UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2000
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)
(972) 934-9227
(Registrant's telephone number, including area code)
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Number of shares outstanding of each of the issuer's classes of common stock, as of January 31, 2001.
Class Shares Outstanding ----- ------------------ No Par Value 38,882,966 |
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
ATMOS ENERGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31, September 30,
2000 2000
---------------------------
(Unaudited)
ASSETS
Property, plant and equipment $ 1,592,248 $ 1,579,803
Less accum. depreciation and amortization 610,166 597,457
---------------------------
Net property, plant and equipment 982,082 982,346
Current assets
Cash and cash equivalents 5,559 7,379
Accounts receivable, net 357,760 114,448
Inventories of supplies and mdse 6,740 6,456
Gas stored underground 76,713 64,222
Prepayments 6,447 8,101
---------------------------
Total current assets 453,219 200,606
Deferred charges and other assets 164,713 165,806
---------------------------
$ 1,600,014 $ 1,348,758
===========================
SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders' equity
Common stock $ 194 $ 160
Additional paid-in capital 452,275 306,887
Retained earnings 96,841 83,154
Accumulated other comprehensive income (loss) (2,891) 2,265
---------------------------
Shareholders' equity 546,419 392,466
Long-term debt 357,241 363,198
---------------------------
Total capitalization 903,660 755,664
Current liabilities
Current maturities of long-term debt 15,630 17,566
Short-term debt 147,601 250,047
Accounts payable 259,314 73,031
Taxes payable 29,113 10,844
Customers' deposits 12,926 9,923
Other current liabilities 23,446 21,085
---------------------------
Total current liabilities 488,030 382,496
Deferred income taxes 126,127 131,619
Deferred credits and other liabilities 82,197 78,979
---------------------------
$ 1,600,014 $ 1,348,758
===========================
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See accompanying notes to condensed consolidated financial statements.
ATMOS ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
Three months ended
December 31,
------------------------
2000 1999
------------------------
Operating revenues $ 442,790 $ 224,458
Purchased gas cost 332,842 134,908
------------------------
Gross profit 109,948 89,550
Operating expenses
Operation 34,269 33,082
Maintenance 1,690 2,342
Depreciation and amortization 15,781 16,500
Taxes, other than income 9,267 7,485
------------------------
Total operating expenses 61,007 59,409
------------------------
Operating income 48,941 30,141
Other income (expense) (347) 3,958
Interest charges, net 12,246 11,217
------------------------
Income before income taxes 36,348 22,882
Income taxes 13,376 8,558
------------------------
Net income $ 22,972 $ 14,324
========================
Basic net income per share $ .70 $ .46
========================
Diluted net income per share $ .70 $ .46
========================
Cash dividends per share $ .290 $ .285
========================
Weighted average shares outstanding:
Basic 32,810 31,122
========================
Diluted 32,908 31,339
========================
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See accompanying notes to condensed consolidated financial statements.
ATMOS ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
Three months ended
December 31,
------------------------
2000 1999
------------------------
Cash Flows From Operating Activities
Net income $ 22,972 $ 14,324
Adjustments to reconcile net income to
net cash used by operating activities:
Depreciation and amortization:
Charged to depreciation and
amortization 15,781 16,500
Charged to other accounts 750 1,151
Deferred income taxes (benefit) (4,606) 8,511
Net change in operating assets and
liabilities (49,529) (77,483)
------------------------
Net cash used by operating activities (14,632) (36,997)
Cash Flows From Investing Activities
Capital expenditures (19,464) (17,472)
Retirements of property, plant and
equipment, net (147) 845
Proceeds from sale of utility assets 6,625 -
------------------------
Net cash used in investing activities (12,986) (16,627)
Cash Flows From Financing Activities
Net increase (decrease) in short-term debt (102,446) 81,082
Cash dividends paid (9,285) (8,925)
Repayment of long-term debt (7,893) (6,997)
Issuance of common stock 3,379 5,048
Proceeds from equity offering, net 142,043 -
------------------------
Net cash provided by financing activities 25,798 70,208
------------------------
Net increase (decrease) in cash and cash
equivalents (1,820) 16,584
Cash and cash equivalents at beginning
of period 7,379 8,585
------------------------
Cash and cash equivalents at end
of period $ 5,559 $ 25,169
========================
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See accompanying notes to condensed consolidated financial statements.
ATMOS ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
DECEMBER 31, 2000
1. Unaudited interim financial information
In the opinion of management, all material adjustments necessary for a fair presentation have been made to the unaudited interim period financial statements. Because of seasonal and other factors, the results of operations for the three month period ended December 31, 2000 are not indicative of expected results of operations for the year ending September 30, 2001. These interim financial statements and notes are condensed as permitted by the instructions to Form 10-Q and should be read in conjunction with the audited consolidated financial statements of Atmos Energy Corporation in its Annual Report on Form 10-K for the fiscal year ended September 30, 2000.
Common stock - As of December 31, 2000, we had 100,000,000 shares of common stock, no par value (stated at $.005 per share), authorized and 38,848,193 shares outstanding. At September 30, 2000, we had 31,952,340 shares outstanding.
Comprehensive income - The following table presents the components of comprehensive income, net of related tax, for the three-month period ended December 31, 2000 and 1999:
Three months ended
December 31,
----------------------
2000 1999
----------------------
(In thousands)
Net income $ 22,972 $ 14,324
Unrealized holding gains (losses) on investments (1,522) 1,445
Unrealized losses on derivative financial instruments (3,634) -
----------------------
Comprehensive income $ 17,816 $ 15,769
======================
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The only components of accumulated other comprehensive income (loss), net of related tax, relate to unrealized holding gains and losses associated with certain available for sale investments and unrealized gains and losses associated with derivative financial instruments.
Reclassifications - Certain prior year amounts have been reclassified to conform with the current year presentation.
2. Contingencies
Litigation
Greeley Division
On September 23, 1999, a suit was filed in the District Court of Stevens County, Kansas, by Quinque Operating Company, Tom Boles and Robert Ditto, against more than 200 companies in the natural gas industry including Atmos and our Greeley Gas Division. The plaintiffs, who purport to represent a class consisting of gas producers, royalty owners, overriding royalty owners, working interest owners and state taxing authorities, accuse the defendants of underpaying royalties on gas taken from wells situated on non-federal and non-Indian lands throughout the United States and offshore waters predicated upon allegations that the defendants' gas measurements are simply inaccurate and that the defendants failed to comply with applicable regulations and industry standards over the last 25 years. Although the plaintiffs do not specifically allege an amount of damages, they contend that this suit is brought to recover billions of dollars in revenues that the defendants have allegedly unlawfully diverted from the plaintiffs to themselves. On April 10, 2000, this case was consolidated for pre-trial proceedings with other similar pending litigation in federal court in Wyoming in which we are also a defendant along with over 200 other defendants in the case of In Re Natural Gas Royalties Quitam Litigation. In January 2001, the federal court elected to remand this case back to the Kansas state court. A reconsideration of remand has been filed, but it is expected to be denied. We believe that the plaintiffs' claims are lacking in merit and we intend to vigorously defend this action. However, we cannot assess, at this time, the likelihood of whether or not the plaintiffs may prevail on any one or more of their asserted claims. In any event, we expect the final outcome of this case to not have a material adverse effect on our financial condition, results of operations or net cash flows because we believe that we have adequate reserves to cover any damages that may ultimately be awarded.
Energas Division
On June 22, 2000, suit was filed in the 99th District Court of Lubbock County, Texas, by Juanita Juarez, individually and on behalf of Moses Benitez, a minor and Yolanda Davila, individually and on behalf of Isiah Garcia, a minor, against Richard Ratliff and our Energas Division. The plaintiffs were involved in an automobile accident with Mr. Ratliff, an Energas Division employee who was driving a vehicle belonging to the Energas Division. The plaintiffs allege that Mr. Ratliff failed to maintain proper control of the vehicle which failure led to the plaintiffs being damaged. Although the plaintiffs have not as yet alleged a total amount of damages, they have submitted evidence that they incurred in excess of $75,000 in direct medical expenses and alleged that the two adult plaintiffs will suffer a combined loss of approximately $1.1 million of earnings capacity as a result of injuries suffered in the incident. We believe that the plaintiffs' claims are wholly lacking in merit and intend to vigorously defend this action. However, we cannot assess, at this time, the likelihood of whether or not the plaintiffs may prevail on any one or more of their asserted claims. We expect the final outcome of this case to not have a
material adverse effect on our financial condition, results of operations or net cash flows because we believe that we have adequate reserves to cover any damages that may ultimately be awarded.
United Cities Propane Gas, Inc.
United Cities Propane Gas, Inc., one of our wholly-owned subsidiaries, is a party to an action filed in June 2000 which is pending in the Circuit Court of Sevier County, Tennessee. The plaintiffs' claims arise out of injuries alleged to have been caused by a low-level propane explosion. The plaintiffs seek to recover damages of $13.0 million. Discovery activities have begun in this case. We deny any wrongdoing and we intend to vigorously defend against the plaintiffs' claims. We expect the final outcome of this case to not have a material adverse effect on our financial condition, results of operations or net cash flows because we believe that we have adequate insurance coverage for any damages that may ultimately be awarded.
We are a party to other litigation matters and claims that arise out of our ordinary business. While the results of these litigation matters and claims cannot be predicted with certainty, we believe the final outcome of such litigation and claims will not have a material adverse effect on our financial condition, results of operations or net cash flows because we believe that we have adequate insurance and reserves to cover any damages that may ultimately be awarded.
Environmental Matters
The United Cities Division is the owner or previous owner of manufactured gas plant sites in Johnson City and Bristol, Tennessee and Hannibal, Missouri which were used to supply gas prior to the availability of natural gas. The gas manufacturing process resulted in certain by-products and residual materials including coal tar. The manufacturing process used by us was an acceptable and satisfactory process at the time such operations were being conducted. Under current environmental protection laws and regulations, we may be responsible for response actions with respect to such materials if response actions are necessary.
As of December 31, 2000, we had incurred costs of approximately $0.9 million for the investigations of the Johnson City and Bristol, Tennessee and Hannibal, Missouri sites and had a remaining accrual of $0.8 million.
Tennessee sites
United Cities Gas Company and the Tennessee Department of Environment and Conservation entered into a consent order effective January 23, 1997, to facilitate the investigation, removal and remediation of the Johnson City site. United Cities Gas Company began the implementation of the consent order in the first quarter of 1997 which continued through December 31, 2000. The investigative phase of the work at the site has been completed. Work on an interim removal action is scheduled for 2001.
We are 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 United Cities Gas Company permission to defer, until its next rate case, all cost incurred in Tennessee in connection with state and federally mandated environmental control requirements.
Missouri site
On July 22, 1998, we entered into an Abatement Order on Consent with the Missouri Department of Natural Resources addressing the former manufactured gas plant located in Hannibal, Missouri. Through our United Cities Division, we agreed 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 field work was conducted in August 1999. A risk assessment for the site is currently being performed. On March 9, 1999, the Missouri Public Service Commission issued an Order authorizing us to defer the costs associated with this site until March 9, 2001. A renewal of the Order has been requested.
Kansas sites
We are currently conducting investigation and remediation activities pursuant to Consent Orders between the Kansas Department of Health and Environment and United Cities Gas Company. The Orders provide for the investigation and remediation of mercury contamination at gas pipeline sites which utilize or formerly utilized mercury meter equipment in Kansas. As of December 31, 2000, based upon available current information, we had a remaining accrual of $0.3 million for recovery. In addition, as of December 31, 2000, we had incurred costs of $0.1 million for these sites. The Kansas Corporation Commission has authorized us to defer these costs and seek recovery in a future rate case.
We are a party to other environmental matters and claims that arise out of our ordinary business. While the ultimate results of response actions to these environmental matters and claims cannot be predicted with certainty, we believe the final outcome of such response actions will not have a material adverse effect on our financial condition, results of operations or net cash flows because we believe that the expenditures related to such response actions will either be recovered through rates, shared with other parties or covered by adequate insurance or reserves.
3. Short-term debt
At December 31, 2000, short-term debt was composed of $132.6 million of commercial paper and $15.0 million outstanding under bank credit facilities.
Committed credit facilities
We have short-term committed credit facilities totaling $800.0 million. One short-term unsecured credit facility, which serves as a backup liquidity facility for our commercial paper program, is for $300.0 million. A second facility is for $15.0 million. These credit facilities are negotiated at least annually. In addition, on August 3, 2000, we entered into a $485.0 million short-term unsecured credit facility with interest starting at LIBOR plus 75 basis points which will provide $385.0 million of bridge financing for the acquisition of the assets and related costs of Louisiana Gas Service Company, a division of Citizens Communications Company and LGS Natural Gas Company, a subsidiary of Citizens and $100.0 million for refinancing certain existing debt. At December 31, 2000, $15.0 million was outstanding under these credit facilities.
Uncommitted credit facilities
We also have unsecured short-term uncommitted credit lines from three banks totaling $90.0 million. No amounts were outstanding under these credit facilities at December 31, 2000.
Commercial paper program
We implemented a $250.0 million commercial paper program in October 1998 which was subsequently increased to $300.0 million in August 2000. It is supported by the $300.0 million committed line of credit described above. Our commercial paper is rated A-2 by Standard and Poor's and P-2 by Moody's.
