<PAGE> 1
UNITED CITIES GAS COMPANIES (LOGO)
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 28, 1995,
at 10:30 a.m. local time, for the following purposes:
1. To elect four directors of the Company;
2. To approve a Non-Employee Director Stock Plan;
3. To consider and act upon a proposed Amendment to the Articles of
Incorporation of the Company to (i) delete the provisions for
Cumulative Preferred Stock and 11 1/2% Cumulative Convertible
Preference Stock and (ii) create a class of Preferred Stock;
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
THE CLOSE OF BUSINESS ON MARCH 20, 1995, 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
March 30, 1995
IMPORTANT
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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> 2
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/X/ Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
UNITED CITIES GAS COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $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 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / 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> 3
UNITED CITIES GAS COMPANY (LOGO)
March 30, 1995
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 28, 1995, 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 March 30, 1995.
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 20, 1995, 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
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.
For employees participating in the Company's 401(k) Plan, which
includes a portion of the Company's Common Stock, the proxy card will
include the number of shares registered in the participant's name and/or the
number of shares allocated to the participant's account under the plan. For
those shares held in the plan, the proxy card will serve as a direction to
the trustee under the plan as to how the shares are to be voted.
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.
The withholding of votes as to all or specific nominees and broker
non-votes will not be considered in the vote totals and will have no effect
on the outcome of the vote.
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1
<PAGE> 4
PROPOSAL 1 -- ELECTION OF DIRECTORS
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The Company's By-laws presently provide for a board of 8 directors
serving staggered three-year terms. The board intends to amend the By-laws
to include 9 directors following the Annual Meeting of Shareholders on April
28. It is proposed that the following four persons be nominated for election
as directors, three of which will serve for terms of three years to expire
in 1998 and until their successors are elected and qualified and one of
which will serve a one-year term to expire in 1996: Dwight C. Baum, Dale A.
Keasling, Dennis L. Newberry, II and Timothy W. Triplett.
It is intended that the proxies received in response to this
solicitation will be voted for the election of the four 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 nominee and director and any other business
affiliations for the past five years.
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MANAGEMENT AND THE BOARD OF DIRECTORS OF THE COMPANY
RECOMMEND UNANIMOUSLY A VOTE "FOR" THE NOMINEES SET FORTH BELOW.
- --------------------------------------------------------------------------------
NOMINEES FOR DIRECTOR WHOSE TERMS WILL EXPIRE IN 1998
DWIGHT C. BAUM------------------------------------------------------------------
Chairman of the Board
Retired Senior Vice President
PaineWebber Incorporated
Director Since: 1964
Board Committee: Audit (ex officio)
Mr. Baum, 82, 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, 67, has been a consultant and private investor since his
retirement as president and chief executive officer of Texas Gas
Transmission Corporation. Mr. Newberry serves on United Cities' retirement
committee.
- --------------------------------------------------------------------------------
2
<PAGE> 5
TIMOTHY W. TRIPLETT ------------------------------------------------------------
Partner
Blackwell Sanders Matheny Weary & Lombardi, Attorneys
Director Since: 1992
Board Committee: Audit
Mr. Triplett, 40, is a partner in the law firm of Blackwell Sanders
Matheny Weary & Lombardi in Overland Park, Kansas. He is a member of the
board of trustees of Southwest Baptist University in Bolivar, Missouri.
NOMINEE FOR DIRECTOR WHOSE TERM WILL EXPIRE IN 1996
DALE A. KEASLING----------------------------------------------------------------
President
Home Federal Bank
Director Since: N/A
Board Committee: N/A
Mr. Keasling, 51, is president of Home Federal Bank in Knoxville,
Tennessee. He was previously president of Valley Fidelity Bank and Trust
Company in Knoxville.
TERMS EXPIRING IN 1996
VINCENT J. LEWIS----------------------------------------------------------------
Senior Vice President
Legg Mason Wood Walker, Inc.
Director Since: 1986
Board Committee: Audit (chairman)
Mr. Lewis, 50, is a senior vice president at Legg Mason Wood Walker,
Inc. in Rutherford, New Jersey. He served as a director of
Tennessee-Virginia Energy Corporation until its acquisition by United Cities
Gas Company in 1986.
STIRTON OMAN, JR.---------------------------------------------------------------
Consultant and Private Investor
Director Since: 1976
Board Committee: Audit
Mr. Oman, 62, is a consultant and private investor and previously
served as chairman of the board of directors of Oman Construction Company in
Nashville, Tennessee.
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3
<PAGE> 6
TERMS EXPIRING IN 1997
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, 60, 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, 63, 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 is also a director
of the American Gas Association. He has served as chairman of the Southern
Gas Association and president of the Tennessee Gas Association.
GEORGE C. WOODRUFF, JR.---------------------------------------------------------
Chairman
George C. Woodruff Company
Director Since: 1988
Board Committee: Compensation
Mr. Woodruff, 66, 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.
- ----------------------------------------
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 Legg Mason Wood
Walker, 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 $607,409 payable to Blackwell Sanders Matheny
Weary & Lombardi in 1994, a portion of which 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.
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4
<PAGE> 7
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
- --------------------------------------------------------------------------------
On March 20, 1995, the Company did not have any beneficial owners of 5%
or more of the Company's Common Stock.
SECURITY OWNERSHIP OF MANAGEMENT
- --------------------------------------------------------------------------------
The following table sets forth certain information concerning the
ownership of Common Stock as of March 20, 1995, (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 Dennis L. Newberry, II
Thomas R. Blose, Jr. (3) Stirton Oman, Jr.
James B. Ford (3) Glenn B. Rogers (3)
Thomas J. Garland Timothy W. Triplett
Shirley M. Hawkins (3) George C. Woodruff, Jr.
Gene C. Koonce (3) All directors and executive
Vincent J. Lewis officers as a group
(12 persons) (3)
</TABLE>
(1) Beneficial holdings shown herein are deemed to include shares held by
spouses 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 20, 1995, as follows: 6,000
shares for Mr. Blose, 3,000 shares for Mr. Ford, 1,000 shares for Ms.
