vested in his retirement
benefits under the Pension Plan at the
10
<PAGE>
time of his Involuntary Termination and has been an Eligible Employee for at
least two years prior to the Involuntary Termination.
(c) Upon Voluntary Termination Prior to a Change in Control or
----------------------------------------------------------
Termination For Cause. A Participant who voluntarily resigns from employment
- ---------------------
with the Employer prior to being eligible for Retirement and prior to a Change
in Control or who is terminated from employment with the Employer for Cause
shall not be entitled to receive a Supplemental Pension.
(d) Upon Disability. A Participant who suffers a Disability shall be
---------------
entitled to a Supplemental Pension as provided in Section 6.4.
Section 5.2. Amount of Supplemental Pension:
------------------------------
(a) Upon Retirement. Except as otherwise provided in the
---------------
Participant's Participation Agreement, the Supplemental Pension payable to a
Participant who Retires, and who has been an Eligible Employee for at least two
years shall, unless reduced as provided in paragraph (b) below, equal (i) minus
-----
(ii) as follows:
(i) One-twelfth (1/12th) of seventy-five percent (75%) of the
Participant's Compensation, reduced if the Participant has fewer than
ten (10) years of vesting service under the Pension Plan by one-tenth
(1/10th) for each year of his vesting service less than ten (10);
(ii) The monthly amount of pension payable to the Participant
under the Pension Plan as of the date that his Supplemental Pension
commences, assuming payment in the automatic form applicable to him
under the Pension Plan;
provided, however, in no event shall the combined annual payment from this Plan
and the Pension Plan to any Participant listed on the Minimum Benefit Schedule
attached to this Plan as Exhibit A be less than the minimum Annual Amount for
such Participant listed on the Minimum Benefit Schedule.
11
<PAGE>
(b) Reduction for Early Commencement of Supplemental Pensions. If a
---------------------------------------------------------
Participant's Supplemental Pension commences before the Participant attains age
62, his Supplemental Pension shall, unless otherwise provided in Exhibit A or in
a Participation Agreement, be reduced for each year (or fraction thereof, based
on full months) that the date of commencement precedes age 62. Prior to January
1, 1999, the reduction shall be made in the same manner as reductions are made
for early commencement under the Pension Plan. On and after January 1, 1999,
the reduction shall be 2% per year for the first two years (or fractional years
thereof, based on full months) that the date of commencement precedes age 62,
and 4% per year for the next five years (or fractional years thereof, based on
full months) that the date of commencement precedes age 60.
(c) Cost of Living and Other Adjustments. A Participant who has begun
------------------------------------
to receive his Supplemental Pension shall be entitled to receive any cost of
living or other adjustments to which he is otherwise entitled pursuant to the
Pension Plan, and his Supplemental Pension shall not be reduced by such
adjustments. If a Participant would not be entitled to receive a cost of living
or other adjustment due to statutory or regulatory limitations on Pension Plan
benefits, the Supplemental Pension shall be increased by the amount of such
adjustment for the time the limitations are in effect.
(d) Upon Involuntary Termination Prior to a Change in Control. The
---------------------------------------------------------
Supplemental Pension payable to a Participant who suffers an Involuntary
Termination prior to a Change in Control shall be determined in accordance with
paragraph (a) above, but, except as otherwise provided in the Participant's
Participation Agreement, for purposes of subparagraph (a)(i) shall be based upon
his Compensation and years of vesting service under the Pension Plan as of the
date of his Involuntary Termination.
12
<PAGE>
Section 5.3. Form of Payment of Supplemental Pension:
---------------------------------------
(a) Married Participants. Except as otherwise provided in the
--------------------
Participant's Participation Agreement, if a Participant is married when his
Supplemental Pension commences, it shall be paid in the form of a joint and 50%
survivor annuity, with the Participant's spouse on the date payment commences as
the joint annuitant.
(b) Unmarried Participants. Except as otherwise provided in the
----------------------
Participant's Participation Agreement, if a Participant is not married when his
Supplemental Pension commences, it shall be paid in the form of a ten year
certain and life annuity payable to the Participant or the Participant's named
beneficiary.
Section 5.4. Commencement of Supplemental Pension:
------------------------------------
(a) Upon Retirement. The Supplemental Pension of a Participant who
---------------
Retires shall commence at the time he begins receiving retirement benefits from
the Pension Plan.
(b) Upon Involuntary Termination Prior to a Change in Control. The
---------------------------------------------------------
Supplemental Pension of a Participant who suffers an Involuntary Termination
prior to a Change in Control shall commence (i) prior to January 1, 1999, at the
time he begins receiving retirement benefits from the Pension Plan, and (ii)
from and after January 1, 1999, at such time as elected by the Participant on or
after he attains age 55.
Section 5.5. Supplemental Pensions After a Change in Control:
-----------------------------------------------
(a) Eligibility For Supplemental Pension. Notwithstanding anything to
------------------------------------
the contrary in this Plan, a Participant shall be entitled to a Supplemental
Pension, regardless of whether he has been an Eligible Employee for at least two
years or is vested in his
13
<PAGE>
retirement benefits under the Pension Plan, if following a Change in Control of
the Employer which occurs at a time when he is an Eligible Employee, either (i)
or (ii) occurs:
(i) The Participant's employment is terminated
(A) on account of disability;
(B) if the Change in Control occurred prior to November 13,
1996, either (I) voluntarily, or (II) involuntarily by the
Employer for any reason other than for Cause; or
(C) if the Change in Control occurred on or after November
13, 1996, involuntarily by the Employer for any reason other than
for Cause.
(ii) The Participant's participation in the Plan is terminated by
the Employer for any reason other than for Cause prior to his
termination of employment with the Employer.
In the case of any employee of the Employer who becomes an Eligible Employee on
or after May 14, 1997, other than any such employee who becomes an Eligible
Employee in accordance with the Agreement and Plan of Reorganization, dated as
of July 19, 1996, between the Employer and United Cities Gas Company, in order
for the provisions of this Section 5.5 to apply, the involuntary termination of
employment referred to in subparagraph (i)(C) above or the termination of
participation referred to in subparagraph (ii) above must occur within three (3)
years after the Change in Control.
From and after May 14, 1997, for purposes of this Section 5.5, if a
Participant's employment is involuntarily terminated by the Employer for any
reason other than for Cause, or his participation in the Plan is terminated by
the Employer for any reason other than for Cause, prior to a Change in Control
(whether or not a Change in Control ever occurs) and such termination either (A)
was at the request or direction of a person who has entered into an agreement
with the Employer, the consummation of which would constitute a Change in
Control, or (B) was otherwise in connection with or in anticipation of a Change
in Control (whether or not a Change in Control ever occurs), then such
14
<PAGE>
Participant's termination of employment or participation shall be deemed to have
followed a Change in Control of the Employer, and such Participant shall be one
who is described in this paragraph (a).
(b) Amount of Supplemental Pension. The Supplemental Pension payable
------------------------------
to a Participant described in paragraph (a) above shall be calculated in the
same manner as set forth in Section 9.1(c) for benefits payable in the event of
a termination of the Plan, but based on his Compensation as of the date of his
employment termination or the date his participation in the Plan is terminated,
whichever is applicable.
(c) Commencement of Supplemental Pension. The Supplemental Pension
------------------------------------
payable to a Participant described in paragraph (a) above shall commence, (i) if
prior to January 1, 1999, at the time such Participant begins receiving
retirement benefits from the Pension Plan, or if he is not entitled to benefits
from the Pension Plan when his employment is terminated, at the time he would
otherwise be entitled to begin receiving retirement benefits under the Pension
Plan if he were so entitled, and (ii) from and after January 1, 1999, on the
later of (A) the date his employment terminates, or (B) the date he elects
payment on or after he attains age 55.
ARTICLE VI
----------
Disability Benefits
-------------------
Section 6.1. Eligibility For Disability Benefits: A Participant shall be
-----------------------------------
entitled to a Disability Benefit if he suffers a Disability prior to his
Retirement.
Section 6.2. Amount of Disability Benefits: The Disability Benefit
-----------------------------
payable to an eligible Participant shall equal (a) minus (b) as follows:
(a) One-twelfth (1/12th) of sixty percent (60%) of the Participant's
Compensation calculated as of the date of his Disability.
15
<PAGE>
(b) The total monthly amount of disability benefit payable to the
Participant under the Group Long-Term Disability Plan (before any offsets)
as of the date that his employment terminates due to Disability.
Section 6.3. Payment of Disability Benefits: A Participant's Disability
------------------------------
Benefits shall commence at the same time such Participant begins receiving
benefits from the Group Long-Term Disability Plan and shall continue for so long
as benefits are paid under the Group Long-Term Disability Plan.
Section 6.4. Payment of Supplemental Pension to Disabled Participants:
--------------------------------------------------------
(a) Upon Reaching Normal Retirement Age. If a Participant who
-----------------------------------
has suffered a Disability reaches his normal retirement age under the Pension
Plan while still receiving Disability Benefits, such Participant shall be
entitled to a Supplemental Pension commencing at the time Participant begins
receiving retirement benefits from the Pension Plan regardless of whether the
Participant has been an Eligible Employee for at least two years. The
Supplemental Pension payable to such Participant shall be in the form provided
in Section 5.3 and determined in accordance with Subsection 5.2(a). Upon
commencement of a Participant's Supplemental Pension under this Section 6.4(a),
such Participant's Disability Benefit under Section 6.3 hereof shall cease.
(b) Prior to Reaching Normal Retirement Age. Notwithstanding the
---------------------------------------
provisions of paragraph (a) above, a Participant receiving a Disability Benefit
may elect to receive a Supplemental Pension at any time after becoming eligible
to Retire and prior to his normal retirement age under the Pension Plan. If
such an election is made, the Participant's Disability Benefits shall cease and
the Participant shall commence receiving a Supplemental Pension in the form
provided in Section 5.3 at the same time he begins receiving retirement benefits
from the Pension Plan. The Supplemental Pension payable to such Participant
shall be determined in accordance with Subsections 5.2(a) and (b), and shall be
determined based on the Participant's Compensation as of the date that such
individual terminated employment on account of disability.
16
<PAGE>
ARTICLE VII
-----------
Death Benefits
--------------
Section 7.1. Eligibility For Death Benefits: A Participant shall be
------------------------------
entitled to a Death Benefit if he meets the requirements of either (a) or (b) or
(c) as follows:
(a) He dies before his employment with the Employer terminates or
while receiving a Disability Benefit under this Plan.
(b) He Retires but dies before the commencement of his
Supplemental Pension.
(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. Amount of Death Benefit:
-----------------------
(a) In-Service Death: In the case of a Participant who dies as
----------------
provided in Subsection 7.1(a), the Death Benefit will be the total of the
following (i), (ii), and (iii):
(i) A lump sum payment equal to two times the Participant's
Compensation minus any amount payable under the Employer's Group
Basic Life Insurance Plan (the "Lump Sum Death Benefit").
(ii) A monthly benefit equal to one-twelfth of an amount
equal to fifty percent of the Participant's Compensation at the
time of his death (the "Monthly Death Benefit").
(iii) If the Participant leaves a child or children to whom
payments are to be made under Section 7.3 hereof, a monthly
benefit equal to one-twelfth of an amount equal to twenty-five
percent of the Participant's Compensation at the time of his
death (the "Dependent Death Benefit").
(b) Post Retirement Death: In the case of a Participant who dies
---------------------
as provided in Subsection 7.1(b), a Death Benefit will be paid in the amount and
to the beneficiary that would have been applicable had the Participant's
Supplemental Pension commenced in the month of his death.
17
<PAGE>
(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:
(i) 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.
(ii) 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 7.3. Form of Payment of Death Benefit:
--------------------------------
(a) Lump Sum and Monthly Death Benefits: The Lump Sum and Monthly
-----------------------------------
Death Benefits are payable to the Participant's surviving spouse. If the
Participant does not have a surviving spouse, the Lump Sum and Monthly Death
Benefits are payable to the Participant's surviving children in equal shares
(regardless of dependent status) or, if there are no surviving children, to the
Participant's surviving parents or siblings as designated by the Participant for
this purpose and in the manner specified by the Participant on a form supplied
by the Employer. Payment of the Monthly Death Benefit shall be as a single life
annuity if payable to Participant's surviving spouse or a 120-month term certain
annuity if payable to a child, parent, or sibling.
(b) Dependent Death Benefit: The Dependent Death Benefit is payable
-----------------------
to the Participant's dependent children in equal shares until there cease to be
any dependent children remaining. As each child loses his or her dependent
status, the child's share of the Dependent Death Benefit shall be paid to the
remaining dependent child or children in equal shares. A child of the
Participant is deemed to be a dependent until the
18
<PAGE>
child reaches age eighteen or, if a full-time student (i.e. enrolled in twelve
hours or more of courses of higher education), age 25, or until the child's
death if earlier. At the discretion of the Plan Administrator, any dependent
child's share of the Dependent Death Benefit may be paid to the Participant's
surviving spouse or other guardian of such child if applicable and shall
constitute full settlement of the Plan's obligation to such child with respect
to such payment. If the Participant's surviving spouse dies while receiving the
Monthly Death Benefit and while any dependent child or children of the
Participant remain, then the Monthly Death Benefit shall be added to the
Dependent Death Benefit and shall be payable in equal shares to the dependent
children in the same manner and for the same time period as the Dependent Death
Benefit.
Section 7.4. Commencement of Death Benefits:
------------------------------
(a) 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
(b) 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 to 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).
(c) 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).
19
<PAGE>
ARTICLE VIII
------------
Administration
--------------
Section 8.1. Plan Administration: The Plan shall be administered by the
-------------------
Board of Directors. The Board of Directors may, in its sole discretion,
establish a committee to carry out the day-to-day administration of the Plan and
may delegate any portion of its authority and responsibilities as Plan
Administrator to such committee.
Section 8.2. Powers of Plan Administrator: The Plan Administrator shall
----------------------------
have the discretionary power and authority to interpret and administer the Plan
according to its terms, including the power to construe and interpret the Plan,
to supply any omissions therein, to reconcile and correct any errors or
inconsistencies, to decide any questions in the administration and application
of the Plan, and to make equitable adjustments for any mistakes or errors in the
administration and application of the Plan. The Plan Administrator shall have
such additional powers as may be necessary to discharge its duties and
responsibilities hereunder.
Section 8.3. Calculation of Funding Obligations: The Employer shall
----------------------------------
calculate its funding obligations hereunder solely by using the actuarial
assumptions and methodology set forth in Exhibit D hereto. In its discretion,
at any time prior to a Change in Control of the Employer, the Employer may amend
Exhibit D to change such actuarial assumptions and methodology, provided that
such changes are communicated promptly in writing to all Participants, Retired
Participants, and Beneficiaries. Upon and after a Change in Control of the
Employer, the actuarial assumptions and methodology set forth in Exhibit D may
be changed with respect to any Participant, Retired Participant, or Beneficiary
who was a Participant, Retired Participant, or Beneficiary at the time of such
Change in Control, only with the written consent of such affected Participant,
Retired
20
<PAGE>
Participant, or Beneficiary. For purposes of this Section 8.3 only, and
notwithstanding the foregoing, no actions or events related to the merger of
United Cities Gas Company ("United Cities") with and into the Employer, as
contemplated by the Agreement and Plan of Reorganization, dated as of July 19,
1996, between the Employer and United Cities, including shareholder approval of
the Merger or the consummation of the Merger, shall constitute a Change in
Control of the Employer that requires any consent be obtained pursuant to this
Section 8.3.
Section 8.4. Annual Statements: As soon as practicable after the end of
-----------------
each Plan Year, the Employer shall deliver to each Participant, Retired
Participant, and Beneficiary a statement containing (i) the present value of the
Employer's future benefit obligations to the Participant, Retired Participant,
or Beneficiary; (ii) the actuarial assumptions used to calculate the present
value of the Employer's future benefit obligations hereunder; and (iii) the
current value of the assets, if any, held in a trust or other funding
arrangement for the benefit of the Participant, Retired Participant, or
Beneficiary.
ARTICLE IX
----------
Miscellaneous Provisions
------------------------
Section 9.1. Amendment or Termination of the Plan:
------------------------------------
(a) In General. Subject to the remaining provisions of this
----------
Section 9.1, the Board of Directors may by resolution, in its absolute
discretion, from time to time, amend, suspend, or terminate any or all of the
provisions of the Plan; provided, however, that no amendment, suspension, or
termination may apply so as to decrease the payment to any Participant or
beneficiary of any benefit under the Plan that he accrued prior to the
21
<PAGE>
effective date of such amendment, suspension, or termination unless the
Participant has engaged in dishonest or competitive activities as described in
Section 9.5 hereof.
(b) Amendment That Decreases Benefits. If the Board of Directors
---------------------------------
amends the Plan and such amendment results in a decrease in the Supplemental
Pension, Death Benefit or Disability Benefit that otherwise would be paid under
this Plan but for the amendment, except as provided in subparagraphs (iii) and
(iv) below, the Participant's Supplemental Pension, Death Benefit or Disability
Benefit shall equal the sum of (i) and (ii) as follows:
(i) The amount derived by multiplying the Participant's benefit
calculated pursuant to the terms of the Plan in effect immediately
prior to the amendment and based upon the Participant's Compensation
used to calculate the appropriate benefit by the following fraction:
The numerator is the number of years of vesting service the
Participant has under the Pension Plan prior to the effective date of
the amendment, and the denominator is the total number of years of
vesting service the Participant has under the Pension Plan; however,
neither the numerator nor the denominator shall exceed 10.
(ii) The amount derived by multiplying the Participant's benefit
as calculated pursuant to the terms of the Plan as amended based upon
the Participant's Compensation used to calculate the appropriate
benefit by the following fraction: The numerator is the number of
years that the Participant participated in the Pension Plan after the
effective date of the amendment (but this number when added to the
numerator of the fraction in subparagraph (i) above, shall not exceed
10) and the denominator is the total number of years of vesting
service the Participant has under the Pension Plan (but this number
shall not exceed 10).
(iii) Notwithstanding the foregoing provisions of this paragraph
(b), if the Plan is so amended before a Participant has five years of
vesting service under the Pension Plan, the Participant's Supplemental
Pension, Death Benefit or Disability Benefit shall be calculated
solely in accordance with the terms of the Plan as amended.
(iv) Notwithstanding the foregoing provisions of this paragraph
(b), if any such amendment occurs upon or after a Change in Control,
the Participant's Supplemental Pension shall at least equal the
benefits which
22
<PAGE>
would be paid under paragraph (c) below if there was a termination of
the Plan at the time of such amendment.
Notwithstanding the foregoing provisions of this paragraph (b), the
Amendment and Restatement of the Plan effective May 14, 1997 shall not for any
purposes be treated as resulting in a decrease in the Supplemental Pension,
Death Benefit or Disability Benefit otherwise payable under this Plan.
(c) Termination of the Plan.
-----------------------
(i) If the Board of Directors terminates all or any portion of
the Plan and such termination adversely affects a Participant's
Supplemental Pension, such Participant shall be entitled to receive a
Supplemental Pension whether or not such Participant has been an
Eligible Employee for at least two years or has five years of vesting
service under the Pension Plan at the time of such Plan termination.
(A) It shall be based upon the Participant's Compensation as
of the date of the termination of the Plan;
(B) If payment of the Supplemental Pension begins before the
Participant has ten years of vesting service in the Pension Plan,
the reduction referred to in Section 5.2(a)(i) shall not apply;
(C) If payment of the Supplemental Pension begins before the
Participant attains age 62, the reductions referred to in Section
5.2(b) shall not apply; and
(D) If the Participant is not otherwise vested under the
Pension Plan, the calculation made under Subsection 5.2(a)(ii)
above shall be made as if he were so vested.
The Supplemental Pension determined under this paragraph (c) shall commence
(i) prior to January 1, 1999, at the time the Participant begins receiving
retirement benefits from the Pension Plan, or if he is not entitled to
benefits from the Pension Plan when his employment is terminated, at the
time he would otherwise be entitled to begin receiving retirement benefits
under the Pension Plan if he were so entitled, and (ii) if on or after
January 1, 1999, on the later of (A) the date his employment terminates, or
(B) the date he elects payment on or after he attains age 55.
(ii) If the Board of Directors terminates all or any portion of
the Plan and such termination adversely affects the Disability
Benefits or Death
23
<PAGE>
Benefits described in the Plan, a Participant shall continue to be
entitled to the Disability Benefits or Death Benefits described in the
Plan if he thereafter dies or suffers a Disability. Any such Death
Benefit or Disability Benefit, however, shall be calculated as of the
date of termination of such benefit or the Plan as if such date of
termination was the date the Participant died or suffered a
Disability. Payment of any such Death Benefit or Disability Benefit
shall be made in accordance with the terms of the Plan as in effect
immediately prior to the date of termination of such benefit or the
Plan.
Section 9.2. Nonguarantee of Employment: Nothing contained in this Plan
--------------------------
shall be construed as a contract of employment between the Employer and any
employee, as a right of any employee to be continued in the employment of the
Employer, or as a limitation of the right of the Employer to discharge any of
its employees, with or without Cause.
Section 9.3. Nonalienation of Benefits: To the extent permitted by law,
-------------------------
benefits payable under this Plan shall not, without the Plan Administrator's
consent, be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any
kind, either voluntary or involuntary. Any unauthorized attempt to anticipate,
alienate, sell, transfer, assign, pledge, encumber, charge, or otherwise dispose
of any right to benefits payable hereunder shall be void. No part of the assets
of the Employer shall be subject to seizure by legal process resulting from any
attempt by creditors of or claimants against any Participant or beneficiary or
any person claiming under or through the foregoing to attach his interest under
the Plan.
Section 9.4. Liability: No director, officer, or employee of the Employer
---------
shall be liable for any act or action, whether of commission or omission, taken
by any other director, officer, employee, or agent of the Employer under the
terms of the Plan or, except in circumstances involving his bad faith, for
anything done or omitted to be done by him under the terms of the Plan.
Section 9.5. Noncompetition Agreement: All Participants in the Plan shall
------------------------
have entered into Noncompetition Agreements in the form attached hereto as
Exhibit B as a
24
<PAGE>
condition to their participation in the Plan. Notwithstanding any other
provisions of this Plan to the contrary, no benefits shall be payable under the
Plan, and payment of benefits will cease, if a Participant is in breach of such
agreement at any time during the term of such agreement.
Section 9.6. Participation Agreement: Each Participant shall enter into a
-----------------------
Participation Agreement as a condition to his participation in the Plan. Such
Participation Agreement shall constitute a separate and enforceable agreement
between the Employer and the Participant regarding the Participant's rights in
the Plan.
Section 9.7. Successors to the Employer: Any successor to the Employer
--------------------------
hereunder, which successor continues or acquires any of the business of the
Employer, shall be bound by the terms of this Plan in the same manner and to the
same extent as the Employer.
IN WITNESS WHEREOF, and as conclusive evidence of its adoption of this
Amended and Restated Supplemental Executive Benefits Plan, the Employer has
caused this Plan to be duly executed effective as of the 12th day of August,
1998.
ATMOS ENERGY CORPORATION
By: /s/ Robert W. Best
----------------------------------
Robert W. Best,
Chairman of the Board, President and
Chief Executive Officer
25
<PAGE>
EXHIBIT A
MINIMUM BENEFIT SCHEDULE
One twelfth (1/12th) of the Annual Amount set forth below for a Participant
is the minimum total monthly pension amount payable from this Plan and the
Pension Plan to the Participant so long as payment commences no earlier than the
specified Earliest Commencement Age. Earlier commencement will result in
reduction under Section 5.2 of this Plan, except in the case of Mr. Vaughan,
whose benefits under this Plan (including the minimum Annual Amount stated
below) are payable upon his retirement at any time after he has reached age
fifty-five (55).
- --------------------------------------------------------------------------------
Participant Name Annual Amount Earliest Commencement
Age
- --------------------------------------------------------------------------------
E. G. Carter $ 84,503 62
- --------------------------------------------------------------------------------
J. A. Enloe 76,924 62
- --------------------------------------------------------------------------------
N. V. Fariss 84,060 62
- --------------------------------------------------------------------------------
D. E. James 104,668 62
- --------------------------------------------------------------------------------
W. P. McKee, Jr. 79,851 62
- --------------------------------------------------------------------------------
H. E. Neel 100,259 62
- --------------------------------------------------------------------------------
J. F. Purser 124,625 62
- --------------------------------------------------------------------------------
C. G. Shaffer 69,499 62
- -------------------------------------------------------------------------------
R. F. Stephens 143,028 62
- -------------------------------------------------------------------------------
C. K. Vaughan 277,103 55
- -------------------------------------------------------------------------------
<PAGE>
EXHIBIT B
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT is entered into as of the___________ day of
______________, 199___, by and between ATMOS ENERGY CORPORATION, a Texas
corporation (the "Employer"), and ____________________________________________
("Participant").
W I T N E S S E T H:
WHEREAS, the Employer has adopted the Atmos Energy Corporation Supplemental
Executive Benefits Plan (the "Plan"), pursuant to which certain executive or
management employees of the Employer are eligible to receive supplemental
retirement, disability, and death benefits; and
WHEREAS, in accordance with the requirements of the Plan and as an
inducement to the Employer to allow Participant's participation in the Plan,
Participant has agreed to execute and enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Participant agrees that, during the term of this Agreement, Participant
shall not (a) participate, directly or indirectly, as an employee, agent,
representative, officer, director, stockholder, partner, joint venturer, or
otherwise or (b) have any direct or indirect financial interest in any form in
any business that sells or offers for sale, directly or indirectly, any products
or services that are competitive with the products or services sold or offered
for sale by the Employer in any geographic location in which the Employer shall
be doing business during such period of time as Participant is a participant in
the Plan; provided, however, that the ownership by Participant of any stock
listed on a national securities exchange of any corporation conducting a
competing business shall not be deemed a violation of this Agreement if the
aggregate amount of such stock owned by Participant does not exceed one percent
(1%) of the total outstanding stock of such corporation.
2. In the event of a breach or threatened breach of the provisions of this
Agreement by Participant, the Employer shall be entitled (as an absolute right
and without the necessity of proving irreparable injury or damages and in
addition to any other remedies available under the Plan or otherwise) to an
injunction restraining Participant from such violation.
3. If any provision of this Agreement shall, for any reason, be adjudged
by any court of competent jurisdiction to be invalid or unenforceable, such
judgment shall not affect, impair, or invalidate the remainder of this Agreement
but shall be confined in
<PAGE>
its operation to the provisions of this Agreement directly involved in the
controversy in which such judgment shall have been rendered. To the extent that
the provisions of this Agreement are adjudged to be invalid or unenforceable,
this Agreement shall be construed and (in the absence of such construction)
reformed so as to allow the maximum benefit of the provisions of this Agreement
permitted by law. If, however, this Agreement shall for any reason be held by a
court of competent jurisdiction to be excessively broad as to time, duration,
geographical scope, activity, or subject matter, it shall be construed by
limiting and reducing it so as to be enforceable to the extent compatible with
the applicable laws as they shall then appear.
4. This Agreement shall become effective as of the commencement of
Supplemental Pension or Disability Benefits from the Plan and shall terminate
upon the earliest to occur of (i) five (5) years from the date Participant
begins receiving Supplemental Pension or Disability Benefits from the Plan, (ii)
the attainment of age 67 by Participant, or (iii) Participant's death.
5. This Agreement shall be construed and enforced in accordance with the
laws of the State of Texas.
IN WITNESS WHEREOF, the parties hereto have executed this Noncompetition
Agreement as of the date first written above.
PARTICIPANT ATMOS ENERGY CORPORATION
By:
- --------------------------------- -------------------------------------
2
<PAGE>
EXHIBIT C-1
PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT is entered into as of the _________ day of
_______________, 19____ by and between ATMOS ENERGY CORPORATION, a Texas
corporation (the "Employer"), and __________________________________________
("Participant").
W I T N E S S E T H:
WHEREAS, the Employer adopted and has been maintaining the Atmos Energy
Corporation Supplemental Executive Benefits Plan (the "Plan"), pursuant to which
certain executive or management employees of the Employer may receive
supplemental retirement, disability, and death benefits; and
WHEREAS, Participant has been a participant in the Plan; and
WHEREAS, effective as of May 14, 1997 (the "Effective Date"), the Employer
amended and restated the Plan; and
WHEREAS, the parties desire to enter into a new participation agreement in
order for Participant to continue participation in the amended and restated
Plan; and
WHEREAS, in accordance with Section 9.6 of the Plan, the Employer and
Participant have agreed to execute and enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Agreement. The Employer hereby agrees to provide to Participant the
benefits described in the Plan pursuant to the terms and conditions set forth in
the Plan and in this Agreement.