4. Earnings per share
Basic earnings per share has been computed by dividing net income for the period by the weighted average number of common shares outstanding during the period. Diluted earnings per share has been computed by dividing net income for the period by the weighted average number of common shares outstanding during the period adjusted for the assumed exercise of restricted stock and other contingently issuable shares of common stock. Net income for basic and diluted earnings per share are the same, as there are no contingently issuable shares of stock whose issuance would have impacted net income. A reconciliation between basic and diluted weighted average common shares outstanding follows:
For the three months ended
December 31,
--------------------------
2000 1999
--------------------------
Weighted average common shares - basic 32,810 31,122
Effect of dilutive securities:
Restricted stock 92 207
Stock options 6 10
--------------------------
Weighted average common shares - assuming
dilution 32,908 31,339
==========================
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5. Segment information
In accordance with Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information", we have identified the following two segments: Utility and Non-Regulated. For an expanded description of these segments, please refer to Note 1 of notes to consolidated financial statements in our Annual Report on Form 10-K for the year ended September 30, 2000. For the year ended September 30, 2000 and periods prior thereto, we had identified three segments: Utility, Propane and Non-Regulated. However, in August 2000, we combined our propane operations with the propane operations of three other companies and the resulting combined joint venture combined its operations with Heritage Propane Partners, LLC. As a result of this transaction, the Propane segment for prior periods has been combined with the Non-Regulated segment.
Summarized financial information concerning our reportable segments for the three months ended December 31, 2000 and 1999 are shown in the following table:
Non-
Utility Regulated Total
--------------------------------------------
(In thousands)
As of and for the
three months ended
December 31, 2000:
------------------
Operating revenues $ 428,462 $ 15,967 $ 444,429
Intersegment revenues 753 886 1,639
Net income 22,838 134 22,972
Total assets 1,508,608 107,961 1,616,569
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Non-
Utility Regulated Total
--------------------------------------------
(In thousands)
As of and for the
three months ended
December 31, 1999:
------------------
Operating revenues $ 209,295 $ 16,630 $ 225,925
Intersegment revenues 596 871 1,467
Net income 11,104 3,220 14,324
Total assets 1,279,138 91,556 1,370,694
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The following table presents a reconciliation of the operating revenues to total consolidated revenues for the three months ended December 31, 2000 and 1999:
Three months ended
December 31,
------------------------------
2000 1999
------------------------------
(In thousands)
Total revenues for reportable segments $ 444,429 $ 225,925
Elimination of intersegment revenues (1,639) (1,467)
------------------------------
Total operating revenues $ 442,790 $ 224,458
==============================
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A reconciliation of total assets for the reportable segments to total consolidated assets for December 31, 2000 and 1999 is presented below:
December 31,
------------------------------
2000 1999
------------------------------
(In thousands)
Total assets for reportable segments $ 1,616,569 $ 1,370,694
Elimination of intercompany accounts (16,555) (16,559)
------------------------------
Total consolidated assets $ 1,600,014 $ 1,354,135
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6. Derivative Instruments and Hedging Activities
Effective October 1, 2000, we adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended. This Statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that all derivative financial instruments be recognized in the financial statements and measured at fair value regardless of the purpose or intent for holding them. Changes in the fair value of derivative financial instruments are either recognized periodically in income or shareholders' equity (as a component of other comprehensive income), depending on the classification of the derivative. Derivative instruments may be classified as either fair value hedges, cash flow hedges or net investment in a foreign operation hedges. The cumulative effect of the change in
accounting for the adoption of this Statement did not have a material impact on our financial position, results of operations or cash flows.
Our derivative financial instruments are classified as cash flow hedges. We primarily use futures and options contracts in our hedging activities. Once a derivative financial instrument is classified as a cash flow hedge, the effective portions of changes in the fair value of the instrument are recorded in other comprehensive income and are recognized in the consolidated statement of income when the hedged item affects earnings. Ineffective portions of changes in the fair value of cash flow hedges are recognized in earnings. Our derivative financial instruments are considered to be highly effective, thus the changes in fair value of the instruments are recognized in shareholders' equity as a component of other comprehensive income.
Our hedging activities are used primarily in our non-regulated irrigation business and underground storage business. In our non-regulated irrigation business, we use derivative instruments to hedge certain volumes of gas to be purchased that will ultimately be used to fulfill sales contracts. The objective of using these derivative instruments is to help mitigate market fluctuations related to the purchase price. In our non-regulated underground storage business, we use derivative instruments to hedge forecasted sales prices on withdrawals from our underground storage facilities to help minimize our exposure to market volatility. Any amounts recognized as gains and losses reported in other comprehensive income will be reclassified into earnings upon the completion of the purchase of gas related to the hedge for irrigation and upon the ultimate sale of gas from our underground storage facilities related to the hedge instrument. As of December 31, 2000, the maximum period of time over which we hedge our exposure to market volatility is not greater than three months. Our other gas contracts meet the exclusion criteria for normal purchases and sales; thus, they are not accounted for as derivative financial instruments.
For the three months ended December 31, 2000, an unrecognized loss of $3.6 million relating to our hedging activities is recorded in other comprehensive income.
7. Woodward Marketing, LLC
Through Atmos Energy Marketing, LLC ("AEM"), our wholly-owned subsidiary, we own a 45 percent interest in Woodward Marketing, LLC ("WMLLC"), a limited liability company formed in Delaware with headquarters in Houston, Texas. WMLLC is engaged in gas marketing and energy management services. WMLLC provides gas supply management services to industrial customers, municipalities and local distribution companies including our five regulated utility divisions.
We account for our 45 percent interest in WMLLC using the equity method of accounting for investments. Equity in earnings of WMLLC included in the condensed consolidated statement of income was $2.0 million and $3.0 million for the three months ended December 31, 2000 and 1999. The $5.4 million excess purchase price over the value of the net tangible assets, which was allocated to customer contracts and goodwill, is being
amortized over 10 and 20 years. In 1999, WMLLC adopted Emerging Issues Task Force 98-10, "Accounting for Contracts Involved in Energy Trading and Risk Management Activities," ("EITF 98-10"). EITF 98-10 requires that energy trading contracts be marked to market (that is, measured at fair value determined as of the balance sheet date) with the gains and losses included in earnings and separately disclosed. During our first quarter of fiscal 2001, WMLLC adopted Emerging Issues Task Force 00-17, "Measuring the Fair Value of Energy-Related Contracts in Applying EITF Issue No. 98-10" ("EITF 00-17"). EITF 00-17 extends the requirements under EITF 98-10 to storage and transportation contracts. Upon completion of the acquisition of the remaining 55 percent interest in WMLLC as discussed below, WMLLC will be required to adopt Statement of Financial Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging Activities," as amended. We are currently in the process of evaluating the impact of adopting this Statement on our financial condition, results of operations and cash flows.
In August 2000, we entered into an agreement with Woodward Marketing, Inc. ("WMI") to acquire the 55 percent interest in WMLLC that we do not own in exchange for 1,423,193 restricted shares of Atmos common stock. The consideration is subject to an upward adjustment based on the market price of Atmos common stock. The maximum number of additional shares that could be issued under the adjustment provision is 232,547 plus an amount to compensate for dividends paid after the completion of the acquisition. This transaction is subject to state regulatory approval.
Guarantees
AEM, our wholly-owned subsidiary, and WMI, sole members of WMLLC, act as guarantors of balances outstanding under a $125.0 million credit facility for WMLLC. AEM guarantees the payment of 45 percent of borrowings under this facility. No borrowing was outstanding under this credit facility at December 31, 2000; however, related letters of credit totaling $125.0 million reduced the amount available under this facility. In addition, WMLLC has additional letters of credit totaling $15.0 million secured by cash. AEM and WMI also act as joint and several guarantors on payables of WMLLC up to $40.0 million of natural gas purchases and transportation services from certain suppliers. WMLLC payable balances outstanding that were subject to these guarantees amounted to $21.0 million at December 31, 2000. Upon completion of the acquisition by us of the remaining 55 percent of WMLLC, as discussed above, AEM will be the sole guarantor of all amounts outstanding under the bank facility discussed above as well as the sole guarantor of all payables of WMLLC for natural gas purchases and transportation services from suppliers.
Gas Purchases
Included in purchased gas cost were purchases from WMLLC of approximately $144.9 million and $48.4 million for the three-month periods ended December 31, 2000 and 1999.
Revolving Credit Facility
In June 2000, AEM established an unsecured revolving credit facility with WMLLC whereby WMLLC may borrow up to $15.0 million on a revolving credit basis. In December 2000, the credit facility with WMLLC was increased to $30.0 million. The term of the facility is for one year ending on May 31, 2001. Interest is paid monthly and adjusted periodically at a rate equal to the One Month LIBOR plus 125 basis points. At December 31, 2000, $30.0 million in advances were outstanding under this facility. In addition, at December 31, 2000, $9.0 million in working capital advances to fund gas purchase obligations were outstanding.
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Board of Directors
Atmos Energy Corporation
We have reviewed the accompanying condensed consolidated balance sheet of Atmos Energy Corporation as of December 31, 2000 and the related condensed consolidated statements of income and cash flows for the three-month periods ended December 31, 2000 and 1999. These financial statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States, which will be performed for the full year with the objective of expressing an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should be made to the accompanying condensed consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States.
We have previously audited, in accordance with auditing standards generally accepted in the Untied States, the consolidated balance sheet of Atmos Energy Corporation as of September 30, 2000, and the related consolidated statements of income, shareholders' equity and cash flows for the year then ended (not presented herein) and in our report dated November 8, 2000, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of September 30, 2000 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
ERNST & YOUNG LLP
Dallas, Texas
January 23, 2001
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Introduction
The following discussion should be read in conjunction with the condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q and Management's Discussion and Analysis contained in our Annual Report on Form 10-K for the year ended September 30, 2000.
We distribute and sell natural gas to over one million residential, commercial, industrial, agricultural and other customers in eleven states after the sale of the South Carolina operations effective December 31, 2000. Such business is subject to regulation by state and/or local authorities in each of the states in which we operate. In addition, our business is affected by seasonal weather patterns, competitive factors within the energy industry and economic conditions in the areas that we serve.
Cautionary Statement for the Purposes of the Safe Harbor under the Private Securities Litigation Reform Act of 1995
The statements contained in this Quarterly Report on Form 10-Q 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 the Report 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, any other of the Company's 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 strategy,
operations, markets, services, rates, recovery of costs, availability of gas
supply and other factors. These risks and uncertainties include the following:
national, regional and local economic conditions, including competition from
other energy suppliers as well as alternative forms of energy; regulatory and
business trends and decisions, including the impact of pending rate proceedings
before various state regulatory commissions; successful implementation of new
technologies and systems, including any technologies and systems related to the
Company's customer support center and billing operations; weather conditions
that would be adverse to its business such as warmer than normal weather in the
Company's service territories; successful completion and integration of pending
acquisitions; inflation rates, including their effect on commodity prices for
natural gas; hedging and market risk activities; further deregulation or
"unbundling" of the natural gas distribution industry 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 these forward-looking
statements to be reasonable, there can be no assurance that they will
approximate
actual experience or that the expectations derived from them will be realized. Further, the Company undertakes no obligation to update or revise any of its forward-looking statements whether as a result of new information, future events or otherwise.
Ratemaking Activity
In August 1999, the Energas Division filed a rate case in its West Texas System cities requesting a rate increase of approximately $9.8 million annually. This request was denied by the 67 cities served by our West Texas System. In March 2000, this decision was appealed to the Railroad Commission of Texas. Subsequently, 59 cities representing approximately 58 percent of Energas' customers ratified a non-binding Settlement Agreement. The Settlement Agreement capped the rate increase at $3.0 million and entitled the ratifying cities to accept a rate increase below $3.0 million in the event the Railroad Commission adopted a lesser increase for the non-ratifying cities. Eight cities declined to participate in the settlement and a hearing with the Railroad Commission was held in August 2000. In December 2000, the Railroad Commission approved an increase in annual revenues of approximately $3.0 million effective December 1, 2000. In addition, the Railroad Commission approved a new rate design providing more protection from warmer than normal weather.
In February 2000, the United Cities Division filed a rate case in Illinois with the Illinois Commerce Commission requesting an increase in revenues of approximately $3.1 million annually. After review by the Illinois Commerce Commission, the amount requested was revised to approximately $2.1 million. The United Cities Division received an increase in annual revenues of approximately $1.4 million. The new rates went into effect on October 23, 2000 and will be collected primarily through an increase in customer charges.
We continue to monitor rates in all of our service areas for recovery of service costs and an adequate return on investment.
Weather and Seasonality
Our natural gas distribution business and irrigation sales business is seasonal and dependent upon weather conditions in our service areas. Natural gas sales to residential, commercial and public authority customers are affected by winter heating season requirements. This generally results 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. Sales to industrial customers are much less weather sensitive. Sales to agricultural customers, who typically use natural gas to power irrigation pumps during the period from March through September, are affected by rainfall amounts and the price of natural gas. Weather for the three months ended December 31, 2000 was 21% colder than normal and 46% colder than weather in the corresponding period of the prior year.
The effects of weather that is colder or warmer than normal are offset in the Tennessee and Georgia jurisdictions served by the United Cities Division and in the Kentucky jurisdiction served by the Western Kentucky Division through weather normalization adjustments. The Georgia Public Service Commission, the Tennessee Regulatory Authority and the Kentucky Public Service Commission have approved WNAs. The WNAs, effective October through May each year in Georgia, and November through April each year in Tennessee and Kentucky, allow the United Cities Division and Western Kentucky 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 a decrease in revenues of approximately $1.4 million for the three months ended December 31, 2000, as compared with an increase of $0.9 million for the three months ended December 31, 1999. Approximately 375,000 or 34 percent of our meters in service are located in Georgia, Tennessee and Kentucky. We did not have WNAs in our other service areas during the three months ended December 31, 2000.