Hawkins, 7,800 shares for Mr. Koonce and 12,200 shares for Mr. Rogers;
and 30,000 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 1994 the Company's Board of Directors held six 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, 1994, 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. Two meetings
were held during 1994.
The Company has a Compensation Committee comprised of the following
directors: Mr. Garland (chairman), Mr. Newberry, and Mr. Woodruff. The
Compensation Committee has responsibility for recommending officer pay levels to
the Board of Directors for approval. Three meetings were held in 1994.
The Company had a Nominating Committee during 1994 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 1994.
- --------------------------------------------------------------------------------
6
<PAGE> 9
EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
The following table contains information with respect to compensation
awarded, earned or paid during the years 1992-1994 to (i) the chief
executive officer, and (ii) the other four most highly compensated officers
of the Company in 1994, whose total remuneration paid in 1994 exceeded
$100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
---------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
COMPENSATION OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($)(1) (#)(2) ($)(3)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gene C. Koonce 1994 $281,000 $ 43,560 9,000 $1,152
President & Chief 1993 260,846 76,860 -- -- 1,152
Executive Officer 1992 250,619 55,200 -- -- 432
James B. Ford 1994 148,192 25,028 5,000 812
Senior Vice President 1993 138,625 41,672 -- -- 760
& Treasurer 1992 131,110 30,313 -- -- 432
Thomas R. Blose, Jr. 1994 145,846 24,495 5,000 795
Senior Vice President -- 1993 135,573 40,672 -- -- 742
Operations & Engineering 1992 128,011 29,585 -- -- 432
Glenn B. Rogers 1994 117,836 18,769 5,000 489
Senior Vice President -- 1993 111,721 32,025 -- -- 605
Gas Supply & Marketing 1992 105,556 24,250 -- -- 432
Shirley M. Hawkins 1994 91,669 14,025 5,000 657
Senior Vice President 1993 82,042 21,485 -- -- 426
& Secretary 1992 74,218 12,604 -- -- 312
</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 1994 were nonqualified stock options.
(3) Dollar value of term life insurance premiums paid by the Company.
- --------------------------------------------------------------------------------
7
<PAGE> 10
LONG-TERM STOCK PLAN
- --------------------------------------------------------------------------------
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.
STOCK OPTION/SAR GRANTS IN LAST FISCAL YEAR
The table below provides information concerning stock option grants to
the Named Executive Officers who were granted stock options during the 1994
Fiscal Year.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF
- ----------------------------------------------------------------------------------------- STOCK PRICE
% OF TOTAL OPTIONS APPRECIATION FOR
GRANTED TO EXERCISE OPTION TERM
OPTIONS EMPLOYEES PRICE EXPIRATION -------------------
NAME GRANTED IN FISCAL YEAR ($/SHARE) DATE(1) 5% 10%
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Gene C. Koonce 9,000 19.57% $ 16.00 04/29/04 $90,561 $229,499
James B. Ford 5,000 10.87% $ 16.00 04/29/04 50,312 127,499
Thomas R. Blose, Jr. 5,000 10.87% $ 16.00 04/29/04 50,312 127,499
Glenn B. Rogers 5,000 10.87% $ 16.00 04/29/04 50,312 127,499
Shirley M. Hawkins 5,000 10.87% $ 16.00 04/29/04 50,312 127,499
</TABLE>
(1) These options vest at a rate of 20% per year.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following table provides information as of December 31, 1994 with
respect to the exercised and unexercised options to purchase the Company's
Common Stock granted under the Long-Term Stock Plan of 1989.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES FISCAL YEAR-END (#)(2) FISCAL YEAR-END ($)(3)
ACQUIRED ON VALUE (1) --------------------------- -----------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Gene C. Koonce -- -- 3,600/1,260 3,600/1,260 $ 6,900/2,415 $ 8,550/2,993
James B. Ford 3,000 13,625 -- 3,000/1,050 -- 7,125/2,494
Thomas R. Blose, Jr. -- -- 3,000/1,050 3,000/1,050 5,750/2,013 7,125/2,494
Glenn B. Rogers -- -- 9,600/3,360 2,400/840 17,300/6,055 5,700/1,955
</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,
1994) of $15.75 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: Koonce,
$358,860, 18 years of service; Ford, $190,864, 30 years of service; Blose,
$187,518, 35 years of service; Rogers, $150,861, 33 years of service; and
Hawkins, $117,380, 33 years of service.
<TABLE>
<CAPTION>
BASED ON THE FOLLOWING YEARS OF SERVICE:
FINAL AVERAGE -------------------------------------------------------------------
ANNUAL COMPENSATION 15 20 25 30 35 40
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
$ 30,000 $ 7,200 $ 9,600 $12,000 $13,725 $15,450 $17,175
40,000 9,600 12,800 16,000 18,300 20,600 22,900
50,000 12,000 16,000 20,000 22,875 25,750 28,625
75,000 18,000 24,000 30,000 34,313 38,625 42,938
100,000 24,000 32,000 40,000 45,750 51,500 57,250
125,000 30,000 40,000 50,000 57,188 64,375 71,563
150,000 36,000 48,000 60,000 68,625 77,250 85,875
175,000 36,000* 48,000* 60,000* 68,625* 77,250* 85,875*
</TABLE>
* Compensation limited to $150,000 under Internal Revenue Code Section
401(a)(17).
