<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
United Cities Gas Company
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Charter)
James B. Ford
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
- --------------------------------------------------------------------------------
The Annual Meeting of Shareholders of United Cities Gas Company
("Company") will be held in the fifth floor auditorium of the First American
Center, 326 Union Street, Nashville, Tennessee, on Friday, April 29, 1994, at
10:30 a.m. local time, for the following purposes:
1. To elect three directors of the Company;
2. To consider and act upon a proposed Amendment to the Articles of
Incorporation of the Company to increase the number of authorized
shares of Common Stock as set forth in the accompanying
Proxy Statement;
3. To consider and act upon a proposal to amend the Employee Stock
Purchase Plan as described in the Proxy Statement;
4. To transact such other business as may properly come before the meeting
or any adjournments thereof.
THE CLOSE OF BUSINESS ON MARCH 25, 1994, HAS BEEN FIXED BY THE BOARD
OF DIRECTORS AS THE RECORD DATE FOR THE DETERMINATION OF SHAREHOLDERS ENTITLED
TO NOTICE OF AND TO VOTE AT THE ANNUAL MEETING OF SHAREHOLDERS OR ANY
ADJOURNMENTS THEREOF.
By Order of the Board of Directors,
Shirley M. Hawkins
Senior Vice President and Secretary
Brentwood, Tennessee
April 4, 1994
IMPORTANT
- --------------------------------------------------------------------------------
EACH SHAREHOLDER IS URGED TO EXECUTE AND RETURN THE PROXY PROMPTLY. A
BUSINESS REPLY ENVELOPE, REQUIRING NO POSTAGE, IS PROVIDED FOR YOUR USE.
- --------------------------------------------------------------------------------
5300 Maryland Way - Brentwood, Tennessee 37027 - Telephone: 615/373-5310
<PAGE> 3
April 4, 1994
PROXY STATEMENT
- --------------------------------------------------------------------------------
Proxies in the form enclosed with this statement are solicited by the
Board of Directors of United Cities Gas Company to be voted at the Annual
Meeting of Shareholders to be held in the fifth floor auditorium of the First
American Center, 326 Union Street, Nashville, Tennessee, on Friday, April 29,
1994, at 10:30 a.m. local time, for the purposes set forth in the foregoing
Notice of Annual Meeting. This proxy statement and proxy card are being mailed
by April 4, 1994.
REVOCABILITY OF PROXY
- --------------------------------------------------------------------------------
Each valid proxy which is returned will be voted at the meeting. A
proxy may be revoked by the person or persons voting at any time prior to the
recording of the official vote. Shareholders attending the meeting may, on
request, vote their own shares even though they have previously sent in a
proxy.
VOTING SECURITIES
- --------------------------------------------------------------------------------
As of the close of business on March 25, 1994, the record date fixed
by the Board of Directors for determining shareholders of the Company entitled
to notice of and to vote at the Annual Meeting of Shareholders, there were
00,000,000 shares of Common Stock outstanding.
Shares of Common Stock held for the accounts of participants in the
Company's Dividend Reinvestment and Stock Purchase Plan will be voted by the
Plan Administrator in the same manner as the participants vote their shares
held of record.
Cumulative voting in the election of directors is permitted. Under
cumulative voting, each shareholder is entitled to as many votes as shall equal
the number of shares of stock held as of the record date multiplied by the
number of directors to be elected; a shareholder may cast all of such votes for
a single director or may cast them for any or all of the directors in any
manner desired. There are no conditions precedent to the exercise of the right
of cumulative voting.
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1
<PAGE> 4
PROPOSAL 1 - ELECTION OF DIRECTORS
- --------------------------------------------------------------------------------
The Company's By-laws provide for a board of 10 directors serving
staggered three-year terms. It is proposed that the following three persons be
nominated for election as directors to serve for terms of three years to expire
in 1997 and until their successors are elected and qualified: Thomas J.
Garland, Gene C. Koonce and George C. Woodruff, Jr.
Mr. James L. Bomar, Jr., who has served the company for the past
thirty-two years, has decided not to stand for re-election. The Nominating
Committee of the Board is conducting a review of possible candidates to replace
Mr. Bomar.
It is intended that the proxies received in response to this
solicitation will be voted for the election of the three persons so nominated,
unless otherwise specified. If for any reason any nominee shall become
unavailable for election or shall decline to serve, persons named in the proxy
may exercise discretionary authority to vote for a substitute proposed by the
remaining directors of the Company. No circumstances are presently known which
would render any nominee herein unavailable.
The name of each director nominee is disclosed below followed by a
listing of directors whose terms expire at a later date. Included herein is
the principal occupation of each director and any other business affiliations
for the past five years as well as the year such person was elected a director
of the Company.
- --------------------------------------------------------------------------------
MANAGEMENT AND THE BOARD OF DIRECTORS OF THE COMPANY
RECOMMEND UNANIMOUSLY A VOTE "FOR" THE NOMINEES SET FORTH BELOW.
- --------------------------------------------------------------------------------
NOMINEES FOR DIRECTOR
THOMAS J. GARLAND -------------------------------------------------------------
Executive in Residence and Distinguished Service Professor of the Civic Arts
Tusculum College
Director Since: 1990
Board Committee: Compensation (chairman)
Mr. Garland, 59, is an executive in residence and distinguished
service professor of the civic arts at Tusculum College in Greeneville,
Tennessee and also a consultant. He previously served as chancellor of the
Tennessee Board of Regents.