2. Amendment or Termination of the Plan; Termination of Employment or
Participation Without Cause. The Employer hereby agrees that, if
(i) the Employer amends or terminates the Plan after May 14, 1997
in such a manner that results in a decrease in the amount of the benefits
to be paid under the Plan to Participant, or
(ii) Participant's employment is terminated voluntarily or
involuntarily by the Employer for any reason other than for Cause (as
defined in Subparagraph 2(e) below), or
<PAGE>
(iii) Participant's participation in the Plan is terminated by the
Employer for any reason other than for Cause prior to the Participant's
termination of employment with the Employer,
Participant shall have the right to, and the Employer agrees to pay to
Participant, any benefits accrued prior to the effective date of such amendment
or termination of the Plan or of such termination of Participant's employment
with the Employer or participation in the Plan. The amount of benefits that
shall be paid under this Paragraph 2 shall be calculated as follows:
(a) In the event the Employer amends the Plan after May 14, 1997
and such amendment results in a decrease in the amount of the Supplemental
Pension, Disability Pension, or Death Benefit that would be paid under the
Plan but for the amendment thereof, the amount of Participant's benefit
shall be the sum of:
(i) Participant's benefit as calculated pursuant to the
terms of the Plan in effect immediately prior to the amendment
thereof, based upon Participant's Compensation as of the date of his
retirement, disability, or death, multiplied by a fraction, the
numerator of which shall be the number of years of vesting service by
Participant in the Pension Plan prior to the effective date of the
amendment (which number shall not be less than 5 nor greater than 10)
and the denominator of which shall be the total number of years of
vesting service by Participant in the Pension Plan (which number, for
purposes of calculating Participant's Supplemental Pension, shall not
be greater than 10); plus
(ii) Participant's benefit as calculated pursuant to the
terms of the Plan as amended, based upon Participant's Compensation as
of the date of his retirement, disability, or death, multiplied by a
fraction, the numerator of which shall be the number of years that
Participant participated in the Pension Plan after the effective date
of the amendment (which number, for purposes of calculating
Participant's Supplemental Pension, when added to the numerator of the
fraction in clause (i) above, may not exceed 10) and the denominator
of which shall be the total number of years of vesting service by
Participant in the Pension Plan (which number for purposes of
calculating Participant's Supplemental Pension, shall not be greater
than 10);
provided, however, that if the Plan is so amended prior to Participant's
fifth year of vesting service in the Pension Plan, Participant's
Supplemental
2
<PAGE>
Pension payable hereunder shall be calculated solely in accordance with the
terms of the Plan as amended; provided, further, that, Participant's
Supplemental Pension must at least equal the benefits which would be paid
under Section 9.1(c) of the Plan if there was a termination of the Plan at
the time of such amendment.
(b) In the event the Employer terminates the Plan or any portion
thereof after May 14, 1997 and such termination affects the Disability
Pension or Death Benefit described in the Plan, Participant's Disability
Pension and Death Benefit shall be calculated as of the date of termination
of such benefit as though the date of such termination was the date that
Participant became disabled or died. Such Disability Pension and Death
Benefit shall become payable, however, only upon Participant's disability
or death occurring in accordance with the terms of the Plan or any portion
thereof in effect immediately prior to the date of its termination.
(c) In the event the Employer terminates the Plan or any portion
thereof after May 14, 1997 and such termination affects the Supplemental
Pension described in the Plan, Participant's Supplemental Pension shall be
the amount determined in accordance with Section 5.2 of the Plan except
that
(i) It shall be based upon the Participant's Compensation as
of the date of the termination of the Plan;
(ii) If payment of the Supplemental Pension begins before the
Participant has ten years of vesting service in the Pension Plan, the
reduction referred to in Section 5.2(a)(i) of the Plan shall not
apply;
(iii) If payment of the Supplemental Pension begins before the
Participant attains age 62, the reductions referred to in Section
5.2(b) of the Plan shall not apply; and
(iv) If the Participant is not otherwise vested under the
Pension Plan, the calculation made under Subsection 5.2(a)(ii) of the
Plan shall be made as if he were so vested.
(d) If Participant's employment with the Employer is terminated
voluntarily or involuntarily by the Employer for any reason other than for
Cause (as defined in Subparagraph 2(e) below) or if Participant's
participation in the Plan is terminated by the Employer for any reason
other than for Cause, Participant shall be entitled to receive a
Supplemental
3
<PAGE>
Pension at such time as he becomes entitled to receive a benefit under the
Pension Plan. Such Supplemental Pension shall be calculated in the same
manner as set forth in Subparagraph 2(c) above for benefits payable in the
event of a termination of the Plan.
(e) As used in this Agreement, "Cause" for termination of
employment shall mean termination upon
(i) the willful and continued failure by Participant to
substantially perform his duties with the Employer (other than any
such failure resulting from Participant's incapacity due to physical
or mental illness) after a written demand for substantial performance
is delivered to Participant by the Employer that specifically
identifies the manner in which the Employer believes that Participant
has not substantially performed his duties, or
(ii) Participant's willful engagement in conduct that is
demonstrably and materially injurious to the Employer, monetarily or
otherwise.
For purposes of this Subparagraph, no act, or failure to act, on
Participant's part shall be deemed "willful" unless done, or omitted to be
done, by Participant not in good faith and without a reasonable belief that
the action or omission was in the best interests of the Employer.
Notwithstanding the foregoing, Participant shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to
Participant a copy of a resolution duly adopted by the affirmative vote of
not less than three-quarters (3/4) of the entire membership of the Board of
Directors of the Employer at a meeting of such Board of Directors called
and held for such purpose (after reasonable notice to Participant and an
opportunity for Participant, together with Participant's counsel, to be
heard before the Board of Directors), finding that in the good faith
opinion of the Board of Directors that Participant was guilty of conduct
set forth above in clauses (i) or (ii) of this Subparagraph 2(e) and
specifying the particulars thereof in detail.
3. Limitations. Participant agrees that nothing in this Agreement or the
Plan shall entitle him, or be deemed to entitle him, to receive a Supplemental
Pension under the Plan if
(i) he has not met the requirements for a Supplemental Pension as
set forth in the Plan, or
4
<PAGE>
(ii) his employment with the Employer or participation in the Plan
is terminated for Cause (as defined in Subparagraph 2(e) above).
4. Amendment. No amendment or termination of the Plan by the Employer
shall constitute an amendment or termination of this Agreement. This Agreement
may be amended or modified only by the written agreement of the parties hereto,
and will terminate only upon the occurrence of the earlier of the following
events: (i) the execution of a written agreement to terminate this Agreement
signed by all of the parties hereto, (ii) the satisfaction of all of the
Employer's obligations to Participant under the Plan and this Agreement, (iii)
the termination for Cause of Participant's employment with the Employer or
participation in the Plan, or (iv) the breach by Participant of any of the terms
or provisions of the Noncompetition Agreement executed by Participant in
accordance with the Plan.
5. Funding.
(a) Not later than the time the Participant Retires or becomes
eligible to receive an unreduced Supplemental Pension under the Plan,
whichever occurs first, the Employer shall contribute to a trust or other
funding arrangement an amount necessary to fund 100% of the then-present
value of the Participant's accrued Supplemental Pension. Notwithstanding
the foregoing, immediately upon a Change in Control, the Employer shall
contribute to a trust or other funding arrangement an amount necessary to
fund 100% of the then-present value of all Supplemental Pension benefits
(vested and unvested) payable under this Agreement and/or the Plan to the
Participant, regardless of whether the Participant is then eligible to
Retire. The amount required to be funded by this Paragraph 5 shall be
calculated in accordance with Paragraph 6 hereof. The Employer shall review
the funding status of the trust or other funding arrangement established
under this Paragraph 5 on an annual basis and shall make contributions
thereto as may be required to maintain the value of the assets thereof at
no less than 100% of the then-present value of all such Supplemental
Pension benefits.
(b) (i) As used in this Paragraph 5 and Paragraph 6, except as
provided herein, a "Change in Control" of the Employer shall be deemed
to have occurred if:
(A) Any "Person" (as defined in subparagraph (ii)
below), other than (1) the Employer or any of its subsidiaries,
(2) a trustee or other fiduciary holding securities under an
employee benefit plan of the Employer or any of its Affiliates,
(3) an underwriter temporarily holding securities pursuant to
an offering of such securities, or (4) a corporation owned,
directly or indirectly, by the
5
<PAGE>
shareholders of the Employer in substantially the same
proportions as their ownership of stock of the Employer, is or
becomes the "beneficial owner" (as defined in subparagraph (ii)
below), directly or indirectly, of securities of the Employer
(not including in the securities beneficially owned by such
person any securities acquired directly from the Company or its
Affiliates) representing 33-1/3% or more of the combined voting
power of the Employer's then outstanding securities, or 33-1/3%
or more of the then outstanding common stock of the Employer,
excluding any Person who becomes such a beneficial owner in
connection with a transaction described in subparagraph (C)(1)
below.
(B) During any period of two consecutive years (the
"Period"), individuals who at the beginning of the Period
constitute the Board of Directors of the Employer and any "new
director" (as defined in subparagraph (ii) below) cease for any
reason to constitute a majority of the Board of Directors.
(C) There is consummated a merger or consolidation of
the Employer or any direct or indirect subsidiary of the
Employer with any other corporation, except if:
(1) the merger or consolidation would result in
the voting securities of the Employer outstanding
immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted
into voting securities of the surviving entity or any
parent thereof) at least 60% of the combined voting
power of the voting securities of the Employer or such
surviving entity or any parent thereof outstanding
immediately after such merger or consolidation; or
(2) the merger or consolidation is effected to
implement a recapitalization of the Employer (or similar
transaction) in which no Person is or becomes the
beneficial owner, directly or indirectly, of securities
of the Employer (not including in the securities
beneficially owned by such Person any securities
acquired directly from the Employer or its Affiliates
other than in connection with the acquisition by the
Employer or its Affiliates
6
<PAGE>
of a business) representing 60% or more of the combined
voting power of the Employer's then outstanding
securities;
(D) The shareholders of the Employer approve a plan of
complete liquidation or dissolution of the Employer or an
agreement for the sale or disposition by the Employer of all or
substantially all the Employer's assets, other than a sale or
disposition by the Employer of all or substantially all of the
Employer's assets to an entity, at least 60% of the combined
voting power of the voting securities of which are owned by the
stockholders of the Employer in substantially the same
proportions as their ownership of the Employer immediately
prior to such sale.
Notwithstanding the foregoing provisions of this subparagraph (b)(i),
no actions or events related to the merger of United Cities Gas
Company ("United Cities") with and into the Employer, as contemplated
by the Agreement and Plan of Reorganization, dated as of July 19,
1996, between the Employer and United Cities (the "Merger"), including
the consummation of the Merger, shall constitute a Change in Control
of the Employer for purposes of this Agreement.
(ii) For purposes of subparagraph (i) above,
(A) "Person" shall have the meaning given in Section
3(a)(9) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") as modified and used in Sections 13(d) and
14(d) of the Exchange Act.
(B) "Beneficial owner" shall have the meaning provided
in Rule 13d-3 under the Exchange Act.
(C) "New director" shall mean an individual whose
election by the Employer's Board of Directors or nomination for
election by the Employer's shareholders was approved by a vote
of at least 2/3's of the directors then still in office who
either were directors at the beginning of the Period or whose
election or nomination for election was previously so approved
or recommended. However, "new director" shall not include a
director whose initial assumption of office is in connection
with an actual or threatened election contest, including but
not limited to a consent solicitation relating to the election
of directors of the Company.
7
<PAGE>
(D) "Affiliate" shall have the meaning set forth in
Rule 12b-2 promulgated under Section 12 of the Exchange Act.
6. Calculation of Funding Obligations. The Employer shall calculate its
funding obligations under this Agreement and the Plan solely by using the
actuarial assumptions and methodology set forth in Exhibit D to the Plan. Upon
and after a Change in Control of the Employer, the actuarial assumptions and
methodology set forth in Exhibit D may be changed with respect to the
Participant or, if applicable, his Beneficiary, only with the Participant's, or,
if applicable, his Beneficiary's, written consent.
7. Annual Statements: As soon as practicable after the end of each Plan
Year, the Employer shall deliver to the Participant or, if applicable, his
Beneficiary, a statement containing (i) the present value of the Employer's
future benefit obligations to the Participant, or, if applicable, his
Beneficiary; (ii) the actuarial assumptions used to calculate the present value
of the Employer's future benefit obligations under the Plan; and (iii) the
current value of the assets, if any, held in any trust or other funding
arrangement for the benefit of the Participant, or, if applicable, his
Beneficiary.
8. No Guarantee of Employment. Nothing contained in this Agreement shall
be construed as a contract of employment between the Employer and Participant,
or as a right of Participant to be continued in the employment of the Employer,
or as a limitation of the right of the Employer to discharge Participant with or
without cause.
9. Legal Fees and Expenses. The Employer agrees to pay any and all legal
fees and expenses incurred by Participant in seeking to obtain or enforce any
right or benefit provided by this Agreement.
10. Capitalized Terms. Each capitalized term used in this Agreement that
is not otherwise defined herein shall have the same meaning attributed to it in
the Plan.
11. Agreement Binding on Successors to the Employer. Any successor to the
Employer hereunder, which successor continues or acquires any of the business of
the Employer, shall be bound by the terms of this Agreement in the same manner
and to the same extent as the Employer.
12. Prior Agreements Superseded. The terms of this Agreement supersede
the terms of all prior Participation Agreements between Participant and the
Employer.
13. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Texas.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Participation
Agreement as of the date first written above.
PARTICIPANT: ATMOS ENERGY CORPORATION:
By:
- ------------------------------ -------------------------------------------
9
<PAGE>
EXHIBIT C-2
PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT is entered into as of the ____ day of
_____________, 19____ by and between ATMOS ENERGY CORPORATION, a Texas
corporation (the "Employer"), and _____________________________________
("Participant").
W I T N E S S E T H:
WHEREAS, the Employer has adopted the Atmos Energy Corporation Supplemental
Executive Benefits Plan (the "Plan"), pursuant to which certain executive or
management employees of the Employer may receive supplemental retirement,
disability, and death benefits; and
WHEREAS, in accordance with Section 9.6 of the Plan, the Employer and
Participant have agreed to execute and enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Agreement. The Employer hereby agrees to provide to Participant the
benefits described in the Plan pursuant to the terms and conditions set forth in
the Plan and in this Agreement.
2. Amendment or Termination of the Plan; Termination of Employment or
Participation Without Cause. The Employer hereby agrees that, if
(i) the Employer amends or terminates the Plan in such a manner
that results in a decrease in the amount of the benefits to be paid under
the Plan to Participant, or
(ii) Participant's employment is terminated involuntarily by the
Employer for any reason other than for Cause (as defined in Subparagraph
2(e) below), or
(iii) Participant's participation in the Plan is terminated by the
Employer for any reason other than for Cause prior to the Participant's
termination of employment with the Employer,
Participant shall have the right to, and the Employer agrees to pay to
Participant, any benefits accrued prior to the effective date of such amendment
or termination of the Plan or of such termination of Participant's employment
with the Employer or participation in
<PAGE>
the Plan. The amount of benefits that shall be paid under this Paragraph 2 shall
be calculated as follows:
(a) In the event the Employer amends the Plan and such amendment
results in a decrease in the amount of the Supplemental Pension, Disability
Pension, or Death Benefit that would be paid under the Plan but for the
amendment thereof, the amount of Participant's benefit shall be the sum of:
(i) Participant's benefit as calculated pursuant to the
terms of the Plan in effect immediately prior to the amendment
thereof, based upon Participant's Compensation as of the date of his
retirement, disability, or death, multiplied by a fraction, the
numerator of which shall be the number of years of vesting service by
Participant in the Pension Plan prior to the effective date of the
amendment (which number shall not be less than 5 nor greater than 10)
and the denominator of which shall be the total number of years of
vesting service by Participant in the Pension Plan (which number, for
purposes of calculating Participant's Supplemental Pension, shall not
be greater than 10); plus
(ii) Participant's benefit as calculated pursuant to the
terms of the Plan as amended, based upon Participant's Compensation as
of the date of his retirement, disability, or death, multiplied by a
fraction, the numerator of which shall be the number of years that
Participant participated in the Pension Plan after the effective date
of the amendment (which number, for purposes of calculating
Participant's Supplemental Pension, when added to the numerator of the
fraction in clause (i) above, may not exceed 10) and the denominator
of which shall be the total number of years of vesting service by
Participant in the Pension Plan (which number for purposes of
calculating Participant's Supplemental Pension, shall not be greater
than 10);
provided, however, that if the Plan is so amended prior to Participant's
fifth year of vesting service in the Pension Plan, Participant's
Supplemental Pension payable hereunder shall be calculated solely in
accordance with the terms of the Plan as amended; provided, further, that,
if such amendment occurs upon or after a "Change in Control" (as defined in
Subparagraph 3(b) below), Participant's Supplemental Pension must be at
least equal the benefits which would be paid under Section 9.1(c) of the
Plan if there was a termination of the Plan at the time of such amendment.
2
<PAGE>
(b) In the event the Employer terminates the Plan or any portion
thereof and such termination affects the Disability Pension or Death
Benefit described in the Plan, Participant's Disability Pension and Death
Benefit shall be calculated as of the date of termination of such benefit
as though the date of such termination was the date that Participant became
disabled or died. Such Disability Pension and Death Benefit shall become
payable, however, only upon Participant's disability or death occurring in
accordance with the terms of the Plan or any portion thereof in effect
immediately prior to the date of its termination.
(c) In the event the Employer terminates the Plan or any portion
thereof and such termination affects the Supplemental Pension described in
the Plan, Participant's Supplemental Pension shall be the amount determined
in accordance with Section 5.2 of the Plan except that
(i) It shall be based upon the Participant's Compensation as
of the date of the termination of the Plan;
(ii) If payment of the Supplemental Pension begins before the
Participant has ten years of vesting service in the Pension Plan, the
reduction referred to in Section 5.2(a)(i) of the Plan shall not
apply;
(iii) If payment of the Supplemental Pension begins before the
Participant attains age 62, the reductions referred to in Section
5.2(b) of the Plan shall not apply; and
(iv) If the Participant is not otherwise vested under the
Pension Plan, the calculation made under Subsection 5.2(a)(ii) of the
Plan shall be made as if he were so vested.
(d) If, at any time prior to a "Change in Control" (as defined in
Subparagraph 3(b) hereof), Participant's employment with the Employer is
terminated involuntarily by the Employer for any reason other than for
Cause (as defined in Subparagraph 2(e) below) or if Participant's
participation in the Plan is terminated by the Employer for any reason
other than for Cause, Participant shall nevertheless be entitled to the
benefits payable under the Plan that have accrued prior to the termination
of Participant's employment or Plan participation, the amount of such
benefits to be calculated in the manner set forth in Section 5.2 of the
Plan; provided, however, that Participant's right to a Supplemental Pension
shall vest only if Participant has been an Eligible Employee for at least
two years and has at least five years of vesting service under the Pension
Plan as of the date of such termination.
3
<PAGE>
(e) As used in this Agreement, "Cause" for termination of
employment shall mean termination upon
(i) the willful and continued failure by Participant to
substantially perform his duties with the Employer (other than any
such failure resulting from Participant's incapacity due to physical
or mental illness) after a written demand for substantial performance
is delivered to Participant by the Employer that specifically
identifies the manner in which the Employer believes that Participant
has not substantially performed his duties, or
(ii) Participant's willful engagement in conduct that is
demonstrably and materially injurious to the Employer, monetarily or
otherwise.
For purposes of this Subparagraph, no act, or failure to act, on
Participant's part shall be deemed "willful" unless done, or omitted to be
done, by Participant not in good faith and without a reasonable belief that
the action or omission was in the best interests of the Employer.
Notwithstanding the foregoing, Participant shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to
Participant a copy of a resolution duly adopted by the affirmative vote of
not less than three-quarters (3/4) of the entire membership of the Board of
Directors of the Employer at a meeting of such Board of Directors called
and held for such purpose (after reasonable notice to Participant and an
opportunity for Participant, together with Participant's counsel, to be
heard before the Board of Directors), finding that in the good faith
opinion of the Board of Directors that Participant was guilty of conduct
set forth above in clauses (i) or (ii) of this Subparagraph 2(e) and
specifying the particulars thereof in detail.
3. Change in Control.
(a) Notwithstanding anything expressly or impliedly to the contrary
contained in this Agreement or the Plan, if, [TO BE INSERTED WHERE
APPROPRIATE: AT ANY TIME DURING THE THREE (3)-YEAR PERIOD IMMEDIATELY]
following a Change in Control of the Employer, Participant's employment is
involuntarily terminated by the Employer, or he is demoted or reassigned to
a position that causes him to cease to be an Eligible Employee, for any
reason other than for Cause (as defined in Subparagraph 2(e) above),
Participant shall nevertheless be entitled to receive a Supplemental
Pension at such time as he becomes entitled to receive a benefit under the
Pension Plan regardless of whether Participant has been an Eligible
Employee for at least two years or has five years of vesting service under
the Pension Plan at the time of such termination, demotion, or
reassignment. If a
4
<PAGE>
Participant's employment is involuntarily terminated by the Employer for
any reason other than for Cause, or his participation in the Plan is
terminated by the Employer for any reason other than for Cause, prior to a
Change in Control (whether or not a Change in Control ever occurs) and such
termination either (A) was at the request or direction of a person who has
entered into an agreement with the Employer, the consummation of which
would constitute a Change in Control, or (B) was otherwise in connection
with or in anticipation of a Change in Control (whether or not a Change in
Control ever occurs), then such Participant's termination of employment or
participation shall be deemed to have followed a Change in Control of the
Employer. Such Supplemental Pension shall be calculated in the same manner
as set forth in Subparagraph 2(c) above for benefits payable in the event
of a termination of the Plan.
(b) (i) As used in this Agreement, except as provided herein, a
"Change in Control" of the Employer shall be deemed to have occurred
if:
(A) Any "Person" (as defined in subparagraph (ii)
below), other than (1) the Employer or any of its subsidiaries,
(2) a trustee or other fiduciary holding securities under an
employee benefit plan of the Employer or any of its Affiliates,
(3) an underwriter temporarily holding securities pursuant to
an offering of such securities, or (4) a corporation owned,
directly or indirectly, by the shareholders of the Employer in
substantially the same proportions as their ownership of stock
of the Employer, is or becomes the "beneficial owner" (as
defined in subparagraph (ii) below), directly or indirectly, of
securities of the Employer (not including in the securities
beneficially owned by such person any securities acquired
directly from the Company or its Affiliates) representing 33-
1/3% or more of the combined voting power of the Employer's
then outstanding securities, or 33-1/3% or more of the then
outstanding common stock of the Employer, excluding any Person
who becomes such a beneficial owner in connection with a
transaction described in subparagraph (C)(1) below.
(B) During any period of two consecutive years (the
"Period"), individuals who at the beginning of the Period
constitute the Board of Directors of the Employer and any "new
director" (as defined in subparagraph (ii) below) cease for any
reason to constitute a majority of the Board of Directors.
5
<PAGE>
(C) There is consummated a merger or consolidation of
the Employer or any direct or indirect subsidiary of the
Employer with any other corporation, except if:
(1) the merger or consolidation would result in
the voting securities of the Employer outstanding
immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted
into voting securities of the surviving entity or any
parent thereof) at least 60% of the combined voting
power of the voting securities of the Employer or such
surviving entity or any parent thereof outstanding
immediately after such merger or consolidation; or
(2) the merger or consolidation is effected to
implement a recapitalization of the Employer (or similar
transaction) in which no Person is or becomes the
beneficial owner, directly or indirectly, of securities
of the Employer (not including in the securities
beneficially owned by such Person any securities
acquired directly from the Employer or its Affiliates
other than in connection with the acquisition by the
Employer or its Affiliates of a business) representing
60% or more of the combined voting power of the
Employer's then outstanding securities;
(D) The shareholders of the Employer approve a plan of
complete liquidation or dissolution of the Employer or an
agreement for the sale or disposition by the Employer of all or
substantially all the Employer's assets, other than a sale or
disposition by the Employer of all or substantially all of the
Employer's assets to an entity, at least 60% of the combined
voting power of the voting securities of which are owned by the
stockholders of the Employer in substantially the same
proportions as their ownership of the Employer immediately
prior to such sale.
[CAN BE DROPPED FOR ANY PERSON WHO BECOMES AN ELIGIBLE EMPLOYEE
FOLLOWING CONSUMMATION OF THE UNITED CITIES MERGER: NOTWITHSTANDING
THE FOREGOING PROVISIONS OF THIS SUBPARAGRAPH (B)(I), NO ACTIONS OR
EVENTS RELATED TO THE MERGER OF UNITED CITIES GAS COMPANY ("UNITED
CITIES") WITH AND INTO THE EMPLOYER, AS
6
<PAGE>
CONTEMPLATED BY THE AGREEMENT AND PLAN OF REORGANIZATION, DATED AS OF
JULY 19, 1996, BETWEEN THE EMPLOYER AND UNITED CITIES (THE "MERGER"),
INCLUDING THE CONSUMMATION OF THE MERGER, SHALL CONSTITUTE A CHANGE IN
CONTROL OF THE EMPLOYER FOR PURPOSES OF THIS AGREEMENT.]
(ii) For purposes of subparagraph (i) above,
(A) "Person" shall have the meaning given in Section
3(a)(9) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") as modified and used in Sections 13(d) and
14(d) of the Exchange Act.
(B) "Beneficial owner" shall have the meaning provided
in Rule 13d-3 under the Exchange Act.
(C) "New director" shall mean an individual whose
election by the Employer's Board of Directors or nomination for
election by the Employer's shareholders was approved by a vote
of at least 2/3's of the directors then still in office who
either were directors at the beginning of the Period or whose
election or nomination for election was previously so approved
or recommended. However, "new director" shall not include a
director whose initial assumption of office is in connection
with an actual or threatened election contest, including but
not limited to a consent solicitation relating to the election
of directors of the Company.
(D) "Affiliate" shall have the meaning set forth in Rule
12b-2 promulgated under Section 12 of the Exchange Act.
4. Limitations. Except as otherwise provided in Paragraph 3 of this
Agreement, Participant agrees that nothing in this Agreement or the Plan shall
entitle him, or be deemed to entitle him, to receive a Supplemental Pension
under the Plan if
(i) he has not met the requirements for a Supplemental Pension as
set forth in the Plan,
(ii) his employment with the Employer is terminated prior to his
reaching the age of eligibility for the immediate commencement of his
Pension Plan benefit due to resignation, or
7
<PAGE>
(iii) his employment with the Employer or participation in the Plan
is terminated for Cause (as defined in Subparagraph 2(e) above).
5. Amendment or Termination. No amendment or termination of the Plan by
the Employer shall constitute an amendment or termination of this Agreement.
This Agreement may be amended or modified only by the written agreement of the
parties hereto, and will terminate only upon the occurrence of the earlier of
the following events: (i) the execution of a written agreement to terminate
this Agreement signed by all of the parties hereto, (ii) the satisfaction of all
of the Employer's obligations to Participant under the Plan and this Agreement,
(iii) the termination by Participant of Participant's employment with the
Employer by resignation effective prior to Participant reaching age 55, unless
such resignation occurs after a Change in Control, (iv) the termination for
Cause of Participant's employment with the Employer, or (v) the breach by
Participant of any of the terms or provisions of the Noncompetition Agreement
executed by Participant in accordance with the Plan.
6. Funding. Not later than the time the Participant Retires or becomes
eligible to receive an unreduced Supplemental Pension under the Plan, whichever
occurs first, the Employer shall contribute to a trust or other funding
arrangement an amount necessary to fund 100% of the then-present value of the
Participant's accrued Supplemental Pension. Notwithstanding the foregoing,
immediately upon a Change in Control, the Employer shall contribute to a trust
or other funding arrangement an amount necessary to fund 100% of the then-
present value of all Supplemental Pension benefits (vested and unvested) payable
under this Agreement and/or the Plan to the Participant, regardless of whether
the Participant is then eligible to Retire or to receive an unreduced
Supplemental Pension. The amount required to be funded by this Paragraph 6
shall be calculated in accordance with Paragraph 7 hereof. The Employer shall
review the funding status of the trust or other funding arrangement established
under this Paragraph 6 on an annual basis and shall make contributions thereto
as may be required to maintain the value of the assets thereof at no less than
100% of the then-present value of all such Supplemental Pension benefits.
7. Calculation of Funding Obligations. The Employer shall calculate its
funding obligations under this Agreement and the Plan solely by using the
actuarial assumptions and methodology set forth in Exhibit D to the Plan. Upon
and after a Change in Control of the Employer which occurs at a time when the
Participant is an Eligible Employee, the actuarial assumptions and methodology
set forth in Exhibit D may be changed with respect to the Participant or, if
applicable, his Beneficiary, only with the Participant's, or, if applicable, his
Beneficiary's, written consent.
8. Annual Statements: As soon as practicable after the end of each Plan
Year, the Employer shall deliver to the Participant or, if applicable, his
Beneficiary, a statement containing (i) the present value of the Employer's
future benefit obligations to the Participant, or, if applicable, his
Beneficiary; (ii) the actuarial assumptions used to calculate the present value
of the Employer's future benefit obligations under the Plan;
8
<PAGE>
and (iii) the current value of the assets, if any, held in any trust or other
funding arrangement for the benefit of the Participant, or, if applicable, his
Beneficiary.
9. No Guarantee of Employment. Nothing contained in this Agreement shall
be construed as a contract of employment between the Employer and Participant,
or as a right of Participant to be continued in the employment of the Employer,
or as a limitation of the right of the Employer to discharge Participant with or
without cause.
10. Legal Fees and Expenses. The Employer agrees to pay any and all legal
fees and expenses incurred by Participant in seeking to obtain or enforce any
right or benefit provided by this Agreement.
11. Capitalized Terms. Each capitalized term used in this Agreement that
is not otherwise defined herein shall have the same meaning attributed to it in
the Plan.
12. Agreement Binding on Successors to the Employer. Any successor to the
Employer hereunder, which successor continues or acquires any of the business of
the Employer, shall be bound by the terms of this Agreement in the same manner
and to the same extent as the Employer.
13. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Texas.
IN WITNESS WHEREOF, the parties hereto have executed this Participation
Agreement as of the date first written above.
PARTICIPANT: ATMOS ENERGY CORPORATION:
By:
- ------------------------------- -------------------------------
9
<PAGE>
EXHIBIT D
ATMOS ENERGY CORPORATION
SUMMARY OF ACTUARIAL ASSUMPTIONS AND METHODS
FOR
DETERMINING ANNUAL SEBP TRUST
FUNDING LIABILITIES
ACTUARIAL ASSUMPTIONS
- ---------------------
Discount Rate 8%
Mortality
Prior to Age 62 None
After Age 62 IRS Applicable Table
(50/50 GAM83)
Salary Scale 0%
METHOD FOR DETERMINING LIABILITIES
- ----------------------------------
The liability determined is the present value as of the valuation date of the
projected age 62 SEBP benefit. The projected age 62 benefit is based on SEBP
compensation determined as the sum of (1), (2) and (3) as follows:
(1) The greater of (A) the Participant's annual base salary at the date of
his termination of employment, or (B) the average of the Participant's
annual base salary for the highest three (3) calendar years (whether
or not consecutive) of the Participant's employment with the Employer.