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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 1930 and using
the law effective January 1, 1995. 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>
<CAPTION>
BASED ON THE FOLLOWING YEARS OF SERVICE:
BASIC RATE OF -------------------------------------------------------------------
ANNUAL COMPENSATION 15 20 25 30 35 40
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
$ 30,000 $ 1,776 $ 0* $ 0* $ 0* $ 0* $ 0*
40,000 5,056 1,856 0* 0* 0* 0*
50,000 8,996 4,996 996 0* 0* 0*
75,000 20,016 14,016 8,016 3,704 0* 0*
100,000 31,516 23,516 15,516 9,766 4,016 0*
125,000 43,016 33,016 23,016 15,829 8,641 1,454
150,000 54,516 42,516 30,516 21,891 13,266 4,641
175,000 72,016 60,016 48,016 39,391 30,766 22,141
200,000 89,516 77,516 65,516 56,891 48,266 39,641
225,000 107,016 95,016 83,016 74,391 65,766 57,141
250,000 124,516 112,516 100,516 91,891 83,266 74,641
275,000 142,016 130,016 118,016 109,391 100,766 92,141
300,000 159,516 147,516 135,516 126,891 118,266 109,641
</TABLE>
* The benefit determined under the Qualified Retirement Plan is in excess of
the benefit determined under the SERP. Therefore, no supplemental 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 1994.
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,
Timothy W. Triplett, a director of the Company, failed to file a report for
May reflecting the purchase of 160 shares. George C. Woodruff, Jr., also a
director of the Company, failed to file a report for January reflecting the
purchase of 111 shares. 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 three 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
compen-sation 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
<C> <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 return on equity,
cost containment and customer growth
- No awards are payable unless the Company's return
on equity equals or exceeds the established
threshold for the year
- 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 cost containment
- 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 $290,000
at the April 1994 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 three
meetings during 1994, 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
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, 1994.
(Graph)
<TABLE>
<CAPTION>
Amer. Gas
United Standard & Assn's
Measurement Period Cities Gas Poor's 500 Distribution
(Fiscal Year Covered) Company Stock Index Co. Index
<S> <C> <C> <C>
1989 100 100 100
1990 97 97 101
1991 125 126 122
1992 135 136 146
1993 160 150 170
1994 145 152 166
</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., EnergyWest, Essex County Gas Company, 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, and Yankee Energy System, Inc.
- --------------------------------------------------------------------------------
12
<PAGE> 15
PROPOSAL 2 -- APPROVAL OF NON-EMPLOYEE DIRECTOR STOCK PLAN
- ----------------------------------------------------------------------------
GENERAL
The Board of Directors has adopted, subject to the approval of the
Company's shareholders, the United Cities Gas Company Non-Employee Director
Stock Plan (the "Plan"). The purpose of the Plan is to help strengthen the
common interest of the directors and shareholders of the Company in enhancing
the value of the common stock, no par value, of the Company (the "Company Common
Stock"). If approved by the Company's shareholders, the Plan will give those
directors who are not also employees of the Company or any of its subsidiaries
the opportunity to elect to receive shares of Company Common Stock in lieu of
receiving some or all of the annual cash retainer compensation which they would
otherwise be entitled to receive as directors of the Company. A copy of the Plan
is attached as Exhibit A hereto, and the summary description below is qualified
in its entirety by reference to such Exhibit.
The following table indicates the number of shares of Company Common Stock
each Non-Employee Director would have received pursuant to the Plan during the
fiscal year 1994 if the Plan had been in effect and if each of the directors
eligible to participate in the Plan had chosen to receive 100 percent of his or
her annual cash retainer compensation in Company Common Stock:
NEW PLAN BENEFITS
NON-EMPLOYEE DIRECTOR STOCK PLAN
<TABLE>
<CAPTION>
DOLLAR VALUE OF
ANNUAL CASH
RETAINER NUMBER OF
NAME AND POSITION COMPENSATION($) SHARES(1)
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------
Dwight C. Baum, Chairman of the Board 26,000 1,650
Thomas J. Garland, Director 18,000 1,142
Vincent J. Lewis, Director 18,000 1,142
Dennis L. Newberry, II, Director 18,000 1,142
Stirton Oman, Jr., Director 18,000 1,142
Timothy W. Triplett, Director 18,000 1,142
George C. Woodruff, Jr., Director 18,000 1,142
All current directors who are not executive officers as a group 134,000 8,502
</TABLE>
(1) Based on $15.75 per share as of December 31, 1994, as reported on
NASDAQ/NMS.
SUMMARY OF NON-EMPLOYEE DIRECTOR STOCK PLAN
- --------------------------------------------------------------------------------
The following is a summary of the major provisions of the Plan:
Shares Subject to the Plan -- If the Plan is approved, an aggregate of
100,000 shares of Company Common Stock (the "Stock") will be reserved for future
issuance under the Plan. In the event of a recapitalization, stock split, stock
dividend, combination or exchange of shares, merger, consolidation,
reorganization, or any other change in the capital structure or shares of the
Company, the Board of Directors may make such equitable adjustments, as they may
deem appropriate, in the number and class of shares authorized to be issued
under the Plan.
Eligibility -- Any person who is serving as a director of the Company
and who is not an employee of the Company or any of its subsidiaries (an
"Eligible Director," or as to all non-
- --------------------------------------------------------------------------------
13
<PAGE> 16
employee directors, collectively, the "Eligible Directors") shall be eligible to
participate under the Plan.
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 Compensation may be deferred and deemed to have accumulated
under the Plan.
Stock Purchases -- 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;" provided, however, that no Stock may be acquired by an Eligible Director
until a Price Date occurring on or after the second business day after the 185th
day following the date the Eligible Director elects to receive Stock by
delivering a written election to the Investor Relations/Corporate Communications
Department of the Company. In such election an Eligible Director must elect to
receive Stock equal to 25, 50, 75 or 100 percent of his or her Compensation. An
Eligible Director shall be deemed to have earned one-fourth of his or her
Compensation on each Price Date. As used in the Plan, the term "Compensation"
means only the annual retainer fee payable to an Eligible Director, as the same
may be adjusted from time to time, and shall not include any other fees or
retainers payable to an Eligible Director by the Company for his or her services
as a director or any portion of an Eligible Director's annual retainer fee which
is treated as Deferred Compensation under the Company Directors' Deferred
Compensation Plan.
Only full shares of Stock may be purchased. Any balance remaining of an
Eligible Director's Compensation after a purchase will be reported to the
director and will be carried forward to the next Payment Period.