GENE C. KOONCE ----------------------------------------------------------------
President and Chief Executive Officer
Director Since: 1978
Board Committee: N/A
Mr. Koonce, 62, joined the company in 1978 as president and chief
executive officer. He is a professional engineer. Mr. Koonce is a director of
First American Corporation in Nashville, Tennessee. He has served as chairman
of the Southern Gas Association, a director of the American Gas Association and
president of the Tennessee Gas Association.
- --------------------------------------------------------------------------------
2
<PAGE> 5
GEORGE C. WOODRUFF, JR. -------------------------------------------------------
Chairman
George C. Woodruff Company
Director Since: 1988
Board Committee: Compensation
Mr. Woodruff, 65, is chairman of the George C. Woodruff Company, a
real estate development and management firm in Columbus, Georgia. Mr. Woodruff
is a director of Synovus Financial Corporation, Columbus Bank and Trust
Company, and Total System Services, Inc., all in Columbus, Georgia. He is past
director of the Georgia Department of Industry, Trade and Tourism in Atlanta,
Georgia.
TERMS EXPIRING IN 1995
DWIGHT C. BAUM ----------------------------------------------------------------
Chairman of the Board
Retired Senior Vice President
PaineWebber Incorporated
Director Since: 1964
Board Committee: Audit (ex officio)
Mr. Baum, 81, was elected chairman of the board in October 1979. He is
a retired senior vice president of PaineWebber Incorporated. Mr. Baum is also a
director of Dominguez Services Corporation, Measurex Corporation and
Westminster Capital Corporation.
DENNIS L. NEWBERRY, II --------------------------------------------------------
Consultant and Private Investor
Retired President and Chief Executive Officer
Texas Gas Transmission Corporation
Director Since: 1986
Board Committee: Compensation
Mr. Newberry, 66, has been a consultant and private investor since his
retirement as president and chief executive officer of Texas Gas Transmission
Corporation.
TIMOTHY W. TRIPLETT -----------------------------------------------------------
Partner
Blackwell Sanders Matheny Weary & Lombardi, Attorneys
Director Since: 1992
Board Committee: Audit
Mr. Triplett, 39, is a partner in the law firm of Blackwell Sanders
Matheny Weary & Lombardi in Overland Park, Kansas.
- --------------------------------------------------------------------------------
3
<PAGE> 6
TERMS EXPIRING IN 1996
VINCENT J. LEWIS --------------------------------------------------------------
Senior Vice President
Howard, Weil, Labouisse, Friedrichs Inc.
Director Since: 1986
Board Committee: Audit (chairman)
Mr. Lewis, 49, is a senior vice president at Howard, Weil, Labouisse,
Friedrichs Inc. in Rutherford, New Jersey. He served as a director of
Tennessee-Virginia Energy Corporation until its acquistion by United Cities Gas
Company in 1986.
J. M. (RAY) MCRAE -------------------------------------------------------------
Chairman Emeritus
The First National Bancorp and its subsidiary,
The First National Bank
Director Since: 1979
Board Committee: Compensation
Mr. McRae, 70, is chairman emeritus of The First National Bancorp and
its subsidiary, The First National Bank, both in Gainesville, Georgia. He is a
director of Elan Corporation, PLC.
STIRTON OMAN, JR. -------------------------------------------------------------
Consultant and Private Investor
Director Since: 1976
Board Committee: Audit
Mr. Oman, 61, is a consultant and private investor and previously
served as chairman of the board of directors of Oman Construction Company in
Nashville, Tennessee.
- ------------------------
Mr. Baum, a director, is a retired senior vice president of
PaineWebber Incorporated which has performed various investment banking
services for the Company in the last fiscal year and is expected to perform
similar services in the current year.
Mr. Lewis, a director, is a senior vice president of Howard, Weil,
Labouisse, Friedrichs Inc. which has performed investment banking services for
the Company in the last fiscal year and is expected to perform similar services
in the current year.
Mr. Triplett, a director, is a partner in the law firm of Blackwell
Sanders Matheny Weary & Lombardi which represents the Company and its primary
liability insurance carrier in general liability lawsuits. The Company incurred
expenses of $562,846 payable to Blackwell Sanders Matheny Weary & Lombardi in
1993 of which $249,930 was reimbursed by insurance. The fees paid to Blackwell
Sanders Matheny Weary & Lombardi included amounts paid to other attorneys and
outside experts under the firm's management.
- --------------------------------------------------------------------------------
4
<PAGE> 7
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
- --------------------------------------------------------------------------------
The following information is furnished with respect to beneficial
ownership on March 25, 1994, of 5% or more of the Company's Common Stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME ADDRESS BENEFICIALLY OWNED (1) OF CLASS
- --------------------------------------------------------------------------------
<S> <C> <C>
Cincinnati Financial Corporation 648,500 --
Box 145496
Cincinnati, Ohio 45250-5496
</TABLE>
(1) To the Company's knowledge, the institution listed has sole power to
vote and direct the disposition of the shares of stock of which it is
the beneficial owner.
SECURITY OWNERSHIP OF MANAGEMENT
- --------------------------------------------------------------------------------
The following table sets forth certain information concerning the
ownership of Common Stock as of March 25, 1994, (i) by each member of the Board
of Directors, (ii) each executive officer named in the Summary Compensation
Table herein, and (iii) all directors and executive officers as a group.