(2) The greater of (A) the Participant's last Performance Award or (B) the
average of the highest three (3) Performance Awards (whether or not
consecutive).
(3) The Participant's annual car allowance amount at the date of his
termination of employment.
The qualified plan offset is the projected age 62 qualified plan benefit
with no salary scale or wage base projections.
<PAGE>
EXHIBIT 10.30(c)
AMENDMENT NO. 2 TO
CONSULTING AGREEMENT
THIS AMENDMENT NO. 2 TO CONSULTING AGREEMENT (the "Amendment") is made and
entered into this 12th day of August, 1998, by and between ATMOS ENERGY
CORPORATION, a Texas and Virginia corporation (the "Company"), and CHARLES K.
VAUGHAN ("Consultant").
WHEREAS, the Company and Consultant entered into that certain Consulting
Agreement dated October 1, 1994, as amended by Amendment No. 1 to Consulting
Agreement dated May 14, 1997 (the "Agreement"); and
WHEREAS, the Company and Consultant desire to amend the Agreement to extend
the term thereof for an additional one-year period;
NOW, THEREFORE, for and in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. Extension of Term. In accordance with Subparagraph 4(a) of the
Agreement, the Company and the Consultant hereby agree to extend the term of the
Agreement for an additional one-year period commencing on October 1, 1999 and
ending September 30, 2000. The Consultant's annual compensation during such
year shall be $130,000, to be paid in equal semi-annual installments on October
1, 1999 and April 1, 2000.
2. No Other Amendment. Except as expressly amended hereby, all of the
other terms, provisions, and conditions of the Agreement are hereby ratified and
confirmed and shall remain unchanged and in full force and effect. To the
extent any terms or provisions of this Amendment conflict with those of the
Agreement, the terms and provisions of the Agreement shall control. This
Amendment shall be deemed a part of, and is hereby incorporated into the
Agreement. The Agreement and any and all other documents heretofore, now, or
hereafter executed and delivered pursuant to the terms of the Agreement are
hereby amended so that any reference to the Agreement shall mean a reference to
the Agreement as amended hereby.
3. Governing Law. This Amendment shall be governed by, and construed in
accordance with, the laws of the State of Texas.
4. Counterparts. This Amendment may be executed in counterparts, each of
which will be an original, but all of which together will constitute one and the
same agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
effective as of the date and year first above written.
COMPANY
ATMOS ENERGY CORPORATION
By: /s/ Robert W. Best
--------------------------
Robert W. Best
Chairman, President and
Chief Executive Officer
CONSULTANT
/s/ Charles K Vaughan
-------------------------
CHARLES K. VAUGHAN
2
<PAGE>
Exhibit 10.32
ATMOS ENERGY CORPORATION
------------------------
PERFORMANCE-BASED
-----------------
SUPPLEMENTAL EXECUTIVE BENEFITS PLAN
------------------------------------
Effective Date: August 12, 1998
-------------------------------
<PAGE>
ARTICLE I
---------
Purpose and Effective Date
--------------------------
Section 1.1. Purpose: The purpose of this Plan is to provide supplemental
-------
retirement income, death and disability benefits to certain executive employees
of Atmos Energy Corporation.
Section 1.2. Effective Date: The Plan is effective on August 12, 1998.
--------------
ARTICLE II
----------
Definitions and Construction
----------------------------
Section 2.1. Definitions: The following words and phrases used in this
-----------
Plan shall have the respective meanings set forth below, unless the context in
which they are used clearly indicates a contrary meaning:
(a) Beneficiary: The individual or individuals described in
-----------
Section 7.3 of this Plan who are receiving any benefit payments hereunder.
(b) Board of Directors: The Board of Directors of the Employer.
------------------
(c) Cause: The termination of employment by the Employer upon the
-----
happening of either (i) or (ii) as follows:
(i) The willful and continued failure by the Participant to
substantially perform his duties with the Employer (other than any
such failure resulting from the Participant's incapacity due to
physical or mental illness) after a written demand for substantial
performance is delivered to the Participant by the Employer that
specifically identifies the manner in which the Employer believes that
the Participant has not substantially performed his duties.
(ii) The Participant's willful engagement in conduct that is
demonstrably and materially injurious to the Employer, monetarily or
otherwise.
For purposes of this paragraph, no act, or failure to act, on the
Participant's part shall be deemed "willful" if done, or omitted to be
done, by the Participant in good faith and with a reasonable belief that
the action or omission was in the best
1
<PAGE>
interests of the Employer. Notwithstanding the foregoing, Participant shall
not be deemed to have been terminated for Cause unless and until there
shall have been delivered to Participant a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters (3/4) of
the entire membership of the Board of Directors of the Employer at a
meeting of such Board of Directors called and held for such purpose (after
reasonable notice to Participant and an opportunity for Participant,
together with Participant's counsel, to be heard before the Board of
Directors), finding that in the good faith opinion of the Board of
Directors that Participant was guilty of conduct set forth above in clauses
(i) or (ii) of this Paragraph and specifying the particulars thereof in
detail.
(d) Change in Control:
-----------------
(i) The occurrence of any of the following:
(A) Any "Person" (as defined in subparagraph (ii) below),
other than (1) the Employer or any of its subsidiaries, (2) a
trustee or other fiduciary holding securities under an employee
benefit plan of the Employer or any of its Affiliates, (3) an
underwriter temporarily holding securities pursuant to an
offering of such securities, or (4) a corporation owned, directly
or indirectly, by the shareholders of the Employer in
substantially the same proportions as their ownership of stock of
the Employer, is or becomes the "beneficial owner" (as defined in
subparagraph (ii) below), directly or indirectly, of securities
of the Employer (not including in the securities beneficially
owned by such person any securities acquired directly from the
Company or its Affiliates) representing 33-1/3% or more of the
combined voting power of the Employer's then outstanding
securities, or 33-1/3% or more of the then outstanding common
stock of the Employer, excluding any Person who becomes such a
beneficial owner in connection with a transaction described in
subparagraph (C)(1) below.
(B) During any period of two consecutive years (the
"Period"), individuals who at the beginning of the Period
constitute the Board of Directors of the Employer and any "new
director" (as defined in subparagraph (ii) below) cease for any
reason to constitute a majority of the Board of Directors.
(C) There is consummated a merger or consolidation of the
Employer or any direct or indirect subsidiary of the Employer
with any other corporation, except if:
(1) the merger or consolidation would result in the
voting securities of the Employer outstanding immediately
prior thereto continuing to represent (either by
2
<PAGE>
remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof) at
least 60% of the combined voting power of the voting
securities of the Employer or such surviving entity or any
parent thereof outstanding immediately after such merger or
consolidation; or
(2) the merger or consolidation is effected to
implement a recapitalization of the Employer (or similar
transaction) in which no Person is or becomes the beneficial
owner, directly or indirectly, of securities of the Employer
(not including in the securities beneficially owned by such
Person any securities acquired directly from the Employer or
its Affiliates other than in connection with the acquisition
by the Employer or its Affiliates of a business)
representing 60% or more of the combined voting power of the
Employer's then outstanding securities.
(D) The shareholders of the Employer approve a plan of
complete liquidation or dissolution of the Employer or an
agreement for the sale or disposition by the Employer of all or
substantially all the Employer's assets, other than a sale or
disposition by the Employer of all or substantially all of the
Employer's assets to an entity, at least 60% of the combined
voting power of the voting securities of which are owned by the
stockholders of the Employer in substantially the same
proportions as their ownership of the Employer immediately prior
to such sale.
(ii) For purposes of subparagraph (i) above,
(A) "Person" shall have the meaning given in Section
3(a)(9) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") as modified and used in Sections 13(d) and 14(d)
of the Exchange Act.
(B) "Beneficial owner" shall have the meaning provided in
Rule 13d-3 under the Exchange Act.
(C) "New director" shall mean an individual whose election
by the Employer's Board of Directors or nomination for election
by the Employer's shareholders was approved by a vote of at least
2/3's of the directors then still in office who either were
directors at the beginning of the Period or whose election or
nomination for election was previously so approved or
recommended. However, "new director" shall not include a director
whose initial assumption of office is in connection with an
3
<PAGE>
actual or threatened election contest, including but not limited
to a consent solicitation relating to the election of directors
of the Company.
(D) "Affiliate" shall have the meaning set forth in Rule
12b-2 promulgated under Section 12 of the Exchange Act.
(e) Compensation: Except as otherwise provided in the Participant's
------------
Participation Agreement, the sum of (i) and (ii) as follows:
(i) The greater of (A) the Participant's annual base salary at
the date of his termination of employment, or (B) the average of the
Participant's annual base salary for the highest three (3) calendar
years (whether or not consecutive) of the Participant's employment
with the Employer.
(ii) The greater of (A) the Participant's last Performance Award,
or (B) the average of the highest three (3) Performance Awards
(whether or not consecutive).
(f) Death Benefit: The total benefit provided under this Plan upon
-------------
the death of a Participant, which benefit is calculated in this Plan on a
pre-tax basis.
(g) Disability: The termination of a Participant's employment with
----------
the Employer on account of disability as determined under the Group Long-
Term Disability Plan, or, if the Group Long-Term Disability Plan is not
then in existence, on account of ill health, physical or mental disability
or any other reason beyond the Participant's control, which prevents him
from performing his duties of employment for a period of six (6) continuous
months, as determined in good faith by the Employer.
(h) Disability Benefit: The monthly benefit provided under this Plan
------------------
to a Participant who suffers a Disability, which benefit is calculated in
this Plan on a pre-tax basis.
(i) Eligible Employee: An employee (i) who is not a participant in
-----------------
the Supplemental Executive Benefits Plan ("SEBP") as of August 12, 1998 and
is either a corporate officer of the Employer elected by the Board of
Directors (excluding any assistant officers that may be elected from time
to time) or the president of an Operating Division; or (ii) who was a
participant in the SEBP prior to January 1, 1999, but who as of January 1,
1999 elected in writing to cease his participation in the SEBP and become
an Eligible Employee hereunder as of that date. Any employee who elects to
become an Eligible Employee pursuant to clause (ii) of the preceding
sentence shall receive credit as an Eligible Employee hereunder for the
period of time he was an eligible employee under the SEBP.
4
<PAGE>
(j) Employer: Atmos Energy Corporation.
--------
(k) Group Long-Term Disability Plan: The Atmos Energy Corporation
-------------------------------
Group Long-Term Disability Plan, as amended from time to time.
(l) Industry Peer Group: The peer group of companies identified in
-------------------
Exhibit D which will serve as the Employer's benchmark in setting its
executive compensation programs. The Board of Directors may from time to
time change the peer group set forth on Exhibit D, but any such change
shall be applied prospectively in accordance with the principles set forth
in Exhibit D.
(m) Involuntary Termination: The termination of a Participant's
-----------------------
participation in the Plan due to either (i) or (ii) as follows:
(i) The Participant's employment with the Employer is terminated
involuntarily by the Employer for any reason other than Cause or
Disability.
(ii) Any reason other than for Cause by the Employer prior to his
termination of employment with the Employer.
(n) Operating Division: Energas Company, Greeley Gas Company, Trans
------------------
Louisiana Gas Company, Western Kentucky Gas Company, United Cities Gas
Company and any other division of the Employer that the Employer may
hereafter establish.
(o) Participant: An Eligible Employee of the Employer who meets the
-----------
requirements to participate in the Plan in accordance with the provisions
of Article III hereof.
(p) Participation Agreement: The agreement between the Employer and a
-----------------------
Participant described in Section 9.6 of this Plan, executed in the form
attached hereto as Exhibit A, or in such other form as the Board of
Directors, in its sole discretion, may establish from time to time.
(q) Plan: The Atmos Energy Corporation Performance-Based Supplemental
----
Executive Benefits Plan, as set forth herein and as amended from time to
time.
(r) Pension Plan: Any defined benefit pension plan adopted,
------------
established or maintained by the Employer, whichever is applicable, as
amended from time to time. Any amount payable to or with respect to a
Participant from any group annuity contract maintained in connection with
the Pension Plan shall be deemed part of the benefit applicable to the
Participant under the Pension Plan.
5
<PAGE>
(s) Performance Awards: Except as otherwise provided in the
------------------
Participant's Participation Agreement, any amount paid, or authorized to be
paid, to a Participant pursuant to any annual performance bonus or
incentive compensation plan adopted or established by the Employer, or,
upon and after a Change in Control, any amount paid, or authorized to be
paid, to a Participant as a performance related cash bonus in addition to
his base cash compensation.
(t) Performance Ranking: The Employer's percentile ranking in Total
-------------------
Shareholder Return compared to the Industry Peer Group for the lesser of
(i) the ten (10)-year period, or (ii) the most recent period of the
Participant's continuous employment with the Employer, preceding the
Participant's Retirement or Involuntary Termination.
(u) Plan Administrator: The Board of Directors.
------------------
(v) Plan Year: Each twelve (12) month period beginning on January 1
---------
and ending on December 31, except the first Plan Year shall be for the
period beginning August 12, 1998 and ending December 31, 1998.
(w) Retired Participant: A Retired employee of the Employer who
-------------------
receives benefits under this Plan.
(x) Retirement or Retire: A Participant's voluntary termination from
--------------------
employment with the Employer after he is vested in his retirement benefits
under the Pension Plan and has met the age and service requirements to be
eligible to commence an early retirement benefit under the Pension Plan.
(y) Supplemental Pension: A Participant's monthly pension benefit
--------------------
provided under this Plan, which benefit is calculated in this Plan on a
pre-tax basis.
(z) Total Shareholder Return: As of any determination date (the
------------------------
"Determination Date"), shall mean the change, stated as a percentage, in
the price of one share of the Employer's or Industry Peer Group's Common
Stock, as reported on the applicable stock exchange ("Price of One Share")
from a prior point in time (the "Beginning Date") to the Determination
Date. In calculating the Price of One Share as of the Determination Date,
(i) there shall be added to such Price the value of any shares or
fractional shares which would result from the reinvestment, on the last day
of the month in which declared, of any dividends paid on such One Share
during the period between the Beginning Date and the Determination Date,
with the value of such shares or fractional shares being calculated on the
basis of the Price of One Share as of the Determination Date; and (ii)
appropriate adjustment shall be made in such Price for other increases or
decreases in the number of issued and outstanding shares resulting from
events such as stock split-ups, combinations or exchanges of shares.
6
<PAGE>
Section 2.2. Construction: The masculine gender, whenever appearing in
------------
this Plan, shall be deemed to include the feminine gender; the singular may
include the plural; and vice versa, unless the context clearly indicates to the
contrary.
Section 2.3. Governing Law: This Plan shall be construed in accordance
-------------
with and governed by the laws of the State of Texas, except to the extent
otherwise preempted by the Employee Retirement Income Security Act of 1974, as
amended, or any other Federal law.
ARTICLE III
-----------
Eligibility and Participation
-----------------------------
Section 3.1. Employees Eligible to Participate: Each Eligible Employee
---------------------------------
shall participate in this Plan, provided he complies with the provisions of
Sections 9.5 and 9.6 hereof. Any Participant who ceases being an Eligible
Employee during his employment with the Employer shall immediately cease
participation in this Plan and shall no longer be a Participant, except as
otherwise set forth herein.
ARTICLE IV
----------
Assets Used for Benefits
------------------------
Section 4.1. Amounts Provided by the Employer: Benefits payable under
--------------------------------
this Plan shall constitute general obligations of the Employer in accordance
with the terms of this Plan. The Employer may, in its sole discretion, establish
a trust or other funding arrangement that is subject to the claims of the
Employer's general creditors for the purpose of funding a Participant's accrued
benefit payable under this Plan. Any such trust or other funding arrangement may
also provide for the distribution to the Participant of an
7
<PAGE>
amount equal to any federal or state income taxes that are incurred by the
Participant in the event the establishment of such trust or other funding
arrangement constitutes the constructive receipt by the Participant of any
benefits payable hereunder prior to the actual receipt of such benefits. The
Employer shall make appropriate adjustments to the amount of the Participant's
Supplemental Pension payable each month in order to reflect the effect upon such
Supplemental Pension of the distribution described in the foregoing sentence.
The Employer also may, but shall not be obligated to, purchase one or more life
insurance policies or contracts to provide for the payment of the Death
Benefits. Any such policies or contracts purchased hereunder shall remain a
general asset of the Employer or of any trust established hereunder.
Section 4.2. Funding: Not later than the time each Participant Retires or
-------
becomes eligible to receive an unreduced Supplemental Pension under this Plan,
whichever occurs first, the Employer shall contribute to a trust or other
funding arrangement an amount necessary to fund 100% of the then-present value
of such Participant's accrued Supplemental Pension. The amount required to be
funded by this Section 4.2 shall be calculated in accordance with Section 8.3
hereof. Notwithstanding the foregoing, immediately upon a Change in Control, the
Employer shall contribute to a trust or other funding arrangement an amount
necessary to fund 100% of the then-present value of all Supplemental Pension
benefits (vested and unvested) payable hereunder to each Participant and Retired
Participant, regardless of whether any such person is then eligible to Retire or
to receive an unreduced Supplemental Pension. The Employer shall review the
funding status of each such trust or other funding arrangement required to be
established under this Section 4.2 on an annual basis and shall make such
contributions
8
<PAGE>
thereto as may be required to maintain the value of the assets thereof at no
less than 100% of the then-present value of all such Supplemental Pension
benefits.
ARTICLE V
---------
Supplemental Pension Benefits
-----------------------------
Section 5.1. Eligibility for Supplemental Pension:
------------------------------------
(a) Upon Retirement. Except as otherwise provided elsewhere in this Plan
---------------
or in a Participation Agreement, a Participant who has been an Eligible Employee
for at least two years and Retires shall be entitled to receive a Supplemental
Pension.
(b) Upon Involuntary Termination Prior to a Change in Control. A
---------------------------------------------------------
Participant who suffers an Involuntary Termination prior to a Change in Control
shall be entitled to receive a Supplemental Pension, subject to the provisions
of Section 5.1(c) of this Plan, so long as he is vested in his retirement
benefits under the Pension Plan at the time of his Involuntary Termination and
has been an Eligible Employee for at least two years prior to the Involuntary
Termination.
(c) Upon Voluntary Termination Prior to a Change in Control or Termination
----------------------------------------------------------------------
For Cause. A Participant who voluntarily resigns from employment with the
- ---------
Employer prior to being eligible for Retirement and prior to a Change in Control
or who is terminated from employment with the Employer for Cause shall not be
entitled to receive a Supplemental Pension.
(d) Upon Disability. A Participant who suffers a Disability shall be
---------------
entitled to a Supplemental Pension as provided in Section 6.4.
Section 5.2. Amount of Supplemental Pension:
------------------------------
(a) Upon Retirement. Except as otherwise provided in the Participant's
---------------
Participation Agreement, the Supplemental Pension payable to a Participant who
Retires,
9
<PAGE>
and who has been an Eligible Employee for at least two years shall, unless
reduced as provided in paragraph (c) below, equal (i) minus (ii) as follows:
-----
(i) One-twelfth (1/12th) of the Target Percentage (as defined in
paragraph (b) below) of the Participant's Compensation, reduced if the
Participant has fewer than ten (10) years of vesting service under the
Pension Plan by one-tenth (1/10th) for each year of his vesting service
less than ten (10);
(ii) The monthly amount of pension payable to the Participant under
the Pension Plan as of the date that his Supplemental Pension commences,
assuming payment in the automatic form applicable to him under the Pension
Plan.
(b) Target Percentage: The Target Percentage shall mean the percentage set
-----------------
forth in the following table based on the Performance Ranking (to the nearest
5%) calculated as of the last day of the plan year preceding or coincident with
the date such Participant Retires:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Performance Target Performance Target
Ranking Percentage Ranking Percentage
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
50% 50% 75% 70%
- ------------------------------------------------------------------------------------------------------------------------------------
55% 60% 80% 77.5%
- ------------------------------------------------------------------------------------------------------------------------------------
60% 62.5% 85% 85%
- ------------------------------------------------------------------------------------------------------------------------------------
65% 65% 90% 92.5%
- ------------------------------------------------------------------------------------------------------------------------------------
70% 67.5% 95% 100%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
In no event can the target percentage exceed 100%.
(c) Reduction for Early Commencement of Supplemental Pensions. If a
---------------------------------------------------------
Participant's Supplemental Pension commences before the Participant attains age
62, the amount determined under subparagraph (a)(i) above shall, unless
otherwise provided in a Participation Agreement, be reduced by 2% per year for
the first two (2) years (or fractional years thereof, based on full months) that
the date of commencement precedes
10
<PAGE>
age 62, and by 4% per year for the next five (5) years (or fractional years
thereof, based on full months) that the date of commencement precedes age 60.
(d) Cost of Living and Other Adjustments. A Participant who has begun to
------------------------------------
receive his Supplemental Pension shall be entitled to receive any cost of living
or other adjustments to which he is otherwise entitled pursuant to the Pension
Plan, and his Supplemental Pension shall not be reduced by such adjustments. If
a Participant would not be entitled to receive a cost of living or other
adjustment due to statutory or regulatory limitations on Pension Plan benefits,
the Supplemental Pension shall be increased by the amount of such adjustment for
the time the limitations are in effect.
(e) Upon Involuntary Termination Prior to a Change in Control. The
---------------------------------------------------------
Supplemental Pension payable to a Participant who suffers an Involuntary
Termination prior to a Change in Control shall be determined in accordance with
paragraph (a) above, but, except as otherwise provided in the Participant's
Participation Agreement, for purposes of subparagraph (a)(i) and (b) shall be
based upon his Compensation and years of vesting service under the Pension Plan
and his Target Percentage calculated as of the date of his Involuntary
Termination.
Section 5.3. Form of Payment of Supplemental Pension:
---------------------------------------
(a) Married Participants. Except as otherwise provided in the
--------------------
Participant's Participation Agreement, if a Participant is married when his
Supplemental Pension commences, it shall be paid in the form of a joint and 50%
survivor annuity, with the Participant's spouse on the date payment commences as
the joint annuitant.
(b) Unmarried Participants. Except as otherwise provided in the
----------------------
Participant's Participation Agreement, if a Participant is not married when his
Supplemental Pension
11
<PAGE>
commences, it shall be paid in the form of a ten year certain and life annuity
payable to the Participant or the Participant's named beneficiary.
Section 5.4. Commencement of Supplemental Pension:
------------------------------------
(a) Upon Retirement. The Supplemental Pension of a Participant who Retires
---------------
shall commence at the time he begins receiving retirement benefits from the
Pension Plan.
(b) Upon Involuntary Termination Prior to a Change in Control. The
---------------------------------------------------------
Supplemental Pension of a Participant who suffers an Involuntary Termination
prior to a Change in Control shall commence at such time as elected by the
Participant on or after he attains age 55.
Section 5.5. Supplemental Pensions After a Change in Control:
-----------------------------------------------
(a) Eligibility For Supplemental Pension. Notwithstanding anything to the
------------------------------------
contrary in this Plan, a Participant shall be entitled to a Supplemental
Pension, regardless of whether he has been an Eligible Employee for at least two
years or is vested in his retirement benefits under the Pension Plan, if
following a Change in Control of the Employer which occurs at a time when he is
an Eligible Employee, either (i) or (ii) occurs:
(i) The Participant's employment is terminated involuntarily by the
Employer for any reason other than for Cause.
(ii) The Participant's participation in the Plan is terminated by the
Employer for any reason other than for Cause prior to his termination of
employment with the Employer.
In order for the provisions of this Section 5.5 to apply, the involuntary
termination of employment referred to in subparagraph (i) above or the
termination of participation referred to in subparagraph (ii) above must occur
within three (3) years after the Change in Control.
12
<PAGE>
If a Participant's employment is involuntarily terminated by the Employer
for any reason other than for Cause, or his participation in the Plan is
terminated by the Employer for any reason other than for Cause, prior to a
Change in Control (whether or not a Change in Control ever occurs) and such
termination either (A) was at the request or direction of a person who has
entered into an agreement with the Employer, the consummation of which would
constitute a Change in Control, or (B) was otherwise in connection with or in
anticipation of a Change in Control (whether or not a Change in Control ever
occurs), then such Participant's termination of employment or participation
shall be deemed to have followed a Change in Control of the Employer, and such
Participant shall be one who is described in this paragraph (a).
(b) Amount of Supplemental Pension. The Supplemental Pension payable to a
------------------------------
Participant described in paragraph (a) above shall be calculated in the same
manner as set forth in Section 9.1(c) for benefits payable in the event of a
termination of the Plan, but based on a Target Percentage of not less than 75%
and his Compensation as of the date of his employment termination or the date
his participation in the Plan is terminated, whichever is applicable.
(c) Commencement of Supplemental Pension. The Supplemental Pension payable
------------------------------------
to a Participant described in paragraph (a) above shall commence on the later of
(i) the date his employment terminates, or (ii) the date he elects payment on or
after he attains age 55.
13
<PAGE>
ARTICLE VI
----------
Disability Benefits
-------------------
Section 6.1. Eligibility For Disability Benefits: A Participant shall be
-----------------------------------
entitled to a Disability Benefit if he suffers a Disability prior to his
Retirement.
Section 6.2. Amount of Disability Benefits: The Disability Benefit
-----------------------------
payable to an eligible Participant shall equal (a) minus (b) as follows:
(a) One-twelfth (1/12th) of sixty percent (60%) of the Participant's
Compensation calculated as of the date of his Disability.
(b) The total monthly amount of disability benefit payable to the
Participant under the Group Long-Term Disability Plan (before any offsets)
as of the date that his employment terminates due to Disability.
Section 6.3. Payment of Disability Benefits: A Participant's Disability
------------------------------
Benefits shall commence at the same time such Participant begins receiving
benefits from the Group Long-Term Disability Plan and shall continue for so long
as benefits are paid under the Group Long-Term Disability Plan.
Section 6.4. Payment of Supplemental Pension to Disabled Participants:
--------------------------------------------------------
(a) Upon Reaching Normal Retirement Age. If a Participant who has suffered
-----------------------------------
a Disability reaches his normal retirement age under the Pension Plan while
still receiving Disability Benefits, such Participant shall be entitled to a
Supplemental Pension commencing at the time Participant begins receiving
retirement benefits from the Pension Plan regardless of whether the Participant
has been an Eligible Employee for at least two years. The Supplemental Pension
payable to such Participant shall be in the form provided in Section 5.3 and
determined in accordance with Subsection 5.2(a). Upon commencement of a
Participant's Supplemental Pension under this Section 6.4(a), such Participant's
Disability Benefit under Section 6.3 hereof shall cease.
14
<PAGE>
(b) Prior to Reaching Normal Retirement Age. Notwithstanding the
---------------------------------------
provisions of paragraph (a) above, a Participant receiving a Disability Benefit
may elect to receive a Supplemental Pension at any time after becoming eligible
to Retire and prior to his normal retirement age under the Pension Plan. If
such an election is made, the Participant's Disability Benefits shall cease and
the Participant shall commence receiving a Supplemental Pension in the form
provided in Section 5.3 at the same time he begins receiving retirement benefits
from the Pension Plan. The Supplemental Pension payable to such Participant
shall be determined in accordance with Subsections 5.2(a), (b) and (c), and
shall be determined based on the Participant's Compensation as of the date that
such individual terminated employment on account of disability.
ARTICLE VII
-----------
Death Benefits
--------------
Section 7.1. Eligibility For Death Benefits: A Participant shall be
------------------------------
entitled to a Death Benefit if he meets the requirements of either (a) or (b) or
(c) as follows:
(a) He dies before his employment with the Employer terminates or
while receiving a Disability Benefit under this Plan.
(b) He Retires but dies before the commencement of his Supplemental
Pension.
(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.
15
<PAGE>
Section 7.2. Amount of Death Benefit:
-----------------------
(a) In-Service Death: In the case of a Participant who dies as provided in
----------------
Subsection 7.1(a), the Death Benefit will be the total of the following (i),
(ii), and (iii):
(i) A lump sum payment equal to two times the Participant's
Compensation minus any amount payable under the Employer's Group Basic Life
Insurance Plan (the "Lump Sum Death Benefit").
(ii) A monthly benefit equal to one-twelfth of an amount equal to
fifty percent of the Participant's Compensation at the time of his death
(the "Monthly Death Benefit").
(iii) If the Participant leaves a child or children to whom payments
are to be made under Section 7.3 hereof, a monthly benefit equal to one-
twelfth of an amount equal to twenty-five percent of the Participant's
Compensation at the time of his death (the "Dependent Death Benefit").
(b) Post Retirement Death: In the case of a Participant who dies as
---------------------
provided in Subsection 7.1(b), a Death Benefit will be paid in the amount and to
the beneficiary that would have been applicable had the Participant's
Supplemental Pension commenced in the month of his death.
(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:
(i) 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.
(ii) 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.
16
<PAGE>
Section 7.3. Form of Payment of Death Benefit:
--------------------------------
(a) Lump Sum and Monthly Death Benefits: The Lump Sum and Monthly Death
-----------------------------------
Benefits are payable to the Participant's surviving spouse. If the Participant
does not have a surviving spouse, the Lump Sum and Monthly Death Benefits are
payable to the Participant's surviving children in equal shares (regardless of
dependent status) or, if there are no surviving children, to the Participant's
surviving parents or siblings as designated by the Participant for this purpose
and in the manner specified by the Participant on a form supplied by the
Employer. Payment of the Monthly Death Benefit shall be as a single life
annuity if payable to Participant's surviving spouse or a 120-month term certain
annuity if payable to a child, parent, or sibling.