In July 2000, we entered into an agreement to purchase weather hedges for our Texas and Louisiana operations effective for the 2000-2001 heating season. The hedges should mitigate the effects of weather that is at least seven percent warmer than normal in both Texas and Louisiana while preserving any upside.
Status of Pending Acquisition
In April 2000, we entered into a definitive agreement to acquire the gas operations of Louisiana Gas Service Company, a division of Citizens Communications Company and LGS Natural Gas Company, a subsidiary of Citizens, for $375.0 million. In December 2000, the purchase price was adjusted to $365.0 million. The acquisition is anticipated to be completed during the third quarter of fiscal 2001.
FINANCIAL CONDITION
For the three months ended December 31, 2000, net cash used by operating activities totaled $14.6 million compared with $37.0 million for the three months ended December 31, 1999. The decrease in net cash used by operating activities was primarily the result of an increase in net income and increases in accounts payable and taxes payable partially offset by increases in accounts receivable and gas storage inventories. The increase in net income was primarily due to higher gross profit due to increased volumes and rate increases. This increase was partially offset by increased operating expenses and higher interest charges as well as lower other income (expense) as a result of charges incurred related to our performance based-ratemaking mechanisms and amortization relating to weather hedges purchased for our Louisiana and Texas operations.
For the three months ended December 31, 2000, net cash used in investing activities totaled $13.0 million compared with $16.6 million for the three months ended December 31, 1999. Major cash flows used in investing activities for the three months ended December 31, 2000 included capital expenditures of $19.5 million compared with $17.5
million for the three months ended December 31, 1999. The capital expenditures budget for fiscal 2001, excluding acquisitions, is approximately $81.0 million as compared with actual capital expenditures of $75.6 million for fiscal 2000. Budgeted capital projects for fiscal 2001 include expenditures for additional mains, services, meters and equipment. In fiscal 2001, we also plan to complete the Louisiana acquisition for $365.0 million and the acquisition of the remaining 55 percent of WMLLC for 1,423,193 restricted shares of our common stock, subject to adjustment. Capital expenditures and acquisitions for fiscal 2001 are planned to be financed from internally generated funds and financing activities as discussed below. For the three months ended December 31, 2000, we received net proceeds of $6.6 million in connection with the sale of certain utility assets.
For the three months ended December 31, 2000, net cash provided by financing activities totaled $25.8 million compared with $70.2 million for the three months ended December 31, 1999. For the three-month period ended December 31, 2000, short-term debt decreased $102.4 million compared with an increase of $81.1 million for the three months ended December 31, 1999. The decrease was due to the net proceeds from the equity offering discussed below being used to reduce the amount of short-term debt outstanding. Repayments of long-term debt totaled $7.9 million for the three months ended December 31, 2000 compared with $7.0 million for the three months ended December 31, 1999. We paid $9.3 million in cash dividends during the three months ended December 31, 2000 compared with dividends of $8.9 million during the three months ended December 31, 1999. This reflects increases in the quarterly dividend rate and in the number of shares outstanding. During the three months ended December 31, 2000, we issued 6,895,853 shares of common stock. In December 2000, we completed our equity offering of 6,000,000 shares of common stock priced at $22.25 per share. The underwriters exercised their overallotment option and purchased a total of 6,741,500 shares of our common stock. The net proceeds from the equity offering totaled approximately $142.0 million after underwriting discounts. The net proceeds were used to reduce short-term debt outstanding as discussed above.
The following table presents the number of shares issued for the three-month periods ended December 31, 2000 and 1999:
Three months ended
December 31,
-------------------------
2000 1999
-------------------------
Shares issued:
Employee Stock Ownership Plan 48,738 40,557
Direct Stock Purchase Plan 105,010 200,406
Outside Directors Stock-for-Fee Plan 605 517
Equity Offering 6,741,500 -
-------------------------
Total shares issued 6,895,853 241,480
=========================
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We believe that internally generated funds, our 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 the
remainder of fiscal 2001. At December 31, 2000, we have $800.0 million in committed short-term credit facilities, of which $300.0 million serves as a backup liquidity facility for our commercial paper program. At December 31, 2000, $15.0 million was outstanding under these credit facilities and $132.6 million supported commercial paper outstanding. In addition, at December 31, 2000, we also had $90.0 million of uncommitted short-term lines of credit, none of which was outstanding.
In December 1999, we filed a universal shelf registration statement with the Securities and Exchange Commission to issue, from time to time, up to $500.0 million in new common stock and/or debt. In connection with this filing, we also filed applications for approval to issue securities with six state utility commissions. We have received approvals from all six required states and the registration statement has been declared effective. No further state or federal regulatory approvals will be required before any debt or equity securities may be issued under the shelf registration statement by us from time to time. As discussed previously, in December 2000, we issued 6,741,500 shares of common stock under the shelf registration statement reducing the amount available to be issued by approximately $150.0 million. At December 31, 2000, we had approximately $350.0 million available to issue under the shelf registration statement.
RESULTS OF OPERATIONS
Three Months Ended December 31, 2000, Compared with Three Months Ended December 31, 1999
Operating revenues increased by 97 percent to $442.8 million for the three months ended December 31, 2000 from $224.5 million for the three months ended December 31, 1999. The most significant factors contributing to the increase in operating revenues were a 54 percent increase in average sales price due to the increased cost of gas and a 27 percent increase in sales and transportation volumes due to colder weather. During the quarter ended December 2000, temperatures were 46 percent colder than in the corresponding quarter of the prior year and were 21 percent colder than the 30-year normal for the quarter. The total volume of gas sold and transported for the three months ended December 31, 2000 was 68.0 billion cubic feet compared with 53.7 billion cubic feet for the three months ended December 31, 1999. The average sales price per Mcf sold increased $2.87 or 54 percent to $8.22 primarily due to an increase in the average cost of gas. The average cost of gas per Mcf sold increased 87 percent to $6.29 for the three months ended December 31, 2000 from $3.37 for the three months ended December 31, 1999. In addition, operating revenues increased due to the impact of rate increases in Kentucky, Illinois, Amarillo, Texas, and West Texas, as well as the addition of approximately 48,000 customers in Missouri due to the Associated Natural Gas acquisition completed in fiscal 2000.
Gross profit increased by 23 percent to $109.9 million for the three months ended December 31, 2000 from $89.6 million for the three months ended December 31, 1999. The increase in gross profit was due to the increase in volumes sold to weather sensitive customers and an increase of $1.1 million in transportation revenues due to higher
average transportation revenue per Mcf. In addition, gross profit increased due to the impact of rate increases and the additional customers discussed previously. Changes in the cost of gas do not directly affect gross profit.
Operating expenses increased to $61.0 million for the three months ended December 31, 2000 from $59.4 million for the three months ended December 31, 1999. Operation and maintenance expense increased due to an increase in the allowance for doubtful accounts. Savings resulting from the continued cost control initiatives started during fiscal 2000 partially offset this increase. Taxes other than income increased as a result of increased city franchise taxes, which are revenue based.
Operating income increased 62 percent for the three months ended December 31, 2000 to $48.9 million from $30.1 million for the three months ended December 31, 1999. The increase in operating income resulted primarily from increased gross profit described above.
Other income (expense) decreased $4.3 million for the three months ended December 31, 2000 compared with the three months ended December 31, 1999. This decrease was due to charges incurred related to our performance based-ratemaking mechanisms and the amortization of weather hedges purchased for our Louisiana and Texas operations. In addition, our earnings from our 45 percent interest in WMLLC decreased due to mark to market accounting under EITF No. 98-10 and the volatility of current gas prices.
Interest expense increased $1.0 million, or 9 percent, for the three months ended December 31, 2000 compared with the three months ended December 31, 1999 due to higher weighted average interest rates on short-term debt partially offset by a slight decrease in the average short-term debt outstanding.
Net income increased for the three months ended December 31, 2000 by $8.7 million to $23.0 million from $14.3 million for the three months ended December 31, 1999. This increase in net income resulted primarily from the increase in sales volumes due to the colder than normal weather and the impact of rate increases discussed above.
UTILITY AND NON-REGULATED OPERATING DATA
Our utility business is composed of our five regulated utility divisions:
Energas Division, Greeley Gas Division, Trans La Division, United Cities
Division, Western Kentucky Division and Shared Services. The non-regulated
business includes non-regulated irrigation sales, energy services to large
volume customers, non-regulated underground storage operations, a 45 percent
interest in WMLLC, leasing of buildings and vehicles and non-regulated shared
services. The following table of operating statistics summarizes data of the
utility and non-regulated segments for the three-month periods ended December
31, 2000 and 1999. For further information regarding operating results of the
segments, see Note 5 of notes to condensed consolidated financial statements. As
discussed in our Annual Report on Form 10-K for the year ended September 30,
2000, in August 2000, we combined our propane with the propane operations of
three other
companies and the resulting combined joint venture combined its operations with Heritage Propane Partners, LLC. As a result of this transactions, no information for the quarter ended December 31, 2000 is presented for propane.
ATMOS ENERGY CORPORATION
CONSOLIDATED OPERATING STATISTICS
Three months ended
December 31,
--------------------------
2000 1999
--------------------------
METERS IN SERVICE, end of period
Residential 977,410 923,083
Commercial 105,375 98,032
Public authority and other 7,428 7,380
Industrial (including agricultural) 14,277 14,518
--------------------------
Total meters 1,104,490 1,043,013
Propane customers - 41,401
--------------------------
Total 1,104,490 1,084,414
==========================
HEATING DEGREE DAYS
Actual (weighted average) 1,840 1,287
Percent of normal 121% 83%
SALES VOLUMES - MMcf (1)
Residential 28,813 19,929
Commercial 13,266 10,080
Public authority and other 2,883 1,833
Industrial (including agricultural) 7,585 7,310
--------------------------
Total 52,547 39,152
Transportation volumes - MMcf (1) 15,498 14,510
--------------------------
Total throughput - MMcf (1) 68,045 53,662
==========================
Propane - Gallons (000's) - 6,354
==========================
OPERATING REVENUES (000's)
Gas sales revenues
Residential $ 249,834 $ 117,304
Commercial 110,628 52,438
Public authority and other 22,080 8,802
Industrial (including agricultural) 49,320 31,007
--------------------------
Total gas sales revenues 431,862 209,551
Transportation revenues 6,738 5,617
Propane revenues - 7,839
Other revenues 4,190 1,451
--------------------------
Total operating revenues $ 442,790 $ 224,458
==========================
Cost of gas (excluding non-regulated) $ 330,820 $ 131,815
==========================
Average gas sales revenues per Mcf $ 8.22 $ 5.35
Average transportation revenue per Mcf $ .43 $ .39
Average cost of gas per Mcf sold $ 6.29 $ 3.37
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(1) Volumes are reported as metered in million cubic feet (MMcf).
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes from the information provided in Item 7A of our Annual Report on Form 10-K for the year ended September 30, 2000.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Note 2 of notes to condensed consolidated financial statements herein for a description of legal proceedings.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
A list of exhibits required by Item 601 of Regulation S-K and filed as part of this report is set forth in the Exhibits Index, which immediately precedes such exhibits.
(b) Reports on Form 8-K
We filed a Form 8-K Current Report, Item 5, Other Events, dated December 14, 2000, announcing that we had entered into a Purchase Agreement with Merrill Lynch & Co., on behalf of Merrill Lynch, Pierce, Fenner & Smith Incorporated and UBS Warburg LLC, as representatives of the several underwriters named in Schedule A of the Purchase Agreement (collectively the "Underwriters"), and executed that certain Purchase Agreement in connection with the sale by us to the Underwriters of a total of 6,741,500 shares of our common stock.
Under Item 7, Financial Statements and Exhibits, an exhibit was attached: a copy of the Purchase Agreement dated December 14, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ATMOS ENERGY CORPORATION
(Registrant)
Date: February 8, 2001 By: /s/ F.E. MEISENHEIMER
-----------------------------
F.E. Meisenheimer
Vice President and Controller
(Chief Accounting Officer
and duly authorized signatory)
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EXHIBITS INDEX
Item 6(a)
Exhibit Page
Number Description Number
-------------------------------------------------------------------------------
10.1* Atmos Energy Corporation Performance-Based Supplemental
Executive Benefits Plan Trust Agreement, Effective Date
December 1, 2000
10.2* Amendment Number One to the Atmos Energy Corporation
Performance-Based Supplemental Executive Benefits Plan,
Effective Date January 1, 1999
10.3* Form of Individual Trust Agreement for the Supplemental
Executive Benefits Plan
12 Computation of ratio of earnings to fixed charges
15 Letter regarding unaudited interim financial information
--------------
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* This exhibit constitutes a "management contract or compensatory plan, contract or arrangement."