<TABLE>
<CAPTION>
NUMBER NUMBER
OF SHARES OF SHARES
BENEFICIALLY PERCENT OF BENEFICIALLY PERCENT OF
OWNED (1) CLASS (2) OWNED (1) CLASS (2)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dwight C. Baum 0 0.0 Dennis L. Newberry, II 0
Thomas R. Blose, Jr. 0(3) Stirton Oman, Jr. 0
James B. Ford 0 Glenn B. Rogers 0(3)
Thomas J. Garland 0 Timothy W. Triplett 0
Shirley M. Hawkins 0 George C. Woodruff, Jr. 0
Gene C. Koonce 0(3) All directors and executive
Vincent J. Lewis 0 officers as a group
J. M. (Ray) McRae 0 (13 persons) 0(3) 0.0
</TABLE>
(1) Beneficial holdings shown herein are deemed to include shares held by
wives and minor children; the directors and officers neither affirm nor deny
that such shares are in fact beneficially owned by them.
(2) Unless otherwise noted, less than 1% per individual.
(3) Includes shares that may be acquired pursuant to the exercise of stock
options exercisable within 60 days of March 25, 1994, as follows: 3,000
shares for Mr. Blose, 3,600 shares for Mr. Koonce and 9,600 shares for
Mr. Rogers; and 16,200 shares for all directors and executive officers as
a group.
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5
<PAGE> 8
MEETINGS AND FEES OF THE BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
During 1993 the Company's Board of Directors held five meetings and
each incumbent director attended more than 75% of the aggregate board and
committee meetings of the Committee on which he served.
Non-officer directors of the Company receive an annual retainer fee of
$18,000. In addition, these directors are paid $750 for each meeting of the
Board of Directors and $500 for each committee meeting attended. Mr. Baum, as
Chairman of the Board of Directors, receives an additional annual retainer fee
of $8,000.
In February 1992, a deferred compensation plan for members of the
Company's Board of Directors was established. Under the plan, eligible
participants may defer, until after termination of services as a director, any
or all compensation for service on the Board. Interest will accrue on any
deferred compensation balance. As of December 31, 1993, there was one
participant in the plan deferring 65% of his total director compensation.
COMMITTEES OF THE BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
The Company has an Audit Committee comprised of the following
directors: Mr. Baum, Mr. Lewis (chairman), Mr. Oman, and Mr. Triplett. The
Audit Committee has responsibility for recommending to the Board of Directors
the annual selection of independent public accountants, reviewing the scope of
their audits, taking action as required with respect to audit reports submitted
and reporting to the full Board of Directors. Three meetings were held during
1993.
The Company has a Compensation Committee comprised of the following
directors: Mr. Garland (chairman), Mr. McRae, Mr. Newberry, and Mr. Woodruff.
The Compensation Committee has responsibility for recommending officer pay
levels to the Board of Directors for approval. Six meetings were held during
1993.
The Company had a Nominating Committee during 1993 comprised of the
following directors: Mr. Baum, Mr. Garland, Mr. Lewis and Mr. Koonce. The
Nominating Committee has responsibility for considering nominees brought to its
attention by management and shareholders. One meeting was held during 1993.
- --------------------------------------------------------------------------------
6
<PAGE> 9
EXECUTIVE COMPENSATION
- -------------------------------------------------------------------------------
The following table contains information with respect to compensation
awarded, earned or paid during the years 1991-1993 to (i) the chief executive
officer, and (ii) the other four most highly compensated officers of the
Company in 1993, whose total remuneration paid in 1993 exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------------- -----------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
COMPENSATION OPTIONS/SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($)(1) (#)(2) ($)(3)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gene C. Koonce 1993 $260,846 $76,860 -- -- $1,152
President & Chief 1992 250,619 55,200 -- -- 432
Executive Officer 1991 239,238 -- -- 6,000/2,100 576
James B. Ford 1993 138,625 41,672 -- -- 760
Senior Vice President 1992 131,110 30,313 -- -- 432
& Treasurer 1991 125,219 -- -- 5,000/1,750 576
Thomas R. Blose, Jr. 1993 135,573 40,672 -- -- 742
Senior Vice President -- 1992 128,011 29,585 -- -- 432
Operations & Engineering 1991 122,219 -- -- 5,000/1,750 576
Glenn B. Rogers 1993 111,721 32,025 -- -- 605
Senior Vice President -- 1992 105,556 24,250 -- -- 432
Gas Supply & Marketing 1991 100,473 -- -- 4,000/1,400 564
Shirley M. Hawkins 1993 82,042 21,485 -- -- 426
Senior Vice President 1992 74,218 12,604 -- -- 312
& Secretary 1991 69,256 -- -- -- 388
</TABLE>
(1) The aggregate amount of such compensation for the named officers did
not exceed 10% of the total annual salary and bonus for the reported
years.
(2) All of the options issued during 1991 were non-qualified stock options
and were issued in tandem with SARs for 35% of the number of shares
covered by the associated option.
(3) Dollar value of term life insurance premiums paid by the Company.
- -------------------------------------------------------------------------------
7
<PAGE> 10
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
- --------------------------------------------------------------------------------
Under the Long-Term Stock Plan implemented in 1989, the Compensation
Committee may grant incentive stock options, nonqualified stock options, stock
appreciation rights, restricted stock or any combination thereof to officers
and key employees of the Company and its subsidiaries selected by, and on the
terms established by, the Compensation Committee at the time of grant. The
Long-Term Stock Plan, which was approved by the shareholders of the Company,
will be in effect for ten years.
The Long-Term Stock Plan has a Stock Appreciation Right ("SAR")
feature which provides optionees the right to receive appreciation in the
shares of Common Stock subject to such option in Common Stock or cash, or a
combination thereof, equal in value to the difference between the fair market
value of such shares on the date of exercise and the option exercise price. In
addition, the Long-Term Stock Plan provides for payment to the Company of the
exercise price of the options in either cash, Common Stock held by an optionee
at the time of exercise, or a combination thereof.