Purchase Price -- The price of each share of Stock acquired pursuant to the
Plan will be the lesser of (i) the average closing prices for the Company Common
Stock in the NASDAQ Over-the-Counter National Market Issues report of the
Midwest Edition of the Wall Street Journal, during the 30-day period prior to
the Price Date applicable to the issuance of the Stock or (ii) the price so
quoted on the Price Date applicable to the issuance of the Stock, or on the last
preceding day quotations are available.
Non-Transferability of Rights -- Rights granted to an Eligible Director
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 the Plan -- The Board of Directors of the
Company reserves the right to amend or terminate the Plan at any time; provided,
however, that without the approval of the Company's shareholders, no alteration
or amendment may be made which would (i) increase the aggregate number of shares
of Stock which may be issued under the Plan (except as described above in Shares
Subject to the Plan), (ii) change the category of Directors eligible to acquire
Stock under the Plan, or (iii) materially increase the benefits to Eligible
Directors under the Plan. In any event, the Plan shall terminate on the earlier
of (i) 10 years after the effective date of the Plan, or (ii) when all or
substantially all of the Stock has been issued pursuant to the Plan. If, at any
time, Stock remains available for issue but not in sufficient numbers to satisfy
all then unfilled acquisition requirements such shares shall be apportioned
equally among the Eligible Directors with then unfilled acquisition
requirements.
- --------------------------------------------------------------------------------
14
<PAGE> 17
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 the intent of the Company that the Plan
comply in all respects with applicable provisions of Rule 16b-3 under the
Securities Exchange Act of 1934. Accordingly, if any provision of the Plan does
not comply with the requirements of said Rule 16b-3 as then applicable to any
such Eligible Director, or would cause any Eligible Director to no longer be
deemed a "disinterested person" within the meaning of Rule 16b-3, such provision
shall be construed or deemed amended to the extent necessary to conform to such
requirements with respect to such Eligible Director. In addition, the Board of
Directors of the Company shall have no authority to make any amendment,
alteration, suspension, discontinuation or termination of the Plan or take other
action if and to the extent such authority would cause an Eligible Director's
transactions under the Plan not to be exempt or any Eligible Director no longer
to be deemed a "disinterested person," under Rule 16b-3 under the Securities
Exchange Act of 1934.
Regulatory Approval -- The Plan will not become effective until
authorization for the issuance of the additional 100,000 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.
The proposed Non-Employee Director Stock Plan must be approved by the
holders of a majority of the outstanding shares of Common Stock of the Company
present or represented at the meeting and entitled to vote.
- --------------------------------------------------------------------------------
MANAGEMENT AND THE BOARD OF DIRECTORS OF THE COMPANY RECOMMEND
UNANIMOUSLY A VOTE "FOR" THE ADOPTION OF THE NON-EMPLOYEE
DIRECTOR STOCK PLAN AS SET FORTH IN PROPOSAL 2.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
15
<PAGE> 18
PROPOSAL 3 -- AMENDMENT TO THE ARTICLES OF INCORPORATION TO
(I) DELETE THE PROVISIONS FOR CUMULATIVE PREFERRED STOCK AND
11 1/2% CUMULATIVE CONVERTIBLE PREFERENCE STOCK AND
(II) CREATE A CLASS OF PREFERRED STOCK
- --------------------------------------------------------------------------------
The proposed amendment to Article Five (the "Proposed Amendment") of the
Articles of Incorporation (the "Articles") of the Company would provide for the
creation of 200,000 shares of preferred stock, without par value (the "Preferred
Stock"), and would delete the provisions in Article Five which authorize the
Company to issue 200,000 shares of Cumulative Preferred Stock, par value $100.00
(the "Cumulative Preferred Stock") and 58,000 shares of 11 1/2% Cumulative
Convertible Preference Stock, par value $100.00 (the "Preference Stock"). The
authorized shares of Common Stock, no par value (the "Common Stock") would
remain unchanged. The text of the Proposed Amendment is attached to this Proxy
Statement as Exhibit B.
Article Five currently authorizes the Company to issue 40,258,000 shares
divided into three classes consisting of 200,000 shares of the Cumulative
Preferred Stock, 58,000 shares of the Preference Stock, of which 17,349 shares
are available for issuance, and 40,000,000 shares of the Common Stock. As of
March 20, 1995, there are no issued and outstanding shares of the Cumulative
Preferred Stock or the Preference Stock.
The Cumulative Preferred Stock is issuable, subject to certain restrictions
contained in Article Five, in series, with such variations as to dividend rate,
terms of redemption, amounts payable in the event of voluntary or involuntary
liquidation and sinking fund provisions and such conversion rights, if any, as
may be established by the Company's Board of Directors. Pursuant to Article
Five, the Company is not permitted to pay dividends on the Common Stock until
full accrued and unpaid dividends on outstanding shares of the Cumulative
Preferred Stock have been paid. In addition, Article Five contains provisions
that either restrict certain corporate actions or require the approval of
certain corporate actions by the holders of Cumulative Preferred Stock, so long
as any shares of Cumulative Preferred Stock are outstanding.
The Preference Stock is issuable by the Board of Directors. The dividend
rate, terms of redemption, amounts payable in the event of voluntary or
involuntary liquidation, sinking fund requirements and conversion rights of the
Preference Stock are expressly set forth in Article Five. Pursuant to Article
Five all shares of the Preference Stock which are issued and reacquired by the
Company may not be reissued. Only 17,349 shares of the Preference Stock remain
available for issuance.