Exhibit 10.1
ATMOS ENERGY CORPORATION
PERFORMANCE-BASED SEBP
TRUST AGREEMENT
EFFECTIVE AS OF DECEMBER 1, 2000
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS 2
ARTICLE II ESTABLISHMENT OF TRUST 4
ARTICLE III PAYMENTS TO PLAN PARTICIPANTS AND THEIR
BENEFICIARIES 5
ARTICLE IV TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO
TRUST BENEFICIARY WHEN COMPANY IS INSOLVENT 6
ARTICLE V PAYMENTS TO COMPANY 8
ARTICLE VI THE RIGHTS OF THE PARTICIPANTS AND CREDITORS
TO THE TRUST ESTATE 8
ARTICLE VII INVESTMENT AUTHORITY 9
ARTICLE VIII DUTIES, POWERS AND RESPONSIBILITIES OF TRUSTEE
AND ASSET MANAGERS 10
ARTICLE IX INDEMNIFICATION; LIABILITIES OF THE TRUSTEE 15
ARTICLE X TRUSTEE'S COMPENSATION AND EXPENSES 16
ARTICLE XI TAXES 16
ARTICLE XII RESIGNATION AND REMOVAL OF TRUSTEE;
APPOINTMENT OF SUCCESSOR 16
ARTICLE XIII AMENDMENT OR TERMINATION 17
ARTICLE XIV MISCELLANEOUS 18
ARTICLE XV EFFECTIVE DATE 19
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ATMOS ENERGY CORPORATION
PERFORMANCE-BASED SEBP
TRUST AGREEMENT
THIS ATMOS ENERGY CORPORATION PERFORMANCE-BASED SEBP TRUST AGREEMENT (the "Trust Agreement") is made this 1st day of December, 2000, between Atmos Energy Corporation (the "Company"), as Settlor, and Bankers Trust Company, as Trustee, for the benefit of such employees of the Company as are participants in the Plan (as defined in Section 1.6 herein) from time to time to provide funds to satisfy the obligations of the Company to participants under the Plan.
WHEREAS, Company has adopted the Atmos Energy Corporation Performance-Based Supplemental Executive Benefits Plan.
WHEREAS, Company has incurred or expects to incur liability under the terms of such Plan with respect to the individuals participating in such Plan for monthly supplemental retirement income and disability benefits and/or death benefits (the "Supplemental Benefits" or "Benefits");
WHEREAS, Company wishes to establish a trust (hereinafter called "Trust") and to contribute to the Trust assets that shall be held therein, subject to the claims of Company's creditors in the event of Company's Insolvency (as herein defined) until paid to Plan participants and their beneficiaries in such manner and at such times as specified in the Plan;
WHEREAS, it is the intention of the parties that this Trust shall constitute an unfunded arrangement and shall not affect the status of the Plan as an unfunded plan maintained for the purpose of providing deferred compensation for a select group of management or highly compensated employees for purposes of Title I of the Employee Retirement Income Security Act of 1974;
WHEREAS, it is the intention of Company to make contributions to the Trust to provide itself with a source of funds to assist it in the meeting of its liabilities under the Plan;
WHEREAS, Bankers Trust Company is willing to act as Trustee of the Trust upon all of the terms and conditions hereinafter set forth;
NOW, THEREFORE, the parties do hereby establish the Trust and agree that the Trust shall be comprised, held and disposed of as follows:
ARTICLE I
DEFINITIONS
1.1 "Asset Manager" shall mean, individually or collectively as the context shall require, the Trustee, with respect to those assets of the Trust allocated to the Discretionary Fund, or an Investment Manager or the Company with respect to those assets of the Trust allocated to a Directed Fund to the extent each is authorized to exercise, discretionary investment authority or control over such assets under Section 7.1.
1.2 (a) "Change in Control" of the Company shall be deemed to have occurred if:
(i) any "Person" (as defined in 1.2(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 1.2(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.
(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 1.2(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 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 capitalization 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 1.2(a) above,
(i) "Person" shall have the meaning given in Section 3(a)(9) of the Securities Exchange Act of 1934 as modified (the "1934 Act") 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 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.
(iv) "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the 1934 Act.
1.3 "Directed Fund" shall mean each portion of the Trust subject to the discretionary management and control of an Asset Manager other than the Trustee. If more than one Directed Fund is established under this Trust Agreement, "Directed Fund" shall also mean the Directed Fund subject to the management and control of a particular Asset Manager, as the context may require.
1.4 "Discretionary Fund" shall mean any portion of the Trust subject to the discretionary management and control of the Trustee.
1.5 "Investment Manager" shall mean (i) an investment adviser registered under the Investment Advisers Act of 1940, (ii) a bank as defined in that Act, or (iii) an insurance company qualified to manage, acquire or dispose of any assets of the trusts under the laws of one or more state.
1.6 "Plan" shall mean the Atmos Energy Corporation Performance-Based Supplemental Executive Benefits Plan, as amended from time to time.
1.7 "Trust" shall mean the Atmos Energy Corporation Performance-Based SEBP Trust established and continued under this Trust Agreement.
1.8 "Trustee" shall mean Bankers Trust Company and its successors and assigns, and any successor trustee of the Trust acting at the time in question.
ARTICLE II
ESTABLISHMENT OF TRUST
2.1 The Company hereby deposits with Trustee in trust One Hundred Dollars ($100.00), which shall become the principal of the Trust, to be held, administered and disposed of by Trustee as provided in this Trust Agreement.
2.2 The Trust shall be revocable. Notwithstanding the foregoing, the Trust shall become irrevocable thirty (30) days following the issuance of a favorable private letter ruling regarding the Trust from the Internal Revenue Service.
2.3 The Trust is intended to be a grantor trust, of which Company is a grantor, within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended (the "Code"), and shall be construed accordingly. The Company acknowledges that determination of the status of the Trust as a grantor trust has been made by the Company, and Trustee assumes no responsibility in this regard.
2.4 The principal of the Trust, and any earnings thereon shall be held separate and apart from other funds of the Company and shall be used exclusively for the uses and purposes of Plan participants and general creditors as herein set forth. Plan participants and their beneficiaries shall have no preferred claim on, or any beneficial ownership interest in, any assets of the Trust. Any rights created under the Plan and this Trust Agreement shall be mere unsecured contractual rights of Plan participants and their beneficiaries against the Company. Any assets held by the Trust will be subject to the claims of the Company's general creditors under federal and state law in the event of Insolvency, as defined in Section 4.1 herein.
2.5 The Company shall make such deposits as provided for in the Plan and may, in its sole discretion, at any time, or from time to time, make additional deposits of cash or other property acceptable to the Trustee in trust with Trustee to augment the principal to be held, administered and disposed of by Trustee as provided in this Trust Agreement. Notwithstanding the foregoing, upon and after a Change in Control, Trustee shall be responsible for assuring that deposits are made in accordance with the Plan, and it may rely on written certifications of the actuary employed with respect to the Plan as to the funded status of the Trust and the Company's contribution obligations under the Plan. Prior to a Change in Control, the Trustee shall have no responsibility therefor.
ARTICLE III
PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES
3.1 The Company shall be solely responsible for keeping accurate books and records with respect to the Plan participants and beneficiaries, their compensation and rights and interests in the Trust pursuant to the Plan. As soon as practicable after the establishment of this Trust or the amendment of the Plan, the Company shall provide the Trustee with copies of the Plan and any amendments. The Trustee shall not be required to maintain any separate records or accounts with respect to any Plan participant or beneficiary, and any records or accounts required to be maintained pursuant to the terms of the Plan shall be the responsibility of the Company.
3.2 Trustee shall make payments of Supplemental Benefits to Plan participants from the assets of the Trust, if and to the extent such assets are available for distribution, in accordance with the Plan, at all times the Company is not Insolvent. Trustee shall not be required to make payments unless notified by the Company or the Plan participant that Benefits are then due and owing to the Plan participant, and it has received a written certification of the time for payment of Benefits and the amount of Benefits due and owing to the Plan participant at such time, all in accordance with the Plan, prepared by the actuary employed by the Company to calculate the Supplemental Benefits, and has received sufficient information that indicates the amount of federal, state and/or local taxes to be withheld from such payment and the form in which such amount is to be paid (as provided for or available under the Plan). In addition, the Trustee shall make provision for the payment and reporting of any federal, state or local taxes that may be required to be withheld with respect to the payment of Benefits. The actuary shall also provide written certification to the Trustee of any changes in the amount of Benefits payable to a Beneficiary from time to time. Following a Change in Control, if no actuary is employed by the Company, the Trustee shall employ an actuary. The Trustee shall be fully protected in relying on the written certification of the actuary for all purposes of this Agreement.
3.3 The entitlement of a Plan participant or his or her beneficiaries to Benefits under the Plan shall be determined by the Company or such party (other than the Trustee) as the Company shall designate under the Plan, and any claim for such Benefits shall be considered and reviewed under the procedures set out in the Plan. Except as set forth in this Trust Agreement, the Trustee shall have no responsibility with regard to administration of the Plan. Without limiting the generality of the foregoing, the Trustee shall have no responsibility should the Trust have insufficient assets from which to make any distribution called for under the Plan, the Trustee shall have no responsibility to interpret the provisions of the Plan, and the Trustee shall have no responsibility for determining whether any Plan participant or their beneficiary has become entitled to any distribution under the Plan, or the amount thereof, and the Trustee shall be entitled to rely solely upon the accuracy, timeliness and completeness of the Benefit information delivered to it by the actuary.
3.4 The Company may make payment of Supplemental Benefits directly to Plan participants or their beneficiaries as they become due under the terms of the Plan. In such event, the Company shall also provide for the reporting, withholding and payment of any federal, state or local taxes that may be required to be withheld with respect to such Benefit payments. The Company shall notify Trustee of its decision to make payment of Benefits directly prior to the time amounts are payable to participants or their
beneficiaries. In addition, if the principal of the Trust, and any earnings thereon, are not sufficient to make payments of Benefits in accordance with the terms of the Plan, the Company shall make the balance of each such payment as it falls due. Trustee shall notify the Company where principal and earnings are not sufficient to pay Benefits as they became due. The Company shall provide the Trustee with a schedule of all Benefits that have been paid by the Company directly to Participants and a schedule of all tax withholding payments made by it to the taxing authorities within fifteen (15) days after the end of the month in which such payments have been made.
3.5 The Trustee shall notify the Company periodically of any returned or undeliverable payments to Plan participants or their beneficiaries. Any payments remaining unclaimed for six (6) months after such notice has been given to the Company shall be returned to the Trust.
3.6 The Trustee shall have sole responsibility with respect to all payments made from the Trust for the payment of all withholding taxes to, and the filing of all required tax returns with, the appropriate taxing authority and shall furnish each Participant with the appropriate tax information form evidencing such payment and the amount thereof.
3.7 It is expressly acknowledged that Employee (or if Employee is dead, his beneficiaries under the Plan) is a third-party beneficiary under this Trust Agreement and, as such, shall have the right to enforce the terms of this Agreement as if he were a party hereto.
ARTICLE IV
TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST BENEFICIARY WHEN
COMPANY IS INSOLVENT
4.1 Trustee shall cease payment of Benefits to Plan participants and their beneficiaries if the Company is Insolvent. The Company shall be considered "Insolvent" for purposes of this Trust Agreement if (i) the Company is unable to pay its debts as they become due, or (ii) the Company is subject to a pending proceeding as a debtor under the United States Bankruptcy Code.
4.2 At all times during the continuance of this Trust, as provided in Sections 2.4 and 6.1 hereof, the principal and income of the Trust shall be subject to claims of general creditors of the Company under federal and state law as set forth below.
(a) The Board of Directors and the Chief Executive Officer of the Company shall have the duty to inform Trustee in writing of the Company's Insolvency. The Company shall also have the duty to respond to any inquiry from the Trustee regarding the Company's possible Insolvency, if the Trustee has an obligation to determine whether the Company is Insolvent. If a person claiming to be a creditor of the Company alleges in writing to the Trustee that the Company has become Insolvent, Trustee shall determine whether the Company is Insolvent and, pending such determination, Trustee shall discontinue payment of Supplemental Benefits to Plan participants or their beneficiaries. In determining whether or not the Company is Insolvent, Trustee may rely on a written statement signed by the Company, together with the evidence supporting such statement that is satisfactory to the Trustee, that the Company is not Insolvent, or may await receipt of an order
from a regulatory agency or court of competent jurisdiction directing disposition of the Trust assets.
(b) Unless Trustee has actual knowledge of the Company's Insolvency, or has received notice from the Company or a person claiming to be a creditor of the Company alleging that the Company is Insolvent, Trustee shall have no duty to inquire whether the Company is Insolvent. Trustee may in all events rely on such evidence concerning the Company's solvency as may be furnished to Trustee and that provides Trustee with a reasonable basis for making a determination concerning the Company's solvency. Specifically, the Trustee may rely conclusively upon, and shall be protected in relying upon, court records submitted to it showing whether the Company is Insolvent, a current report or statement from a nationally recognized credit reporting agency submitted to it showing whether such Company is Insolvent, or the written notice with supporting evidence where appropriate, submitted to it from the Company as provided in this Section 4.2 stating that the Company is or is not Insolvent. For purposes of this Trust, knowledge and information regarding the Company which is not in the possession of employees of the Trustee's Trust Department shall not be imputed to the Trustee.
(c) If at any time the Trustee has determined that the Company is Insolvent, Trustee shall discontinue payments to the Company's Plan participants or their beneficiaries and shall hold the assets of the Trust for the benefit of the Company's general creditors. Nothing in this Trust Agreement shall in any way diminish any rights of Plan participants or their beneficiaries to pursue their rights as general creditors of the Company with respect to Benefits due under the Plan or otherwise.
(d) Trustee shall resume the payment of Benefits to Plan participants or their beneficiaries in accordance with Article III of this Trust Agreement only after the Trustee has determined that the Company is not Insolvent (or is no longer Insolvent), or if a regulatory agency or court of competent jurisdiction otherwise so orders.