The following table provides information as of December 31, 1993 with
respect to the unexercised options to purchase the Company's Common Stock
granted under the Long-Term Stock Plan of 1989.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED OPTIONS/ VALUE OF UNEXERCISED IN THE MONEY
SHARES SARS AT FISCAL YEAR-END (#)(2) OPTIONS/SARS AT FISCAL YEAR-END ($)(3)
ACQUIRED VALUE (1) ------------------------------ ---------------------------------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gene C. Koonce 10,800 $43,350 -- 7,200/2,520 -- $35,250/12,338
James B. Ford 9,000 18,125 -- 6,000/2,100 -- 29,375/10,281
Thomas R. Blose, Jr. 9,000 18,125 -- 6,000/2,100 -- 29,375/10,281
Glenn B. Rogers -- -- 7,200/2,520 4,800/1,680 $32,500/11,375 23,500/ 8,225
</TABLE>
(1) Market value of underlying shares at time of exercise minus the
exercise price.
(2) Stock options granted under the Long-Term Stock Plan vest at a rate of
20% per year.
(3) Market value of underlying securities at fiscal year-end (December 31,
1993) of $18.50 per share minus the exercise price.
- -------------------------------------------------------------------------------
8
<PAGE> 11
QUALIFIED RETIREMENT PLAN
- ------------------------------------------------------------------------------
The following table shows the estimated annual benefits (based on a 10
Years Certain and Life Annuity payable at age 65) payable to employees and
officers upon retirement under the Company's Qualified Retirement Plan.
Considered compensation equals salary and bonus. The calculation of
retirement benefits under the plan is based upon final average earnings for the
highest five consecutive years of the ten years preceding retirement. The
benefits shown are not subject to offset for Social Security or other benefits.
The current compensation and the years of credited service that would
be used in calculating benefits under the Qualified Retirement Plan for the
executives named in the Summary Compensation Table are as follows: Mr. Koonce,
$316,046, 18 years of service; Mr. Ford, $168,938, 30 years of service; Mr.
Blose, $165,158, 35 years of service; Mr. Rogers, $135,971, 33 years of
service; and Ms. Hawkins, $94,646, 33 years of service.
<TABLE>
ESTIMATED ANNUAL PENSION BENEFIT BASED ON SERVICE OF:
--------------------------------------------------------------------
FINAL AVERAGE
ANNUAL COMPENSATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 30,000 $ 7,755 $ 10,339 $ 12,214 $ 14,089 $ 15,964 $ 17,839
40,000 11,130 14,839 17,339 19,839 22,339 24,839
50,000 14,505 19,339 22,464 25,589 28,714 31,839
75,000 22,942 30,589 35,277 39,964 44,652 49,339
100,000 31,380 41,839 48,089 54,339 60,589 66,839
125,000 39,817 53,089 60,902 68,714 76,527 84,339
150,000 48,255 64,339 73,714 83,089 92,464 101,839
175,000 56,692 75,589 86,527 97,464 108,251* 108,251*
200,000 65,130 86,839 99,339 108,251* 108,251* 108,251*
225,000 73,567 98,089 108,251 108,251* 108,251* 108,251*
250,000 82,005 108,251* 108,251* 108,251* 108,251* 108,251*
275,000 90,442 108,251* 108,251* 108,251* 108,251* 108,251*
300,000 98,880 108,251* 108,251* 108,251* 108,251* 108,251*
325,000 107,317 108,251* 108,251* 108,251* 108,251* 108,251*
350,000 108,251* 108,251* 108,251* 108,251* 108,251* 108,251*
</TABLE>
* This is the maximum benefit payable in the normal form (10 Years
Certain & Life) under Section 415 of the Internal Revenue Code as of
January 1, 1994.
- --------------------------------------------------------------------------------
9
<PAGE> 12
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
- -------------------------------------------------------------------------------
The following table shows the estimated total annual regular benefit
that a participant in the Company's non-qualified Supplemental Executive
Retirement Plan (SERP) would be entitled to receive at age 65 or upon
determination of total and permanent disability as defined in the Plan, given
the years of service and the compensation levels indicated. The plan provides
for payment of supplemental retirement benefits equal to 70% of the officer's
basic rate of annual compensation at the time he retires, reduced by the sum of
(i) benefits receivable under the Company's Qualified Retirement Plan and (ii)
the annual Primary Insurance Amount payable as the result of participation in
the Social Security Program. Estimated Social Security benefits were determined
for an individual born in 1929 and using the law effective January 1, 1994.
Actual benefits will vary depending on an officer's year of birth and pay
history.
All officers named in the Summary Compensation Table are eligible to
participate in the SERP. Estimated credited service at Normal Retirement Date
(age 65) for Koonce, Ford, Blose, Rogers, and Hawkins, is 18, 30, 35, 33 and 33
years, respectively.