The Proposed Amendment eliminating the Cumulative Preferred Stock and
the Preference Stock and creating the Preferred Stock will give the Board of
Directors authority similar to the authority currently granted to the Board of
Directors with respect to the Cumulative Preferred Stock. The Board of Directors
will have the authority to determine the designations, preferences, conversion
rights, special or relative rights, qualifications, limitations or restrictions
(collectively, the "Limitations and Restrictions") with respect to the Preferred
Stock. Therefore, the Board of Directors of the Company will, in the event of
the approval of this proposal by the Company's shareholders, be entitled to
authorize the creation and issuance of 200,000 shares of the Preferred Stock in
one or more series with such Limitations and Restrictions as may be determined
in the discretion of the Board of Directors, with no further authorization by
shareholders required for the creation and issuance thereof. Under applicable
law, shares of the Cumulative Preferred Stock are issuable for the consideration
determined by the Board of Directors, so long as such consideration is
- --------------------------------------------------------------------------------
16
<PAGE> 19
at least equal to the par value of such shares. The Preferred Stock will not
have a par value. As a result, the Board of Directors will have the authority to
issue shares of the Preferred Stock for the consideration determined in good
faith by the Board of Directors.
The Board of Directors believes the proposed amendment and the creation of
the Preferred Stock is in the best interests of the Company and its shareholders
and believes it is advisable to authorize such shares to have them available in
connection with such future financings, acquisitions and other uses not
presently determinable as may be deemed to be feasible and in the best interests
of the Company. In addition, the Board of Directors believes that it is
desirable that the Company have the flexibility to issue shares of the Preferred
Stock without further shareholder action. The Board of Directors also believes
that the availability of the Preferred Stock will enhance the Company's
flexibility and potential cost efficiencies in connection with possible future
transactions, such as financings, corporate mergers, acquisitions, possible
funding of new businesses or for other corporate purposes. The Proposed
Amendment will provide the Board of Directors with more flexibility in issuing
the Preferred Stock and determining the Limitations and Restrictions for the
Preferred Stock than it currently has with respect to the Cumulative Preferred
Stock since certain of the special rights of the Cumulative Preferred Stock,
such as restrictions on corporate action while the Cumulative Preferred Stock is
outstanding and requirements that the outstanding Cumulative Preferred Stock
approve certain corporate action, will be eliminated from Article Five. The
Board of Directors will retain the discretion to fix the terms of any such
special rights with respect to the Preferred Stock which terms may, in the
discretion of the Board of Directors, include similar restrictions and approval
requirements.
It is not possible to state the actual effect of the authorization of the
Preferred Stock on the rights of holders of the Common Stock until the Board of
Directors determines the respective rights of the holders of one or more series
of the Preferred Stock. However, such effect might include (i) restrictions on
dividends; (ii) special voting rights granted to the holders of the Preferred
Stock to approve certain corporate actions; (iii) dilution of the equity
interest and voting power if the Preferred Stock were convertible into Common
Stock; and (iv) restrictions upon any distribution of assets to the holders of
Common Stock upon liquidation or dissolution until the satisfaction of any
liquidation preference granted to holders of the Preferred Stock.
Each outstanding share, regardless of class, shall continue to be entitled
to one vote on each matter submitted to a vote at a meeting of shareholders. In
addition, each shareholder shall continue to have the right to cumulate the
shares owned by him or her in all elections for directors, and shareholders will
not have preemptive rights to subscribe for any unissued stock of any class or
any additional shares of any class.
The Board of Directors is required to make any determination to issue
shares of the Preferred Stock based on their judgment as to the best interests
of the Company. Although the Board of Directors has no present intention of
doing so, it could issue shares of the Preferred Stock within the limits imposed
by applicable laws that could, depending on the terms of such series, make more
difficult or discourage an attempt to obtain control of the Company by means of
a merger, tender offer, proxy contest or other means. When in the judgment of
the Board of Directors this action will be in the best interests of the Company,
such shares could be used to create voting or other impediments or to discourage
persons seeking to gain control of the Company. Such shares could be privately
placed with purchasers favorable to the Board of Directors in opposing such
action. In addition, the Board of Directors could authorize holders of a series
of Preferred Stock to vote either separately as a class or with the holders of
the Common Stock, on any merger, sale or exchange of
- --------------------------------------------------------------------------------
17
<PAGE> 20
assets by the Company or any other extraordinary corporate transaction. The
existence of the authorized Preferred Stock could have the effect of
discouraging unsolicited takeover attempts. The issuance of new shares also
could be used to dilute the stock ownership of a person or entity seeking to
obtain control of the Company should the Board of Directors consider the action
of such entity or person not to be in the best interest of the shareholders and
the Company. The Company is not aware of any pending or threatened efforts to
obtain control of the Company. Such issuance of the Preferred Stock could also
have the effect of diluting the earnings per share, book value per share and
voting power of Common Stock held by shareholders.
While the Company may consider issuing the Preferred Stock in the proximate
future for purposes of raising additional working capital or otherwise, the
Company, as of the date hereof, has no agreements, understandings or
arrangements which would result in the issuance of any shares of the Preferred
Stock. Therefore, the terms of any Preferred Stock subject to this proposal
cannot be stated or estimated with respect to any or all of the securities
authorized.
The proposed amendment to the Articles 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 ARTICLE FIVE AS SET FORTH IN PROPOSAL 3.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
18
<PAGE> 21
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 1996 proxy
materials for the 1996 Annual Meeting, all such proposals intended for
presentation at the 1996 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 4,
1995.
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 1994 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
March 30, 1995
- --------------------------------------------------------------------------------
19
<PAGE> 22
EXHIBIT A
UNITED CITIES GAS COMPANY
NON-EMPLOYEE DIRECTOR STOCK PLAN
1. PURPOSE OF THE PLAN
The purpose of the United Cities Gas Company Non-Employee Director Stock
Plan (the "Plan") is to promote the ownership by non-employee directors of
United Cities Gas Company, an Illinois and Virginia corporation (the "Company"),
of shares of common stock, without par value, of the Company ("Company Common
Stock"), by allowing non-employee directors of the Company to elect to receive
shares of Company Common Stock in lieu of their receiving some or all of the
annual cash retainer compensation which they would otherwise be entitled to
receive as payment for their services rendered as directors of the Company. The
Company believes that ownership of Company Common Stock by its non-employee
directors aligns the interests of such non-employee directors more closely with
the interests of the shareholders of the Company and that the Plan will also
assist the Company in attracting and retaining highly qualified persons to serve
as non-employee directors of the Company.