4.3 Provided that there are sufficient assets, if Trustee discontinues the payment of Benefits from the Trust pursuant to Section 4.2 hereof and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate amount of all payments due to Plan participants or their beneficiaries under the terms of the Plan for the period of such discontinuance, less the aggregate amount of any payments made to Plan participants or their beneficiaries by the Company in lieu of the payments provided for hereunder during any such period of discontinuance.
4.4 In the case of the Trustee's actual knowledge of or determination that the Company is Insolvent, Trustee shall deliver the assets of the Trust to satisfy claims of the Company's general creditors as directed by a regulatory agency or a court of competent jurisdiction.
4.5 The establishment and funding of this Trust by the Company is solely for the purpose of facilitating payment of Supplemental Benefits to participants and their beneficiaries under the Plan, but in no way shall the establishment or existence of this Trust relieve the Company of its obligations under the Plan, impose any additional
obligation on the Company separate and apart from those assumed by the Company under the Plan, or increase the rights and benefits of the Plan participants and their beneficiaries.
ARTICLE V
PAYMENTS TO COMPANY
5.1 Except as provided in Article IV hereof and this Section 5.1, after the Trust has become irrevocable, the Company shall have no right or power to direct Trustee to return to the Company or to divert to others any of the Trust assets before all payment of Benefits have been made to Plan participants and their beneficiaries pursuant to the terms of the Plan. Notwithstanding any provision of this Trust Agreement to the contrary and prior to a Change in Control, if it is determined by the Plan's actuary and so certified, that certain Trust assets will never be required to pay Supplemental Benefits to Plan participants or beneficiaries (because, for example, of any difference between actual requirements and expected actuarial requirements), such excess assets shall be returned to Company, but only to the extent that such return does not cause the value of the total Trust assets to be less than one hundred thirty percent (130%) of the present value of projected Supplemental Benefits, with such present value to be determined on the basis of actuarial assumptions applied by mutual agreement of the Company and the actuary. Upon and after a Change in Control, such assets may be returned to Company only after all Supplemental Benefits have been fully distributed to or on behalf of all Plan participants and beneficiaries.
ARTICLE VI
THE RIGHTS OF THE PARTICIPANTS AND CREDITORS
TO THE TRUST ESTATE
6.1 As provided in Section 2.4 hereof, neither the Plan participants nor
anyone claiming under such participants shall have any present ownership or
present beneficial interest (including a security interest) or preferred claim
of any kind in the assets of the Trust prior to the time provided in the Plan
for the payment of Supplemental Benefits. Prior to that time, the rights of the
participants under the Plan and the rights of anyone claiming under the
participants shall be limited to general unsecured, contractual rights against
the Company. As a precondition to the execution of this Trust Agreement by the
Company, each person meeting the qualification requirements of Section 2.1 of
the Plan shall have waived in writing any priority such person may have under
any state or federal law with respect to any claims such person may have against
the Company under the Plan or the Trust Fund beyond the rights such person would
have as a general creditor of the Company. After the execution of this Trust
Agreement by the Company, any person who thereafter qualifies for coverage under
the Plan shall, as provided for in Section 2.1 of the Plan, execute the written
waiver described herein prior to becoming a participant in the Plan. The Trustee
shall not be responsible for determining whether any waiver referred to in this
Section 6.1 has been obtained.
6.2 As provided in Section 14.2 hereof, the assets of the Trust shall not be subject to legal process or the claims of any creditor of the participants or of anyone claiming under the participants, whether such claim arises out of any debts, contracts,
liabilities (including claim for child support or alimony), torts or any other source whatsoever.
ARTICLE VII
INVESTMENT AUTHORITY
7.1 Discretionary authority for the management and control of the assets of the Trust may be retained, allocated or delegated, as the case may be, for one or more purposes, to and among the Asset Managers by the Company in its absolute discretion; provided, however, that for a period of three (3) years following a Change in Control the Company may not remove or appoint an Asset Manager without the written consent of a majority of the Plan participants. Any investment policy, and any related guidelines, established by the Company from time to time, shall be communicated to the affected Asset Manager and monitored by the Company. The assets of the Trust shall be invested and reinvested, without distinction between principal and income, at such time or times in such investments pursuant to such investment strategies or courses of action and in such shares and proportions, as each Asset Manager, in its sole discretion, shall deem advisable, subject to such policies and guidelines, if any.
7.2 The Company shall promptly notify the Trustee in writing of the appointment or removal of an Asset Manager and shall specify the portion of the Trust to be managed by such Asset Manager. Each Asset Manager shall have sole and complete investment responsibility for the assets of the Trust that are subject to its discretionary authority or control and the Trustee shall receive, hold and transfer assets purchased or sold by the Asset Manager in accordance with the directions of such Asset Manager. The Trustee shall be under no duty or obligation to review or to question any direction of any Asset Manager, or to review the securities or any other property held in any Directed Fund with respect to prudence, proper diversification or compliance with any limitation on an Asset Manager's authority under this Trust Agreement or the terms of the Plan, any investment policies and guidelines, or any agreement entered into between the Company and the Asset Manager or imposed by applicable law, or to make any suggestions or recommendations to any Asset Manager or the Company with respect to the retention or investment of any asset in a Directed Fund. The Trustee shall have no authority to take any action or to refrain from taking any action with respect to any asset of a Directed Fund unless and until it is directed to do so by the Asset Manager of such Directed Fund or the Company.
7.3 The Trustee will have no responsibility for any asset allocated to a Directed Fund upon the resignation or removal of an Asset Manager unless and until the Trustee has been notified in writing by the Company that the Asset Manager's authority will be terminated or relinquished, and the Trustee has agreed in writing to become an Asset Manager or that such assets are to be integrated with a Discretionary Fund, as the case may be. In no event shall the Trustee be liable for any losses to the Trust resulting from the disposition of any investment made for a Directed Fund or for the retention of any illiquid or unmarketable investment or for the holding of any other asset acquired therefor if the Trustee is unable to dispose of such investment because of any securities laws restrictions or if an orderly liquidation of such investment is difficult under prevailing conditions, or for failure to comply with any investment or diversification limitations imposed by the Company, or for any other violation of the terms of this Trust Agreement, any Plan or applicable law or laws, as a result of the addition of such assets to the Discretionary Fund.
ARTICLE VIII
DUTIES, POWERS AND RESPONSIBILITIES OF TRUSTEE
AND ASSET MANAGERS
8.1 Trustee shall perform all of its fiduciary duties with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims; provided, however, that nothing herein shall be construed to impose any responsibility on the Trustee with respect to transactions effected or assets managed within a Directed Fund or any other duty with respect to which the Trustee has no responsibility under this Agreement.
8.2 Without in any way limiting the powers and discretions conferred upon the Asset Managers by the other provisions of this Trust Agreement or by law, each Asset Manager shall have the power to invest and reinvest the assets of the Trust, in its sole discretion, in Securities or Other Property. "Securities or Other Property" means investments in any properties, real or personal or mixed, wherever situated, including, but not limited to, preferred and common stocks or any other interest in any corporation; securities; life insurance contracts; governmental or corporate notes, bonds, or obligations; trust and participation certificates; leaseholds, beneficial interests, fee titles, mortgages, deeds of trust, leases on real property, contracts to sell real property, and other interests in realty, shares or interests in real estate investment trusts, common trust funds and mutual funds; insurance and annuity policies; and any other evidence of indebtedness or ownership, and any other property of any kind or nature whatsoever (unless prohibited by law under a provision which may not be waived); provided, however, that securities issued by the Company or any affiliate of the Company are not "Securities or Other Property." In no event may an Asset Manager invest in securities (including stock or rights to acquire stock) or obligations issued by the Company, other than a de minimis amount held in common investment vehicles in which such Asset Manager invests. All rights associated with assets of the Trust shall be exercised by the Asset Manager or the person designated by the Asset Manager, and shall in no event be exercisable by or rest with Plan participants.
When acting hereunder, except as provided otherwise by this Section 8.2 hereof, Asset Manager shall have the following powers with respect to any and all monies and Securities or Other Property at any time held by Trustee and constituting part of the assets of the Trust hereunder:
(a) To purchase or subscribe for Securities or Other Property and to retain them in trust; to sell any Securities or Other Property at any time held in the Trust at either public or private sale for cash or other consideration or on credit at such time or times and on such terms and conditions as may be deemed appropriate; to exchange such Securities or Other Property and to grant options for the purchase or exchange thereof, and to convey, partition, or otherwise dispose of, with or without covenants, including covenants of warranty of title, any Securities or Other Property free of all trusts.
(b) To oppose, or consent to and participate in, any plan of reorganization, consolidation, merger, combination, or other similar plan; to
oppose or to consent to any contract, lease, mortgage, purchase, sale, or other action by any corporation pursuant to such plan, and to accept and retain any Securities or Other Property issued under any such plan; to deposit any Securities or Other Property with any protective, reorganization or other similar committee; to delegate discretionary power thereto and to pay and agree to pay any part of Trustee's expenses and compensation and any assessments levied with respect to any such Securities or Other Property so deposited.
(c) To exercise all conversion and subscription rights pertaining to any Securities or Other Property.
(d) To collect and receive any and all monies and Securities or Other Property of whatsoever kind or nature due or owing or belonging to the Trust, and to give full discharge and acquittance therefor.
(e) To exercise all voting rights with respect to any investment held in the Trust, and, in addition thereto, to grant proxies, discretionary or otherwise, to appoint one or more individuals or corporations or voting trustees under voting trust agreements and to delegate to such voting trustees discretion to vote.
(f) To acquire any real estate by purchase or lease, or as the result of any foreclosure, liquidation, or other salvage or any investment previously made, or otherwise; and to manage, operate, sell, improve, or demolish any buildings in whole or in part, and to erect buildings, partition, mortgage, or lease for any term or terms of years, even though such period extends beyond the term of the Trust, grant options to renew or purchase, any such real estate, upon such terms and conditions as may be deemed proper.
(g) To borrow money from others for such purposes, including payment of Benefits hereunder, as may be deemed proper, and for the sum or sums so borrowed or advanced, Asset Manager may issue the Trust's promissory note as investment manager and secure the repayment thereof by creating a lien upon any assets of the Trust.
(h) To acquire property returning no income or slight income for such period as an Asset Manager shall deem advisable; to retain any assets which shall be delivered from the trustee of a prior trust; to retain in cash or other property unproductive of income any amount of the Trust as deemed advisable.
(i) To invest in interest-bearing deposits in Asset Manager's or an affiliate of Asset Manager's, commercial banking department, including, but not limited to, investments in time deposits, savings deposits, certificates of deposit, or time accounts which bear a reasonable rate of interest.
(j) To surrender any life insurance contract held in Trust and, except as provided in Section 8.10, to exercise any incident of ownership with respect to any such life insurance contract.
8.3 In addition, the Trustee is hereby authorized
(a) To cause any Securities or Other Property to be registered in, or transferred into, Trustee's name as Trustee or held in the name of one or more of Trustee's nominees or to retain them unregistered or in form permitting transferability by delivery, but the books and records of Trustee shall at all times show such Securities or Other Property are part of the Trust; to deposit or arrange for the deposit of securities in a qualified central depository even though, when so deposited, such securities may be held in the name of the nominee of such depository with other securities deposited therein by other persons, or to deposit or to arrange for the deposit of any securities issued by the United States Government, or any agency or instrumentality thereof, with a federal reserve bank (provided that the books and records of Trustee shall at all times show that all such securities are part of the Trust).
(b) To employ on behalf of the Trust suitable agents, accountants, and counsel, who may be counsel to the Company or the Trustee, to assist it in determining or performing its duties or obligations hereunder, and to pay their reasonable expenses and compensation from the Trust to the extent not paid by the Company.
(c) To settle, compromise, or submit to arbitration, any claims, debts, or damages due or owing to or from the Trust, to commence or defend suits or legal proceedings whenever, in Trustee's judgment, any interest of the Trust so requires, and to represent the Trust in all suits or legal proceedings in any court of law or equity or before any other body or tribunal.
(d) Pending investment of cash, to hold such cash in Trustee's, or an affiliate of Trustee's, non-interest bearing accounts; and to hold such non-interest bearing cash balances as Trustee shall deem reasonable or necessary to meet anticipated distributions from or administrative costs of the Trust.
(e) Generally to do all such acts, to make, execute, acknowledge, and deliver any and all deeds, leases, assignments, documents of transfer, and conveyances, receipts, releases, agreements, and without limitation by the foregoing, to execute any and all other instruments, take all such proceedings and exercise all such rights and powers with relation to any Securities or Other Property constituting a part of the Trust to the same extent as an individual might do with respect to his own property.
8.4 When the Trustee delivers property against payment, delivery of the property and receipt of payment may not be simultaneous. In such case, the risk of non-receipt of payment shall be the Trust's, and the Trustee shall have no liability therefor. All credits to the Trust of the anticipated proceeds of sales and redemption of property and of anticipated income from property shall be conditional upon receipt by the Trustee of final payment and may be reversed to the extent final payment is not received. At the discretion of the Trustee, the Trust may make use of such conditional credits. To the extent such credits do not become unconditional by receipt of final payment, the Trust shall reimburse the Trustee upon demand for the amount of such conditional credits.
When the Trustee is to receive property, it is authorized to accept documents in lieu of such property as long as such documents contain the agreement of the issuer thereof to deliver such property to the Trustee. The Trustee may, in its discretion, advance funds to the Trust to facilitate the settlement of any trade. In the event of such an advance, the Trustee shall immediately reimburse the Trust for the amount thereof.
8.5 During the term of this Trust, all income received by the Trust, net of expenses and taxes, shall be accumulated and reinvested.