<TABLE>
ESTIMATED ANNUAL PENSION BENEFIT BASED ON SERVICE OF:
----------------------------------------------------------------------
BASIC RATE OF
ANNUAL COMPENSATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 30,000 $ 1,461 $ 0* $ 0* $ 0* $ 0* $ 0*
40,000 4,018 309 0* 0* 0* 0*
50,000 7,043 2,209 0* 0* 0* 0*
75,000 15,794 8,147 3,459 0* 0* 0*
100,000 24,856 14,397 8,147 1,897 0* 0*
125,000 33,919 20,647 12,834 5,022 0* 0*
150,000 42,981 26,897 17,522 8,147 0* 0*
175,000 52,044 33,147 22,209 11,272 485 485
200,000 61,106 39,397 26,897 17,985 17,985 17,985
225,000 70,169 45,647 35,485 35,485 35,485 35,485
250,000 79,231 52,985 52,985 52,985 52,985 52,985
275,000 88,294 70,485 70,485 70,485 70,485 70,485
</TABLE>
* The benefit determined under the Qualified Retirement Plan is in excess
of the benefit determined under the SERP. Therefore, no supplemental
retirement benefits are payable.
COMPLIANCE WITH OWNERSHIP REPORTING REQUIREMENTS
- -------------------------------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and officers to file reports of ownership and changes in
ownership of the Company's Common Stock with the Securities and Exchange
Commission. The Company is required to disclose in this proxy statement any
late filings of those reports made by its directors and officers in 1993.
Under the Section 16(a) rules, directors and officers are required to file a
Form 4 on or before the tenth day after the end of the month in which a change
in beneficial ownership has occurred. Due to an administrative error, Don L.
Howard and James B. Gaylor, Vice Presidents of the Company, failed to file
reports for August reflecting the exercise and sale of 3,000 shares,
respectively, granted under the Company's Long-Term Stock Plan; Robert M. Elam,
also a Vice President of the Company, failed to file a report for October
reflecting eight shares purchased under the Company's Employee Stock Purchase
Plan. The shares were reported on Form 5 as required by the Securities and
Exchange Commission.
- -------------------------------------------------------------------------------
10
<PAGE> 13
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
- -------------------------------------------------------------------------------
The Compensation Committee of the Company, made up of four independent
members of the Board of Directors, determines the compensation level of the
chief executive and other officers of the Company. To assist the Committee in
its review and evaluations, independent compensation consultants are retained
periodically to confirm the competitiveness of the Company's compensation
policies and practices. Among considerations, the elements of compensation and
factors and subjective criteria used in the determination of the compensation
of executive officers are as follows:
<TABLE>
<CAPTION>
ELEMENTS OF COMPENSATION FACTORS AND CRITERIA
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Base Salary - Level of responsibility and experience
- Market comparisons of the base salaries for similar positions at other similar
- industry companies
- Corporate performance as measured by shareholder return on equity and earnings
- Individual performance, including quality and implementation of the strategic plan,
organizational and management development, industry and civic involvement
Annual Bonus - Goals (equal to 10% - 37.5% of base salary) are established with respect to earnings,
cost containment and customer growth
- No awards are payable unless the Company's earnings equal or exceed the established
earnings goal
- Percentage goals are based on market comparisons of bonuses for similar positions at
other companies
- Corporate performance as measured by shareholder return on equity and earnings
- Individual performance, separate from overall Company performance, can affect bonus
target amount either positively or negatively
Stock Options - Market comparisons of the stock options for certain officers are based on goals
attained and similar positions in other companies
</TABLE>
CEO COMPENSATION
On recommendation of the Compensation Committee and approval of the
Board of Directors, Mr. Koonce's base salary was set at a level of $264,000 at
the April 1993 meeting of the Board of Directors in recognition of his efforts
in cost containment, improved earnings, increases in shareholder value,
continued acquisition program, improvement in the equity base of the Company
and other subjective factors. The Compensation Committee held six meetings
during 1993, and no recommendations of the Compensation Committee were rejected
by the Board of Directors.
Submitted by the Compensation Committee of the Board of Directors of the
Company.
Thomas J. Garland - Chairman J. M. (Ray) McRae
Dennis L. Newberry, II George C. Woodruff, Jr.
- -----------------------------------------------------------------------------
11
<PAGE> 14
COMPANY PERFORMANCE
- -------------------------------------------------------------------------------
The following graph compares the Company's performance, as measured by
the change in price of its Common Stock plus reinvested dividends, with the
Standard & Poor's ("S&P") 500 Stock Index and the American Gas Association's
Distribution Company Index for the five years ended December 31, 1993.
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------
United Cities
Gas Company $100.00 $126.00 $122.00 $157.00 $170.00 $201.00
- ----------------------------------------------------------------------------------
Standard & Poor's
500 Stock Index $100.00 $132.00 $128.00 $167.00 $180.00 $198.00
- ----------------------------------------------------------------------------------
American Gas
Association's
Distribution
Company Index $100.00 $132.00 $134.00 $162.00 $193.00 $224.00
- ----------------------------------------------------------------------------------
</TABLE>
The companies in the American Gas Association's Distribution Company Index
noted above are as follows: Atlanta Gas Light Company, Atmos Energy
Corporation, Bay State Gas Company, Brooklyn Union Gas Company, Cascade Natural
Gas Corporation, Colonial Gas Company, Connecticut Energy Corporation,
Connecticut Natural Gas, Delta Natural Gas Company, Inc., EnergyNorth, Inc.,
Essex County Gas Company, EnergyWest, Indiana Energy, Inc., MCN Corporation,
Mobile Gas Service Corporation, New Jersey Resources Corporation, North
Carolina Natural Gas, Northwest Natural Gas Company, NUI Corporation, Peoples
Energy Corporation, Piedmont Natural Gas Company, Providence Energy
Corporation, Public Service Company of North Carolina, Southern Union Company,
United Cities Gas Company, Washington Gas Light Company, Wisconsin Southern Gas
Company, and Yankee Energy System, Inc.