2. ELIGIBILITY AND SHARES ISSUED UNDER THE PLAN
Any person who is serving as a director of the Company and who is not an
employee of the Company or any of its subsidiaries shall be eligible to
participate under the Plan (hereinafter referred to individually as an "Eligible
Director" and collectively as the "Eligible Directors").
The total number of shares of Company Common Stock which may be issued
under the Plan (the "Stock") shall not exceed 100,000. The shares may be
authorized and unissued or issued and reacquired shares, as the Board of
Directors from time to time may determine. In the event of a recapitalization,
stock split, stock dividend, combination or exchange of shares, merger,
consolidation, reorganization, or any other change in the capital structure or
shares of the Company, the Board of Directors may make such equitable
adjustments, as they may deem appropriate, in the number and class of shares
authorized to be issued hereunder.
3. 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 Compensation (as hereinafter defined) may be deferred and deemed to have
accumulated under the Plan for the acquisition of Stock.
4. COMPENSATION ELECTIONS
Stock may be acquired only on the final business day in each Payment
Period (a "Price Date"); provided, however, that no Stock may be acquired by an
Eligible Director until a Price Date occurring on or after the second business
day after the 185th day following the date the Eligible Director delivers a
written election to receive Stock. Not later than May 1, 1995, an Eligible
Director may, by filing a written election with the Investor Relations/Corporate
Communications Department of the Company (the "Department"), direct the Company
to pay his or her Compensation for all Payment Periods ending on or after the
date of the election in such amounts of Stock as specified by such Eligible
Director. In such election an Eligible Director must elect to
- --------------------------------------------------------------------------------
A-1
<PAGE> 23
receive Stock equal to 25, 50, 75 or 100 percent of his or her Compensation. An
Eligible Director shall be deemed to have earned one-fourth of his or her
Compensation on each Price Date. As used herein, the term "Compensation" shall
mean only the annual retainer fee payable to an Eligible Director, as the same
may be adjusted from time to time, and shall not include any other fees or
retainers payable to an Eligible Director by the Company for his or her services
as a director or any portion of an Eligible Director's annual retainer fee which
is treated as Deferred Compensation under the Company Directors' Deferred
Compensation Plan.
After May 1, 1995, any new election, which may be an initial election or an
amendment to any prior election, may be made by an Eligible Director effective
as of the next January 1 thereafter for Payment Periods ending after such
January 1, by filing such written election with the Department prior to such
January 1; provided, however, that upon any such new election, no Stock may be
acquired by an Eligible Director with respect to Payment Periods following the
effective date thereof until a Price Date occurring on or after the second
business day after the 185th day following the date the Eligible Director
delivers his new written election to receive Stock. Only full shares of Stock
may be acquired. Any balance of the Compensation remaining after the Stock
acquisition will be carried forward to the next Payment Period. Upon termination
of a Director's participation in the Plan, any remaining balance of such
Director's Compensation retained under the Plan shall be paid to the Director in
cash.
Once an election by an Eligible Director to receive some or all of his or
her Compensation in Stock becomes effective pursuant to this Section 4, such
election shall remain in effect until the earlier of (i) the termination of the
Plan, (ii) a new election is effective as provided herein, or (ii) a written
notice of withdrawal from the Plan is given to the Department prior to January 1
of any year to be effective for Payment Periods ending after such January 1.
5. STOCK PURCHASE PRICE
The price of each share of Stock acquired pursuant to the Plan will be the
lesser of (i) the average closing prices for the Company Common Stock in the
NASDAQ Over-the-Counter National Market Issues report of the Midwest Edition of
the Wall Street Journal, during the 30-day period prior to the Price Date
applicable to the issuance of the Stock or (ii) the price so quoted on the Price
Date applicable to the issuance of the Stock, or on the last preceding day
quotations are available. The price for each share of Stock to be acquired with
respect to a Payment Period which ends prior to the date the Eligible Director
is entitled to acquire Stock as provided in Section 4 shall be the first Price
Date to occur on or after the date the Eligible Director is entitled to acquire
Stock as provided in Section 4. (i.e. The Price Date for all Stock to be
acquired for all Payment Periods ending in 1995 for an election filed in April
of 1995 would be Friday, December 29, 1995).
6. ISSUANCE OF STOCK
Certificates for Stock acquired pursuant to the Plan will be issued and
delivered as soon as practicable after such acquisition. Stock acquired under
the Plan will be issued only in the name of the Eligible Director. Upon
issuance, Stock will be deemed fully paid and non-assessable.
7. TERM OF THE PLAN
The Board of Directors of the Company reserves the right to amend or
terminate the Plan at any time provided, however, that without the approval of
the Company's shareholders, no alteration or amendment may be made which would
(i) increase the aggregate number of shares of Stock
- --------------------------------------------------------------------------------
A-2
<PAGE> 24
which may be issued under the Plan (except by operation of Section 2), (ii)
change the category of Directors eligible to acquire Stock under the Plan, or
(iii) materially increase the benefits to Eligible Directors under the Plan.
Notwithstanding the foregoing, the Plan may not be amended more than once every
six months, other than to comply with changes in the Internal Revenue Code of
1986, as amended, or the Employee Retirement Income Security Act, as amended, or
the rules thereunder, if such amendment would cause the Plan not to be in
compliance with Rule 16b-3 under the Securities Exchange Act of 1934. In any
event, the Plan shall terminate on the earlier of (i) 10 years after the
effective date of the Plan, or (ii) when all or substantially all of the Stock
has been issued pursuant to the Plan. If, at any time, Stock remains available
for issue but not in sufficient numbers to satisfy all then unfilled acquisition
requirements such shares shall be apportioned equally among the Eligible
Directors with then unfilled acquisition requirements.