8.6 Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions hereunder. All records
relating thereto shall be open to inspection and audit at all reasonable times
by the Company or by any person designated by the Company. At such intervals as
the Company and the Trustee mutually agree, and as of the date of the removal or
resignation of Trustee, Trustee shall deliver to the Company a written account
of its administration of the Trust, setting forth all investments, receipts,
disbursements and other transactions effected by Trustee during the period from
the date of Trustee's last such account, including a description of all
securities and investments purchased and sold with the cost or net proceeds of
such purchases or sales (accrued interest paid or receivable being shown
separately), and showing all cash, securities and other property held in the
trust at the close of such period. Any such account shall be deemed an account
stated and accepted and approved by the Company, and the Trustee shall be
relieved and discharged to all persons with respect to all matters and things
contained in such statement as though such account had been settled and allowed
by a judgment or decree of a court of competent jurisdiction in an action or
proceeding to which the Company and all persons having any beneficial interest
in the Trust were parties, unless the Company shall have filed with the Trustee
specific written exceptions or objections to any such statement within ninety
(90) days of receipt thereof by the Company.
8.7 The Trustee will determine the value of the Trust as of each reporting date under Section 8.6. Except in the case of an investment in which amortized cost is the valuation method designated, assets will be valued at their market values at the close of business on such date, or, in the absence of readily ascertainable market values, at such values as the Trustee determines in accordance with methods consistently followed and uniformly applied or obtained as provided below. The Company acknowledges and agrees that in the normal course of valuing assets, the Trustee may rely on pricing information provided by recognized pricing services which the Trustee deems to be reliable or provided by the Asset Manager or dealers or sponsors of pooled investment vehicles ("dealers"), and that the Trustee does not verify, warrant or represent the accuracy or completeness of such information, and shall not be liable for any diminution or inflation in the value of any assets as a result of any inaccurate or incomplete information furnished or transmitted by such pricing services or the Asset Managers or dealers. The Trustee may rely for all purposes of this Trust Agreement on the latest valuation information submitted to it even if such information predates the purported valuation date. The Company will provide or cause the Asset Managers to provide the Trustee with all information needed by the Trustee to value such assets and to report and account under this Trust Agreement.
8.8 The Trustee shall have the right, at the expense of the Trust, to apply at any time to a court of competent jurisdiction for judicial settlement of any account of the Trustee not previously settled as herein provided or for the determination of any question of construction or for instructions. In any such action or proceeding it shall be necessary to join as parties only the Trustee and the Company (although the Trustee may also join
such other persons as it may deem appropriate), and any judgment or decree entered therein shall be conclusive.
8.9 A third party dealing with Trustee shall not make, or be required by any person to make, any inquiry concerning the authority of Trustee to take or omit any action or whether Trustee has been authorized or directed by the Company, but each such person shall be fully protected in relying upon the certificates of Trustee that Trustee has authority to take such proposed action. No third party shall be required to follow the application by Trustee of any monies or Securities or Other Property paid or delivered to Trustee.
8.10 To the extent not inconsistent with the express provisions hereof, enumeration of any power herein shall not be by way of limitation but shall be cumulative and construed as full and complete power in favor of Trustee. In addition to the authority specifically herein granted, except as provided in Article VII, Trustee shall have such power to do all acts as may be deemed necessary for full and complete management of the Trust and appropriate to carry out the purposes of this Trust. Trustee shall have, without exclusion, all powers conferred on trustees by applicable law, unless expressly provided otherwise herein, provided, however, that if an insurance policy is held as an asset of the Trust, Trustee shall have no power to name a beneficiary of the policy other than the Trust, to assign the policy (as distinct from conversion of the policy to a different form) other than to a successor Trustee, or to loan to any person the proceeds of any borrowing against such policy. None of the powers granted to an Asset Manager under this Article, however, shall be construed to allow an Asset Manager to purchase, exchange, or otherwise deal with or dispose of the corpus or the income from the corpus for less than adequate consideration.
8.11 The Trustee shall be fully protected in relying upon a certification by the Board of Directors of the Company signed by a majority of all the members thereof, or by any member, or the secretary thereof, if designated by all such members to act for the Board of Directors of the Company with respect to any written instruction, written direction or written approval by said Board, except that such secretary or individual member shall not be authorized to direct any distribution to himself. The Trustee shall be protected in relying upon a specimen signature of each member and the secretary, and in continuing to rely upon such certification until a subsequent certification is filed with the Trustee, or in relying upon the certification by the Company or the Company's designee in lieu of said Board of Directors, in all respects for the administration of the Plan of which this Trust is a part. The Company shall cause each Investment Manager to file with the Trustee a certified list of the names and specimen signatures of those individuals authorized to direct the Trustee on its behalf.
8.12 Any action by the Company shall be evidenced by a written instrument executed in accordance with Section 8.11 hereof. The Trustee shall be fully protected in acting upon any certifications, instructions, notices, directions, requests or approvals and other communications ("Instructions"), howsoever transmitted, received by the Trustee and purporting to be from the Company or an Investment Manager which the Trustee reasonably believed to be from such person, each such Instruction constituting a certification by the person so giving that such Instruction is in conformity with the terms of the Plan, the Trust and/or other related documents, and the Trustee shall be fully protected in omitting to act in the absence of Instructions. The Trustee shall have the right to assume, in the absence of notice in writing to the contrary, that no event
constituting a change in, or terminating, the authority of any person, including any Investment Manager, has occurred.
8.13 Notwithstanding any powers granted to Trustee pursuant to this Trust Agreement or to applicable law, Trustee shall not have any power that could give this Trust the objective of carrying on a business and dividing the gains therefrom, within the meaning of Section 301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant to the Internal Revenue Code.
ARTICLE IX
INDEMNIFICATION; LIABILITIES OF THE TRUSTEE
9.1 The Trustee shall be held harmless by the Company from and against any claim, liability, loss, damage or expenses (including, but not limited to, reasonable attorneys' fees and expenses incurred in preparing, investigating or defending any claim) that may be asserted against the Trustee arising out of any action taken or omitted by the Trustee pursuant to this Trust Agreement, except due to the Trustee's own negligence or willful misconduct. If the Company does not pay any claim, liability, loss, damage or expense under this Section or Article X, the Trustee may obtain payment from the Atmos Energy Corporation Legal Defense Fund Trust of which Trustee is the trustee for all amounts other than the payment of any Supplemental Benefits due under the Plan, but until so paid such amounts shall constitute a charge against, and may be paid from this Trust. Notwithstanding the foregoing provisions of this Section 9.1, the Company shall be and remain liable for any Benefits due and owing under the Plan.
9.2 If the Trustee undertakes or defends any claim, litigation, action,
proceeding or appeal arising in connection with this Trust unless any such
defense shall be due to the Trustee's own neglect or willful misconduct, the
Company agrees to indemnify the Trustee against the Trustee's costs, expenses,
losses, damages, and liabilities (including, without limitation, reasonable
attorneys' fees and expenses incurred in preparing, investigating or defending
any claim) relating thereto and to be primarily liable for such payments, and to
make periodic payments in respect of such fees and expenses during the course of
any such proceedings. In any action taken by the Trustee pursuant to this
Section 9.2, Section 8.3(c) or otherwise, the Trustee shall be indemnified by
the Company or, if not, the Trustee may obtain payment from the Atmos Energy
Corporation Legal Defense Fund Trust, but until so paid shall constitute a
charge against, and may be paid from this Trust.
ARTICLE X
TRUSTEE'S COMPENSATION AND EXPENSES
10.1 The Trustee shall be paid such reasonable compensation as shall from time to time be agreed upon in writing by the Company and the Trustee. In addition, the Trustee shall be reimbursed for any reasonable expenses, including reasonable accounting and legal fees incurred by it as Trustee. Company shall pay all such administrative and Trustee's fees and expenses. If not so paid, such fees and expenses shall be paid from the Atmos Energy Corporation Legal Defense Fund Trust, but until so paid shall constitute a charge against, and may be paid from this Trust.
ARTICLE XI
TAXES
11.1 All income, deductions and credits attributable to the Trust belong to the Company and will be included on the Company's income tax returns. The Company shall pay any Federal, state, local or other taxes imposed or levied with respect to the assets and/or income of the Trust or any part thereof under existing or future laws. Upon furnishing the Trustee with evidence reasonably required by the Trustee of any such tax payments made directly by the Company, the Company shall be entitled to receive reimbursement from the assets of the Trust for the full amount of such taxes paid by it. The Trustee shall promptly notify the Company of any notice it receives relating to any taxes imposed or levied with respect to the assets and/or income of the Trust. If the Trustee receives notice that any such taxes are not timely paid by the Company, the Trustee shall pay such taxes from the assets of the Trust to the extent sufficient therefor, prior to any payments to Participants, after notifying the Company as herein provided. As provided in Article III, the Trustee shall deduct any taxes required to be withheld with respect to any payments made to Participants pursuant to the Trust, with any such taxes being paid out of the Trust.
ARTICLE XII
RESIGNATION AND REMOVAL OF TRUSTEE;
APPOINTMENT OF SUCCESSOR
12.1 Trustee shall serve until a successor shall be appointed. Trustee may
resign at any time by written notice to the Company, which shall be effective
thirty (30) days after receipt of such notice unless the Company and Trustee
agree otherwise. The Company may remove Trustee at any time upon giving thirty
(30) days' written notice to Trustee; however, for a period of three years
following a Change in Control any such removal shall require the written consent
of a majority of the Plan participants at the time of such removal. In either
case, such notice may be wholly or partially waived by the party to whom it is
due.
12.2 Upon resignation or removal of Trustee and appointment of a successor
Trustee, all assets shall subsequently be transferred to the successor Trustee.
The Trustee shall use its best efforts to complete the transfer within thirty
(30) days after receipt of notice of resignation, removal or transfer, unless
the Company extends the time limit.
12.3 If Trustee resigns or is removed, a successor shall be appointed, in accordance with Section 12.4 hereof, by the effective date of resignation or removal under Section 12.1 hereof. If no such appointment has been made, Trustee may apply to a court of competent jurisdiction for appointment of a successor or for instructions. All expenses of Trustee in connection with the proceeding shall be allowed as administrative expenses of the Trust.
12.4 If Trustee resigns or is removed in accordance with Section 12.1 hereof, the Company may appoint any third party, such as a bank trust department or other party that may be granted corporate trustee powers under state law, as a successor Trustee; however, for a period of three years following a Change in Control any such appointment
shall require the written consent of a majority of the Plan participants at the time of such appointment. The appointment shall be effective when accepted in writing by the new Trustee. The appointment of a new Trustee shall be by a written instrument, duly acknowledged, delivered to the Trustee so removed, to the successor Trustee, and to the Company. Upon resignation or removal of Trustee, Trustee shall refund any unearned portion of any fee or compensation previously collected by Trustee hereunder. The resigning or removed Trustee, upon receipt of acceptance in writing of the Trust by the successor Trustee, must execute all documents and do all acts reasonably necessary to vest the title of record in any successor Trustee. The successor Trustee shall have the same powers and duties as those conferred upon Trustee hereunder.
ARTICLE XIII
AMENDMENT OR TERMINATION
13.1 This Trust Agreement may be amended by a written instrument executed by Trustee and the Company; however, for a period of three years following a Change in Control any such amendment shall require the written consent of a majority of the Plan participants at the time of such amendment. If any such amendment is made 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 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 amendment shall be deemed to have been made following a Change in Control. Notwithstanding the foregoing, the Company shall ensure that no such amendment shall conflict with the terms of the Plan or shall make the Trust revocable after it has become irrevocable in accordance with Section 2.2 hereof.
13.2 The Trust shall not terminate until the date on which all Plan
participants and their beneficiaries are no longer entitled to Supplemental
Benefits pursuant to the terms of the Plan, unless sooner revoked in accordance
with Section 2.2 hereof; provided, however, the Trust shall terminate prior to
such date if and when all of the assets of the Trust are consumed in
satisfaction of the claims of the general creditors of the Company pursuant to
Article IV. Upon satisfaction of all liabilities under the Plan with respect to
all participants and beneficiaries, the Company, pursuant to a resolution of its
Board of Directors, may terminate the Trust by delivery to the Trustee of (i) a
certified copy of such resolution, (ii) a certification of the Plan's enrolled
actuary confirming that all liabilities under the Plan have been satisfied, and
(iii) a written instrument of termination duly executed and acknowledged in the
same form as this Trust Agreement. Upon termination of the Trust in accordance
with this Section 13.2, any assets remaining in the Trust shall be returned to
the Company.
ARTICLE XIV
MISCELLANEOUS
14.1 Each provision of this Trust is intended to be independent of each other provision. Any provision of this Trust Agreement prohibited by law shall be ineffective to the extent of any such prohibition, without invalidating the remaining provisions hereof. If any provision of this Trust is determined in writing by the Company to be, or is held by any court, tribunal, board or other authority of competent jurisdiction to be, void or invalid as to any participant or group of participants, such provision shall be disregarded as to such participant or group of participants and shall be deemed null and void and no part of this Trust.
14.2 Except as otherwise required by law, Benefits payable to Plan participants and their beneficiaries under this Trust Agreement may not be anticipated, assigned (either at law or in equity), alienated, pledged, encumbered or subjected to attachment, garnishment, levy, execution or other legal or equitable process.
14.3 This Trust Agreement shall be governed by and construed in accordance with the laws of the State of New York. Nothing in this Trust Agreement shall be construed to subject the Trustee created hereunder to ERISA or to cause it to be treated as other than a grantor trust.