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12
<PAGE> 15
PROPOSAL 2 -- AMENDMENT TO THE ARTICLES
OF INCORPORATION TO INCREASE
AUTHORIZED COMMON STOCK
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GENERAL
This proposed amendment to Article Five of the Articles of
Incorporation would increase the number of shares of Common Stock, without par
value, which the Company is authorized to issue from 20,000,000 to 40,000,000.
The text of such proposed amendment is attached to this Proxy Statement as
Exhibit A.
As of March 25, 1994, __________ shares of Common Stock were issued
with an additional ________ shares reserved for issue under the Employee Stock
Purchase Plan, the Dividend Reinvestment and Stock Purchase Plan and the
Company's Long-Term Stock Plan. The additional shares of Common Stock for
which authorization is sought would be a part of the existing class of Common
Stock and, if and when issued, would have the same rights and privileges as the
shares of Common Stock presently outstanding.
The Board believes that it is desirable to have the additional
authorized shares of Common Stock available for possible future financing and
acquisition transactions, stock dividends or splits and other general corporate
purposes. Having such additional authorized shares available for issuance in
the future would give the Company greater flexibility. The additional shares of
Common Stock would be available for issuance without further action by the
shareholders. Shareholders will have no pre-emptive rights with respect to any
such authorized shares.
The authorized but unissued shares of Common Stock could also be used
by incumbent management to make more difficult a change in control of the
Company. Under certain circumstances such shares could be used to create voting
impediments or to frustrate persons seeking to effect a takeover or otherwise
gain control of the Company. Such shares could be privately placed with
purchasers who might side with the Board in opposing a hostile takeover bid.
The amendment could also have the effect of discouraging an attempt by
another person or entity, through the acquisition of a substantial number of
shares of the Company's Common Stock, to acquire control of the Company with a
view to imposing a merger, sale of all or any part of the Company's assets or a
similar transaction that may not be in the best interest of all of the
shareholders, because the issuance of new shares could be used to dilute the
stock ownership of a person or entity seeking to obtain control of the Company.
At the date of this Proxy Statement, the Company has no plans,
arrangements or understandings with respect to the issuance of the shares of
Common Stock to be authorized. However, the Company regularly considers
acquisitions which could involve the issuance of Common Stock.
The authority of the Board to issue Common Stock might be considered as
having the effect of discouraging an attempt by another person or entity to
effect a takeover or otherwise gain control of the Company, since the issuance
of additional shares of Common Stock could dilute the voting power of the
Common Stock owned by a party attempting to obtain control of the Company and
could increase the cost of any such transaction.
The Articles of Incorporation of the Company provide that a business
combination with an interested shareholder (as therein defined) must satisfy
certain minimum price, form of consideration and procedural requirements,
unless it is approved either by at least an 80% shareholder vote or all of the
directors who are unaffiliated with the interested shareholder and contain
certain other provisions restricting the sale of Company assets and the ability
of shareholders to act by consent, call special meetings,
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13
<PAGE> 16
remove directors or amend the By-laws of the Company. In addition, the
Board of Directors of the Company is divided into three classes and terms of
office of the directors are staggered.
The Articles of Incorporation also authorize the issuance of up to
200,000 shares of Cumulative Preferred Stock with such rights, preferences and
limitations as may be determined by the Board of Directors. Such Cumulative
Preferred Stock could be issued with terms which might make more difficult a
change in control of the Company. The Company is not aware of any pending or
threatened efforts to obtain control of the Company.
The proposed amendment to the Articles of Incorporation increasing the
number of shares of Common Stock authorized for issuance must be approved by
the holders of a majority of the outstanding shares of Common Stock of the
Company.
- --------------------------------------------------------------------------------
MANAGEMENT AND THE BOARD OF DIRECTORS OF THE COMPANY
RECOMMEND UNANIMOUSLY A VOTE "FOR" THE AMENDMENT
TO INCREASE THE COMPANY'S AUTHORIZED SHARES OF
COMMON STOCK AS SET FORTH IN PROPOSAL 2.
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PROPOSAL 3 -- AMENDMENT OF EMPLOYEE STOCK PURCHASE PLAN
- --------------------------------------------------------------------------------
GENERAL
The Company's Employee Stock Purchase Plan (hereinafter called the
"Plan") has been in effect since 1968. The Plan originally authorized the sale
to employees of 25,000 shares of Common Stock of the Company and the
shareholders have previously approved increases in such number to 200,000
shares. Of such shares, 174,526 have been sold, leaving 25,474 shares available
for sale under the Plan. An aggregate of 19,457 shares have been purchased by
the Executive Officers of the Company under the Plan. The Board of Directors of
the Company has authorized the amendment of the Plan to increase by 200,000 the
number of shares available thereunder, subject to the approval of the holders
of a majority of the outstanding shares of Common Stock of the Company.
The Board of Directors believes that stock ownership by a large number
of employees has been and will continue to be of mutual benefit to the Company
and to the employees, by promoting thrift on the part of individual employees,
maintaining and strengthening the employees' desire to remain with the Company
and its subsidiaries and stimulating further their efforts in the Company's
behalf.
- --------------------------------------------------------------------------------
MANAGEMENT AND THE BOARD OF DIRECTORS OF THE COMPANY RECOMMEND UNANIMOUSLY A
VOTE "FOR" THE AMENDMENT OF THE EMPLOYEE STOCK PURCHASE
PLAN AS SET FORTH IN PROPOSAL 3.