8. ASSIGNMENT
No right or interest of any Eligible Director or his or her beneficiary (or
any person claiming through or under such Eligible Director or his or her
beneficiary) in any benefit or payment under the Plan shall be assignable or
transferable in any manner or be subject to alienation, anticipation, sale,
pledge, encumbrance or other legal process or in any manner be liable for or
subject to the debts or liabilities of such Eligible Director.
9. TERMINATION OF ELIGIBILITY
When an Eligible Director ceases to be a director of the Company because of
retirement, resignation, discharge, death, or for any other reason, or becomes
ineligible to participate in the Plan, written notice of withdrawal will be
considered as having been received from him or her prior to the close of
business on the day his or her service as a director of the Company ceases, or
on which he or she becomes ineligible to participate in the Plan, and any
elections made for the Payment Period during which his or her service ceases or
for future Payment Periods shall be deemed canceled. If an Eligible Director's
Compensation is interrupted by any legal process, written notice of withdrawal
from the Plan will be considered as having been received from him or her before
the close of business on the day the interruption occurs.
10. COMPLIANCE WITH RULE 16B-3
It is the intent of the Company that the Plan comply in all respects with
applicable provisions of Rule 16b-3 under the Securities Exchange Act of 1934.
Accordingly, if any provision of the Plan does not comply with the requirements
of said Rule 16b-3 as then applicable to any such Eligible Director, or would
cause any Eligible Director to no longer be deemed a "disinterested person"
within the meaning of Rule 16b-3, such provision shall be construed or deemed
amended to the extent necessary to conform to such requirements with respect to
such Eligible Director. In addition, the Board of Directors of the Company shall
have no authority to make any amendment, alteration, suspension, discontinuation
or termination of the Plan or take other action if and to the extent such
authority would cause an Eligible Director's transactions under the Plan not to
be exempt or any Eligible Director no longer to be deemed a "disinterested
person," under Rule 16b-3 under the Securities Exchange Act of 1934.
- --------------------------------------------------------------------------------
A-3
<PAGE> 25
11. ADMINISTRATION OF THE PLAN
The Treasurer of the Company, James B. Ford, 5300 Maryland Way, Brentwood,
TN 37027 or an alternate named by him, will administer the Plan until its
termination and make such interpretations and rulings as are necessary in
connection with its operations. Such administrator will not receive any
compensation from the assets of the Plan.
12. GOVERNING LAW
This plan shall be governed by and construed in accordance with the laws of
the State of Illinois.
13. SUCCESSORS
The provisions of this Plan shall bind and inure to the benefit of the
Company and its successors and assigns.
14. EFFECTIVE DATE OF PLAN
The Plan shall be effective as of February 28, 1995, subject to approval by
the shareholders of the Company. Any elections made prior to such shareholder
approval shall be contingent on such approval, and if such approval is not
obtained prior to April 30, 1995, all elections made pursuant to the Plan shall
be canceled.
15. REGULATORY COMPLIANCE AND LISTING
The issuance or delivery of any shares of Stock may be postponed by the
Company for such period as may be required to comply with any applicable
requirements under the federal securities laws, any applicable listing
requirements of any national securities exchange or any requirements under any
other law or regulation applicable to the issuance or delivery of such shares
including, without limitation, approval by all applicable regulatory commissions
and the Company shall not be obligated to issue or deliver any such shares if
the issuance or delivery thereof shall constitute a violation of any provision
of any law or any regulation of any governmental authority or any national
securities exchange.
16. NO RIGHT TO CONTINUED SERVICE
Nothing contained herein shall be construed to confer upon any Eligible
Director the right to continue to serve as a director of the Company or in any
other capacity.
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A-4
<PAGE> 26
EXHIBIT B
TEXT OF PROPOSED AMENDMENT TO THE ARTICLES OF INCORPORATION
TO (I) DELETE THE PROVISIONS FOR CUMULATIVE PREFERRED STOCK
AND 11 1/2% CUMULATIVE CONVERTIBLE PREFERENCE STOCK
AND (II) CREATE A CLASS OF PREFERRED STOCK
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RESOLVED, that Article Five of the Articles of Incorporation of the
Corporation be amended and restated in its entirety to read as follows:
ARTICLE FIVE
Paragraph 1: The aggregate number of shares which the corporation is
authorized to issue is 40,200,000, divided into two classes consisting of
200,000 shares designated as Preferred Stock, without par value, issuable in
series as hereinafter provided (hereinafter referred to as the "Preferred
Stock"), and 40,000,000 shares designated as Common Stock, without par value
(hereinafter referred to as the "Common Stock").
Paragraph 2: The preferences, qualifications, limitations, restrictions,
and the special or relative rights in respect of the shares of each class
hereinabove designated shall be as follows:
Section 1. Issuance of Preferred Stock in Series. The Preferred Stock
may be divided into and issued from time to time as shares of one or more
series, each series to be appropriately designated by a distinguishing
number, letter, or title prior to the issue of any shares thereof. The
Preferred Stock of all series shall be of the same class and of equal rank
and shall be identical except as to the terms that may be fixed by the Board
of Directors as hereinafter in this Section 1 provided. All shares of each
series shall be alike in every particular. Before any shares of Preferred
Stock of any series shall be issued, the Board of Directors shall fix and is
hereby expressly empowered to fix, in the manner provided by law, the
following relative rights and preferences, in respect of any or all of which
there may be variations between different series:
(i) The designation of such series and the number of shares
which shall constitute such series, which number may, unless the
authorized number of shares of such series shall be limited, be
increased or decreased (but not below the number of shares thereof,
if any, then outstanding) from time to time by like action of the
Board of Directors;
(ii) The rate of dividend;
(iii) The price at and the terms and conditions on which shares
may be redeemed;
(iv) The amount payable on shares of such series in the event of
any voluntary liquidation, dissolution or winding up of the affairs of
the corporation;
(v) The amount payable on shares of such series in the event of
any involuntary liquidation, dissolution or winding up of the affairs
of the corporation;
(vi) Any sinking fund provisions for the redemption or purchase
of shares;
(vii) The terms and conditions on which shares may be
converted, if the shares of any series are issued with the privilege of
conversion;
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B-1
<PAGE> 27
(viii) Any special voting rights providing for the required
approval of a specified proportion of the shares of any series for any
specified corporate action;
so far as not inconsistent with the provisions of this Article Five applicable
to all series of Preferred Stock. Shares of Preferred Stock shall be issued only
as full-paid and nonassessable shares.