(b) Dependent Death Benefit: The Dependent Death Benefit is payable to the
-----------------------
Participant's dependent children in equal shares until there cease to be any
dependent children remaining. As each child loses his or her dependent status,
the child's share of the Dependent Death Benefit shall be paid to the remaining
dependent child or children in equal shares. A child of the Participant is
deemed to be a dependent until the child reaches age eighteen or, if a full-time
student (i.e. enrolled in twelve hours or more of courses of higher education),
age 25, or until the child's death if earlier. At the discretion of the Plan
Administrator, any dependent child's share of the Dependent Death Benefit may be
paid to the Participant's surviving spouse or other guardian of such child if
applicable and shall constitute full settlement of the Plan's obligation to such
child with respect to such payment. If the Participant's surviving spouse dies
while receiving the Monthly Death Benefit and while any dependent child or
children of the Participant remain, then the
17
<PAGE>
Monthly Death Benefit shall be added to the Dependent Death Benefit and shall be
payable in equal shares to the dependent children in the same manner and for the
same time period as the Dependent Death Benefit.
Section 7.4. Commencement of Death Benefits:
------------------------------
(a) 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
(b) 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 to 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).
(c) 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
18
<PAGE>
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).
ARTICLE VIII
------------
Administration
--------------
Section 8.1. Plan Administration: The Plan shall be administered by the
-------------------
Board of Directors. The Board of Directors may, in its sole discretion,
establish a committee to carry out the day-to-day administration of the Plan and
may delegate any portion of its authority and responsibilities as Plan
Administrator to such committee.
Section 8.2. Powers of Plan Administrator: The Plan Administrator shall
----------------------------
have the discretionary power and authority to interpret and administer the Plan
according to its terms, including the power to construe and interpret the Plan,
to supply any omissions therein, to reconcile and correct any errors or
inconsistencies, to decide any questions in the administration and application
of the Plan, and to make equitable adjustments for any mistakes or errors in the
administration and application of the Plan. The Plan Administrator shall have
such additional powers as may be necessary to discharge its duties and
responsibilities hereunder.
Section 8.3. Calculation of Funding Obligations: The Employer shall
----------------------------------
calculate its funding obligations hereunder solely by using the actuarial
assumptions and methodology set forth in Exhibit B hereto. In its discretion,
at any time prior to a Change in Control of the Employer, the Employer may amend
Exhibit B to change such actuarial assumptions and methodology, provided that
such changes are communicated promptly in writing to all Participants, Retired
Participants, and Beneficiaries. Upon and after a Change in Control of the
Employer, the actuarial assumptions and methodology set forth in Exhibit B may
be changed with respect to any Participant, Retired Participant, or Beneficiary
who was a Participant, Retired Participant, or Beneficiary at the time of such
19
<PAGE>
Change in Control, only with the written consent of such affected Participant,
Retired Participant, or Beneficiary.
Section 8.4. Annual Statements: As soon as practicable after the end of
-----------------
each Plan Year, the Employer shall deliver to each Participant, Retired
Participant, and Beneficiary a statement containing (i) the present value of the
Employer's future benefit obligations to the Participant, Retired Participant,
or Beneficiary; (ii) the actuarial assumptions used to calculate the present
value of the Employer's future benefit obligations hereunder; and (iii) the
current value of the assets, if any, held in a trust or other funding
arrangement for the benefit of the Participant, Retired Participant, or
Beneficiary.
ARTICLE IX
----------
Miscellaneous Provisions
------------------------
Section 9.1. Amendment or Termination of the Plan:
------------------------------------
(a) In General. Subject to the remaining provisions of this Section 9.1,
----------
the Board of Directors may by resolution, in its absolute discretion, from time
to time, amend, suspend, or terminate any or all of the provisions of the Plan;
provided, however, that no amendment, suspension, or termination may apply so as
to decrease the payment to any Participant or beneficiary of any benefit under
the Plan that he accrued prior to the effective date of such amendment,
suspension, or termination unless the Participant has engaged in dishonest or
competitive activities as described in Section 9.5 hereof.
(b) Amendment That Decreases Benefits. If the Board of Directors amends
---------------------------------
the Plan and such amendment results in a decrease in the Supplemental Pension,
Death
20
<PAGE>
Benefit or Disability Benefit that otherwise would be paid under this Plan but
for the amendment, except as provided in subparagraphs (iii) and (iv) below, the
Participant's Supplemental Pension, Death Benefit or Disability Benefit shall
equal the sum of (i) and (ii) as follows:
(i) The amount derived by multiplying the Participant's benefit
calculated pursuant to the terms of the Plan in effect immediately prior to
the amendment and based upon the Participant's Compensation used to
calculate the appropriate benefit by the following fraction: The numerator
is the number of years of vesting service the Participant has under the
Pension Plan prior to the effective date of the amendment, and the
denominator is the total number of years of vesting service the Participant
has under the Pension Plan; however, neither the numerator nor the
denominator shall exceed 10.
(ii) The amount derived by multiplying the Participant's benefit as
calculated pursuant to the terms of the Plan as amended based upon the
Participant's Compensation used to calculate the appropriate benefit by the
following fraction: The numerator is the number of years that the
Participant participated in the Pension Plan after the effective date of
the amendment (but this number when added to the numerator of the fraction
in subparagraph (i) above, shall not exceed 10) and the denominator is the
total number of years of vesting service the Participant has under the
Pension Plan (but this number shall not exceed 10).
(iii) Notwithstanding the foregoing provisions of this paragraph (b),
if the Plan is so amended before a Participant has five years of vesting
service under the Pension Plan, the Participant's Supplemental Pension,
Death Benefit or Disability Benefit shall be calculated solely in
accordance with the terms of the Plan as amended.
(iv) Notwithstanding the foregoing provisions of this paragraph (b),
if any such amendment occurs upon or after a Change in Control, the
Participant's Supplemental Pension shall at least equal the benefits which
would be paid under paragraph (c) below if there was a termination of the
Plan at the time of such amendment.
(c) Termination of the Plan.
-----------------------
(i) If the Board of Directors terminates all or any portion of the
Plan and such termination adversely affects a Participant's Supplemental
Pension, such Participant shall be entitled to receive a Supplemental
Pension whether or not such Participant has been an Eligible Employee for
at least two years or has five years of vesting service under the Pension
Plan at the time of such Plan termination.
21
<PAGE>
(A) It shall be based upon the Participant's Compensation as of
the date of the termination of the Plan;
(B) If payment of the Supplemental Pension begins before the
Participant has ten years of vesting service in the Pension Plan, the
reduction referred to in Section 5.2(a)(i) shall not apply;
(C) If payment of the Supplemental Pension begins before the
Participant attains age 62, the reductions referred to in Section
5.2(c) shall not apply; and
(D) If the Participant is not otherwise vested under the Pension
Plan, the calculation made under Subsection 5.2(a)(ii) above shall be
made as if he were so vested.
The Supplemental Pension determined under this paragraph (c) shall commence
on the later of (i) the date his employment terminates, or (ii) the date he
elects payment on or after he attains age 55.
(ii) If the Board of Directors terminates all or any portion of the
Plan and such termination adversely affects the Disability Benefits or
Death Benefits described in the Plan, a Participant shall continue to be
entitled to the Disability Benefits or Death Benefits described in the Plan
if he thereafter dies or suffers a Disability. Any such Death Benefit or
Disability Benefit, however, shall be calculated as of the date of
termination of such benefit or the Plan as if such date of termination was
the date the Participant died or suffered a Disability. Payment of any
such Death Benefit or Disability Benefit shall be made in accordance with
the terms of the Plan as in effect immediately prior to the date of
termination of such benefit or the Plan.
Section 9.2. Nonguarantee of Employment: Nothing contained in this Plan
--------------------------
shall be construed as a contract of employment between the Employer and any
employee, as a right of any employee to be continued in the employment of the
Employer, or as a limitation of the right of the Employer to discharge any of
its employees, with or without Cause.
Section 9.3. Nonalienation of Benefits: To the extent permitted by law,
-------------------------
benefits payable under this Plan shall not, without the Plan Administrator's
consent, be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any
kind, either voluntary or involuntary. Any
22
<PAGE>
unauthorized attempt to anticipate, alienate, sell, transfer, assign, pledge,
encumber, charge, or otherwise dispose of any right to benefits payable
hereunder shall be void. No part of the assets of the Employer shall be subject
to seizure by legal process resulting from any attempt by creditors of or
claimants against any Participant or beneficiary or any person claiming under or
through the foregoing to attach his interest under the Plan.
Section 9.4. Liability: No director, officer, or employee of the Employer
---------
shall be liable for any act or action, whether of commission or omission, taken
by any other director, officer, employee, or agent of the Employer under the
terms of the Plan or, except in circumstances involving his bad faith, for
anything done or omitted to be done by him under the terms of the Plan.
Section 9.5. Noncompetition Agreement: All Participants in the Plan shall
------------------------
have entered into Noncompetition Agreements in the form attached hereto as
Exhibit C as a condition to their participation in the Plan. Notwithstanding
any other provisions of this Plan to the contrary, no benefits shall be payable
under the Plan, and payment of benefits will cease, if a Participant is in
breach of such agreement at any time during the term of such agreement.
Section 9.6. Participation Agreement: Each Participant shall enter into a
-----------------------
Participation Agreement as a condition to his participation in the Plan. Such
Participation Agreement shall constitute a separate and enforceable agreement
between the Employer and the Participant regarding the Participant's rights in
the Plan.
Section 9.7. Successors to the Employer: Any successor to the Employer
--------------------------
hereunder, which successor continues or acquires any of the business of the
Employer, shall be bound by the terms of this Plan in the same manner and to the
same extent as the Employer.
23
<PAGE>
IN WITNESS WHEREOF, and as conclusive evidence of its adoption of this
Performance-Based Supplemental Executive Benefits Plan, the Employer has caused
this Plan to be duly executed effective as of the 12th day of August, 1998.
ATMOS ENERGY CORPORATION
/s/ Robert W. Best
By: ________________________________
Robert W. Best
Chairman of the Board, President and
Chief Executive Officer
24
<PAGE>
EXHIBIT A
PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT is entered into as of the _____ day of
___________________, 19____ by and between ATMOS ENERGY CORPORATION, a Texas and
Virginia corporation (the "Employer"), and ____________________________
_______________________________________________ ("Participant").
W I T N E S S E T H:
WHEREAS, the Employer has adopted the Atmos Energy Corporation Performance-
Based Supplemental Executive Benefits Plan (the "Plan"), pursuant to which
certain executive or management employees of the Employer may receive supple
mental retirement, disability, and death benefits; and
[ TO BE INSERTED FOR THOSE PARTICIPANTS IN THE SEBP WHO ELECT TO PARTICIPATE IN
THIS PLAN:
WHEREAS, EFFECTIVE JANUARY 1, 1999, THE PARTICIPANT HAS ELECTED TO
PARTICIPATE IN THIS PLAN IN LIEU OF CONTINUED PARTICIPATION IN THE ATMOS ENERGY
CORPORATION SUPPLEMENTAL EXECUTIVE BENEFITS PLAN ("SEBP").]
WHEREAS, in accordance with Section 9.6 of the Plan, the Employer and
Participant have agreed to execute and enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Agreement. The Employer hereby agrees to provide to Participant the
---------
benefits described in the Plan pursuant to the terms and conditions set forth in
the Plan and in this Agreement. [ TO BE INSERTED FOR THOSE PARTICIPANTS IN THE
SEBP WHO ELECT TO PARTICIPATE IN THIS PLAN: PARTICIPANT UNDERSTANDS AND AGREES
THAT BY ELECTING TO PARTICIPATE IN THIS PLAN, HE IS VOLUNTARILY TERMINATING HIS
PARTICIPATION IN THE SEBP AND ACKNOWLEDGES THAT FROM AND AFTER THE EFFECTIVE
DATE OF HIS PARTICIPATION IN THIS PLAN HE SHALL HAVE NO FURTHER RIGHTS TO
BENEFITS UNDER THE SEBP AND IS NOT CONSIDERED TO HAVE SUFFERED AN INVOLUNTARY
TERMINATION AS DEFINED IN THE SEBP. ]
2. Amendment or Termination of the Plan; Termination of Employment or
------------------------------------------------------------------
Participation Without Cause. The Employer hereby agrees that, if
- ---------------------------
(i) the Employer amends or terminates the Plan in such a manner that
results in a decrease in the amount of the benefits to be paid under the
Plan to Participant, or
<PAGE>
(ii) Participant's employment is terminated involuntarily by the
Employer for any reason other than for Cause (as defined in Subparagraph
2(e) below), or
(iii) Participant's participation in the Plan is terminated by the
Employer for any reason other than for Cause prior to the Participant's
termination of employment with the Employer,
Participant shall have the right to, and the Employer agrees to pay to
Participant, any benefits accrued prior to the effective date of such amendment
or termination of the Plan or of such termination of Participant's employment
with the Employer or participation in the Plan. The amount of benefits that
shall be paid under this Paragraph 2 shall be calculated as follows:
(a) In the event the Employer amends the Plan and such amendment results
in a decrease in the amount of the Supplemental Pension, Disability Pension,
or Death Benefit that would be paid under the Plan but for the amendment
thereof, the amount of Participant's benefit shall be the sum of:
(i) Participant's benefit as calculated pursuant to the terms of
the Plan in effect immediately prior to the amendment thereof, based upon
Participant's Compensation as of the date of his retirement, disability, or
death, multiplied by a fraction, the numerator of which shall be the number
of years of vesting service by Participant in the Pension Plan prior to the
effective date of the amendment (which number shall not be less than 5 nor
greater than 10) and the denominator of which shall be the total number of
years of vesting service by Participant in the Pension Plan (which number,
for purposes of calculating Participant's Supplemental Pension, shall not
be greater than 10); plus
(ii) Participant's benefit as calculated pursuant to the terms of the
Plan as amended, based upon Participant's Compensation as of the date of
his retirement, disability, or death, multiplied by a fraction, the
numerator of which shall be the number of years that Participant
participated in the Pension Plan after the effective date of the amendment
(which number, for purposes of calculating Participant's Supplemental
Pension, when added to the numerator of the fraction in clause (i) above,
may not exceed 10) and the denominator of which shall be the total number
of years of vesting service by Participant in the Pension Plan (which
number for purposes of calculating Participant's Supplemental Pension,
shall not be greater than 10);
provided, however, that if the Plan is so amended prior to Participant's fifth
- -------- -------
year of vesting service in the Pension Plan, Participant's Supplemental Pension
payable hereunder shall be calculated solely in accordance with the terms of the
Plan as
2
<PAGE>
amended; provided, further, that, if such amendment occurs upon or after a
-------- -------
"Change in Control" (as defined in Subparagraph 3(b) below), Participant's
Supplemental Pension must be at least equal the benefits which would be paid
under Section 9.1(c) of the Plan if there was a termination of the Plan at the
time of such amendment.
(b) In the event the Employer terminates the Plan or any portion thereof
and such termination affects the Disability Pension or Death Benefit described
in the Plan, Participant's Disability Pension and Death Benefit shall be
calculated as of the date of termination of such benefit as though the date of
such termination was the date that Participant became disabled or died. Such
Disability Pension and Death Benefit shall become payable, however, only upon
Participant's disability or death occurring in accordance with the terms of the
Plan or any portion thereof in effect immediately prior to the date of its
termination.
(c) In the event the Employer terminates the Plan or any portion thereof
and such termination affects the Supplemental Pension described in the Plan,
Participant's Supplemental Pension shall be the amount determined in accordance
with Section 5.2 of the Plan except that
(i) It shall be based upon the Participant's Compensation as of the
date of the termination of the Plan;
(ii) If payment of the Supplemental Pension begins before the
Participant has ten years of vesting service in the Pension Plan, the
reduction referred to in Section 5.2(a)(i) of the Plan shall not apply;
(iii) If payment of the Supplemental Pension begins before the
Participant attains age 62, the reductions referred to in Section 5.2(c) of
the Plan shall not apply; and
(iv) If the Participant is not otherwise vested under the Pension
Plan, the calculation made under Subsection 5.2(a)(ii) of the Plan shall be
made as if he were so vested.
(d) If, at any time prior to a "Change in Control" (as defined in
Subparagraph 3(b) hereof), Participant's employment with the Employer is
terminated involuntarily by the Employer for any reason other than for Cause (as
defined in Subparagraph 2(e) below) or if Participant's participation in the
Plan is terminated by the Employer for any reason other than for Cause,
Participant shall nevertheless be entitled to the benefits payable under the
Plan that have accrued prior to the termination of Participant's employment or
Plan participation, the amount of such benefits to be calculated in the manner
set forth in Section 5.2 of the Plan; provided, however, that Participant's
-------- -------
right to a Supplemental Pension shall vest only if Participant has been an
Eligible Employee for at least two years
3
<PAGE>
and has at least five years of vesting service under the Pension Plan as of the
date of such termination.
(e) As used in this Agreement, "Cause" for termination of employment shall
mean termination upon
(i) the willful and continued failure by Participant to substantially
perform his duties with the Employer (other than any such failure resulting
from Participant's incapacity due to physical or mental illness) after a
written demand for substantial performance is delivered to Participant by
the Employer that specifically identifies the manner in which the Employer
believes that Participant has not substantially performed his duties, or
(ii) Participant's willful engagement in conduct that is demonstrably
and materially injurious to the Employer, monetarily or otherwise.
For purposes of this Subparagraph, no act, or failure to act, on Participant's
part shall be deemed "willful" unless done, or omitted to be done, by
Participant not in good faith and without a reasonable belief that the action or
omission was in the best interests of the Employer. Notwithstanding the
foregoing, Participant shall not be deemed to have been terminated for Cause
unless and until there shall have been delivered to Participant a copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters
(3/4) of the entire membership of the Board of Directors of the Employer at a
meeting of such Board of Directors called and held for such purpose (after
reasonable notice to Participant and an opportunity for Participant, together
with Participant's counsel, to be heard before the Board of Directors), finding
that in the good faith opinion of the Board of Directors that Participant was
guilty of conduct set forth above in clauses (i) or (ii) of this Subparagraph
2(e) and specifying the particulars thereof in detail.
3. Change in Control.
-----------------
(a) Notwithstanding anything expressly or impliedly to the contrary
contained in this Agreement or the Plan, if, at any time during the three
(3)-year period immediately following a Change in Control of the Employer,
Participant's employment is involuntarily terminated by the Employer, or he
is demoted or reassigned to a position that causes him to cease to be an
Eligible Employee, for any reason other than for Cause (as defined in
Subparagraph 2(e) above), Participant shall nevertheless be entitled to
receive a Supplemental Pension at such time as he becomes entitled to
receive a benefit under the Pension Plan regardless of whether Participant
has been an Eligible Employee for at least two years or has five years of
vesting service under the Pension Plan at the time of such termination,
demotion, or reassignment. If a Participant's employment is involuntarily
terminated by the Employer for any reason other than for
4
<PAGE>
Cause, or his participation in the Plan is terminated by the Employer for
any reason other than for Cause, prior to a Change in Control (whether or
not a Change in Control ever occurs) and such termination either (A) was at
the request or direction of a person who has entered into an agreement with
the Employer, the consummation of which would constitute a Change in
Control, or (B) was otherwise in connection with or in anticipation of a
Change in Control (whether or not a Change in Control ever occurs), then
such Participant's termination of employment or participation shall be
deemed to have followed a Change in Control of the Employer. Such
Supplemental Pension shall be calculated in the same manner as set forth in
Subparagraph 2(c) above for benefits payable in the event of a termination
of the Plan.
(b) (i) As used in this Agreement, except as provided herein, a
"Change in Control" of the Employer shall be deemed to have occurred
if:
(A) Any "Person" (as defined in subparagraph (ii) below),
other than (1) the Employer or any of its subsidiaries, (2) a
trustee or other fiduciary holding securities under an employee
benefit plan of the Employer or any of its Affiliates, (3) an
underwriter temporarily holding securities pursuant to an
offering of such securities, or (4) a corporation owned, directly
or indirectly, by the shareholders of the Employer in
substantially the same proportions as their ownership of stock of
the Employer, is or becomes the "beneficial owner" (as defined in
subparagraph (ii) below), directly or indirectly, of securities
of the Employer (not including in the securities beneficially
owned by such person any securities acquired directly from the
Company or its Affiliates) representing 33-1/3% or more of the
combined voting power of the Employer's then outstanding
securities, or 33-1/3% or more of the then outstanding common
stock of the Employer, excluding any Person who becomes such a
beneficial owner in connection with a transaction described in
subparagraph (C)(1) below.
(B) During any period of two consecutive years (the
"Period"), individuals who at the beginning of the Period
constitute the Board of Directors of the Employer and any "new
director" (as defined in subparagraph (ii) below) cease for any
reason to constitute a majority of the Board of Directors.
(C) There is consummated a merger or consolidation of the
Employer or any direct or indirect
5
<PAGE>
subsidiary of the Employer with any other corporation, except if:
(1) the merger or consolidation would result in the
voting securities of the Employer outstanding immediately
prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity or any parent thereof) at least 60% of
the combined voting power of the voting securities of the
Employer or such surviving entity or any parent thereof
outstanding immediately after such merger or consolidation;
or
(2) the merger or consolidation is effected to
implement a recapitalization of the Employer (or similar
transaction) in which no Person is or becomes the beneficial
owner, directly or indirectly, of securities of the Employer
(not including in the securities beneficially owned by such
Person any securities acquired directly from the Employer or
its Affiliates other than in connection with the acquisition
by the Employer or its Affiliates of a business)
representing 60% or more of the combined voting power of the
Employer's then outstanding securities;
(D) The shareholders of the Employer approve a plan of
complete liquidation or dissolution of the Employer or an
agreement for the sale or disposition by the Employer of all or
substantially all the Employer's assets, other than a sale or
disposition by the Employer of all or substantially all of the
Employer's assets to an entity, at least 60% of the combined
voting power of the voting securities of which are owned by the
stockholders of the Employer in substantially the same
proportions as their ownership of the Employer immediately prior
to such sale.
(ii) For purposes of subparagraph (i) above,
(A) "Person" shall have the meaning given in Section 3(a)(9)
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") as modified and used in Sections 13(d) and 14(d) of the
Exchange Act.
(B) "Beneficial owner" shall have the meaning provided in
Rule 13d-3 under the Exchange Act.
6
<PAGE>
(C) "New director" shall mean an individual whose election
by the Employer's Board of Directors or nomination for election
by the Employer's shareholders was approved by a vote of at least
2/3's of the directors then still in office who either were
directors at the beginning of the Period or whose election or
nomination for election was previously so approved or
recommended. However, "new director" shall not include a
director whose initial assumption of office is in connection with
an actual or threatened election contest, including but not
limited to a consent solicitation relating to the election of
directors of the Company.
(D) "Affiliate" shall have the meaning set forth in Rule
12b-2 promulgated under Section 12 of the Exchange Act.
4. Limitations. Except as otherwise provided in Paragraph 3 of this
-----------
Agreement, Participant agrees that nothing in this Agreement or the Plan shall
entitle him, or be deemed to entitle him, to receive a Supplemental Pension
under the Plan if
(i) he has not met the requirements for a Supplemental Pension as
set forth in the Plan,
(ii) his employment with the Employer is terminated prior to his
reaching the age of eligibility for the immediate commencement of his
Pension Plan benefit due to resignation, or
(iii) his employment with the Employer or participation in the Plan
is terminated for Cause (as defined in Subparagraph 2(e) above).
5. Amendment or Termination. No amendment or termination of the Plan by
------------------------
the Employer shall constitute an amendment or termination of this Agreement.
This Agreement may be amended or modified only by the written agreement of the
parties hereto, and will terminate only upon the occurrence of the earlier of
the following events: (i) the execution of a written agreement to terminate
this Agreement signed by all of the parties hereto, (ii) the satisfaction of all
of the Employer's obligations to Participant under the Plan and this Agreement,
(iii) the termination by Participant of Participant's employment with the
Employer by resignation effective prior to Participant reaching age 55, unless
such resignation occurs after a Change in Control, (iv) the termination for
Cause of Participant's employment with the Employer, or (v) the breach by
Participant of any of the terms or provisions of the Noncompetition Agreement
executed by Participant in accordance with the Plan.
6. Funding. Not later than the time the Participant Retires or becomes
-------
eligible to receive an unreduced Supplemental Pension under the Plan, whichever
occurs
7
<PAGE>
first, the Employer shall contribute to a trust or other funding arrangement an
amount necessary to fund 100% of the then-present value of the Participant's
accrued Supplemental Pension. Notwithstanding the foregoing, immediately upon a
Change in Control, the Employer shall contribute to a trust or other funding
arrangement an amount necessary to fund 100% of the then-present value of all
Supplemental Pension benefits (vested and unvested) payable under this Agreement
and/or the Plan to the Participant, regardless of whether the Participant is
then eligible to Retire or to receive an unreduced Supplemental Pension. The
amount required to be funded by this Paragraph 6 shall be calculated in
accordance with Paragraph 7 hereof. The Employer shall review the funding status
of the trust or other funding arrangement established under this Paragraph 6 on
an annual basis and shall make contributions thereto as may be required to
maintain the value of the assets thereof at no less than 100% of the then-
present value of all such Supplemental Pension benefits.
7. Calculation of Funding Obligations. The Employer shall calculate its
----------------------------------
funding obligations under this Agreement and the Plan solely by using the
actuarial assumptions and methodology set forth in Exhibit B to the Plan. Upon
and after a Change in Control of the Employer which occurs at a time when the
Participant is an Eligible Employee, the actuarial assumptions and methodology
set forth in Exhibit B may be changed with respect to the Participant or, if
applicable, his Beneficiary, only with the Participant's, or, if applicable, his
Beneficiary's, written consent.
8. Annual Statements: As soon as practicable after the end of each Plan
-----------------
Year, the Employer shall deliver to the Participant or, if applicable, his
Beneficiary, a statement containing (i) the present value of the Employer's
future benefit obligations to the Participant, or, if applicable, his
Beneficiary; (ii) the actuarial assumptions used to calculate the present value
of the Employer's future benefit obligations under the Plan; and (iii) the
current value of the assets, if any, held in any trust or other funding
arrangement for the benefit of the Participant, or, if applicable, his
Beneficiary.
9. No Guarantee of Employment. Nothing contained in this Agreement shall
--------------------------
be construed as a contract of employment between the Employer and Participant,
or as a right of Participant to be continued in the employment of the Employer,
or as a limitation of the right of the Employer to discharge Participant with or
without cause.
10. Legal Fees and Expenses. The Employer agrees to pay any and all legal
-----------------------
fees and expenses incurred by Participant in seeking to obtain or enforce any
right or benefit provided by this Agreement.
11. Capitalized Terms. Each capitalized term used in this Agreement that
-----------------
is not otherwise defined herein shall have the same meaning attributed to it in
the Plan.
12. Agreement Binding on Successors to the Employer. Any successor to the
-----------------------------------------------
Employer hereunder, which successor continues or acquires any of the business of
the Employer, shall be bound by the terms of this Agreement in the same manner
and to the same extent as the Employer.
8
<PAGE>
13. Governing Law. This Agreement shall be construed and enforced in
-------------
accordance with the laws of the State of Texas.
IN WITNESS WHEREOF, the parties hereto have executed this Participation
Agreement as of the date first written above.
PARTICIPANT: ATMOS ENERGY CORPORATION:
_______________________________________ By: ________________________________
9
<PAGE>
EXHIBIT B
ATMOS ENERGY CORPORATION
SUMMARY OF ACTUARIAL ASSUMPTIONS AND METHODS
FOR
DETERMINING ANNUAL PERFORMANCE-BASED SEBP TRUST
FUNDING LIABILITIES
ACTUARIAL ASSUMPTIONS
Discount Rate 8%
Mortality
Prior to Age 62 None
After Age 62 IRS Applicable Table
(50/50 GAM83)
Salary Scale 0%
Target Percentage 75%
METHOD FOR DETERMINING LIABILITIES
The liability determined is the present value as of the valuation date of the
projected age 62 Performance-Based SEBP benefit. The projected age 62 benefit
is based on Performance-Based SEBP compensation determined as the sum of (1) and
(2) as follows:
(1) The greater of (A) the Participant's annual base salary at the date of
his termination of employment, or (B) the average of the Participant's
annual base salary for the highest three (3) calendar years (whether
or not consecutive) of the Participant's employment with the Employer.
(2) The greater of (A) the Participant's last Performance Award or (B) the
average of the highest three (3) Performance Awards (whether or not
consecutive).
The qualified plan offset is the projected age 62 qualified plan benefit
with no salary scale or wage base projections.
<PAGE>
EXHIBIT C
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT is entered into as of the ____ day of
____________, 19___, by and between ATMOS ENERGY CORPORATION, a Texas and
Virginia corporation, on behalf of itself and its affiliates, divisions, parent
corporations, and subsidiaries (collectively the "Employer"), and ______________
("Participant").
RECITALS
A. Contemporaneously with the execution of this Agreement, Participant
will become employed with Employer in the position of [INSERT: PARTICIPANT'S
TITLE]. As a result of his position as [INSERT: PARTICIPANT'S TITLE] and the
execution of this Agreement, Employer will provide Participant with initial and
ongoing confidential information and trade secrets of Employer. For purposes of
this Agreement, confidential information and/or trade secrets includes, but is
not limited to: customer information, pricing information, sales procedures,
operating procedures, marketing plans or information, financial information of
Employer and/or Employer's customers, and other technical, marketing, or
business information. In return, Participant agrees to hold such information in
trust and confidence pursuant to Paragraph 2 below.
B. As a result of becoming [INSERT: PARTICIPANT'S TITLE] and as further
consideration for the promises and covenants herein, Participant is eligible to
participant in the Atmos Energy Corporation Performance-Based Supplemental
Executive Benefits Plan (the "Plan"), pursuant to which certain executive or
management employees of the Employer are eligible to receive supplemental
retirement, disability, and death benefits.