- --------------------------------------------------------------------------------
SUMMARY OF EMPLOYEE STOCK PURCHASE PLAN
The following is a summary of the major provisions of the Plan:
SHARES SUBJECT TO PURCHASE -- If the amendment is approved, an
aggregate of 225,474 shares of Common Stock of the Company will be reserved for
future issuance under the Plan. The number of shares available for purchase
will be adjusted for any increase or decrease in the number of issued shares of
Common Stock resulting from a subdivision or consolidation of shares or the
payment of a stock dividend on the Common Stock or any other increase or
decrease in the number of shares effected without receipt of consideration by
the Company.
ELIGIBILITY -- All regular employees of the Company and its
subsidiaries who are of legal age may participate in the Plan except: (i)
employees who have not completed 12 months of service or employees whose
customary employment is 20 hours or less per week or five months or less in any
calendar year; and (ii) an employee who, immediately after the right to
purchase stock is granted, owns stock, directly or indirectly, possessing 5% or
more of the total combined voting power or value of all classes of stock of the
Company, or of a subsidiary of the Company. Participation in the Plan is
voluntary.
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14
<PAGE> 17
PAYMENT PERIODS -- The three-month periods, January 1 to March 31,
April 1 to June 30, July 1 to September 30 and October 1 to December 31, are
Payment Periods during which payroll deductions will be accumulated under the
Plan. Each Payment Period includes all pay days falling within it.
STOCK PURCHASE DATE -- Stock may be purchased only on the final
business day in each Payment Period, such final business day being referred to
as the Price Date. At the opening of business on each Price Date, a
participating employee shall be granted a right to purchase as many whole
shares of stock as such individual's deductions accumulated during the Payment
Period will buy. Such right shall be considered exercised at the close of
business on such Price Date unless prior thereto such employee has withdrawn or
has been considered to have withdrawn from the Plan. An employee will be
considered to have withdrawn from the Plan if such individual shall have
terminated employment more than three months before the Price Date.
Only full shares of stock may be purchased. Any balance remaining in an
employee's account after a purchase will be reported to the employee and will
be carried forward to the next Payment Period unless such employee withdraws
the balance from such account.
PURCHASE PRICE -- The price per share will be the lesser of 90% of the
average of the closing prices for such stock on the over-the-counter market as
reported in the Midwest Edition of The Wall Street Journal during the 30-day
period prior to each Price Date of 90% of the closing price so reported on the
Price Date, or on the last preceding day on which quotations are available;
provided that the price per share shall not be less than 85% of the fair market
value of such stock on the Price Date. On March 25, 1994, the representative
closing price as reported in The Wall Street Journal was ____________.
MAXIMUM AMOUNT OF PAYROLL DEDUCTIONS -- An employee may authorize
payroll deductions in any even dollar amount up to but not more than 20% of
such individual's regular base pay.
In no event shall an employee be granted a right to purchase stock
which permits such individual's right to purchase stock under all employee
stock purchase plans of the Company or its subsidiaries to accrue at a rate
which exceeds $25,000 of fair market value of such stock (determined at the
time the right is granted) for each calendar year in which the right is
outstanding at any time.
Under the restriction contained in the first paragraph of this section,
the maximum amount which the highest paid employee could authorize as a
deduction, given the Company's present compensation structure, would be $25,000
per annum.
NON-TRANSFERABILITY OF EMPLOYEE'S RIGHTS -- Rights granted to an
employee pursuant to the Plan shall not be transferable otherwise than by will
or the laws of descent and distribution and shall be exercisable, during one's
lifetime, only by that individual.
TERMINATION OF AND AMENDMENTS TO PLAN -- The Plan and all rights of
employees to purchase stock with payroll deductions theretofore made may be
terminated at any time by action of the Board of Directors of the Company. It
shall terminate at the earlier of (a) five years from the adoption of the Plan
by the Board of Directors of the Company or (b) the time at which all or
substantially all of the authorized shares of stock have been purchased;
provided, however, that the Board of Directors of the Company may extend such
five-year period prior to the expiration thereof. The Board of Directors has
extended the Plan through January 25, 1997. If at any time shares of authorized
stock remain available for purchase but not in sufficient number to satisfy all
then unfilled purchase requirements, the Board of Directors may determine a
basis for apportioning such shares among the purchasing employees.
- -------------------------------------------------------------------------------
15
<PAGE> 18
The Board of Directors of the Company also reserves the right to amend
the Plan from time to time, in any respect, in order to meet changes in legal
requirements or for any other reason, insofar as permitted by law. However, no
amendment may become effective without prior approval of the shareholders
which, under Section 423 of the Internal Revenue Code, would require such
shareholder approval.
ADMINISTRATION OF THE PLAN -- The Treasurer of the Company, or an
alternate named by the Treasurer, will administer the Plan and make such
interpretations and rulings as are necessary in connection with its operation.
MISCELLANEOUS INFORMATION -- It is intended that the Plan will continue
to be a qualified "Employee Stock Purchase Plan" under the provisions of
Section 423 of the Internal Revenue Code. The Company is advised that under
that Section, employees would realize no taxable income upon the grant of
rights or acquisition of shares pursuant thereto under the terms of the Plan.
The Company is further advised that an employee who has purchased shares under
any offering made pursuant to the Plan, and who disposes of such shares within
two years from the date of the transfer of shares to such individual
thereunder, will realize taxable income under the Internal Revenue Code as
compensation based on the difference between the purchase price and the fair
market value on the date the employee acquires the right to receive the shares.
In the event of such an early disposition, the Company would be allowed a
deduction equal to the amount which is taxable to the employee as compensation.