All or any shares of any series of Preferred Stock at any time redeemed,
purchased or acquired by the corporation shall be canceled in accordance with
law and shall not be reissued as shares of the same series, but shall become
authorized and unissued shares of Preferred Stock undesignated as to series.
Section 2. Dividends. Out of any source lawfully available for the
payment of dividends, as and when declared by the Board of Directors, the
holders of Preferred Stock of each series shall be entitled to receive dividends
at, but not exceeding, the maximum dividend rate fixed for such series and
expressed in the certificates therefore, payable at the times fixed for such
series and expressed in the certificates therefore, and accruing from the date
of original issue of each share of such stock, before any dividends shall be
declared or paid or set apart for payment on the Common Stock and before any sum
shall be paid or set apart for the purchase or redemption of any Preferred
Stock.
After full dividends on Preferred Stock for all past dividend periods and
for the then current dividend period shall have been declared and paid, or set
apart for payment, then, and not otherwise, dividends may be declared and paid
out of any remaining source lawfully available for the payment thereof upon the
Common Stock, share and share alike, to the exclusion of the holders of
Preferred Stock.
Section 3. Liquidation, Dissolution or Winding Up. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the affairs
of the corporation, the holders of the Preferred Stock of each series shall be
entitled to receive in cash for each share thereof the amount fixed for the
respective series as herein provided, with an amount equal to any accrued and
unpaid dividends thereon to the date fixed for such payment, before any
distribution of the assets shall be made to the holders of Common Stock. After
such payment shall have been made in full to the holders of the outstanding
Preferred Stock or funds necessary for such payment shall have been set aside by
the corporation in trust for the account of the holders of the outstanding
Preferred Stock so as to be and continue available therefor, the remaining
assets of the corporation shall be divided and distributed among the holders of
the Common Stock ratably, share and share alike. If, upon such liquidation,
dissolution or winding-up, the assets of the corporation distributable aforesaid
among the holders of the Preferred Stock shall be insufficient to permit the
payment to them of said amount, the entire assets shall be distributed ratably
according to their respective interest among the holders of the Preferred Stock.
A consolidation or merger of the corporation or any purchase or redemption of
the stock of the corporation or any purchase or redemption of stock of the
corporation of any class shall not be regarded as a liquidation, dissolution or
winding up of the affairs of the corporation within the meaning of this Section
3.
Section 4. Common Stock. Subject to the foregoing provisions of this
Article Five, such dividends (payable in cash, stock or otherwise) as may be
determined by the Board of Directors may be declared and paid out of funds
legally available therefore upon the Common Stock of the corporation from time
to time.
In the event of any voluntary or involuntary liquidation, dissolution
or winding up of the affairs of the corporation, after payment to the holders of
Preferred Stock of the amounts to which they are
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B-2
<PAGE> 28
entitled as hereinbefore provided, the holders of the Common Stock shall be
entitled to share ratably in all assets then remaining subject to distribution
to the shareholders.
Section 5. No Pre-Emptive Rights. No holder of any shares of the capital
stock of the corporation shall be entitled as of right to purchase or subscribe
for any unissued stock of any class or any additional shares of any class to be
issued by reason of any increase of the authorized capital stock of this
corporation of any class, or bonds, certificates of indebtedness, debentures or
other securities convertible into stock of this corporation of any class, or
bonds, certificates of indebtedness debentures or other securities convertible
into stock of this corporation or carrying any right to purchase stock of any
class, but any such unissued stock or such additional authorized issue of any
stock or of other securities convertible into stock or carrying any right to
purchase stock, may be issued and disposed of pursuant to resolution of the
Board of Directors to such persons, firms, corporations or associations and upon
such terms as may be deemed advisable by the Board of Directors in the exercise
of its discretion.
Section 6. Voting Rights. Each outstanding share, regardless of class,
shall be entitled to one vote on each matter submitted to a vote at a meeting of
shareholders.
In all elections for directors every shareholder shall have the right to
vote, in person or by proxy, for the number of shares owned by him, for as many
persons as there are directors to be elected or to cumulate said shares, and
give one candidate as many votes as the number of directors multiplied by the
number of his shares shall equal, or to distribute them on the same principle
among as many candidates as he shall think fit.
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B-3
<PAGE> 29
EXHIBIT C
PROXY UNITED CITIES GAS COMPANY PROXY
ANNUAL MEETING OF SHAREHOLDERS, APRIL 28, 1995
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 28, 1995, 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 NON-EMPLOYEE DIRECTOR STOCK PLAN, AND THE AMENDMENT TO THE ARTICLES OF
INCORPORATION.
(Continued and to be signed on reverse side)
PLEASE MARK VOTE IN SQUARE USING DARK INK ONLY.
1. Election of Directors
Nominees: Dwight C. Baum, Dale A. Keasling, Dennis L. Newberry, II, Timothy W.
Triplett
/ / FOR / / WITHHOLD / / FOR ALL (Except Nominee(s)
written below)
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2. Proposal to approve a Non-Employee Director Stock Plan
/ / FOR / / AGAINST / / ABSTAIN
3. Proposed Amendment to the Articles of Incorporation
/ / FOR / / AGAINST / / ABSTAIN
4. In their discretion, on such other matters as may properly come before the
meeting.
PLEASE VOTE, SIGN, DATE AND RETURN
THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
Dated: _____________________ ,1995
Signature(s) _____________________
__________________________________
Please sign exactly as name appears
hereon. Joint owners should each
sign. Where applicable, indicate
official position or representative
capacity.