14.4 All reasonable expenses incurred in maintaining and administering the Trust pursuant to the provisions of this Trust Agreement shall be paid from the assets of the Trust unless paid by the Company.
14.5 The headings and subheadings of this Trust have been inserted for convenience of reference and are to be ignored in any construction of the provisions hereof.
14.6 Wherever any words are used herein in the masculine, feminine or neuter gender, they shall be construed as though they were also used in another gender in all cases where they would so apply, and whenever any words are used herein in the singular or plural form, they shall be construed as though they were also used in the other form in all cases where they would so apply.
14.7 All provisions of this Trust Agreement shall be interpreted and applied in a uniform, nondiscriminatory manner.
14.8 The Trustee's obligations are limited to those set out in this Trust Agreement. No additional duties or obligations shall be imposed on the Trustee or implied from the terms of this Trust Agreement. In case of any conflict or inconsistency between the terms of this Trust Agreement and the Plan, in determining the obligations and responsibilities of the Trustee, the terms of this Trust Agreement shall control.
14.9 This Trust Agreement shall be binding upon and inure to the benefit of any successor(s) or assign(s) of the Company or the Trustee, or any of its businesses, in whole or in part, as the result of merger, consolidation, reorganization, transfer of assets or otherwise, and any subsequent successor thereto. In the event of any such merger, consolidation, reorganization, transfer of assets or other similar transaction, the successor to the Company or the Trustee or its business or relevant part thereof or any subsequent
successor thereto shall promptly notify the other party hereto in writing of its successorship.
14.10 The undertakings and obligations of the Company, and the entitlements of the Trustee, under Articles IX and X of this Trust Agreement shall survive the termination, amendment or restatement of this Trust Agreement, or the resignation or removal of the Trustee.
14.11 Until notice be given in writing to the contrary, all instructions, notices and other communications shall be delivered or sent:
If to the Trustee to: Bankers Trust Company of the Southwest
500 North Akard, Suite 3900
Dallas, TX 75201
Attn: Elizabeth B. Smith
If to the Company to: Atmos Energy Corporation
5430 LBJ Freeway, Suite 1800
Dallas, TX 75240
Attn: Vice President - Human Resources
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ARTICLE XV
EFFECTIVE DATE
15.1 The effective date of this Trust Agreement shall be the day and year first written above.
IN WITNESS WHEREOF, the Company and Trustee by their duly authorized officers have signed this Trust Agreement on the day and year first written above.
ATMOS ENERGY CORPORATION
Attest:
By: /s/ Shirley A. Hines By: /s/ Wynn McGregor
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Name: Shirley A. Hines Name: Wynn McGregor
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Title: Corporate Secretary Title: Vice President, Human Resources
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BANKERS TRUST COMPANY
Attest:
By: /s/ James F. Shanley By: /s/ Frank Eipper
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Name: James F. Shanley Name: Frank Eipper
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Title: Vice President Title: Vice President
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STATE OF TEXAS )
)ss
COUNTY OF _______________ )
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BEFORE ME, the undersigned, a Notary Public in and for the said County and State, on this day personally appeared, of ATMOS ENERGY CORPORATION, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, in the capacity therein stated, and as the act and deed of said corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this _______ day of ____________
___________________________, 2000.
Notary Public in and for the State of Texas
My Commission Expires:
STATE OF __________________ )
)ss
COUNTY OF _________________ )
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On the ______ day of __________________, 2000, before me personally came ____________________________ to me known, who being by me duly sworn, did depose and say: that he/she resides in _____________________________; that he/she is the __________________ of BANKERS TRUST COMPANY, the corporation described in and which executed the above instrument; that he/she knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he/she signed his/her name thereto by like order.
Exhibit 10.2
AMENDMENT NO. ONE
TO THE
ATMOS ENERGY CORPORATION
PERFORMANCE-BASED
SUPPLEMENTAL EXECUTIVE BENEFITS PLAN
EFFECTIVE JANUARY 1, 1999
WHEREAS, pursuant to the provisions of Section 9.1 of the Atmos Energy Corporation Performance-Based Supplemental Executive Benefits Plan (the "Plan"), the Company desires to amend the Plan in certain respects as hereinafter provided.
NOW, THEREFORE, Atmos Energy Corporation does hereby amend the Plan, effective as of January 1, 1999, as follows:
1. Section 2.1(i) is amended by adding the following at the end of clause
(i) after the word "Division":
"or any other employee selected by the Board of Directors in its discretion."
IN WITNESS WHEREOF, the Company has caused this AMENDMENT NO. ONE TO THE ATMOS ENERGY CORPORATION PERFORMANCE-BASED SUPPLEMENTAL EXECUTIVE BENEFITS PLAN EFFECTIVE JANUARY 1, 1999 to be executed in its name on its behalf this 1st day of August, 2000, effective as of January 1, 1999.
ATMOS ENERGY CORPORATION
By: /s/ ROBERT W. BEST
-------------------------------
Robert W. Best
Chairman of the Board,
President and
Chief Executive Officer
ATTEST:
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SHIRLEY A. HINES
Exhibit 10.3
TRUST AGREEMENT
This Agreement made as of this ______ day of _________________, ______, by and between ATMOS ENERGY CORPORATION (hereinafter called "Company"), whose address is 5430 LBJ Freeway, Dallas, Texas and BANKERS TRUST COMPANY (hereinafter called "Trustee"), a New York banking corporation.
W I T N E S S E T H :
WHEREAS, in addition to the benefits available under the Atmos Energy Corporation Pension Account Plan, as the same has been or may hereafter be amended or restated, or any successor thereto (hereinafter called "Qualified Plan"), to ___________________________, an employee of Company (hereinafter called "Employee"), Employee and Employee's beneficiaries (hereinafter individually and collectively called "Trust Beneficiary") are entitled to monthly supplemental retirement income and disability benefits and/or death benefits (hereinafter called "Supplemental Benefits") arising under the Atmos Energy Corporation Supplemental Executive Benefits Plan, as the same has been or may hereafter be amended or restated, or any successor thereto (hereinafter called "Nonqualified Plan" or "Appendix A"); and
WHEREAS, the amount and timing of Supplemental Benefits to which Trust Beneficiary is entitled is specified in the Nonqualified Plan, attached hereto as Appendix A, and by this reference is made a part hereof, as the same may be amended from time to time by agreement between Company and Employee; and
WHEREAS, Company wishes to establish a trust (hereinafter called "Trust") to which Company may transfer assets to be held therein, subject to the claims of Company's creditors in the event of Company's insolvency, and subject to payment to Company under certain circumstances, as hereinafter specified, until paid to Trust Beneficiary as Supplemental Benefits in such manner and at such times as specified in Appendix A; and
WHEREAS, it is the intention of Company, at its discretion, to make contributions to the Trust as the projected or actual benefit of the Trust Beneficiary increases or otherwise;
NOW, THEREFORE, the parties do hereby establish the Trust and agree that the Trust shall be comprised, held and disposed of as follows:
Section 1. Trust Fund.
(a) Subject to the claims of its creditors as set forth in Section 3, Company hereby deposits with Trustee in trust One Dollar ($1.00) which shall become the principal of the Trust to be held, administered and disposed of by Trustee as provided in this Trust Agreement.
(b) The Trust hereby established shall be irrevocable.
(c) The Trust is intended to be a grantor trust, within the meaning of
Section 671 of the Internal Revenue Code of 1986, as amended, and shall be
construed accordingly.
(d) The principal of the Trust, and any earnings thereon, which are not paid to Company as provided in Sections 4 and 6, shall be held separate and apart from other funds of Company and shall be used exclusively for the uses and purposes herein set forth. Neither the Trust Beneficiary, nor the Nonqualified Plan, shall have any preferred claim on, or any beneficial ownership interest in, any assets of the Trust prior to the time such assets are paid to Trust Beneficiary as Supplemental Benefits as provided in Section 2, and all rights created under the Nonqualified Plan and this Trust Agreement shall be mere unsecured contractual rights of Trust Beneficiary against Company.
(e) Company shall make deposits as provided for in Appendix A and may at any time or from time to time make additional deposits of cash or other property in trust with Trustee to augment the principal to be held, administered and disposed of by Trustee as provided in this Trust Agreement. Upon and after a "Change in Control" (as hereinafter defined), Trustee shall be responsible for assuring that deposits are made in accordance with Appendix A, and it may rely on written certifications of the actuary employed with respect to Appendix A as to the funded status of the Trust and the Company's contribution obligations under Appendix A. Prior to a Change in Control, the Trustee shall have no responsibility therefor.
Section 2. Payments to Trust Beneficiary.
(a) Trustee shall make payments of Supplemental Benefits to Trust Beneficiary from the assets of the Trust, if and to the extent such assets are available for distribution, in accordance with Appendix A, at all times Company is not Insolvent. Trustee shall not be required to make payments unless notified by the Company or the Trust Beneficiary that benefits are then due and owing to the Trust Beneficiary and it has received a written certification of the time for payment of Benefits and the amount of Benefits due and owing to the Trust Beneficiary at such time, all in accordance with Appendix A, prepared by the actuary employed by the Company to calculate the Supplemental Benefits. The actuary shall also provide written certification to the Trustee of any changes in the amount of Benefits payable to a Beneficiary from time to time. Following a Change in Control, if no actuary is employed by the Company, the Trustee shall employ an actuary. The Trustee shall be fully protected in relying on the written certification of the actuary for all purposes of this Agreement.
(b) If the principal of the Trust, and any earnings thereon, which are not paid to Company as provided in Sections 4 and 6, are not sufficient to make payments of Supplemental Benefits to Trust
Beneficiary in accordance with Appendix A, Company shall make the balance of each such payment as it falls due.
(c) It is expressly acknowledged that Employee (or if Employee is dead, his beneficiaries under Nonqualified Plan) is a third-party beneficiary under this Trust Agreement and, as such, shall have the right to enforce the terms of this Agreement as if he were a party thereto.
Section 3. Trustee Responsibility Regarding Payments to Trust Beneficiary When Company Insolvent.
(a) Company shall be considered "Insolvent" for purposes of this Trust Agreement if (i) Company is unable to pay its debts as they mature, or (ii) Company is subject to a pending proceeding as a debtor under the Bankruptcy Code.
(b) At all times during the continuance of this Trust, the principal and income of the Trust shall be subject to claims of general creditors of Company as hereinafter set forth, and at any time Trustee has actual knowledge that Company is Insolvent, Trustee shall deliver any undistributed principal and income in the Trust to satisfy such claims as a court of competent jurisdiction may direct. The board of directors and Chief Executive Officer of Company shall have the duty to inform Trustee of Company's Insolvency. If Company or a person claiming to be a creditor of Company alleges in writing to Trustee that Company has become Insolvent, then, within thirty (30) days after receipt of such notice, such firm of independent auditors as Company, upon notification by Trustee, may select (or, after a "Change in Control" as defined in Section 4 hereof, such national firm of independent auditors as Trustee may select) shall determine whether Company is Insolvent and shall advise Trustee accordingly. Pending such determination, Trustee shall discontinue payments of Supplemental Benefits to Trust Beneficiary, shall hold the Trust assets for the benefit of Company's general creditors, and shall resume payments of Supplemental Benefits to Trust Beneficiary in accordance with Section 2 of this Trust Agreement only after it has been determined that Company is not Insolvent (or is no longer Insolvent, if Company was initially determined to be Insolvent). Unless Trustee has actual knowledge of Company's Insolvency, Trustee shall have no duty to inquire whether Company is Insolvent. Knowledge of Company's insolvency by any affiliate of Trustee shall not be imputed to Trustee. Trustee may in all events rely on such evidence concerning Company's solvency as may be furnished to Trustee which will give Trustee a reasonable basis for making a determination concerning Company's solvency. Nothing in this Trust Agreement shall in any way diminish any rights of Trust Beneficiary or Trustee to pursue his or its rights as a general creditor of Company with respect to Supplemental Benefits or otherwise.
(c) If Trustee discontinues payments of Supplemental Benefits from the Trust pursuant to Section 3(b) and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate amount of all payments which would have been made to Trust Beneficiary (together with interest on the amount delayed at one percentage point above the prime rate of Trustee as then in effect) in accordance with Appendix A during the period of such discontinuance, less the aggregate amount of payments made to Trust Beneficiary by Company in lieu of the payments provided for hereunder during any such period of discontinuance.
Section 4. Payments to Company.
Company shall have no right or power to direct Trustee to return to Company
or to divert to others any of the Trust assets before all payments of
Supplemental Benefits have been made to Trust Beneficiary pursuant to Appendix
A, except as otherwise provided in Section 1(b) and this Section.