If an employee disposes of the shares at any time after the period specified
above, any amount which the individual realizes in excess of the fair market
value of the shares on the date the right was granted will be treated as
long-term capital gain. The balance of any profit which the employee may
realize upon the disposition of the shares will be treated as ordinary income.
In the case of a disposition after the period specified above, the Company will
not be entitled to a deduction in respect of such shares.
REGULATORY APPROVAL -- The amendment to the Plan will not become
effective until authorization for the issuance of the additional 200,000 shares
has been received from the Georgia Public Service Commission, the Illinois
Commerce Commission, the Tennessee Public Service Commission, and the State
Corporation Commission of the Commonwealth of Virginia and the State
Corporation Commission of the State of Kansas.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
- -------------------------------------------------------------------------------
The annual appointment of independent accountants is approved by the
Board of Directors, upon recommendation of the Audit Committee. Arthur Andersen
& Co., independent public accountants, have been auditors of the accounts of
the Company since January 1, 1965.
A representative of Arthur Andersen & Co. will be present at the Annual
Meeting with the opportunity to make a statement and respond to appropriate
questions as needed.
SHAREHOLDER PROPOSALS
- -------------------------------------------------------------------------------
In order for any proposals by shareholders to be included in the 1995
proxy materials for the 1995 Annual Meeting, all such proposals intended for
presentation at the 1995 Annual Meeting should be mailed to United Cities Gas
Company, Shirley M. Hawkins, Senior Vice President and Secretary, 5300 Maryland
Way, Brentwood, Tennessee 37027, and must be received no later than December 5,
1994.
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16
<PAGE> 19
GENERAL
- -------------------------------------------------------------------------------
The management knows of no other matters to be presented at the Annual
Meeting, but if other matters do properly come before the Annual Meeting it is
intended that the persons named in the proxy will vote thereon according to
their best judgment. No financial statements are included herein because they
are not deemed material to the exercise of prudent judgment with respect to any
matter being acted upon at the Annual Meeting.
The 1993 Annual Report to Shareholders of the Company, including
financial statements, is enclosed.
EXPENSES OF SOLICITATION
- -------------------------------------------------------------------------------
The cost of solicitation of proxies will be borne by the Company. In an
effort to have as large a representation at the meeting as possible, special
solicitation of proxies may, in certain instances and without additional
remuneration, be made personally, or by telephone, or mail by one or more
employees of the Company. The Company may also reimburse brokers, banks,
nominees, and other fiduciaries for postage and reasonable clerical expenses of
forwarding the proxy material to their principals who are beneficial owners of
the Company's stock.
By Order of the Board of Directors,
Shirley M. Hawkins
Senior Vice President and Secretary
Brentwood, Tennessee
April 4, 1994
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17
<PAGE> 20
EXHIBIT A
TEXT OF PROPOSED AMENDMENT TO THE ARTICLES OF INCORPORATION TO INCREASE
AUTHORIZED COMMON STOCK
- -------------------------------------------------------------------------------
RESOLVED, THAT: Paragraph 1 of Article Five of the Articles of
Incorporation of the corporation is hereby amended in its entirety to read as
follows:
"Paragraph 1: The aggregate number of shares which the
corporation is authorized to issue is 40,258,000 divided into
three classes consisting of 200,000 shares designated as
Cumulative Preferred Stock, issuable in series as hereinafter
provided, having a par value of $100 per share, 58,000 shares
designated as 11-1/2% Cumulative Convertible Preference Stock
having a par value of $100 per share and 40,000,000 shares
designated as Common Stock, having no par value."
<PAGE> 21
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PROXY UNITED CITIES GAS COMPANY PROXY
ANNUAL MEETING OF SHAREHOLDERS, APRIL 29, 1994
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned shareholder of United Cities Gas Company hereby appoints Gene C.
Koonce, James B. Ford and Shirley M. Hawkins as proxies, each with the power to
appoint a substitute, and hereby authorizes them to vote all such shares of
such Company as to which the undersigned is entitled to vote at the Annual
Meeting of Shareholders of United Cities Gas Company and at all adjournments
thereof, to be held in the fifth floor auditorium of the First American Center,
326 Union Street, Nashville, Tennessee on Friday, April 29, 1994, at the hour
of 10:30 a.m. (CDT), in accordance with the following instructions.
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION
IS MADE, THE SHARES WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES FOR
DIRECTORS, THE AMENDMENT TO THE ARTICLES OF INCORPORATION AND THE AMENDMENT
TO THE EMPLOYEE STOCK PURCHASE PLAN.
(Continued and to be signed on reverse side)
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<PAGE> 22
<TABLE>
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PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. / /
====================================================================================================================================
<S> <C> <C> <C> <C>
FOR ALL
FOR WITHHOLD (Except Nominee(s) written below)
1. Election of Directors -- / / / / / /
Nominees: Thomas J. Garland, ---------------------------------------------------------------------------
Gene C. Koonce,
George C. Woodruff, Jr.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2. Amendment to the Articles FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
of Incorporation. / / / / / / 3. Amendment to the Employee Stock Purchase Plan. / / / / / /
4. In their discretion, on such other matters as may
properly come before the meeting.
Please vote, sign, date and return this Proxy Card
LABEL promptly using the enclosed envelope.
Dated: , 1994
----------------------------------------
Signature(s):
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-----------------------------------------------------------------------
Please sign exactly as name appears hereon.
Joint owners should each sign. Where applicable,
indicate official position or representative capacity.
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</TABLE>