NOW THEREFORE, in consideration of Participant's right to participate in
the Plan the receipt of confidential information and trade secrets of the
Employer, and the mutual promises contained herein, the parties agree as
follows:
1. Restrictions. Participant acknowledges that in order to effectuate the
------------
promises to hold confidential information and trade secrets in trust for the
Employer pursuant to Paragraph 2 below, it is necessary to enter into the
following restrictive covenant, which is ancillary to the agreement between
Employer and Participant herein. Without the prior written consent of Employer,
Participant shall not, during the term of his employment or for two (2) years
following the termination of employment with Employer.
a. Participate, engage in, or render services similar or related to
the services performed by Participant for Employer for any business that
sells or offers for sale any products or services in competition with the
products or services sold by [INSERT: "EMPLOYER" OR NAME OF APPLICABLE
BUSINESS UNIT] in the geographic area [INSERT: DESCRIPTION OF GEOGRAPHIC
AREA].
<PAGE>
b. Have any direct or indirect financial interest in any business
that sells or offers for sale any products or services in competition with
the products or services sold by [INSERT: "EMPLOYER" OR NAME OF APPLICABLE
BUSINESS UNIT] [INSERT: DESCRIPTION OF GEOGRAPHIC AREA IN PARAGRAPH 1.A];
provided, however, that the ownership by Participant of any stock listed on
a national securities exchange of any corporation conducting a competing
business shall not be deemed a violation of this Agreement if the aggregate
amount of such stock owned by Participant does not exceed one percent (1%)
of the total outstanding stock of such corporation; or
c. Solicit or attempt to solicit, on behalf of himself or any other
person or entity, business from any person or entity that was a customer of
Employer during Participant's employment if such business is in the scope
of services or products provided by employer.
2. Solicitation/Disclosure of Confidential Information and Trade Secrets.
---------------------------------------------------------------------
In further consideration for the mutual promises made herein, Participant agrees
that without the prior written consent of Employer, Participant shall not at any
time:
a. Solicit, induce, or attempt to induce, on behalf of himself or
any other person or entity, any employee of Employer to terminate their
employment with Employer; or
a. Use or disclose to any person or entity any confidential
information or trade secrets of Employer except as necessary during the
term of his employment with Employer to perform services on behalf of
Employer.
3. Breach of Agreement by Participant. In the event of a breach of this
----------------------------------
Agreement by Participant, Employer shall be entitled to all appropriate
equitable and legal relief including, but not limited to:
a. Injunction to prevent conduct in violation of this Agreement;
b. Damages incurred by Employer as a result of the breach; and
c. Attorneys' fees and costs incurred by Employer in enforcing the
terms of this Agreement.
Additionally, any period or periods of breach of Paragraph 1 above shall not
count toward the two-year restrictive period, but shall instead be added to the
two-year restrictive period.
4. Partial Validity. In the event any Court of any competent jurisdiction
----------------
holds any provision of this Agreement to be invalid, the remaining provisions
shall not be affected or invalidated and shall remain in full force and effect.
2
<PAGE>
5. Reformation. In the event any Court of competent jurisdiction holds
-----------
any restrictions in this Agreement to be unreasonable or unenforceable as
written, the Court may reform the Agreement to make it enforceable, and this
Agreement shall remain in full force and affect as reformed by the Court.
6. Controlling Law. This Agreement shall be construed and enforced
---------------
according to [INSERT: APPROPRIATE STATE] LAW.
IN WITNESS WHEREOF, the parties hereto have executed this Non-Competition
Agreement as of the date first written above.
PARTICIPANT ATMOS ENERGY CORPORATION
______________________________ By:________________________________
3
<PAGE>
EXHIBIT D
INDUSTRY PEER GROUP
INDUSTRY PEER GROUP DESIGNATED BY THE BOARD OF DIRECTORS: the companies
constituting the Merrill Lynch Mid-Cap LDCs.
EXAMPLE OF THE CALCULATION OF THE PERFORMANCE RANKING IN THE EVENT OF A CHANGE
IN THE INDUSTRY PEER GROUP DURING AN EXECUTIVE'S ACTIVE EMPLOYMENT WITH THE
COMPANY:
Assumptions:
1. Executive retires December 31, 2004 with more than ten years service with the
Company.
2. The Board of Directors changed the Industry Peer Group effective January 1,
2000.
3. The Company's Performance Ranking under the first Industry Peer Group was
the 80/th/ percentile, covering the period from January 1, 1995 through
December 31, 1999.
4. The Company's Performance Ranking under the second Industry Peer Group was
the 50/th/ percentile, covering the period from January 1, 2000 through
December 31, 2004.
Calculation:
1. .50 weight (first 5 years of the Executive's final 10 years of employment
with the Company) x 80% = 40% relative to first Industry Peer Group.
2. .50 weight (second 5 years of the Executive's final 10 years of employment
with the Company) x 50% = 25% relative to second Industry Peer Group.
3. 40% + 25% = 65% total Performance Ranking.
<PAGE>
Exhibit 10.33
ATMOS ENERGY CORPORATION
------------------------
EXECUTIVE NONQUALIFIED DEFERRED COMPENSATION PLAN
-------------------------------------------------
The Atmos Energy Corporation Executive Nonqualified Deferred Compensation
Plan (hereinafter called the "Plan") was adopted by the Board of Directors of
Atmos Energy Corporation, a Texas and Virginia corporation (hereinafter called
the "Company"), on August 12, 1998 to be effective October 1, 1998.
ARTICLE 1
PURPOSE
-------
The purpose of the Plan is to provide certain unfunded benefits for a
select group of the Company's key management personnel and their beneficiaries.
It is the intention of the Company that the Plan meet all of the requirements
necessary or appropriate to qualify it as a non-qualified, unfunded, unsecured
plan of deferred compensation under the Code for a select group of management or
highly compensated Employees within the meaning of ERISA Sections 201(2),
301(a)(3), and 401(a)(1), and all provisions hereof shall be interpreted
accordingly.
ARTICLE 2
DEFINITIONS
-----------
The following are defined terms wherever they appear in the Plan:
2.1 "Award" means any annual incentive award made under the Atmos Energy
Corporation Annual Incentive Plan for Management.
2.2 "Board of Directors" or "Board" shall mean Board of Directors of Atmos
Energy Corporation.
2.3 (a) "Change in Control" of the Company shall be deemed to have
occurred if:
(i) Any "Person" (as defined in Section 2.3(b)(i) below), other
than (1) the Company or any of its Subsidiaries, (2) a trustee or
other fiduciary holding securities under an employee benefit plan of
the Company or any of its Affiliates, (3) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (4)
a corporation owned, directly or indirectly, by the shareholders of
the Company in substantially the same proportions as their ownership
of stock of the Company, is or becomes the "beneficial owner" (as
defined in Section 2.3(b)(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 (iii)(A)
below.
<PAGE>
(ii) During any period of two consecutive years (the "Period"),
individuals who at the beginning of the Period constitute the Board of
Directors of the Company and any "new director" (as defined in Section
2.3(b)(iii) below) cease for any reason to constitute a majority of
the Board of Directors.
(iii) There is consummated a merger or consolidation of the
Company or any direct or indirect subsidiary of the Company with any
other corporation, except if:
(A) 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 sixty percent (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
(B) 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;
(iv) 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.
(b) Definitions. For purposes of Section 2.3(a) above,
-----------
(i) "Person" shall have the meaning given in Section 3(a)(9) of
the 1934 Act as modified and used in Sections 13(d) and 14(d) of the
1934 Act.
(ii) "Beneficial owner" shall have the meaning provided in Rule
13d-3 under the 1934 Act.
(iii) "New director" shall mean an individual whose election by
the Company's Board of Directors 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
2
<PAGE>
whose election or nomination for election was previously so approved
or recommended. However, "new director" shall not include a director
whose initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a consent
solicitation relating to the election of directors of the Company.
(iv) "Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under Section 12 of the 1934 Act.
2.4 "Committee" shall mean the committee appointed or designated by the
Board to administer the Plan.
2.5 "Company" shall mean Atmos Energy Corporation, a Texas and Virginia
corporation, and any successor entity.
2.6 "Deferred Compensation Account" or "Account" shall mean the separate
account established under the Plan for each Participant, as described in Section
4.1.
2.7 "Employee" means common law Employee (as defined in accordance with
the Regulations and Revenue Rulings then applicable under Section 3401(c) of the
Code) of the Company and any Subsidiary of the Company.
2.8 "Participant" shall mean each individual who, as a key executive
Employee of the Company, elects to participate in the Plan in accordance with
the terms and conditions of the Plan.
2.9 "Plan" shall mean the Atmos Energy Corporation Executive Nonqualified
Deferred Compensation Plan, as amended from time to time.
2.10 "Subsidiary" shall mean (i) any corporation in an unbroken chain of
corporations beginning with the Company, if each of the corporations other than
the last corporation in the unbroken chain owns stock possessing a majority of
the total combined voting power of all classes of stock in one of the other
corporations in the chain, (ii) any limited partnership, if the Company or any
corporation described in item (i) above owns a majority of the general
partnership interest and a majority of the limited partnership interests
entitled to vote on the removal and replacement of the general partner, and
(iii) any partnership or limited liability company, if the partners or members
thereof are composed only of the Company, any corporation listed in item (i)
above or any limited partnership listed in item (ii) above. "Subsidiaries"
means more than one of any such corporations, limited partnerships, partnerships
or limited liability companies.
2.11 "Termination of Employment" shall mean the termination of the
employee-employer relationship between a Participant and the Company and any of
its Subsidiaries. A transfer among the Company and any of its Subsidiaries will
not be a Termination of Employment.
3
<PAGE>
ARTICLE 3
PARTICIPATION
-------------
3.1 Eligibility. The individuals who are eligible to participate in the
-----------
Plan are those key Employees of the Company who either: (a) occupy a position
with the Company which has been designated by the Committee as an eligible
position for participation in the Plan; or (b) who have been authorized by the
Committee to participate in the Plan.
3.2 Participation in the Plan.
-------------------------
(a) A Participant may elect to defer receipt of all or a specified
portion of his compensation for services as an Employee of the Company that
would otherwise be payable to the Participant in the form of base salary or
Awards.
(b) The election to defer a portion of an Award must be made in 25
percent increments; that is, the Participant may elect to defer 0%, 25%,
50%, 75%, or 100% of his Award for any given performance period under the
Annual Incentive Plan for Management.
(c) The election to defer is made by delivering a properly executed
election form to the Committee. The election shall specify: (i) the type of
compensation to be deferred; (ii) the amount of such compensation to be
deferred; (iii) the method that such deferred compensation is to be paid;
(iv) the date or dates for payment of such deferred compensation and (v)
the recipient and manner of payment of such deferred compensation in the
event of his death before complete distribution of the deferred
compensation.
(d) An election to defer base salary or Awards must be filed by the
Participant prior to the commencement of the calendar year during which
such compensation will be earned in the case of base salary and prior to
the commencement of the performance period under the Annual Incentive Plan
for Management in the case of Awards; provided, however, that an election
to defer salary or Awards by an individual who subsequently begins active
employment with the Company (by reason of initial employment or
reemployment), may be filed prior to the date such active employment
begins.
(e) The deferral of a Participant's base salary shall begin as of the
first day of the first full pay period of the calendar year next following
the filing of his election described in Paragraph (c) above; or the first
day of the first full pay period of active employment, if applicable.
3.3 Elections Pertaining to Payments. At the time of the election to
--------------------------------
defer, the Participant shall elect any method of payment of the amounts in his
Accounts over a specified period of years or in a lump sum distribution,
provided that:
(a) If the payout provides for installment payments, the payments
shall be made at least annually and no more frequently than monthly and
shall be payable for a period not to exceed 10 years; and
4
<PAGE>
(b) If the payments are to commence after Termination of Employment,
no payments may be made prior to the first day of the calendar year
following the calendar year during which the Participant so terminates.
3.4 Modification of Elections Pertaining to Payments. If the payments are
------------------------------------------------
to commence after Termination of Employment, a Participant may at any time prior
to the date that he terminates such employment request that the Committee modify
his previous elections pertaining to: (i) the method that the balance of his
Deferred Compensation Account is to be paid; (ii) the dates of payment of the
balance of his Account; or (iii) the manner of payment of the balance of his
Account in the event of his death. In determining whether the request should be
allowed, the Committee should consider the Participant's financial needs,
including any changed circumstances, as well as the projected financial needs of
the Company or a Subsidiary that is liable for such future payments. If the
Committee determines that the request should be allowed, the requested
modifications shall be made.
3.5 Reduction or Termination of Future Deferral.
-------------------------------------------
(a) A Participant may elect at any time to terminate the amount of
base salary that will be deferred in the future. Such termination shall
only apply to compensation that has not yet been earned and shall not
accelerate the payment of any amounts previously deferred.
(b) The election to terminate future base salary deferrals shall be
made by delivering a properly executed form to the Committee.
(c) The termination of the deferral of future base salary shall be
effective as of the first day of the first payroll period following the
receipt of the form by the Committee, or if later, the effective date of
such termination as specified on the Participant's election form, and shall
continue throughout the remainder of the calendar year in which such
election to terminate occurred.
(d) On or prior to December 31 preceding a calendar year, a
Participant may elect to resume, change or reduce the amount of base salary
that will be deferred for the next calendar year. In the absence of any
such election, the Participant's current calendar year election regarding
deferral of base salary shall remain effective.
(e) The election provided for in subparagraph (d) above shall be made
by delivering a properly executed form to the Committee and shall be
effective as of the first day of the first payroll period beginning in the
applicable calendar year.
3.6 Deferral of Awards Pursuant to the Annual Incentive Plan for
------------------------------------------------------------
Management. A new voluntary election to defer any portion of an Award must be
- ----------
made prior to the commencement of each performance period under the Annual
Incentive Plan for Management. Once a voluntary election has been made for a
performance period and the performance period has begun, the election may not be
modified, but may be terminated in the same manner as termination of a base
salary deferral election under Section 3.5 above.
5
<PAGE>
ARTICLE 4
COMPENSATION DEFERRED
---------------------
4.1 Deferred Compensation Account. A Deferred Compensation Account shall
-----------------------------
be established for each Employee when the Employee becomes a Participant.
Compensation deferred by a Participant under this Plan shall be credited to this
Account on the date such compensation would have otherwise been payable to the
Participant. Hypothetical income on this deferred compensation shall also be
credited to the Account as provided in Section 4.2.
4.2 Interest Credited.
-----------------
(a) The balance in the Participant's Deferred Compensation Account as
of the last day of a month prior to any additional allocations or credits
of compensation for such month, if any, shall be credited with interest
equal to one-twelfth of the Annual Interest Rate.
(b) The Annual Interest Rate for each applicable calendar year,
beginning on January 1 of the calendar year, will be equal to the sum of
(i) 2.0 percent, plus (ii) the annual yield reported on a 30-year Treasury
Bond for the first business day of January for each calendar year, as
reported in the Wall Street Journal.
ARTICLE 5
PAYMENT OF DEFERRED COMPENSATION
--------------------------------
5.1 Payment of Deferred Compensation. Upon the date specified in the
--------------------------------
election form filed pursuant to Section 3.2 and 3.3 (as modified by Section 3.4,
if applicable), the balance of the Participant's Deferred Compensation Account
shall be paid to him according to the method, and at the time, previously
selected by the Participant.
5.2 Financial Necessity Payment. Notwithstanding any other provisions of
---------------------------
this Plan, if the Committee determines, after consideration of a Participant's
application, that the Participant has a Financial Necessity which is beyond the
Participant's control of such a substantial nature that a contemporaneous
payment of compensation deferred under this Plan is warranted, the Committee may
in its sole and absolute discretion direct that all or a portion of the balance
of the Participant's Deferred Compensation Account, be paid to him in cash as
may be specified by the Committee. The expression "Financial Necessity," as
used in this Subsection means a severe financial hardship to the Participant
resulting from a sudden and unexpected illness or accident of a Participant or
of a dependent (as defined in Code Section 152(a)) of the Participant, loss of
the Participant's property due to casualty or other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the control of
the Participant (but specifically not including the need to send a child of the
Participant to college or the desire to purchase a home). The amount of any
such distribution shall be limited to the amount deemed necessary by the
Committee to alleviate or remedy the hardship. The payment shall be made in the
manner and at the time specified by the Committee.
5.3 Payments of a Deceased Participant's Account. In the event of a
--------------------------------------------
Participant's death before the balance of his Deferred Compensation Account has
been fully paid to him, payment of the balance of the Participant's Account
shall be made in accordance with the terms
6
<PAGE>
selected by the Participant. If the balance of the Account is to be paid in
installments, the Committee may, upon consideration of the application of the
designated beneficiary or the duly appointed Committee or Executor of the
Participant's estate as appropriate, determine that there exists a Financial
Necessity which warrants the payment of the balance in the Participant's
Account. In such event, the Committee will direct that the balance of the
Participant's Account be paid in a single payment. The payment shall be made at
the time specified by the Committee.
5.4 Incapacity of Recipient. If the Committee shall find that any person
-----------------------
to whom any amount is payable under this Plan is unable to carry on his or her
own affairs because of illness, or accident, or is a minor, any distribution or
payment due hereunder (unless a prior claim therefore shall have been made by a
duly appointed guardian, committee, or any legal representative) may be
distributed or paid to the spouse, child, parent, brother or sister, or to any
person determined by the Committee to have incurred expenses for the support of
such person otherwise entitled to distribution or payment in accordance with the
applicable provisions of Sections 5.1, 5.2 or 5.3 above. Any such distribution
or payment shall completely discharge any obligations or liabilities of the
Company under the Plan with respect to such distribution or payment.
ARTICLE 6
DEFERRED COMPENSATION AS AN UNSECURED PROMISE
---------------------------------------------
6.1 Grantor Trust. The Company will create a grantor trust (within the
-------------
meaning of Section 671 of the Internal Revenue Code of 1986, as amended) (the
"Trust") pursuant to a trust agreement by and between the Company and such
trustee as the Committee may from time to time select (the "Trust Agreement"),
to which it will make contributions in an amount equal to the deferred amounts
to be credited to each Participant's Deferred Compensation Account plus the
amount of interest credit required under Section 4.2, to the extent each year
the Trust does not earn sufficient amounts to meet the interest crediting
obligation. If the Trust's earnings for any year exceed the interest required
to be credited for that year, then the excess earnings shall reduce the
Company's contribution obligation hereunder for that year. Notwithstanding any
creation of such a Trust, the benefits hereunder shall be general obligations of
the Company. Payment of benefits from such Trust shall, to that extent,
discharge the Company's obligations under this Plan. All payments provided for
under this Plan not so discharged shall be paid in cash from general assets of
the Company.
6.2 Absence of Escrow Account or Fiduciary Relationship. Nothing in this
---------------------------------------------------
Plan, and no action taken pursuant to its terms, shall create or be construed to
create a trust or escrow account of any kind, or a fiduciary relationship
between the Committee or the Company and any Participant, such Participant's
beneficiary, or any other person other than pursuant to the Trust Agreement.
The Participants and their beneficiaries and any other person entitled to
payment hereunder shall rely solely on the unsecured promise of the Company to
make the payments required hereunder, but shall have the right to enforce such a
claim in the same manner as any general unsecured creditor of the Company.
7
<PAGE>
ARTICLE 7
ADMINISTRATION
--------------
The Plan shall be administered by the Human Resources Committee of the
Board (the "Committee") unless otherwise determined by the Board. If said Human
Resources Committee does not so serve, the Committee shall consist of not fewer
than two persons; any member of the Committee may be removed at any time, with
or without cause, by resolution of the Board; and any vacancy occurring in the
membership of the Committee may be filled by appointment by the Board. The
Committee shall select one of its members to act as its Chairman. A majority of
the Committee shall constitute a quorum, and the act of a majority of the
members of the Committee present at a meeting at which a quorum is present shall
be the act of the Committee.
The Committee shall determine and designate from time to time the eligible
persons to participate in the Plan. The Committee, in its discretion, shall (i)
interpret the Plan, (ii) prescribe, amend, and rescind any rules and regulations
necessary or appropriate for the administration of the Plan, and (iii) make such
other determinations and take such other action as it deems necessary or
advisable in the administration of the Plan. Any interpretation, determination,
or other action made or taken by the Committee shall be final, binding, and
conclusive on all interested parties.
The Committee may appoint a Secretary who may, but need not, be a member of
the Committee, and may employ such agents and such clerical and other
administrative personnel as reasonably may be required for the purpose of
administering the Plan. Such administrative personnel shall carry out the
duties and responsibilities assigned to them by the Committee.
ARTICLE 8
GENERAL PROVISIONS
------------------
8.1 Change in Control. In the event of an occurrence of a Change in
-----------------
Control, as defined herein, the Company or its successor organization shall be
required to fully pay the Deferred Compensation Account of the Participant
through the grantor trust arrangement as specified in Article 6 above. Such
financing of the grantor trust shall occur within 20 days following the date of
the Change in Control and within 10 days following any subsequent increase in
the amount owing to the Deferred Compensation Account of any Participant.
8.2 Nonassignment. The right of the Participant or his Beneficiary to the
-------------
payment of any amounts under the Plan may not be assigned, transferred, pledged,
or encumbered nor shall such right or other interests be subject to attachment,
garnishment, execution, or other legal process.
8.3 No Right to Continued Employment. Nothing in the Plan shall be
--------------------------------
construed to confer upon any Participant any right to continued employment with
the Company or a Subsidiary nor interfere in any way with the right of the
Company or a Subsidiary to terminate the employment of such Participant at any
time without assigning any reason therefor.
8.4 Withholding Taxes. Appropriate payroll taxes shall be withheld from
-----------------
cash payments made to Participants pursuant to this Plan as required by
applicable law.
8
<PAGE>
8.5 Termination and Amendment. The Committee may from time to time amend,
-------------------------
suspend, or terminate the Plan, in whole or in part, and if the Plan is
suspended or terminated, the Committee may reinstate any or all of its
provisions. No amendment, suspension, or termination may, however, impair the
right of a Participant or his or her Beneficiary to the amounts in the Deferred
Compensation Account on the effective date of such amendment, suspension, or
termination, including any additional credits of interest to be earned on such
amounts. If the Plan is terminated, Participants and Beneficiaries who have
Deferred Compensation Accounts under the Plan as of the date of termination will
receive payment of such amounts of those Accounts as specified in the Plan.
8.6 Successors and Assigns. The Company will require any successor
----------------------
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business an/or assets of the Company, expressly
to assume and agree to perform the Company's obligation under this Plan in the
same manner and to the same extent that the Company would be required to perform
them if no such succession had taken place. As used herein, the "Company" shall
mean the Company as hereinbefore defined and any aforesaid successor to its
business and/or assets.
8.7 Indemnification. No member of the Board or the Committee, nor any
---------------
officer or Employee of the Company acting on behalf of the Board or the
Committee, shall be personally liable for any action, determination, or
interpretation taken or made in good faith with respect to the Plan, and all
members of the Board or the Committee and each and any officer or Employee of
the Company acting on their behalf shall, to the extent permitted by law, be
fully indemnified and protected by the Company in respect of any such action,
determination, or interpretation.
8.8 Governing Law. The validity, construction and effect of the Plan and
-------------
any actions taken or relating to the Plan shall be determined in accordance with
the laws of the State of Texas and applicable Federal law.
* * * * *
IN WITNESS WHEREOF, the Company has caused this instrument to be executed
as of August 12, 1998, by its President pursuant to prior action taken by the
Board.
ATMOS ENERGY CORPORATION
By:/s/ Robert W. Best
-------------------
Robert W. Best
Chairman of the Board, President
and Chief Executive Officer
Attest:
/s/ Glen A. Blanscet
- ---------------------------------
Secretary
9
<PAGE>
Exhibit 13
----------
ATMOS ENERGY CORPORATION
1998 ANNUAL REPORT
FINANCIAL REVIEW
Page no.
Consolidated balance sheets 2
Consolidated statements of income 3
Consolidated statements of shareholders' equity 4
Consolidated statements of cash flows 6
Notes to consolidated financial statements 8
Management's responsibility for financial statements 42
Report of independent auditors 43
Management's Discussion and Analysis of
Financial Condition and Results of Operations 44
Selected quarterly financial data (unaudited) 72
Market price of common stock and related matters 73
Selected financial data 74
<PAGE>
<TABLE>
<CAPTION>
ATMOS ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
September 30,
------------------------
1998 1997
----------- -----------
(In thousands, except share data)
<S> <C> <C>
ASSETS
Property, plant and equipment $1,333,556 $1,301,004
Construction in progress 112,864 31,668
---------- ----------
1,446,420 1,332,672
Less accumulated depreciation and amort. 528,560 483,545
---------- ----------
Net property, plant and equipment 917,860 849,127
Current assets
Cash and cash equivalents 4,735 6,016
Accounts receivable, less allowance
for doubtful accounts of $1,969
in 1998 and $2,188 in 1997 34,887 71,217
Inventories 15,219 12,333
Gas in storage 48,909 48,122
Prepayments 3,630 6,017
---------- ----------
Total current assets 107,380 143,705
Deferred charges and other assets 116,150 95,479
---------- ----------
$1,141,390 $1,088,311
========== ==========
CAPITALIZATION AND LIABILITIES
Shareholders' equity
Common stock, no par value (stated at
$.005 per share); 75,000,000 shares
authorized; issued and outstanding
1998 - 30,398,319 shares,
1997 - 29,642,437 shares $ 152 $ 148
Additional paid-in capital 271,637 251,174
Retained earnings 99,369 75,938
---------- ----------
Total shareholders' equity 371,158 327,260
Long-term debt 398,548 302,981
---------- ----------
Total capitalization 769,706 630,241
Current liabilities
Current maturities of long-term debt 57,783 15,201
Notes payable to banks 66,400 167,300
Accounts payable 44,742 62,626
Taxes payable 12,736 416
Customers' deposits 12,029 15,098
Other current liabilities 30,369 52,582
---------- ----------
Total current liabilities 224,059 313,223
Deferred income taxes 80,213 87,828
Deferred credits and other liabilities 67,412 57,019
---------- ----------
$1,141,390 $1,088,311
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
ATMOS ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Year ended September 30,
---------------------------------
1998 1997 1996
-------- ---------- ----------
(In thousands, except per share data)
Operating revenues $848,208 $906,835 $886,691
Purchased gas cost 516,372 577,181 562,279
-------- -------- --------
Gross profit 331,836 329,654 324,412
Operating expenses
Operation 131,336 173,683 148,196
Maintenance 10,278 11,974 11,719
Depreciation and amortization 47,555 45,257 41,666
Taxes, other than income 29,788 32,131 30,254
Income taxes 31,806 14,298 23,316
-------- -------- --------
Total operating expenses 250,763 277,343 255,151
-------- -------- --------
Operating income 81,073 52,311 69,261
Other income (expense)
Interest and investment income 5,430 5,410 3,867
Other, net 4,341 (288) (300)
-------- -------- --------
Total other income 9,771 5,122 3,567
Interest charges 35,579 33,595 31,677
-------- -------- --------
Net income $ 55,265 $ 23,838 $ 41,151
======== ======== ========
Basic net income per share $ 1.85 $ .81 $ 1.42
======== ======== ========
Diluted net income per share $ 1.84 $ .81 $ 1.42
======== ======== ========
Cash dividends per share $ 1.06 $ 1.01 $ .98
======== ======== ========
Weighted average
shares outstanding
Basic 29,822 29,409 28,978
======== ======== ========
Diluted 30,031 29,422 28,994
======== ======== ========
See accompanying notes to consolidated financial statements.