Notwithstanding any provision of this Trust Agreement to the contrary and prior
to a "Change in Control," (as hereinafter defined), if it is determined by
Trustee that certain Trust assets will never be required to pay Supplemental
Benefits to Trust Beneficiary (because, for example, of any difference between
actual requirements and expected actuarial requirements), such excess assets
shall be returned to Company, but (i) only to the extent that such return does
not cause the value of the total Trust assets to be less than one hundred thirty
percent (130%) of the present value of projected Supplemental Benefits, and (ii)
only if the assets of each other trust of which Trustee serves as trustee and
established pursuant to Appendix A are at least one hundred thirty percent
(130%) of the present value of projected supplemental benefits payable under
such Plan to the beneficiary(ies) of such trust, in each case, with such present
value to be determined on the basis of actuarial assumptions applied by mutual
agreement of Company and Trustee. Upon and after a "Change in Control" (as
hereinafter defined), such assets may be returned to Company only after all
Supplemental Benefits have been fully distributed to or on behalf of Trust
Beneficiary and all other supplemental benefits under Appendix A have been fully
distributed to or on behalf of all other trust beneficiaries under all other
trusts for which Trustee serves as trustee and established pursuant to Appendix
A. Trustee may transfer all or any portion of such excess assets to one or more
other trusts established pursuant to Nonqualified Plan to the extent deemed
necessary by Trustee to enable such other trusts to pay supplemental benefits
under such Plan to the beneficiaries of such trusts, but only to the extent that
such transfer does not cause the value of the total Trust assets to be less than
one hundred thirty (130%) percent of the present value of projected Supplemental
Benefits, with such present value to be determined (i) prior to a "Change in
Control" (as hereinafter defined), on the basis of actuarial assumptions applied
by mutual agreement of Company and Trustee and (ii) upon and after a "Change in
Control" (as hereinafter defined), on the basis of actuarial assumptions applied
by mutual agreement of Company and Employee (or, if Employee is dead, his
beneficiaries under Nonqualified Plan); provided, however, that upon and after
such Change in Control, no such transfer may be made without the consent of
Employee (or, if Employee is dead, his beneficiaries under Nonqualified Plan) to
any such other trust which was not in existence prior to the date of such Change
in Control; provided, further, that if such excess assets are attributable to a
termination of the Trust pursuant to Section 11(b) occasioned by Employee's
resignation or termination of employment for Cause (within the meaning of
Appendix A), then Trustee shall transfer the full amount of such excess assets,
on a pro rata basis, to all of such other trusts established pursuant to
Appendix A and for which Trustee serves as trustee (or, in the case of a
transfer occurring on or after a Change in Control, to all of such other trusts
established pursuant to Appendix A for which Trustee serves as trustee which
were in existence prior to the date of such Change in Control), irrespective of
the funding status of such other trusts. For purposes of this Trust, a "Change
in Control" of Company shall occur if (i) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) other than a trustee or other fiduciary holding securities
under an employee benefit plan of Company, is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of Company representing 33-1/3% or more of the combined voting power
of Company's then outstanding securities; or (ii) during any period of two
consecutive years individuals who at the beginning of such period constitute the
board of directors of Company and any new director (other than a director
designated by a person who has entered into an agreement with Company to effect
a transaction described in clauses (i) or (iii) of this sentence) whose election
by such board of directors or nomination for election by Company's shareholders
was approved by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute a majority thereof; or (iii) the shareholders of Company
approve a merger or consolidation of Company with any other corporation, other
than a merger or consolidation which would result in the voting securities of
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted
into voting securities of the surviving entity) at least 60% of the combined voting power of the voting securities of Company or such surviving entity outstanding immediately after such merger or consolidation, or the shareholders of Company approve a plan of complete liquidation of Company or an agreement for the sale or disposition by Company of all or substantially all of Company's assets. Any payment of excess assets to Company made pursuant to this Section 4 shall be made only upon written instructions from Company. In carrying out its duties under this Section 4, Trustee may rely on written certifications of the actuary employed with respect to Appendix A as to the funded status of the Trust and each other trust for which Trustee serves as trustee and established pursuant to Appendix A, and may rely on the written notice of the Company or the Trust Beneficiary that a Change in Control has occurred. Trustee shall not be required to verify the accuracy of any determination made by the actuary under this Agreement.
Section 5. Investment of Trust Assets.
Trustee shall invest the assets comprising the Trust, as Company prescribes, in accordance with the investment directives set forth in Appendix B, attached hereto; provided that no investment shall be made in securities or obligations issued by Company or by any subsidiary or affiliate thereof. Company may from time to time revise, add to, or eliminate any one or more of the investment directives set forth in Appendix B; provided that, upon and after a Change in Control, any such action shall require the consent of Employee (or if Employee is dead, his beneficiaries under Nonqualified Plan). In addition, the board of directors of Company may from time to time direct, by written notice to Trustee, the segregation of any portion or portions of the Trust corpus in a separate investment account or investment accounts and, in such event, may appoint an investment manager to direct the investment and reinvestment of any such account; provided that, upon and after a Change in Control, such direction and appointment shall require the consent of Employee (or, as aforesaid, his beneficiaries under Nonqualified Plan). The appointment of, and any directions by, such investment manager shall be governed by the following:
(a) Any such investment manager shall (i) be registered as an investment adviser under the Investment Advisers Act of 1940; (ii) be a bank, as defined in that Act; or (iii) be an insurance company qualified to perform investment management services under the laws of more than one state.
(b) Trustee shall follow the directions of the investment manager regarding the investment and reinvestment of the Trust corpus, or such portion thereof as shall be under management by the investment manager. Trustee shall be under no duty or obligation to review any investment to be acquired, held or disposed of pursuant to such directions nor to make any recommendations with respect to the disposition or continued retention of any such investment. Trustee shall have no liability or responsibility for acting or not acting pursuant to the direction of, or failing to act in the absence of any direction from, the investment manager.
(c) The investment manager at any time and from time to time may issue orders for the purchase or sale of securities directly to a broker; and in order to facilitate such transaction, Trustee upon request shall execute and deliver appropriate trading authorizations. Written notification of the issuance of each such order shall be given promptly to Trustee by the investment manager, and the execution of each such order shall be confirmed by written advice to Trustee by the broker. Such notification shall be authority for Trustee to pay for securities purchased against receipt thereof and to deliver securities sold against payment therefor, as the case may be. Anything in the preceding sentence to the contrary notwithstanding, payment for securities against receipt and delivery of securities against payment shall not be required if such is not the prevailing practice in the principal market in which such securities are traded.
(d) The board of directors of Company may remove any investment manager appointed hereunder; provided that, upon and after a Change in Control, such removal shall require the consent of Employee (or, if Employee is dead, his beneficiaries under Nonqualified Plan). In the event that an investment manager should resign or be removed by the board of directors of Company, Trustee shall, following receipt from Company of written notice of such resignation or removal, which notice Company shall deliver to Trustee at the time of such resignation or removal, subject to the investment directives set forth in Appendix B hereof, manage the investment and reinvestment of the Trust corpus unless and until Trustee shall be notified of the appointment of another investment manager with respect thereto as provided in this Section 5.
Section 6. Income Tax Obligations.
It is hereby expressly understood that Company shall be liable for any and all taxes imposed on Trust income or assets. All such taxes are to be paid by Company from sources other than the assets or income of this Trust, and, except to the extent otherwise authorized by Section 4 hereof, Trustee shall, under no circumstances, transfer any portion of such income or assets to Company for the payment of same.
Section 7. Accounting by Trustee.
Trustee shall keep accurate and detailed records of all investments, receipts, disbursements, and all other transactions required to be done, including such specific records as shall be agreed upon in writing between Company and Trustee. All such accounts, books and records shall be open to inspection and audit at all reasonable times by Company and by Trust Beneficiary. Within sixty (60) days following the close of any accounting period designated by Company and within sixty (60) days after the removal or resignation of Trustee, Trustee shall deliver to Company and Trust Beneficiary a written account of its administration of the Trust during such period or during the period from the close of the last preceding period to the date of such removal or resignation, setting forth all investments, receipts, disbursements and other transactions effected by it, including a description of all securities and investments purchased and sold with the cost or net proceeds of such purchases or sales (accrued interest paid or receivable being shown separately), and showing all cash, securities and other property held in the Trust at the end of such period or as of the date of such removal or resignation, as the case may be.
Section 8. Responsibility of Trustee.
(a) Trustee's duties and responsibilities shall be limited to those specifically set forth in this Agreement, and no amendments to this Agreement or Appendix A shall affect the Trustee's duties or responsibilities hereunder without its prior written consent. Trustee shall act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims; provided, however, that Trustee shall incur no liability to anyone for any action taken pursuant to a direction, request, or approval given by Company or Trust Beneficiary contemplated by and complying with the terms of this Trust Agreement, and to the extent permitted by law shall be relieved of the Prudent Man Rule for investments.
(b) Trustee shall not be required to undertake or to defend any litigation arising in connection with this Trust Agreement, unless it be first indemnified by Company against its prospective costs, expenses and liability, and Company hereby agrees to indemnify Trustee for such costs, expenses, and liability.
(c) Trustee may consult with legal counsel (who may also be counsel for Trustee generally) with respect to any of its duties or obligations hereunder, and shall be fully protected in acting or refraining from acting in accordance with the advice of such counsel.
(d) Trustee may hire agents, accountants, actuaries and financial consultants.
(e) Trustee shall have, without exclusion, all powers conferred on trustees by applicable law unless expressly provided otherwise herein; provided, however, that if an insurance policy is held as an asset of the Trust, Trustee shall have no power, except in accordance with Section 1(b) or Section 4 hereof, to name a beneficiary of the policy other than the Trust, to assign the policy (as distinct from conversion of the policy to a different form) other than to a successor Trustee, or to loan to any person the proceeds of any borrowing against such policy.
(f) If Trustee undertakes or defends any claim or litigation arising in connection with this Trust, the Company agrees to indemnify Trustee against Trustee's costs, expenses and liabilities (including, without limitation, reasonable attorneys' fees and expenses) relating thereto and to be primarily liable for such payments. If the Company does not pay such costs, expenses and liabilities in a reasonably timely manner, Trustee may obtain payment from the Atmos Energy Corporation Legal Defense Fund Trust of which Trustee is the trustee.
Section 9. Compensation and Expenses of Trustee.
Trustee shall be entitled to receive such reasonable compensation for its
services as shall be agreed upon by Company and Trustee. Trustee shall also be
entitled to receive its reasonable expenses incurred with respect to the
administration of the Trust, including fees incurred by Trustee pursuant to
Section 8(c) and 8(d) of this Trust Agreement. Such compensation and expenses
shall be payable by Company.
Section 10. Replacement of Trustee.
Trustee may be removed at any time by Company or may resign, in which case a new corporate trustee, which shall be independent and not subject to control of either Company or Trust Beneficiary, shall be appointed by Company; provided that, upon and after a Change in Control, any such removal or appointment shall require the consent of Employee (or if Employee is dead, his beneficiaries under Nonqualified Plan). In the event of a resignation by the Trustee, the Trustee may petition a court of competent jurisdiction for the appointment of a successor Trustee if the Company shall fail to appoint a successor within a reasonable period of time, the costs to the Trustee (including reasonable legal fees) of such petition to be an expense of administration of the Trust.
Section 11. Amendment or Termination.
(a) This Trust Agreement may be amended any time and to any extent by written instrument executed by Trustee and Company and, both prior to and after a Change in Control, consented to by Employee (or if Employee is dead, his beneficiaries under Nonqualified Plan); provided, however, that prior to a Change in Control, the consent of Employee is not required for amendments made necessary by state or Federal statutory or regulatory requirements.
(b) The Trustee shall not terminate until the date on which Trust Beneficiary is entitled to no more Supplemental Benefits pursuant to Appendix A (as increased in accordance with Section 4), unless sooner revoked in accordance with Section 1(b).
(c) Except as otherwise provided in Section 4 hereof, upon termination of the Trust as provided in Section 11(b), any assets remaining in the Trust shall be returned to Company.
Section 12. Severability and Alienation.
(a) Any provision of this Trust Agreement prohibited by law shall be ineffective to the extent of any such prohibition without invalidating the remaining provisions hereof.
(b) To the extent permitted by law, benefits to Trust Beneficiary under this Agreement may not be anticipated, assigned (either at law or in equity), alienated or subject to attachment, garnishment, levy, execution or other legal or equitable process and no benefit actually paid to Trust Beneficiary by Trustee shall be subject to any claim for repayment by Company or Trustee.
This Trust Agreement shall be governed by and construed in accordance with the laws of the State of Texas.
IN WITNESS WHEREOF, Company and Trustee have executed this Agreement as of the date first above written.
ATMOS ENERGY CORPORATION
COMPANY
BANKERS TRUST COMPANY
TRUSTEE
Exhibit 12
Atmos Energy Corporation
Computation of Earnings to Fixed Charges
December 31, 2000
Three Months Ended
December 31,
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2000 1999
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Income from continuing operations before provision for
Income taxes per statement of income $36,348 $22,882
Add:
Portion of rents representative of the interest factor 548 765
Interest on debt & amortization of debt expense 12,246 11,217
------- -------
Income as adjusted $49,142 $34,864
======= =======
Fixed charges:
Interest on debt & amortization of debt expense (1) $12,246 $11,217
Capitalized interest (2) -- --
Rents 1,644 2,294
Portion of rents representative of the interest factor (3) 548 765
------- -------
Fixed charges (1)+(2)+(3) $12,794 $11,982
======= =======
Ratio of earnings to fixed charges 3.84 2.91
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Exhibit 15
Board of Directors
Atmos Energy Corporation
We are aware of the incorporation by reference in the Registration Statements (Form S-3, No. 33-37869; Form S-3 D/A, No. 33-70212; Form S-3, 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-3/A, No. 333-93705; Form S-3, No. 333-95525; 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; Form S-8, No. 333-46337; Form S-8, No. 333-73143; and Form S-8, No. 333-73145) of Atmos Energy Corporation and in the related Prospectuses of our report dated January 23, 2001, relating to the unaudited condensed consolidated interim financial statements of Atmos Energy Corporation which are included in its Form 10-Q for the quarter ended December 31, 2000.
ERNST & YOUNG LLP
Dallas, Texas
February 8, 2001