3
<PAGE>
ATMOS ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF
SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common stock
--------------------- Add'l
Number of Stated paid-in Retained
shares value capital earnings
---------- ------- --------- ----------
(In thousands, except share data)
<S> <C> <C> <C> <C>
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 251,224 1 4,322 -
ESOP 161,477 1 3,641 -
Long-term stock plan for
United Cities Division 16,900 - 241 -
Outside directors stock-
for-fee plan 3,389 - 76 -
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
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>
(continued)
4
<PAGE>
ATMOS ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF
SHAREHOLDERS' EQUITY
(continued)
<TABLE>
<CAPTION>
Common stock
-------------------- Add'l
Number of Stated paid-in Retained
shares value capital earnings
---------- -------- -------- ---------
(In thousands, except share data)
<S> <C> <C> <C> <C>
Balance, September 30, 1997 29,642,437 $148 $251,174 $ 75,938
Net income - - - 55,265
Cash dividends ($1.06
per share) - - - (31,834)
Common stock issued:
Restricted stock
grant plan 114,250 1 2,898 -
Direct stock purchase
plan 531,353 3 14,482 -
ESOP/401(k) plans 52,473 - 1,485 -
Long-term stock plan for
United Cities Division 55,500 - 1,533 -
Outside directors
stock-for-fee plan 2,306 - 65 -
---------- -------- -------- --------
Balance, September 30, 1998 30,398,319 $152 $271,637 $ 99,369
========== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
ATMOS ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended September 30,
-------------------------------------
1998 1997 1996
------------ ----------- -----------
(In thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 55,265 $ 14,575 $ 41,151
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization:
Charged to depreciation and
amortization 47,555 39,970 41,666
Charged to other accounts 5,861 2,237 3,580
Deferred income taxes (3,968) 5,807 7,585
Gain on sales of non-utility
assets (3,335) - -
Other - - (1,866)
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable 36,330 32,198 (12,697)
(Increase) decrease in
inventories (2,886) 1,562 (1,238)
Increase in gas in storage (787) (4,772) (15,949)
(Increase) decrease in
prepayments 2,387 (3,208) 1,966
Increase in deferred charges
and other assets (20,671) (29,683) (4,623)
Increase (decrease) in
accounts payable (17,884) (17,695) 23,796
Increase (decrease) in taxes
payable 8,673 (837) 7,099
Increase (decrease) in
customers' deposits (3,069) (1,714) 592
Increase (decrease) in other
current liabilities (22,213) 28,716 (4,165)
Increase in deferred credits
and other liabilities 10,393 1,593 4,836
-------- -------- --------
Net cash provided by
operating activities 91,651 68,749 91,733
</TABLE>
6
<PAGE>
ATMOS ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
<TABLE>
<CAPTION>
Year ended September 30,
----------------------------------------
1998 1997 1996
------------ ---------- ------------
(In thousands)
<S> <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures $(134,989) $(122,312) $(117,589)
Retirements of property, plant
and equipment, net 178 1,189 5,708
Proceeds from sales of assets 15,997 - -
--------- --------- ---------
Net cash used in investing
activities (118,814) (121,123) (111,881)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in
notes payable (100,900) 38,812 62,675
Proceeds from issuance of
long-term debt 154,445 40,000 -
Repayment of long-term debt (16,296) (14,659) (20,734)
Cash dividends paid (31,834) (26,415) (28,478)
Issuance of common stock 20,467 9,518 8,523
--------- --------- ---------
Net cash provided by
financing activities 25,882 47,256 21,986
--------- --------- ---------
Net increase (decrease) in cash
and cash equivalents (1,281) (5,118) 1,838
Cash and cash equivalents at
beginning of year 6,016 11,134 9,296
--------- --------- ---------
Cash and cash equivalents
at end of year $ 4,735 $ 6,016 $ 11,134
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
ATMOS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Contents of Notes to Consolidated Financial Statements
1. Summary of significant accounting policies 8
2. Business combinations 14
3. Rates 16
4. Income taxes 18
5. Contingencies 20
6. Leases 25
7. Long-term debt and notes payable 26
8. Statement of cash flows supplemental
disclosures 28
9. Common stock and stock options 29
10. Employee retirement and stock ownership
plans 32
11. Other postretirement benefits 37
12. Earnings per share 41
13. Related party transactions 41
1. Summary of significant accounting policies
Forward-looking statements These notes to consolidated financial
statements, particularly notes 2, 5, 9, and 11 may contain "forward-looking
statements" as discussed herein in Management's Discussion and Analysis of
Financial Condition and Results of Operations under the heading, "Cautionary
Statement for the Purposes of the Safe Harbor under the Private Securities
Litigation Reform Act of 1995" and should be read in conjunction with such
discussion.
Description of business - Atmos Energy Corporation and its subsidiaries
("Atmos" or the "Company") are engaged primarily in
8
<PAGE>
the natural gas utility business as well as certain non-utility businesses. The
Company distributes through sales and transportation arrangements natural gas to
approximately 1.0 million residential, commercial, industrial and agricultural
customers through its five regulated utility divisions: Energas Company
("Energas Division") in Texas; Trans Louisiana Gas Company ("Trans La
Division")in Louisiana; Western Kentucky Gas Company ("Western Kentucky
Division") in Kentucky; Greeley Gas Company ("Greeley Division") in Colorado and
Kansas; and United Cities Gas Company ("United Cities Division") in Illinois,
Tennessee, Iowa, Virginia, Georgia, South Carolina, Kansas 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 utility divisions operate.
Through United Cities Gas Storage Company ("Storage"), a non-regulated
utility business, the Company also owns and operates natural gas storage fields
in Kentucky and Kansas to supplement natural gas used by regulated customers in
Tennessee, Kansas and Illinois and to provide storage services to other
customers that may be in other states.
Through Atmos Propane, Inc. ("Propane"), a non-regulated utility
business and a wholly-owned subsidiary of UCG Energy Corporation ("UCG Energy"),
which is a wholly-owned subsidiary of Atmos, the Company is engaged in the
retail distribution of propane (LP) gas, the wholesale supply and the
transportation of LP gas, the transportation of certain products for other
companies and the direct merchandising and repair of propane gas appliances.
Propane currently has operation and storage centers and store front offices
located in Tennessee, Kentucky, and North Carolina with a total company storage
capacity of approximately 2.3 million gallons. As of September 30, 1998,
Propane served approximately 37,400 customers.
Through UCG Energy's 45% interest in Woodward Marketing, L.L.C.
("WMLLC"), a limited liability company formed in Delaware and headquartered in
Houston, Texas, the Company is engaged in gas marketing and energy management
services. WMLLC provides gas marketing services to industrial customers,
municipalities and local distribution companies, including the United Cities,
Energas, Greeley, and Trans La Divisions. The Company utilizes equity
accounting for its investment in WMLLC.
Finally, the Company, through UCG Energy, leases and rents appliances,
real estate, equipment, and vehicles to the United Cities Division and others,
and owns a small interest in a partnership engaged in exploration and production
activities.
9
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Principles of consolidation - The accompanying consolidated financial
statements include the accounts of Atmos Energy Corporation and its
subsidiaries. Each subsidiary is wholly owned and all material intercompany
transactions have been eliminated.
Accounting for unconsolidated investments - The Company accounts for its
45% interest in WMLLC, using the equity method of accounting for investments.
Equity in pre-tax earnings of WMLLC included in the interest and investment
income caption in the consolidated statement of income were $3.9 million, $3.3
million and $2.0 million in 1998, 1997 and 1996, respectively.
Restatement for pooling of interests - The consolidated financial
statements for all periods prior to July 31, 1997 have been restated for the
pooling of interests of the Company with United Cities Gas Company. 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. Atmos' accounting policies recognize the financial effects of the
ratemaking and accounting practices and policies of the various regulatory
commissions. Regulated utility operations are accounted for in accordance with
Statement of Financial Accounting Standards No. 71, "Accounting for the Effects
of Certain Types of Regulation." This statement requires cost-based rate
regulated entities that meet certain criteria to reflect the authorized recovery
of costs due to regulatory decisions in their financial statements.
The Company records regulatory assets which represent assets which are
being recovered through customer rates or are probable of being recovered
through customer rates. Significant regulatory assets as of September 30, 1998
included the following: unamortized debt expense of $5.6 million, merger and
integration costs of $59.8 million, environmental costs of $4.0 million, and
deferred cost of purchased gas proceeding of $1.1 million. Regulatory
liabilities represent probable future reductions in revenues associated with
amounts that are to be credited to customers through the ratemaking process. As
of September 30, 1998, the Company had recorded a regulatory liability of $2.2
million for deferred income taxes.
Revenue recognition - Sales of natural gas are billed on a monthly
cycle basis; however, the billing cycle periods for
10
<PAGE>
certain classes of customers do not necessarily coincide with accounting 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.
Utility property, plant and equipment - Utility property, plant and
equipment is stated at original cost net of contributions in aid of
construction. The cost of additions includes direct construction costs, payroll
related costs (taxes, pensions and other fringe benefits), administrative and
general costs, and the estimated cost of an allowance for funds used during
construction (See AFUDC below). Major renewals and betterments are capitalized,
while the costs of maintenance and repairs are charged to expense as incurred.
The costs of large projects are accumulated in construction in progress until
the project is completed. When the project is completed, tested and placed in
service, the balance is transferred to the utility plant in service account,
included in rate base and depreciation begins. As of September 30, 1998, the
Company has invested approximately $80 million in its Customer Service
Initiative ("CSI"). The CSI investment is currently recorded in construction in
progress. CSI is a group of projects that are reorganizing processes throughout
the Company to leverage technology and implement industry best practices. It is
expected to be fully placed in service in 1999. 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 4.0% and 3.9% for the
years ended September 30, 1998 and 1997, respectively. At the time property,
plant and equipment is retired, the cost, plus removal expenses and less
salvage, is charged to accumulated depreciation.
Allowance for funds used during utility construction ("AFUDC") - AFUDC
represents the estimated cost of funds used to finance the construction of major
projects. Under regulatory practices, the costs are capitalized and included in
rate base for ratemaking purposes when the completed projects are placed in
service. Interest expense of $4.1 million, $1.2 million and $.4 million was
capitalized in 1998, 1997 and 1996, respectively. The increased amounts in 1998
and 1997 were related to CSI.
Non-utility property, plant and equipment - Balances are stated at cost
and depreciation is computed generally on the straight-line method for financial
reporting purposes.
11
<PAGE>
Inventories - Inventories consist primarily of materials and supplies
and merchandise held for resale. These inventories are stated at the lower of
average cost or market. Inventories also include propane inventories of
$979,000 and $722,000 at September 30, 1998 and 1997, respectively. Propane is
priced at average cost.
Gas in storage - Net additions of inventory gas to storage and
withdrawals of inventory gas from storage are priced using the average cost
method for all Atmos utility divisions, except for the United Cities Division,
where it is priced on the first-in first-out method. Gas stored underground and
owned by Storage is priced on the last-in first-out ("LIFO") method. In
accordance with the United Cities Division's purchased gas adjustment ("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.
Noncurrent 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, 1998 and 1997 include merger and integration costs of $59.8
million and $49.0 million in 1998 and 1997, respectively; the related reserve
for merger and integration costs of $20.3 million in both 1998 and 1997; and the
investment in WMLLC of $11.9 million and $10.0 million in 1998 and 1997,
respectively. Also included in deferred charges and other assets are assets of
the Company's qualified defined benefit retirement plans in excess of the plans'
obligations, Company assets related to the nonqualified retirement plans,
unamortized debt expense, and deferred compensation expense related to non-
vested restricted stock grants.
Deferred credits and other liabilities - Deferred credits and other
liabilities include customer advances for construction, obligations under
capital leases, obligations under other postretirement benefits, and obligations
under the Company's nonqualified retirement plans.
12
<PAGE>
Earnings per share - The calculation of basic earnings per share is
based on income available to common stockholders divided by weighted average
common shares outstanding. The calculation of diluted earnings per share is
based on net income available to common stockholders divided by weighted average
shares outstanding plus the dilutive shares related to the United Cities
Division's Long-term Stock Plan and Atmos' Restricted Stock Grant Plan.
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. 130 "Reporting Comprehensive Income." The Statement will be
effective for the Company's 1999 fiscal year. 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.
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 the Company's 1999 fiscal
year. 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.
In addition, the Company has not yet adopted Statement of Financial
Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging
Activities." The Statement will be effective for the Company's fiscal year
2000. It establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. This Statement
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<PAGE>
does not allow retroactive application to financial statements of prior periods.
The Company believes that adoption of these Statements will not have a
material impact on its reported 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. At the time of the merger, UCGC served
approximately 306,000 utility customers in Georgia, Illinois, Iowa, Kansas,
Missouri, South Carolina, Tennessee, and Virginia, and approximately 29,000
propane 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.
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,
historical financial statements for periods prior to the merger 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 consolidated statements of income and cash
flows for the year ended September 30, 1996 include Atmos operations for the
year then ended and UCGC operations for the year ended December 31, 1996. 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
approximately $123.0 million and net income of $9.3 million) are included in
both the 1997 and 1996 consolidated statements of income, and 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 reclassifications were made to conform UCGC's classifications to Atmos'
presentation.
Following the merger, UCGC's business began operating as United Cities
Gas Company, a division of Atmos ("United Cities
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<PAGE>
Division") and integration of the companies began. The United Cities Division is
structured like other divisions of Atmos. To achieve this structure,
approximately 560 utility positions in the United Cities Division were
eliminated by September 1998. An additional 75 Atmos positions were 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 resulted 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 center, all part of the CSI project.
The Company has recorded as regulatory assets through September 30, 1998 the
costs of the merger and integration of the United Cities Division, which
amounted to $59.8 million. The Company believes there are substantial long term
benefits to its customers and shareholders from the merger of the two companies,
which are expected to result in operating cost savings over the next 10 years
totaling approximately $375 million. The Company believes a significant amount
of the costs to achieve these benefits will be recovered through rates and
future operating efficiencies of the combined operations. Therefore, the merger
and integration costs will be charged to operations concurrent with the benefits
received. However, in the fourth quarter of fiscal 1997 the Company established
a general reserve of approximately $20.3 million ($12.6 million after-tax), to
account for costs that may not be recovered through rates.
The statements above concerning anticipated cost savings in the future
constitute "forward-looking statements," as defined in the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements should be read in
conjunction with the Company's disclosures under the heading "Cautionary
Statement for the Purposes of the Safe Harbor provisions of the Private
Securities Litigation Reform Act of 1995" at the beginning of Management's
Discussion and Analysis.
15
<PAGE>
Results of operations and net income for the previously separate companies
for the periods prior to the merger are as follows:
10 Months ended Year ended
July 31, 1997 September 30,
(Unaudited) 1996
--------------- -------------
(In thousands)
Operating revenues:
Atmos $474,069 $483,744
UCGC 356,325 402,947
-------- --------
$830,394 $886,691
======== ========
Net income:
Atmos $ 23,079 $ 23,949
UCGC 19,434 17,202
-------- --------
$ 42,513 $ 41,151
======== ========
Dividends per share:
Atmos $ .75 $ .96
UCGC $ .76 $ 1.02
3. Rates
As of September 30, 1998, the Company did not have any general rate cases
currently pending. The Trans La Division does have a hearing scheduled before
the Louisiana Public Service Commission in April 1999 for the Louisiana
Commission to consider the Trans La Division rate of return. Rate proceedings
completed during the three years ended September 30, 1998 are summarized below.
In September 1998, the Company and the staff of the Virginia State
Corporation Commission presented a Stipulation and Settlement of issues to the
Virginia State Corporation Commission. It was adopted effective October 1,
1998. The Stipulation and Settlement provided for a reduction of approximately
$249,000 in annual gross revenues of the United Cities Division. This
represents approximately a .2% reduction in the gross profit of the United
Cities Division and less than .08% reduction in the consolidated gross profit of
the Company.
In fiscal 1997, the Colorado Office of Consumer Counsel filed a complaint
with the Colorado Public Utilities Commission ("Colorado Commission")requesting
a $3.5 million reduction in the annual revenues in Colorado of the Greeley
Division. On December 17, 1997, a hearing was held at the Colorado Commission
presenting a Stipulation and Agreement reached by the Greeley Division and the
Colorado Office of Consumer Counsel. It settled
16
<PAGE>
the Consumer Counsel's complaint against the Greeley Division for a $1.6 million
reduction in annual revenues. The Stipulation and Agreement became effective in
January 1998. The reduction decreased the annual gross profit of the Greeley
Division by approximately 4% and the gross profit of the Company by
approximately .5%.
On June 9, 1998, the Kentucky Public Service Commission issued an Order
approving an Experimental Performance-Based Ratemaking ("PBR") mechanism related
to gas procurement and gas transportation activities filed by the Western
Kentucky Division. The PBR mechanism is incorporated into the Western Kentucky
Division's Gas Cost Adjustment Clause.
The Georgia Public Service Commission and the Tennessee Regulatory Authority
have approved Weather Normalization Adjustments ("WNA"). 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 WNA was an
increase/(decrease) in revenues of $.7 million, $2.6 million and $(2.6) million
in 1998, 1997 and 1996, respectively.
In May 1996, the Company filed to increase revenues by approximately $7.7
million for a portion of its Energas Division service area, which includes
approximately 200,000 customers inside the city limits of 67 cities in West
Texas. All cities either approved, or took no action to reject, a settlement
allowing a $5.3 million increase in annual revenues to be effective for bills
rendered on or after November 1, 1996. In October 1996, the Company filed a
rate request with the Railroad Commission of Texas to increase revenues by
approximately $.5 million for the remaining 22,000 rural customers in West
Texas. The rate request was approved and became effective in April 1997.
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<PAGE>
4. Income taxes
The components of income tax expense for 1998, 1997 and 1996 are as follows:
1998 1997 1996
-------- -------- --------
(In thousands)
Current
Federal $31,694 $ 7,917 $13,641
State 4,503 1,000 2,515
Deferred
Federal (3,352) 4,807 7,024
State (616) 1,000 561
Investment tax credits (423) (426) (425)
------- ------- -------
$31,806 $14,298 $23,316
======= ======= =======
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, 1998 and 1997 are
presented below:
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<PAGE>
1998 1997
---------- ----------
(In thousands)
Deferred tax assets:
Costs expensed for book purposes
and capitalized for tax purposes $ 1,049 $ 641
Accruals not currently deductible
for tax purposes 7,189 12,398
Customer advances 3,730 3,160
Nonqualified benefit plans 11,297 9,118
Postretirement benefits 10,093 5,757
Unamortized investment tax credit 1,427 1,723
Regulatory liabilities 3,175 3,117
Other, net 2,838 3,758
--------- ---------
Total deferred tax assets 40,798 39,672
Deferred tax liabilities:
Difference in net book value
and net tax value of assets (114,229) (102,038)
Pension funding (4,120) (4,190)
Gas cost adjustment 8,943 (6,568)
Regulatory assets (4,941) (8,673)
Other, net (6,664) (6,031)
--------- ---------
Total deferred tax liabilities (121,011) (127,500)
--------- ---------
Net deferred tax liabilities $ (80,213) $ (87,828)
========= =========
SFAS No. 109 deferred accounts for
rate regulated entities (included
in other deferred credits) $ 13,475 $ 15,072
========= =========
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<PAGE>
Reconciliations of the provisions for income taxes computed at the statutory
rate to the reported provisions for income taxes for 1998, 1997 and 1996 are set
forth below:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Tax at statutory rate of 35% $30,474 $13,348 $22,564
Common stock dividends deductible
for tax reporting (695) (706) (684)
State taxes 2,526 1,300 2,000
Other, net (499) 356 (564)
------- ------- -------
Provision for income taxes $31,806 $14,298 $23,316
======= ======= =======
</TABLE>
5. Contingencies
Litigation
Trans La Division
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 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 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 has appealed the verdict and intends 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. To date,
the insurance companies have denied coverage and one company has filed a
declaratory action to determine its obligations under the policy. The Company
does not expect the final outcome of
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<PAGE>
this case to have a material adverse effect on the financial condition, the
results of operations or the cash flows of the Company, because in the Company's
opinion, it is more likely than not that the amount of punitive damages
ultimately awarded will be substantially reduced.
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., 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. The case was concluded on December 15, 1997
when the Court entered its final approval of the settlement whereby LIG made a
payment of $10.3 million to the Trans La Division for the benefit of its
customers in the form of credits to customers' bills during the period November
1997 through March 1998. The suit was dismissed with prejudice at the same
fairness hearing on December 15, 1997.
Greeley Division
In Colorado, the Greeley 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 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 appealed the
judgment to the Colorado Court of Appeals. On June 11, 1998, the Colorado Court
of Appeals reversed the trial court verdict and ordered a new trial. The
plaintiffs have appealed the case to the Colorado Supreme Court. 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 cash flows of the
Company because the Company believes it has adequate
21
<PAGE>
insurance and reserves to cover any damages that may ultimately be awarded.
Western Kentucky Division
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 alleged that
the Western Kentucky Division was negligent in installing and servicing gas
lines at the residence. In September 1998, the Company and the plaintiffs
entered into a confidential settlement of all claims in this case and the case
was dismissed. The majority of the settlement was paid by the Company's
insurance carriers with the remainder being borne by the Company and charged to
the reserve for litigation losses.
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.
Guarantees
The Company's wholly-owned subsidiary, UCG Energy, and Woodward Marketing,
Inc. ("WMI"), sole members of WMLLC, act as guarantors of up to $12.5 million of
balances outstanding under a $30 million bank credit facility for WMLLC. UCG
Energy guarantees the payment of up to $5.6 million of borrowings under this
facility. No balance was outstanding under this credit facility at September
30, 1998. UCG Energy and WMI also act as joint and several guarantors on
certain accounts payable for gas purchases. UCG Energy has agreed to guarantee
payables of WMLLC up to $40.0 million of natural gas purchases and
transportation services from suppliers. WMLLC payable balances outstanding that
were subject to these guarantees amounted to $8.5 million at September 30, 1998.
Environmental matters
Atmos is the owner or previous owner of manufactured gas plant sites which
were used to supply gas prior to availability of natural gas. The gas
manufacturing process resulted in
22
<PAGE>
certain by-products and residual materials including coal tar. It was an
acceptable and satisfactory process at the time such operations were being
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.
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
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 July 22, 1998, Atmos entered into an Abatement Order on Consent with the
Missouri Department of Natural Resources addressing the former manufactured gas
plant located in Hannibal, Missouri. Atmos, through its United Cities Division,
agreed in the order to perform a removal action, a subsequent site evaluation
and to reimburse the response costs incurred by the state of Missouri in
connection with the property. The removal action was conducted and completed in
August 1998 and the site evaluation will be completed in 1999. The Company has
requested an Accounting Authority Order from the Missouri Public Service
Commission ("MSPC") that would authorize it to defer its response costs related
to the Hannibal site. On July 7, 1998, the MPSC Staff recommended that the MPSC
approve the application.
As of September 30, 1998, the Company had incurred and deferred for
recovery $1.1 million 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 the Johnson City, Hannibal and
Bristol sites.
On December 16, 1997, the Company, through its United Cities Division,
entered into a Settlement Agreement with two
23
<PAGE>
other responsible parties at the Americus, Georgia former manufactured gas plant
site. UCGC was a former owner of the property. In the Settlement Agreement, the
Company agreed to pay $250,000 to resolve its liability for response costs and
property damages associated with the site. The Company has paid the $250,000.
The agreement contains a covenant not to sue, an indemnification provision from
the other parties and gives the other parties all responsibility for
investigation and response actions at the site. On October 20, 1998, the Company
filed a proposal with the Georgia Public Service Commission for recovery of this
amount through a rate rider. In November 1998, the Commission approved recovery
through the rate rider which will take affect December 1, 1998.
Atmos is currently conducting an investigation pursuant to a Consent Order
between the Kansas Department of Health and Environment and UCGC. The Order
provides for the investigation, and a possible response action, for mercury
contamination at gas pipeline sites which utilize or formerly utilized mercury
meter equipment in Kansas. As of September 30, 1998, the Company had identified
approximately 720 sites where mercury may have been used and had incurred and
deferred for recovery $100,000. In addition, based upon available current
information, the Company accrued and deferred for recovery an additional
$280,000 for the investigation of these sites. The Kansas Corporation
Commission has authorized the Company to defer these costs and seek recovery in
a future rate case.
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, 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.
24
<PAGE>
6. Leases
The Company has entered into noncancelable operating leases for office and
warehouse space used in its operations. The remaining lease terms range from
one to 20 years and generally provide for the payment of taxes, insurance and
maintenance by the lessee. The Company has also entered into capital leases for
division offices and operating facilities. Net property, plant and equipment
included amounts for capital leases of $3.2 million and $2.3 million at
September 30, 1998 and 1997, respectively.
The related future minimum lease payments at September 30, 1998 were as
follows:
Capital Operating
leases leases
-------- ---------
(In thousands)
1999 $ 735 $ 9,633
2000 735 9,199
2001 735 8,810
2002 735 8,679
2003 735 8,172
Thereafter 4,119 52,564
------- -------
Total minimum lease payments 7,794 $97,057
=======
Less amount representing interest (4,215)
-------
Present value of net minimum
lease payments $ 3,579
=======
Consolidated lease and rental expense amounted to $9.2 million, $10.5 million
and $9.7 million for fiscal 1998, 1997 and 1996, 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.
25
<PAGE>
7. Long-term debt and notes payable
Long-term debt at September 30, 1998 and 1997 consisted of the following:
1998 1997
----------- ---------
Unsecured 7.95% Senior Notes, (In thousands)
due 2006, payable in annual
installments of $1,000 $ 8,000 $ 9,000
Unsecured 9.57% Senior Notes,
due 2006, payable in annual
installments of $2,000 16,000 18,000
Unsecured 9.76% Senior Notes,
due 2004, payable in annual
installments of $3,000 21,000 24,000
Unsecured 11.2% Senior Notes,
due 2002, payable in annual
installments of $2,000 10,000 12,000
Unsecured 10% Notes, due 2011 2,303 2,303
Unsecured 6.09% Note, due November 1998 40,000 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 6.75% Debentures, due 2028 150,000 -
First Mortgage Bonds
Series J, 9.40% due 2021 17,000 17,000
Series N, 8.69% due 2000 3,000 5,000
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 12,860 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 2010 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 21,168 20,879
-------- --------
Total long-term debt 456,331 318,182
Less current maturities (57,783) (15,201)
-------- --------
$398,548 $302,981
======== ========
26
<PAGE>
In July 1998, the Company issued $150 million of 30-year 6.75% debentures.
The proceeds were used to refinance short-term borrowings.
Most of the Senior Notes and First Mortgage Bonds contain provisions that
allow the Company to prepay the outstanding balance in whole at any time,
subject to a prepayment premium. The Senior Note agreements and First Mortgage
Bond indentures 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 $15.0 million. At September 30, 1998,
approximately $60.9 million of retained earnings was unrestricted.
As of September 30, 1998, all of the Greeley Division utility plant assets
with a net book value of approximately $88.3 million are subject to a lien under
the 9.4% Series J First Mortgage Bonds assumed by the Company in the acquisition
of Greeley Gas Company. Also, substantially all of the United Cities Division
utility plant assets, totaling approximately $324.7 million, are subject to a
lien under the Indenture of Mortgage of the Series N through V First Mortgage
Bonds.
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, 1998 and 1997 is estimated, using discounted cash flow
analysis, to be $489.0 million and $348.3 million, respectively. It is not
currently advantageous for the Company to refinance its long-term debt because
of costs of prepayment required in the various debt agreements.
Maturities of long-term debt at September 30, 1998 are as follows (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
1999 $ 57,783
2000 16,389
2001 17,934
2002 15,823
2003 22,745
Thereafter 325,657
--------
$456,331
========
</TABLE>
27
<PAGE>
Short-term debt
Committed credit facilities
The Company has two short-term committed credit facilities. The committed
lines are renewed or renegotiated at least annually. One short-term, unsecured
credit facility from a group of eight banks is for $250 million. This facility
expires in August 1999. No balance was outstanding under it at September 30,
1998. This facility requires a commitment fee of .06% on the unused portion. A
second facility is for $12 million with a single bank. This facility expires
March 31, 1999. It requires a commitment fee of .075% on the unused portion.
Uncommitted credit facilities
The Company also has unsecured short-term uncommitted credit lines from
three banks totaling $80 million, of which $25.6 million was unused as of
September 30, 1998. These uncommitted lines expire at various dates from May
through August 1999, and are renewed or renegotiated at least annually. 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 rate on short-term borrowings outstanding was 6.2% and 6.1% at
September 30, 1998 and 1997, respectively.
Commercial paper program
The Company implemented a $250 million commercial paper program in October
1998. It is supported by the $250 million committed line of credit described
above. The Company's commercial paper was rated A-2 by Standard and Poor's and
P-2 by Moody's.
8. Statement of cash flows supplemental disclosures
Supplemental disclosures of cash flow information for 1998, 1997 and 1996
are presented below.
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Cash paid for
Interest $29,980 $25,216 $32,778
Income taxes $25,598 $ 9,736 $14,562
</TABLE>
28
<PAGE>
9. Common stock and stock options
Shareholders' Rights Plan
On November 12, 1997, the Board of Directors approved a new Rights Agreement
to become effective upon the expiration of the then existing Rights Agreement on
May 10, 1998. Under the Rights Agreement, each right ("Right") will entitle the
holder thereof, until May 10, 2008 or the date of redemption the Rights, to buy
two additional shares of Common Stock of the Company at the exercise price of
$80.00, subject to adjustment. 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. At the date upon which the
rights become separate from the Company's Common Stock (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 the 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 will separate from the Common Stock and a Distribution Date will
occur upon the occurrence of certain events specified in the Agreement,
including but not limited to, the acquisition by certain persons of at least 10%
of the beneficial ownership of the Company's Common Stock. 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 that the Rights become exercisable or transferable, the Rights may be
redeemed by the Company at $.01 per Right.
29
<PAGE>
Shares issued under various plans
The following table presents the number of shares issued under various
plans in 1998 and 1997, as well as the number of shares available for future
issuance at September 30, 1998.
Shares available
for issuance at
Shares issued September 30,
1998 1997 1998
------- ------- -------
Restricted Stock Grant Plan 114,250 100,000 788,250
Employee Stock Ownership Plan 52,473 212,327 460,398
Direct Stock Purchase Plan 531,353 85,243 968,217
Outside Directors
Stock-For-Fee Plan 2,306 3,008 42,379
United Cities Long-term
Stock Plan 55,500 - 194,500
Restricted Stock Grant Plan
The Company's Restricted Stock Grant Plan ("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. During 1998 the Company increased the number
of shares of its common stock that may be issued under the plan by 650,000
shares. Compensation expense of $1,238,000, $437,000 and $795,000 was recognized
in 1998, 1997 and 1996, respectively, in connection with the issuance of shares
under the Plan.
Employee Stock Ownership 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. The ESOP will be
amended effective January 1, 1999, as is more fully discussed in Note 10.
Direct Stock Purchase Plan
The Company also has a Direct Stock Purchase Plan ("DSPP"). Participants in
the DSPP may have all or part of their dividends
30
<PAGE>
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.
Outside Directors Stock-For-Fee Plan
In November 1994, the Board adopted the Outside Directors Stock-for-
Fee Plan, which 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.
United Cities Long-term Stock Plan
Prior to the UCGC merger, certain officers and key employees of UCGC
were covered under UCGC's Long-term Stock Plan implemented in 1989. At the time
of the UCGC merger on July 31, 1997, Atmos adopted this plan by registering a
total of 250,000 shares of Atmos stock to be issued under the Long-term Stock
Plan for the United Cities Division. Under this plan, incentive stock options,
nonqualified stock options, stock appreciation rights, restricted stock or any
combination thereof may be granted to officers and key employees of the United
Cities Division. During 1998, 55,500 options and rights were exercised under
the plan. At September 30, 1998, there were 26,500 options outstanding. No
incentive stock options, nonqualified stock options, stock appreciation rights,
or restricted stock have been granted under the plan since 1996.
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 continue using this
method. Because of the limited nature of the Company's stock-based compensation
plans, the effect of adoption of SFAS 123 would not materially impact reported
earnings per share.
31
<PAGE>
Long-term Incentive Plan
On August 12, 1998, the Board of Directors approved and adopted the 1998
Long-Term Incentive Plan (the "LTIP"), which became effective October 1, 1998,
subject to the approval of the shareholders of the Company at the Annual Meeting
of Shareholders on February 10, 1999. The LTIP represents a part of the
Company's total rewards strategy, which the Company developed as a result of a
study it conducted of all employee, executive and non-employee director
compensation and benefits. The LTIP is a comprehensive, long-term incentive
compensation plan, providing for discretionary awards of incentive stock
options, non-qualified stock options, stock appreciation rights, bonus stock,
restricted stock and performance-based stock to help attract, retain, and reward
employees and non-employee directors of the Company and its subsidiaries. The
maximum aggregate number of shares that may by issued under the LTIP shall not
exceed 1,500,000 shares of common stock.
10. Employee retirement and stock ownership plans
In fiscal 1998, the Company adopted SFAS No. 132, "Employers Disclosures
about Pensions and Other Postretirement Benefits." The Statement revises
employers' disclosures about pension and other postretirement benefit plans. It
does not change the measurement or recognition of those plans. Disclosures for
earlier periods have been restated as required by SFAS No. 132.
Defined benefit plans
As of September 30, 1998, the Company had four defined benefit pension
plans, covering the Western Kentucky Division employees, the Greeley Division
employees, the United Cities Division employees, and the fourth covering all
other Atmos employees. The plans provide similar benefits to all employees.
Prior to January 1, 1999, the benefits are based upon years of service and the
highest paid five consecutive calendar years of compensation within the last 10
years of employment.
Effective January 1, 1999, the plans will be merged into the Western
Kentucky Gas plan, and will be known as the Pension Account Plan which will
cover all employees of the Company. Participants will have an opening account
balance established for them as of January 1, 1999 equal to the present value of
their respective accrued benefits under the pension plans as of December 31,
1998. The Pension Account Plan will credit an allocation to each participant's
account at the end of each year
32
<PAGE>
according to a formula based on his age, service and total pay (excluding
incentive pay).
The Pension Account Plan provides for an additional annual allocation based
upon a participant's age as of January 1, 1999 for those participants who were
participants in the prior pension plans. The plan will credit this additional
allocation each year through December 31, 2008. In addition, at the end of each
year, a participant's account will be credited with interest on the employee's
prior year account balance. A special grandfather benefit also applies through
December 31, 2008, for participants who will be at least age 50 as of January 1,
1999, and who were participants in one of the prior plans on December 31, 1998.
Participants are fully vested in their account balances after five years of
service and may choose to receive their account balances as a lump sum or an
annuity. The obligations shown as of September 30, 1998 anticipate the changes
which will be effective January 1, 1999.
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.
Supplemental Executive Benefits Plan
The Company has a nonqualified Supplemental Executive Benefits Plan
("Supplemental Plan") which provides additional pension, disability and death
benefits to the officers and certain other employees of the Company. The
supplemental plan was amended and restated in November 1997. In addition, in
August 1998, the Company adopted the Performance-Based Supplemental Executive
Benefits Plan, which will cover all employees who become officers or business
unit presidents after August 12, 1998.
33
<PAGE>
The following table sets forth the combined total for the four defined
benefit pension plans and the Supplemental Plan's funded status for 1998 and
1997:
1998 1997
--------- ---------
Change in benefit obligation:
Benefit obligation at
beginning of year $247,948 $235,943
Service cost 5,761 6,124
Interest cost 17,901 16,054
Curtailments/Special
termination benefits (2,645) 4,557
Plan amendments (14,041) 2,314
Actuarial (gain)/loss 15,028 (6,561)
Benefits paid (14,937) (10,483)
-------- --------
Benefit obligation at
end of year 255,015 247,948
-------- --------
Change in plan assets:
Fair value of plan assets
at beginning of year 259,852 224,699
Actual return on plan assets 40,062 42,416
Employer contribution 1,731 3,219
Benefits paid (14,937) (10,482)
-------- --------
Fair value of plan assets
at end of year 286,708 259,852
-------- --------
Funded status 31,693 11,904
Unrecognized transition asset (294) (414)
Unrecognized prior service cost (524) 13,490
Unrecognized net (gain)/loss (38,844) (35,681)
-------- --------
Accrued pension cost
(net amount recognized) $ (7,969) $(10,701)
======== ========
34
<PAGE>
1998 1997
----- -----
Weighted average assumptions
for end of year disclosure:
Discount rate 7.0% 7.5%
Rate of compensation increase 4.0% 4.0%
Expected return on plan assets 9.0% 9.0%
The plan assets consist primarily of investments in common stocks, interest
bearing securities and interests in commingled pension trust funds.
The projected benefit obligation, accumulated benefit obligation, and fair
value of plan assets for the pension plan with accumulated benefit obligations
in excess of plan assets were $36.8 million, $31.4 million, and none,
respectively, as of September 30, 1998, and $30.8 million, $26.0 million, and
none, respectively, as of September 30, 1997.
Net periodic pension cost for the combined pension benefit plans for 1998,
1997 and 1996 included the following components:
1998 1997 1996
-------- --------- --------
(In thousands)
Components of net periodic
pension cost:
Service cost $ 5,761 $ 6,903 $ 6,786
Interest cost 17,901 17,234 16,288
Expected return on assets (23,249) (19,730) (18,695)
Amortization of:
Transition obligation/(asset) (146) (335) (354)
Prior service cost 1,660 1,731 1,048
Actuarial (gain)/loss (1,091) 390 279
-------- -------- --------
Net periodic pension cost 836 6,193 5,352
Curtailment (gain)/loss and
special termination benefits (1,840) 4,758 56
-------- -------- --------
Total pension cost accruals $ (1,004) $10,951 $5,408
======== ======== ========
35
<PAGE>
Employee Stock Ownership Plan
Atmos sponsors an 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 1998 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
$1.8 million, $2.1 million, and $1.9 million for 1998, 1997 and 1996,
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
$1.5 million for a discretionary contribution in the year ended September 30,
1996. No discretionary contributions were made for 1997 and 1998. Company
contributions to the plan are expensed as incurred. The Company's ESOP has been
amended effective January 1, 1999 to provide for deferral of a portion of a
participant's salary of up to 21%. In addition, among other changes to the ESOP
as of January 1, 1999, participants will be provided with automatic matching
contributions of 100% of each participant's salary reduction up to 4% of the
participant's salary, and will be provided the option of taking out loans
against their ESOP accounts, subject to certain restrictions.
401(k) savings plan
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
36
<PAGE>
issuance of the Company's common stock. The Company contributed $648,000 for the
year ended September 30, 1998, $694,000 for the nine months ended September 30,
1997, and $826,000 for the year ended December 31, 1996. This 401(k) savings
plan will be merged into the ESOP effective January 1, 1999, and the United
Cities Division employees will receive the same benefits as other Atmos
employees.
11. Other postretirement benefits
Atmos sponsors two postretirement plans other than pensions. Each provides
health care benefits to retired employees. One provides benefits to the United
Cities Division retirees and the other provides medical benefits to all other
retired Atmos employees.
Substantially all of the Company's employees become eligible for these
benefits if they reach retirement age while working for the Company and attain
certain specified years of service. Although specific terms of the two plans are
different, participant contributions are required under these plans.
Effective January 1, 1999, the United Cities plan will provide benefits to
future retirees that are essentially the same as provided to other Atmos
employees. The obligations as of September 30, 1998 anticipate this plan change.
37
<PAGE>
The following table sets forth the combined total for the two
postretirement plans other than pensions:
<TABLE>
<CAPTION>
1998 1997
---------- ---------
<S> <C> <C>
Change in benefit obligation: (In thousands)
Benefit obligation at
beginning of year $ 53,295 $ 46,801
Service cost 1,659 1,734
Interest cost 3,809 3,208
Plan participants' contributions 382 275
Curtailments/Special
termination benefits 2,125 2,292
Plan amendments 1,888 2,427
Actuarial (gain)/loss 6,210 135
Benefits paid (4,874) (3,577)
-------- --------
Benefit obligation at
end of year 64,494 53,295
Change in plan assets:
Fair value of plan assets
at beginning of year 5,614 4,642
Actual return on plan assets 295 249
Employer contribution 4,963 4,024
Plan participants' contribution 382 276
Benefits paid (4,874) (3,577)
-------- --------
Fair value of plan assets
at end of year 6,380 5,614
-------- --------
Funded status (58,114) (47,681)
Unrecognized transition
obligation 23,243 30,131
Unrecognized prior service cost 3,614 2,125
Unrecognized net loss 8,571 996
-------- --------
Accrued pension cost
(net amount recognized) $(22,686) $(14,429)
======== ========
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
1998 1997
----- -----
<S> <C> <C>
Weighted average assumptions
for end of year disclosure:
Discount rate 7.0% 7.5%
Rate of compensation increase 4.0% 4.0%
Expected return on plan assets 5.3% 5.3%
Initial trend rate 9.0% 7.5%
Ultimate trend rate 4.5% 5.0%
Number of years from initial to
ultimate trend 6 3
</TABLE>
Net periodic pension cost for the combined postretirement benefit plans for
1998, 1997 and 1996 included the following components:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Components of net periodic
pension cost:
Service cost $ 1,659 $ 1,772 $1,622
Interest cost 3,810 3,467 3,260
Expected return on assets (235) (225) (196)
Amortization of:
Transition obligation/(asset) 1,862 1,994 1,994
Prior service cost 269 202 -
Actuarial (gain)/loss (58) 4 98
------- ------- ------
Net periodic pension cost 7,307 7,214 6,778
Curtailment (gain)/ loss and
special termination benefits 5,915 3,043 -
------- ------- ------
Total pension cost accruals $13,222 $10,257 $6,778
======= ======= ======
</TABLE>
39
<PAGE>
Assumed health care cost trend rates have a significant effect on the
amounts reported for the plans. A one-percentage point change in assumed health
care cost trend rates would have the following effects on the latest actuarial
calculations:
<TABLE>
<CAPTION>
1-Percentage 1-Percentage
Point Increase Point Decrease
--------------- --------------
(In thousands)
<S> <C> <C>
Effect on total of
service and interest
cost components $ 504 $ (495)
Effect on postretirement
benefit obligation $6,890 $(5,828)
</TABLE>
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.
40
<PAGE>
12. Earnings Per Share
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings per Share. Statement 128
replaced the previously reported primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per share,
basic earnings per share excludes any dilutive effects of options, warrants and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. Earnings per share amounts
for all historical periods presented have been restated to conform to the
Statement 128 requirements. Adoption of Statement 128 did not change the fully
diluted earnings per share amounts for the years ended September 30, 1997 and
1996. Reconciliations of the numerators and denominators of the basic and
diluted per-share computations for net income for 1998 are as follows:
<TABLE>
<CAPTION>
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- --------
(In thousands, except per share amounts)
<S> <C> <C> <C>
Basic EPS:
Income available to
common stockholders $55,265 29,822 $1.85
=========
Effect of dilutive securities:
Restricted stock - 199
Stock options - 10
-------- ---------
Diluted EPS:
Income available to
common stockholders and
assumed conversions $55,265 30,031 $1.84
======== ========= ========
</TABLE>
13. Related Party Transactions
Included in purchased gas cost were purchases from WMLLC of $124.7
million, $103.0 million and $46.9 million in 1998, 1997, and 1996, respectively.
Volumes purchased were 53.4 billion cubic feet ("Bcf"), 38.6 Bcf and 21.7 Bcf in
1998, 1997 and 1996, respectively. These purchases were made in a competitive
open bidding process and reflect market prices. Average prices per thousand
cubic feet ("Mcf") for gas purchased from WMLLC were $2.33, $2.67 and $2.17 in
1998, 1997 and 1996, respectively.
41
<PAGE>
Management's responsibility for financial statements
Management is responsible for the preparation, presentation and integrity of
the financial statements and other financial information in this report. The
accompanying financial statements have been prepared in accordance with
generally accepted accounting principles, and include estimates and judgments
made by management that were necessary to prepare the statements in accordance
with such accounting principles.
The Company maintains a system of internal accounting controls designed to
provide reasonable assurance that assets are safeguarded from loss and that
transactions are executed and recorded in accordance with established
procedures. The concept of reasonable assurance is based on the recognition
that the cost of maintaining a system of internal accounting controls should not
exceed related benefits. The system of internal accounting controls is
supported by written policies and guidelines, internal auditing and the careful
selection and training of qualified personnel.
The financial statements have been audited by the Company's independent
auditors. Their audit was made in accordance with generally accepted auditing
standards, as indicated in the Report of Independent Auditors, and included a
review of the system of internal accounting controls and tests of transactions
to the extent they considered necessary to carry out their responsibilities for
the audit.
Management has considered the internal auditors' and the independent
auditors' recommendations concerning the Company's system of internal control
and has taken actions that are believed to be cost-effective in the
circumstances to respond appropriately to these recommendations. The Audit
Committee of the Board of Directors meets periodically with the internal
auditors and the independent auditors to discuss the Company's internal
accounting controls, auditing and financial reporting matters.
42
<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, 1998 and 1997, and the related consolidated
statements of income, shareholders' equity and cash flows for each of the three
years in the period ended September 30, 1998. 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 revenues
of $402,947,000 for the year ended December 31, 1996. 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,
1998 and 1997, and its consolidated results of operations and its cash flows for
each of the three years in the period ended September 30, 1998 in conformity
with generally accepted accounting principles.
Ernst & Young LLP
Dallas, Texas
November 10, 1998
43
<PAGE>
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 factors affecting these 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.
Cautionary Statement for the Purposes of the Safe Harbor under the Private
Securities Litigation Reform Act of 1995
The matters discussed or incorporated by reference in this Annual Report
may contain "forward-looking statements" within the meaning of Section 21E of
the Securities Exchange Act of 1934. All statements other than statements of
historical facts included in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the 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 and
are intended to qualify for the safe harbor from liability established by the
Private Securities Litigation Reform Act of 1995. When used in this Report or
in any of the Company's other documents or oral presentations, the words
"anticipate," "expect," "estimate," "plans," "believes," "objective,"
"forecast," "goal" or similar words are intended to identify forward-looking
statements. 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,
national, regional and local economic and competitive conditions, regulatory and
business trends and decisions, technological developments, Year 2000 issues,
inflation rates, weather conditions, and other uncertainties, all of which are
difficult to predict and many of which are beyond the control of the Company.
44
<PAGE>
Accordingly, while the Company believes that the expectations
reflected in the forward-looking statements are reasonable, there can be no
assurance that such expectations will be realized or will approximate actual
results.
Organization
The Company distributes and sells natural gas through 1,004,532 meters
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.
Its non-utility operations include a propane operation; a leasing and rental
operation; and an energy services operation that includes storage, gas
marketing, irrigation and energy services.
The Company's primary source of revenues, net income and cash flows is
its utility business which is composed of five local distribution companies that
are operated as divisions of Atmos. For additional information about these
businesses, please see the "Description of Business" section of Note 1 in the
accompanying notes to consolidated financial statements.
Each segment's contribution to net income is reflected in the table
below:
<TABLE>
<CAPTION>
Year ended September 30,
1998 1997 1996
------- ------- ------
<S> <C> <C> <C>
Utility 76.3 % 71.3 % 77.5%
Propane (0.1)% (.4)% 3.1%
Leasing / Rental 5.9 % 4.7 % 3.0%
Storage and Energy Services 17.9 % 24.4 % 16.4%
------ ------ -----
Total 100.0 % 100.0 % 100.0%
</TABLE>
Acquisitions and mergers
The Company has expanded its customer base and sought to diversify the
regulatory climates, 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 local distribution company ("LDC") operations and achieving
synergies and benefits quickly, while preserving brand equity.
45
<PAGE>
In addition to growing through acquisitions, the Company's strategy
includes running the utility operations exceptionally well, increasing the size
and market share of non-utility operations (gas marketing, related storage and
energy services and propane) and developing plans to participate in retail
services behind the meter.
Ratemaking procedures
The Company's five utility divisions are regulated by various state or
local public utility authorities. The method of determining regulated rates
varies among the 12 states in which the Company has utility operations. It is
the responsibility of the regulators to determine that utilities under their
jurisdiction operate in the best interests of customers while providing the
utilities the opportunity to earn a reasonable return on investment.
In a general rate case, the applicable regulatory authority, which
is typically the state public utility commission, establishes a base margin,
which is the amount of revenue authorized to be collected from customers to
recover authorized operating expense (other than the cost of gas), depreciation,
interest, taxes and return on rate base. The utility divisions perform annual
deficiency studies for each rate jurisdiction to determine when to file rate
cases, which are typically filed every two to five years.
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 as discussed below under "Weather and
Seasonality."
The Company received rate reductions of $1.8 million in 1998, and rate
increases totaling $9.4 million in 1997, and $6.8 million in 1996. For further
information regarding rate activity please see Note 3, "Rates," in notes to
consolidated financial statements.
46
<PAGE>
Weather and seasonality
The Company's natural gas and propane distribution businesses and
irrigation sales business are seasonal due to weather conditions in the
Company's service areas. Natural gas sales to residential, commercial, and
public customers and propane sales are affected by winter heating season
requirements. Sales to industrial customers are much less weather sensitive.
Sales to agricultural customers (who use natural gas to power 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. Degree day information is shown below. For
further information regarding the impact of weather and seasonality on operating
results, see the Supplementary Quarterly Financial Data following the notes to
consolidated financial statements herein.
<TABLE>
<CAPTION>
Year ended September 30,
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Sales volumes - Bcf 159.4 164.2 178.3
Transportation volumes Bcf 56.2 48.8 44.1
------ ------ ------
Total 215.6 213.0 222.4
====== ====== ======
Degree days:
Actual 3,799 3,909 4,043
Normal 3,989 3,990 3,990
% of normal 95% 98% 101%
</TABLE>
The Georgia Public Service Commission and the Tennessee Regulatory
Authority have approved Weather Normalization Adjustments ("WNA"). The WNA,
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 WNA was
an increase/(decrease) in revenues of $.7 million, $2.6 million and $(2.6)
million in 1998, 1997 and 1996, respectively. Approximately 170,000 of the
Company's customers are located in Georgia and Tennessee.
The Company has not sought weather normalization clauses in its other
rate jurisdictions because of the effect of its
47
<PAGE>
geographical diversification strategy and the potential for increased profits in
unusually cold years.
Year 2000 issues
The Year 2000 issue arose because many computer systems and software
applications as well as embedded computer chips in plant and equipment currently
in use were constructed using an abbreviated date field that eliminates the
first two digits of the year. On January 1, 2000, these systems, applications
and embedded computer chips may incorrectly recognize the date as January 1,
1900. Accordingly, many computer systems and software applications, as well as
embedded chips, may incorrectly process financial and operating information or
fail to process such information completely. The Company recognized this
problem and is addressing its potential effects on its computer systems,
software applications and plant and equipment.
State of readiness
In October 1996, the Company established its Year 2000 Project Team with
the mission of ensuring that all critical systems, facilities and processes are
identified, analyzed for Year 2000 compliance, corrected if necessary, and
tested if changes are necessary. The Year 2000 Project Team is headed by an
officer of the Company and consists of representatives from all business units
and shared services units of the Company. The Company, including all of its
departments and business units, has a Year 2000 strategy in place and has begun
the implementation of the Year 2000 plan to manage and minimize risks associated
with the Year 2000 issues.
The Company has also obtained an assessment from an independent consulting
firm, who specializes in such matters, of the risks posed for the Company and
its business units by the Year 2000 issue, including an assessment of its risks
in every area involving the use of computer technology and an assessment of the
business and legal risks created for the Company by the Year 2000 issues. Such
assessment also includes the risks associated with the Company's embedded
technologies such as micro-controllers or microchips embedded in non-information
technology-related equipment.
With respect to information technology ("IT") systems, the Company has
conducted an inventory of and is evaluating and reviewing its application
software on all platforms such as the mainframe, local area network and personal
computers. Concerning non-IT systems, including embedded technology, the
Company has conducted an inventory of and is reviewing and
48
<PAGE>
evaluating all of its telecommunications, security access and building control
systems, forms, reports and other business processes and activities as well as
the equipment and facilities utilized in the Company's gas distribution and
storage systems. In addition, several members of the Year 2000 Project Team have
completed training on an American Gas Association-sponsored database relating to
testing of embedded technology. This database will help expedite the review and
compliance efforts related to embedded technology.
The Company's Year 2000 plan includes specific timetables for the following
categories of tasks for each of its shared services units and business units
with respect to both IT systems and embedded technology as follows:
-Identification of Year 2000 issues--substantially completed;
-Prioritization of Year 2000 issues--substantially
completed
-Estimation of total Year 2000-related costs--in process -and to be
completed by December 31, 1998;
-Implementation of Year 2000 solutions--in process and to be completed by
May 31, 1999;
-Testing of Year 2000 solutions--in process and to be completed by
September 30, 1999;
-Certification of Year 2000 compliance by third party vendors and
suppliers--in process and to be completed by September 30, 1999;
-Monitoring of all systems for changes in current systems that would
require changes in Year 2000 plan--in process and to be completed by
September 30, 1999;
-Development of Year 2000 contingency plans--in process and to be completed
by March 31, 1999; and
-Final Year 2000 tests--to be conducted starting September 30, 1999.
The Company is also currently in the process of conducting an inventory and
review of computer systems provided by outside vendors. The Year 2000 Project
Team is contacting all vendors to coordinate their Year 2000 compliance
schedules with those of the Company. The Company is requiring vendors who
provide mission critical goods or services to submit to the Company their
compliance plans and to certify compliance in order to continue to do business
with the Company. As discussed, the Company is also in the process of testing
vendor products that provide mission critical goods or services to ensure their
Year 2000 compliance. In addition, the Company has identified its key
suppliers, including gas suppliers, and is communicating with them for the
purpose of evaluating the status of their
49
<PAGE>
solutions to their respective Year 2000 issues. The expected date of completion
of these procedures is September 30, 1999.
Costs to address Year 2000 issues
As of September 30, 1998, the Company had incurred a total of less than
$300,000 in fees and expenses in connection with its Year 2000 efforts. The
Company currently expects to spend no more than $1.0 million directly on its
Year 2000 efforts by December 31, 1999. As part of its normal systems upgrade
in the ordinary course of business, the Company is in the process of replacing
its customer information system, accounting and financial reporting system, and
human resources system with systems that happen to be Year 2000 compliant.
However, the installation of these systems was not accelerated in an attempt to
deal with the Year 2000 issues.
Risks of Year 2000 issues and contingency plans
The Company has identified what it believes are its most significant worst
case Year 2000 scenarios. These scenarios are (i) interference with the
Company's ability to receive and deliver gas to customers; (ii) interference
with the Company's ability to communicate with customers; and (iii) the
temporary inability to send invoices to and receive payments from customers.
The most likely primary business risk associated with the Year 2000 issues
is the Company's ability to continue to transport and distribute gas to its
customers without interruption. In the event the Company and/or its suppliers
and vendors are unable to remediate the Year 2000 issues prior to January 1,
2000, operations of the Company could be significantly impacted. In order to
mitigate this risk, the Company is developing a contingency plan to continue
operations through manual intervention and other procedures should it become
necessary to do so. Such procedures are expected to include back-up power
supply for its critical distribution and storage operations and, if necessary,
curtailment of supply. The Company's storage capacity could be used to
supplement system supply in the event its suppliers can not make deliveries.
The Company expects to complete its operational contingency plan by March 31,
1999.
With respect to the communications with customers, which is heavily reliant
on services provided by third parties, the Company is in the process of
evaluating Year 2000 compliance by such third parties and will be developing
contingency plans to address any worst case scenarios that may be determined
after
50
<PAGE>
such evaluations are complete. Concerning the billing and payment systems, as
previously discussed, the Company is in the process of replacing its customer
information system, accounting and financial reporting system, and human
resources system with systems that are Year 2000 compliant, which should
substantially diminish the risk of Year 2000 issues. Nevertheless, the Company
will be developing contingency plans by March 31, 1999 in case the billing and
payment systems prove not to be Year 2000 compliant.
Despite the Company's efforts, there can be no assurance that all material
risks associated with Year 2000 issues relating to systems within its control
will have been adequately identified and corrected before the end of 1999.
However, as the result of its Year 2000 plan and the replacement of the customer
information system, accounting and financial reporting system, and human
resources system in 1999, the Company does not believe that in the aggregate,
Year 2000 issues with respect to both its own IT and non-IT systems will be
material to its business, operations or financial condition. On the other hand,
while the Company is in the process of researching the Year 2000 readiness of
its suppliers and vendors, the Company can make no representation regarding the
Year 2000 compliance status of systems or parties outside its control, and
currently cannot assess the effect on it of any non-compliance by such systems
or parties.
All statements concerning Year 2000 issues other than historical
statements, including, without limitation, estimated costs and the projected
timetable of Year 2000 compliance, constitute "forward-looking statements," as
defined in the Private Securities Litigation Reform Act of 1995. Such forward-
looking statements should be read in conjunction with the Company's disclosures
under the heading "Cautionary Statement for the Purposes of the Safe Harbor
under the Private Securities Litigation Reform Act of 1995" at the beginning of
Management's Discussion and Analysis.
Environmental matters
The Company is involved in certain environmental matters as discussed in
Note 5 "Contingencies" of notes to consolidated financial statements.
51
<PAGE>
RESULTS OF OPERATIONS
Year ended September 30, 1998 compared with year ended September 30, 1997
To assist in management's discussion of results of operations, the
following table presents the effects of certain non-recurring charges and
weather on reported consolidated net income. Earnings per share amounts
presented in this discussion are on a diluted basis.
<TABLE>
<CAPTION>
Year ended September 30,
1998 1997 1996
----------------- ----------------- -----------------
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 $55,265 $1.84 $23,838 $ .81 $41,151 $ 1.42
Non-recurring charges:
Management
reorganization - - 2,800 .10 - -
Reserve for
integration costs - - 12,630 .43 - -
Sale of assets (2,244) (.07) - - - -
------- ----- ------- ------ ------- ------
Normalized net income
except for effects
of weather 53,021 1.77 39,268 1.34 41,151 1.42
Effects of weather 3,485 .11 3,571 .12 (1,838) (.06)
------- ----- ------- ------ ------- ------
Normalized net income $56,506 $1.88 $42,839 $ 1.46 $39,313 $ 1.36
======= ===== ======= ====== ======= ======
</TABLE>
Net income as reported
For the fiscal year ended September 30, 1998, the Company reported net
income of $55.3 million, or $1.84 per diluted share, on operating revenues of
$848.2 million. The 1998 net income includes one-time gains totaling $2.2
million or $.07 per diluted share, from the sales of real estate and equipment
owned by UCG Energy. Although revenues for 1998 were lower as a result of
winter weather that was 5% warmer than normal, as well as warmer than last year,
earnings improved due to gains on asset sales, lower operation and maintenance
expenses and increased irrigation sales. Operations and maintenance expenses
were lower for 1998 due to a company-wide restructuring of the organization and
Atmos' integration of
52
<PAGE>
United Cities Gas Company. Sales of gas in Texas to farmers for fueling
irrigation pumps increased due to hot and dry summer weather in 1998. Irrigation
volumes increased 34% in 1998 compared with 1997. Utility operations contributed
about 76% of 1998 net income, with non-utility operations generating about 24%.
For the fiscal year ended September 30, 1997, the Company reported net
income of $23.8 million, or $.81 per share, on operating revenues of $906.8
million. The 1997 net income included 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 UCGC, which
merged with Atmos effective July 31, 1997, and operating results for years prior
to the merger have been restated to reflect the pooling of interests accounting
which was used for the merger.
Non-recurring charges
In 1998 the Company sold the office building in which UCGC had
headquartered its operation in Brentwood, Tennessee; two office buildings and a
piece of land in Franklin, Tennessee UCGC had held for investment; and an
airplane. The Company realized a pre-tax gain on the sale of assets totaling
$3.3 million or $2.2 million after-tax.
In 1997 the Company completed a management reorganization and recorded
a charge of $4.4 million ($2.8 million after-tax) in related costs.
In connection with the UCGC merger and integration in 1997, the
Company recorded approximately $17 million of transaction costs and $42.8
million for 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 established a reserve of $20.3 million ($12.6 million
after-tax), to account for costs that may not be recovered. For further
information regarding the merger please see Note 2 of notes to consolidated
financial statements.
53
<PAGE>
The statements in the preceding paragraph relating to the anticipated
cost savings over the next 10 years constitute "forward-looking statements."
Such forward-looking statements should be read in conjunction with the Company's
disclosures under the heading "Cautionary Statement for the Purposes of the Safe
Harbor provisions of the Private Securities Litigation Reform Act of 1995" at
the beginning of Management's Discussion and Analysis.
Net income by segment
As previously discussed, the Company currently has four business
segments: utility operations, propane operations, leasing/rental operations,
and storage and energy services including the Company's 45% interest in WMLLC.
The following table sets forth the net income (loss) of each of these business
operations for the years 1998, 1997 and 1996.
<TABLE>
<CAPTION>
Year ended September 30,
----------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
(In thousands)
Utility $42,147 $16,991 $31,905
Propane (66) (90) 1,276
Leasing/Rental 3,272 1,117 1,237
Storage and Energy
Services 9,912 5,820 6,733
------- ------- -------
Reported net income $55,265 $23,838 $41,151
======= ======= =======
</TABLE>
54
<PAGE>
Results of utility operations
Key financial and operating data for the Company's utility operations
are highlighted in the following table.
<TABLE>
<CAPTION>
Year ended September 30,
-------------------------------
1998 1997 1996
----------- -------- --------
Financial (Dollars in thousands)
- ---------
<S> <C> <C> <C>
Operating revenues $ 744,652 $811,537 $778,208
Purchased gas cost 444,288 510,943 488,575
---------- -------- --------
Gross profit 300,364 300,594 289,633
Operating expenses 225,933 253,997 229,158
Other income 901 846 429
Interest charges 33,185 30,452 28,999
---------- -------- --------
Net income $ 42,147 $ 16,991 $ 31,905
========== ======== ========
Operating
- ---------
Sales volumes (MMcf):
Residential 73,472 75,215 77,001
Commercial 36,083 37,382 38,247
Public authority and other 4,937 5,195 5,182
Industrial and irrigation 24,057 29,452 34,898
---------- -------- --------
Total 138,549 147,244 155,328
Transportation (MMcf) 56,224 48,800 44,146
---------- -------- --------
Total volumes (MMcf) 194,773 196,044 199,474
========== ======== ========
Meters in service,
end of year 1,004,532 985,448 976,308
Average gas sales price/Mcf $ 5.37 $ 5.51 $ 5.01
Average cost of gas/Mcf $ 3.21 $ 3.47 $ 3.15
Average transportation
revenue/Mcf $ .43 $ .41 $ .43
</TABLE>
55
<PAGE>
Year ended September 30, 1998 compared with year ended September 30, 1997
Utility operating revenues decreased 8% to $744.7 million for 1998
from $811.5 million for 1997 due to lower total volumes delivered and a lower
average sales price per Mcf. The lower total volumes delivered resulted from
weather that was 3% warmer than 1997 and 5% warmer than 30-year normals. Sales
volumes and revenues were also reduced by certain industrial customers switching
from sales service to transportation service. Gross profits are not
significantly affected by such switching. Gross profit was basically unchanged
at $300.4 million for 1998 as compared with 1997.
Operating expenses, excluding income taxes, decreased $42.0 million
for 1998 as compared with 1997 due to a $20.3 million reserve for integration
included in 1997, and a $21.7 million reduction in 1998 operating expenses due
to the company-wide reorganization related to the Customer Service Initiative
("CSI") and UCGC integration. CSI is composed of a combination of enhancements
including a customer call center, a new customer information system on client
server architecture, mobile data terminals, ITRON electronic meter reading
technology, a network of third party payment centers, and implementation of
industry best practices. Interest charges increased 9% to $33.2 million due to
an increased level of debt in 1998 as compared with 1997.
Year ended September 30, 1997 compared with year ended September 30, 1996
Operating revenues increased approximately 4% to $811.5 million in
1997 from $778.2 million in 1996 due to an increase of 10% in the average sales
price per thousand cubic feet ("Mcf") of gas sold, which more than offset a 5%
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 $.50 to $5.51 in 1997, while the average cost of gas per Mcf sold
increased $.32 to $3.47 in 1997. 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 0.8 Bcf. Total
sales and transportation volumes delivered decreased 2% to 196.0 Bcf in 1997, as
compared with 199.5 Bcf in 1996. The decrease was primarily due to lower demand
as a result of 3% warmer weather in 1997 than in 1996.
56
<PAGE>
Gross profit increased by approximately 4% to $300.6 million in 1997
from $289.6 million in 1996. The primary factor contributing to the higher
gross profit was annual rate increases totaling 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 in
sales volumes of 8.1 Bcf or 5% due to the effect of warmer than normal weather
and switching of certain industrial customers from sales service to
transportation service. Operating expenses increased $24.9 million or 11% to
$254.0 million in 1997. The increase in operating expenses was due primarily to
the non-recurring $20.3 million reserve for merger and integration costs, and
the $4.4 million charge for management reorganization. The $3.3 million
increase in depreciation was due to utility plant additions placed in service in
1996 and 1997.
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 normalized income statement presented at the beginning of Management's
Discussion and Analysis. 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. Normal
weather conditions would have added $.11 per share to net income in 1998 and
$.12 per share to net income in 1997.
Rates
The Company received rate increases totaling $9.4 million and $6.8
million in fiscal 1997 and 1996, respectively, in jurisdictions in Texas,
Kentucky, Illinois, Georgia, Iowa, Tennessee, Missouri and Virginia. Weather
normalization adjustments in Georgia and Tennessee contributed approximately $.7
million to gross profit in 1998, $2.6 million in 1997, and a reduction of $2.6
million in 1996. The Company received rate reductions totaling approximately
$1.8 million in Colorado and Virginia in fiscal 1998.
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<PAGE>
Results of propane operations
Key financial and operating data for the propane operations are presented
in the following table.
<TABLE>
<CAPTION>
Year ended September 30,
-----------------------------
1998 1997 1996
--------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Financial Data:
Operating revenues $29,091 $33,194 $38,372
Purchased gas cost 17,709 21,193 24,858
------- ------- -------
Gross profit 11,382 12,001 13,514
Operating expenses 10,725 11,508 11,766
Other income 72 159 223
Interest charges 795 742 695
------- ------- -------
Net income (loss) $ (66) $ (90) $ 1,276
======= ======= =======
Operating Data:
Propane heating degree days:
Actual 3,799 3,847 4,258
% of normal 94% 96% 108%
Sales volumes (000 gallons):
Retail 17,229 17,145 19,724
Wholesale 16,447 15,830 20,999
------- ------- -------
Total 33,676 32,975 40,723
Average selling price/gallon:
Retail $ 1.02 $ 1.12 $ 1.09
Wholesale $ .51 $ .65 $ .63
Average cost of propane/gallon $ .53 $ .65 $ .61
Customers, end of year 37,400 29,097 26,108
</TABLE>
58
<PAGE>
Year ended September 30, 1998, compared with year ended September 30, 1997
Revenues from propane operations decreased from $33.2 million in 1997
to $29.1 million 1998 primarily due to the decreased selling price per gallon to
retail and wholesale customers. This decreased selling price was the result of
the lower demand because of warmer weather and increased competition for
customers as compared to the prior year. Partially offsetting this decrease was
an increase in total gallon sales. The increase in volumes sold resulted from
the acquisitions of Ingas, Inc. in May 1998, Harris Propane Gas Co., Inc. in
July 1998, Massey Propane Gas Company and E-con Gas, Inc. in August 1998 and
Shaw LP Gas, Inc. in September 1998.
Purchased gas cost decreased from $21.2 million in 1997 to $17.7
million in 1998 primarily due to the decreased market cost of propane to the
Company amounting to approximately $.12 per gallon. Partially offsetting this
decrease was increased retail and wholesale gallon sales in 1998 as compared to
1997.
Operating expenses decreased from $11.5 million in 1997 to $10.7
million in 1998 primarily due to decreased administrative and general expenses
due to control of operating expenses during 1998. Partially offsetting this
decrease was an increase in depreciation and amortization expense from $2.1
million in 1997 to $2.3 million in 1998 due to the acquisitions in 1997 and in
1998, and depreciation on additional plant placed in service.
Interest expense increased from $.74 million in 1997 to $.80 million
in 1998 due to increased short-term borrowings and long-term interest payments
associated with the acquisitions in 1998, as well as increased short-term
borrowings to cover cash flow deficits from decreased sales.
Net loss from propane operations decreased from $90,000 in 1997 to
$66,000 in 1998, due primarily to the favorable operating expense variances
discussed above. The Company is committed to substantially improving the
profitability of its propane operations. To that end, the Company plans to exit
the less profitable propane transportation, cylinder exchange, and appliance
sales and service segments in 1999.
Year ended September 30, 1997 compared with year ended September 30, 1996
Propane revenues decreased $5.2 million from $38.4 million in 1996 to
$33.2 million in 1997 primarily due to decreased retail and wholesale volumes
sold as a result of warmer than
59
<PAGE>
normal weather. The weather in 1997 was 4% warmer than normal, compared to 8%
colder than normal in 1996. Partially offsetting the decrease in volumes sold
was an increase in the average selling price per gallon.
Purchased gas cost decreased $3.7 million from $24.9 million in 1996
to $21.2 million 1997 due primarily to decreased propane volumes sold as a
result of warmer than normal weather. This decrease was partially offset by an
increase in wholesale cost per gallon of $.04 per gallon from $.61 per gallon in
1996 to $.65 per gallon in 1997.
Operating expenses decreased $.3 million from $11.8 million in 1996 to
$11.5 million in 1997 due primarily to a decrease in income tax expense of $.9
million, which was partially offset by increased administrative and general
expenses due to the acquisitions of Harlan LP Gas, Inc. and Propane Sales and
Services, Inc. in 1997. Additionally, depreciation and amortization expense
increased from $1.9 million in 1996 to $2.1 million in 1997. This increase was
due primarily to the acquisitions, and increased depreciation expense on
additional plant and equipment placed in service.
Interest expense increased from $.7 million in 1996 to $.74 million in
1997 due to increased short-term borrowings and long-term interest payments
associated with the acquisitions in 1997, as well as increased short-term
borrowings to cover cash flow deficits from decreased sales.
Net income from propane operations decreased from $1.3 million in 1996
to a net loss of $90,000 in 1997, due primarily to warmer than normal weather.
The decrease in gross profit of $1.5 million more than offset the decrease in
operating expenses of $.3 million, resulting in 1997 being less profitable when
compared to 1996.
Effects of weather
Like the utility operations, annual sales volumes and revenues of the
propane operation vary in relation to winter heating degree days. The table
above presents data for propane heating degree days, propane volumes delivered
and profitability of the propane business for 1998, 1997 and 1996.
Gas storage and energy services
This segment is currently composed of four parts: United Cities Gas
Storage Company, which owns underground storage
60
<PAGE>
fields in Kansas and Kentucky and provides storage services to the United Cities
Division and other non-regulated customers; EnerMart, Inc. and EGASCO, which
market gas to industrial and irrigation customers in West Texas; Atmos Energy
Services, which is developing plans for marketing various non-regulated services
and products; and the Company's 45% investment in WMLLC, a gas marketing and
energy management services business.
Key financial data for the storage and energy services segment are set
forth below.
<TABLE>
<CAPTION>
Year ended September 30,
-------------------------
1998 1997 1996
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Operating revenues $70,488 $58,099 $65,907
Purchased gas cost 54,375 45,045 48,846
------- ------- -------
Gross profit 16,113 13,054 17,061
Operating expense 10,357 9,230 11,509
Other income 1,418 358 432
Equity in WMLLC 3,920 3,254 1,997
Interest charges 1,182 1,616 1,248
------- ------- -------
Net income $ 9,912 $ 5,820 $ 6,733
======= ======= =======
</TABLE>
Year ended September 30, 1998 compared with year ended September 30, 1997
Operating revenues increased 21% from $58.1 million for 1997 to $70.5
million for 1998 due to increases of $10.7 million in non-regulated West Texas
irrigation and industrial revenues, and $1.7 million for gas storage operations.
The increase in irrigation and industrial revenues was primarily due to hotter
and drier than normal weather in West Texas. The increase in storage revenues
was due to increased volumes withdrawn from underground storage in 1998 as
compared with 1997. Like the utility and propane operations, gas storage
volumes and revenues vary in relation to winter heating degree days.
Operating expenses increased $1.1 million in 1998 as compared with 1997 due
primarily to the increased volumes
61
<PAGE>
delivered to West Texas irrigation customers and storage customers in Kansas and
Tennessee.
Other income increased to $1.4 million for 1998 as compared with $.4
million for 1997. The increase was primarily due to gas brokering and
utilization of storage capacity in excess of that dedicated to regulated markets
to serve certain non-regulated markets.
Interest charges decreased $.4 million in 1998 as compared with 1997 due
primarily to reduced debt balances in EnerMart Inc., the Company's wholly-owned
subsidiary that conducts non-regulated utility operations in West Texas.
Net income for 1998 increased by $4.1 million from 1997 primarily due to
increased West Texas irrigation revenues, favorable returns from its 45%
investment in WMLLC, increased other income from non-regulated storage services
and gas brokering, and a reduction in interest expense.
Year ended September 30, 1997 compared with year ended September 30, 1996
Operating revenues decreased 12% from $65.9 million in 1996 to $58.1
million in 1997 due primarily to decreased West Texas non-regulated irrigation
and industrial revenues. The decrease in irrigation revenues was due to
increased rainfall and cooler summer temperatures in West Texas. Storage
revenues also decreased due to decreased volumes withdrawn from underground
storage as a result of warmer than normal winter weather in Kansas and
Tennessee.
Operating expenses decreased $2.3 million due primarily to decreased
irrigation volumes in West Texas and storage withdrawals in Kansas and
Tennessee.
Interest charges increased $.4 million due primarily to increased short-
term debt due to lower cash flows and revenues from irrigation and storage
operations in 1997 as compared with 1996.
Net income decreased to $5.8 million in 1997 as compared with $6.7 million
in 1996. The primary factor causing the decreased net income was a $7.1 million
decrease in West Texas irrigation revenues in 1997 as discussed above.
62
<PAGE>
Equity in earnings of WMLLC
The Company accounts for its 45% investment in WMLLC through UCG
Energy using the equity method of accounting. Against the 45% of the net income
before tax recorded in the WMLLC financial statements, the Company records the
amortization of the excess of the purchase price over the value of the net
tangible assets, amounting to approximately $5.4 million which was allocated to
intangible assets consisting of customer contracts and goodwill, and are being
amortized over ten and twenty years, respectively, as well as the provision for
income taxes.
The following table presents the WMLLC financial results recorded by
Atmos for the years ended September 30, 1998, 1997 and 1996. WMLLC has a
calendar year for financial reporting purposes.
<TABLE>
<CAPTION>
Year ended September 30,
------------------------
1998 1997 1996
------- ------- ------
(In thousands)
<S> <C> <C> <C>
WMLLC net income $8,711 $7,231 $4,438
====== ====== ======
Atmos share @ 45% 3,920 3,254 1,997
Less:
Amortization of excess
purchase price 400 359 352
Provision for taxes 1,337 1,100 625
------ ------ ------
Atmos equity in WMLLC
earnings $2,183 $1,795 $1,020
====== ====== ======
</TABLE>
The net income of WMLLC increased from $4.4 million for 1996, to $7.2
million for 1997, to $8.7 million for 1998, due to growth in number of customers
and gas marketing revenues each year. Gross brokerage profit increased
approximately 48% in 1998 as compared with 1997 due to increases in both sales
volumes and margins, due primarily to customer growth. The Company's equity
investment in WMLLC has grown from $5.8 million in 1995 to $11.9 million at
September 30, 1998.
63
<PAGE>
Leasing and Rental Operations
Key financial and operating data for the leasing and rental operations
are presented in the following table.
<TABLE>
<CAPTION>
Year ended September 30,
------------------------------
1998 1997 1996
-------- ------ ------
(In thousands)
<S> <C> <C> <C>
Operating revenues $3,977 $4,005 $4,204
Operating expenses 3,748 2,609 2,718
------ ------ ------
Operating income 229 1,396 1,486
Other income 3,460 505 486
Interest charges 417 784 735
------ ------ ------
Net income $3,272 $1,117 $1,237
====== ====== ======
</TABLE>
This segment leases buildings, vehicles, and other equipment to the
Company and other non-related customers.
Year ended September 30, 1998 compared with year ended September 30, 1997
Operating revenues remained consistent due to the stable nature of the
leasing business (the leasing and rental segment leases buildings and equipment
to the United Cities Division and other third parties).
Operating expenses increased $1.1 million from $2.6 million in 1997 to
$3.7 million in 1998 primarily due to the tax effect of gains on sales of real
estate and equipment.
Other income increased $3.0 million from $.5 million in 1997 to $3.5
million in 1998 primarily due to gains on the sale of real estate and equipment.
Interest expense decreased $.4 million from $.8 million in 1997 to $.4
million in 1998 due to decreased debt, which was retired using the proceeds from
the sales of real estate and equipment.
64
<PAGE>
Year ended September 30, 1997 compared with year ended September 30, 1996
Operating revenues, operating expenses, other income, and interest
charges remained relatively consistent between 1997 and 1996 due to the stable
nature of the business. No buildings or equipment were purchased or sold during
1997.
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, as required by
generally accepted accounting principles, the activities of UCGC for the quarter
ended December 31, 1996 are included in the restated 1996 consolidated statement
of cash flows instead of 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.
65
<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.
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
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
=========
</TABLE>
Cash flows from operating activities
Cash flows from operating activities as reported in the consolidated
statement of cash flows totaled $91.7 million for 1998 compared with $68.7
million for 1997 and $91.7 million for 1996. The decline in net cash provided
by operating activities from 1996 to 1997 was primarily the result of only
including nine months of UCGC activity in the 1997 statement of cash flows.
Likewise, the increase in net cash provided from 1997 to 1998 was the result of
the full 12 months activity for 1998 for the combined companies. 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 in storage increased in 1996 because of higher gas cost,
but was lower in 1997 and 1998 because of substantially lower gas prices during
the summers of 1997 and
66
<PAGE>
1998 when the storage reservoirs were being refilled. The changes in deferred
charges and other assets and other current liabilities in 1997 and 1998 were
related to merger and integration costs accrued and the related regulatory
assets recorded in the fourth quarter of 1997. See "Consolidated 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 and CSI which will upgrade processes and systems
companywide. Net cash used in investing activities totaled $118.8 million in
1998 compared with $121.1 million in 1997 and $111.9 million in 1996. In 1998,
the Company received $16.0 million from the sale of office buildings and an
airplane. Capital expenditures in fiscal 1998 amounted to $135.0 million
compared with $122.3 million in 1997 and $117.6 million in 1996. Currently
budgeted capital expenditures for 1999 total $86.8 million and include funds for
completing the CSI project and implementing new financial systems, as well as
funds for additional mains, services, meters, and vehicles. The CSI project
includes application software, related technology infrastructure and business
process changes. Capital expenditures on the CSI project to date include
approximately $26 million in 1997 and $54 million in 1998. Benefits related to
the CSI project include enabling the Company's ability to achieve its vision by
positioning for future growth, using industry best practices, timely integration
of new acquisitions and resolution of Year 2000 issues. Capital expenditures
for fiscal 1999 are planned to be financed from internally generated funds and
financing activities, as discussed below.
67
<PAGE>
The following table reflects the Company's capitalization, including
short-term debt except for the portion related to current storage gas.
<TABLE>
<CAPTION>
September 30,
1998 1997
--------------- ----------------
(In thousands)
<S> <C> <C>
Working capital
short-term debt(1) $ 48,909 $ 48,122
======== ========
Short-term debt $ 17,491 2.1% $119,178 15.6%
Long-term debt 456,331 54.0% 318,182 41.6%
Shareholders' equity 371,158 43.9% 327,260 42.8%
-------- ----- -------- -----
Total capitalization $844,980 100.0% $764,620 100.0%
======== ===== ======== =====
</TABLE>
(1) Includes short-term borrowings associated with working gas inventories.
As of the end of fiscal 1998, the debt to capitalization ratio had
decreased to 56.1% from 57.2% for 1997 which was an increase from 53.4% for
1996. The improvement in 1998 reflects the benefits of 1998 net income in
excess of dividend requirements and the issuance of equity under the Direct
Stock Purchase Plan ("DSPP"). The increase in 1997 was primarily due to
increased cash requirements related to merger and integration costs and CSI
investments, as well as the effects of the nonrecurring charges and reserves
previously discussed. The Company plans to decrease the debt to capitalization
ratio to nearer its target range of 50-52% over the next two years through cash
flow generated from operations, issuance of new common stock under its DSPP and
ESOP, recovery of CSI and merger/integration costs and from the possible sale of
certain remaining real estate assets.
68
<PAGE>
Future capital requirements
Short-term borrowings are expected to continue to increase somewhat in
fiscal 1999 due to budgeted capital expenditures discussed above and scheduled
maturities of long-term debt of $57.8 million. The Company has access to $262.0
million under its committed lines of credit and $80.0 million under its
uncommitted lines. A committed line of credit of $250.0 million is used to
support the Company's $250.0 million commercial paper program which was begun in
October 1998.
Forward-looking cash requirements beyond fiscal 1999 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 $25.9 million for
1998 compared with $47.3 million for 1997 and $22.0 million for 1996. Financing
activities during these periods included issuance of common stock, dividend
payments, short-term borrowings from banks under the Company's credit lines, and
issuance and repayments of long-term debt.
Cash dividends paid. The Company paid $31.8 million in cash dividends
during 1998 compared with $26.4 million in 1997 (excluding dividends of $3.4
million paid by UCGC in the quarter ended December 31, 1996) and $28.5 million
in 1996. Prior to the UCGC merger in July 1997, Atmos increased its actual
annual dividend rate by $.04 in each of the years presented. It also raised the
dividend rate $.04 for 1998 and 1999. Including fiscal 1999, the Company has
increased its dividend rate for 11 consecutive years.
Short-term financing activities. At September 30, 1998, the Company
had committed lines of credit totaling $262.0 million, $250.0 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, 1998, the Company
also had uncommitted short-term credit lines of $80.0 million, of which $25.6
million was unused. Subsequent to September 30, 1998, the Company began a
commercial paper program under which it is authorized to issue up to $250.0
million. The commercial paper program is supported by the $250.0 million
committed line of credit. During 1998, notes payable decreased
69
<PAGE>
$100.9 million, after the application of a portion of the $150.0 million
proceeds from the issuance of 6.75% debentures to reduce notes payable, compared
with an increase of $38.8 million during 1997 and an increase of $62.7 million
in 1996.
Long-term financing activities. In July 1998, the Company issued
$150.0 million of 30-year 6.75% debentures. The debentures are rated A3 by
Moody's and A- by Standard & Poor's. 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 $16.3
million, $14.7 million, and $20.7 million for the years ended September 30,
1998, 1997 and 1996, 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 1998, 1997 and 1996 consisted of annual installments under the
various loan documents. No long-term debt was issued in fiscal 1996.
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 members of
WMLLC, act as guarantors of up to $12.5 million of balances outstanding under a
$30 million bank facility for WMLLC. UCG Energy guarantees the payment of up
to $5.6 million of borrowings under this facility. No balance was outstanding
on this credit facility at September 30, 1998. UCG Energy and WMI also act as
joint and several guarantors on certain purchases of natural gas and
transportation services from suppliers by WMLLC. UCG Energy has agreed to
guarantee such payables up to $40.0 million. These outstanding obligations
amounted to $8.5 million at September 30, 1998.
Issuance of common stock. The Company issued 755,882, 400,578 and
995,467 shares of common stock in 1998, 1997 and 1996, respectively, for its
Direct Stock Purchase Plan, Employee Stock Ownership Plans, Long-term Stock Plan
for United Cities Division, Restricted Stock Grant Plan, Outside Directors
Stock-for-Fee Plan, and acquisitions of Oceana Heights and Monarch Gas Company
in 1996. 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
70
<PAGE>
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.
The Company believes that internally generated funds, its credit
facilities, commercial paper program 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 1999.
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.
71
<PAGE>
Selected 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>
Fiscal year 1998
--------------------------------------------------
Quarter ended
December 31, March 31, June 30, September 30,
-------------------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Operating revenues $295,331 $288,550 $137,311 $127,016
Gross profit 99,601 123,971 57,366 50,898
Operating income 28,668 44,493 6,931 981
Net income (loss) 20,122 37,398 1,676 (3,931)
Net income (loss)
per share .68 1.25 .06 (.13)
<CAPTION>
Fiscal year 1997
--------------------------------------------------
Quarter ended
December 31, March 31, June 30, September 30,
-------------------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Operating revenues $280,624 $362,636 $143,714 $119,861
Gross profit 97,269 124,249 59,546 48,590
Operating income
(loss) 25,968 37,075 4,599 (15,331)
Net income (loss) 18,155 30,625 (3,018) (21,924)
Net income (loss) per
share .62 1.04 (.10) (.74)
</TABLE>
72
<PAGE>
MARKET PRICE OF COMMON STOCK AND RELATED 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 1998 and 1997 are listed below. Dividends
paid for 1997 have been restated to reflect the merger of Atmos and UCGC
accounted for as a pooling of interests. The high and low prices listed are the
actual closing NYSE quotes for Atmos shares.
<TABLE>
<CAPTION>
Fiscal year 1998
---------------------------------
Dividends
High Low paid
Quarter ended: ---------- --------- ----------
<S> <C> <C> <C>
December 31 $ 30 1/2 $ 24 5/16 $.265
March 31 30 5/16 26 1/16 .265
June 30 31 3/16 28 3/16 .265
September 30 30 15/16 24 3/4 .265
-----
$1.06
=====
<CAPTION>
Fiscal year 1997
---------------------------------
Dividends
High Low paid
Quarter ended: ---------- --------- ----------
<S> <C> <C> <C>
December 31 $ 24 3/4 $ 22 5/8 $.251
March 31 26 1/4 22 1/8 .252
June 30 25 1/2 22 1/2 .252
September 30 27 7/8 24 1/2 .255
-----
$1.01
=====
</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, 1998 was 36,949.
73
<PAGE>
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 1998 and 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,
------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- -------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Operating
revenues $ 848,208 $ 906,835 $ 886,691 $749,555 $826,302
========== ========== ========== ======== ========
Net income $ 55,265 $ 23,838 $ 41,151 $ 28,808 $ 26,772
========== ========== ========== ======== ========
Net income per
share $ 1.84 $ .81 $ 1.42 $ 1.06 $ 1.05
========== ========== ========== ======== ========
Cash dividends
per share $ 1.06 $ 1.01 $ .98 $ .96 $ .91
========== ========== ========== ======== ========
Total assets
at end of
year $1,141,390 $1,088,311 $1,010,610 $900,948 $829,385
========== ========== ========== ======== ========
Long-term debt
at end of
year $ 398,548 $ 302,981 $ 276,162 $294,463 $282,647
========== ========== ========== ======== ========
</TABLE>
74
<PAGE>
Exhibit 21
SUBSIDIARIES OF ATMOS ENERGY CORPORATION
<TABLE>
<CAPTION>
State of
Name Incorporation Percent of Stock
<S> <C> <C>
Atmos Energy Services, Inc. Delaware 100%
EGASCO, Inc. Texas 100%
ENERMART, INC Delaware 100%
ENERMART TRUST (a Pennsylvania Business Trust and a Pennsylvania 100%
wholly-owned subsidiary of Enermart, Inc.)
Trans Louisiana Industrial Gas Company, Inc Louisiana 100%
UCG Energy Corporation Delaware 100%
UCG Leasing, Inc. (wholly-owned subsidiary of UCG Georgia 100%
Energy Corporation)
United Cities Gas Storage Company Delaware 100%
Atmos Propane, Inc. (wholly-owned subsidiary of UCG
Energy Corporation) Tennessee 100%
Western Kentucky Gas Resources Company d/b/a NRG, Inc. Delaware 100%
</TABLE>
<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 D/A, No. 33-58220;
Form S-3, No. 33-56915; Form S-3/A, No. 333-03339; Form S-3/A, No. 333-32475;
Form S-3/A, No. 333-50477; Form S-4, No. 333-13429; Form S-8, No. 33-68852; Form
S-8, No. 33-57687; Form S-8, No. 33-57695; Form S-8, No. 333-32343; and Form S-
8, No. 333-46337) of Atmos Energy Corporation and in the related Prospectuses of
our report dated November 10, 1998, with respect to the consolidated financial
statements of Atmos Energy Corporation incorporated by reference in this Annual
Report (Form 10-K) for the year ended September 30, 1998.
ERNST & YOUNG LLP
Dallas, Texas
December 22, 1998
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
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 D/A, No. 33-58220; Form S-3,
No. 33-56915; Form S-3/A, No. 333-03339; Form S-3/A, No. 333-32475, Form S-3/A,
No. 333-50477; Form S-4, No. 333-13429; Form S-8, No. 33-68852; Form S-8, No.
33-57687; Form S-8, No. 33-57695; Form S-8, No. 333-32343; and Form S-8, No.
333-46337) of Atmos Energy Corporation and in the related Prospectuses, of our
report dated February 14, 1997, with respect to the consolidated statements of
income and cash flows of United Cities Gas Company and subsidiaries for the year
ended December 31, 1996, which are incorporated by reference in this Annual
Report (Form 10-K) of Atmos Energy Corporation for the year ended September 30,
1998.
ARTHUR ANDERSEN LLP
Nashville, Tennessee
December 22, 1998
<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, 1998 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-30-1998
<PERIOD-END> SEP-30-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 917,860
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 107,380
<TOTAL-DEFERRED-CHARGES> 116,150
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,141,390
<COMMON> 152
<CAPITAL-SURPLUS-PAID-IN> 271,637
<RETAINED-EARNINGS> 99,369
<TOTAL-COMMON-STOCKHOLDERS-EQ> 371,158
0
0
<LONG-TERM-DEBT-NET> 398,548
<SHORT-TERM-NOTES> 66,400
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 57,783
0
<CAPITAL-LEASE-OBLIGATIONS> 3,242
<LEASES-CURRENT> 337
<OTHER-ITEMS-CAPITAL-AND-LIAB> 243,922
<TOT-CAPITALIZATION-AND-LIAB> 1,141,390
<GROSS-OPERATING-REVENUE> 848,208
<INCOME-TAX-EXPENSE> 31,806
<OTHER-OPERATING-EXPENSES> 735,329
<TOTAL-OPERATING-EXPENSES> 767,135
<OPERATING-INCOME-LOSS> 81,073
<OTHER-INCOME-NET> 9,771
<INCOME-BEFORE-INTEREST-EXPEN> 90,844
<TOTAL-INTEREST-EXPENSE> 35,579
<NET-INCOME> 55,265
0
<EARNINGS-AVAILABLE-FOR-COMM> 55,265
<COMMON-STOCK-DIVIDENDS> 31,834
<TOTAL-INTEREST-ON-BONDS> 12,296
<CASH-FLOW-OPERATIONS> 91,561
<EPS-PRIMARY> 1.85
<EPS-DILUTED> 1.84
</TABLE>
