<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
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:
<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>
ALATENN RESOURCES, INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
BERKOWITZ, LEFKOVITS, ISOM & KUSHNER
A Professional Corporation
- - --------------------------------------------------------------------------------
(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> 2
[To Be Printed on AlaTenn Resources, Inc. Letterhead]
March [ ], 1995
Dear Shareholder:
You are cordially invited to attend the 1995 annual meeting of
shareholders of AlaTenn Resources, Inc., which will be held at the offices of
the Company, 100 East Second Street, Sheffield, Alabama on Monday, May 1, 1995
at 10:00 a.m., Central Time. A notice of the annual meeting and the Company's
proxy statement, together with a proxy card, accompany this letter.
At the annual meeting, shareholders will be asked to elect three
directors, each to serve for a term of three years, to consider and vote upon a
proposal to amend the Company's Articles of Incorporation to eliminate certain
director liability to the extent permitted by Alabama law, and to ratify the
Board of Directors' appointment of Arthur Andersen LLP as independent
accountants. These matters are described in detail in the accompanying
material.
We hope that you will attend the meeting in person. However, whether
or not you plan to be personally present, we urge you to read the accompanying
proxy statement carefully and then complete, date and sign the enclosed proxy
card and return it promptly in the envelope provided herewith. This will ensure
representation of your shares if you are unable to attend the meeting.
Sincerely,
Jerry A. Howard
PRELIMINARY COPY
<PAGE> 3
ALATENN RESOURCES, INC.
POST OFFICE BOX 918
FLORENCE, ALABAMA 35631
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of AlaTenn Resources, Inc.:
Notice is hereby given that the annual meeting of shareholders of
AlaTenn Resources, Inc. (the "Company") will be held at the offices of the
Company, 100 East Second Street, Sheffield, Alabama on Monday, May 1, 1995 at
10:00 a.m., Central Time, for the following purposes:
1. To elect three directors.
2. To consider and vote upon a proposal to amend the Company's
Articles of Incorporation to eliminate certain director
liability to the extent permitted by Alabama law.
3. To ratify the Board of Directors' appointment of Arthur
Andersen LLP as independent accountants to audit the Company's
financial statements for the year 1995.
4. To transact such other business as may properly come before
the meeting.
The Board of Directors has fixed the close of business on March 17,
1995 as the record date for the determination of shareholders entitled to
notice of and to vote at the annual meeting and at any adjournment thereof. A
list of such shareholders will be available for inspection at the time and
place of the meeting.
By Order of the Board of Directors
George G. Petty
Vice President - Finance,
Chief Financial Officer and
Secretary-Treasurer
March [ ], 1995
IMPORTANT
YOU ARE REQUESTED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT
PROMPTLY IN THE ENVELOPE PROVIDED HEREWITH. IF YOU ATTEND THE MEETING, YOU
MAY, IF YOU WISH, WITHDRAW YOUR PROXY AND VOTE IN PERSON.
PRELIMINARY COPY
<PAGE> 4
ALATENN RESOURCES, INC.
POST OFFICE BOX 918
FLORENCE, ALABAMA 35631
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 1, 1995
GENERAL INFORMATION
This proxy statement is being furnished to the shareholders of AlaTenn
Resources, Inc. (the "Company") in connection with the solicitation of proxies
by the Board of Directors of the Company to be voted at the annual meeting of
shareholders to be held at the offices of the Company, 100 East Second Street,
Sheffield, Alabama on Monday, May 1, 1995 at 10:00 a.m., Central Time, and at
any adjournment of such meeting. This proxy statement and the accompanying
form of proxy are being first sent or given to shareholders on or about March
[ ], 1995. The 1994 Annual Report of the Company is being mailed to
shareholders with this proxy statement.
PURPOSE OF THE MEETING
At the annual meeting, the Company's shareholders will consider and
vote upon the election of three directors, a proposal to amend the Company's
Articles of Incorporation to eliminate certain director liability to the extent
permitted by Alabama law, and a proposal to ratify the Board of Directors'
appointment of Arthur Andersen LLP as independent accountants to audit the
Company's financial statements for the year 1995.
VOTING SECURITIES AND RECORD DATE
At the close of business on March 17, 1995, which has been fixed as
the record date for the annual meeting, the Company had outstanding 2,115,484
common shares, the only voting securities of the Company. Holders of record of
common shares outstanding on the record date will be entitled to one vote for
each share held of record on that date upon each matter presented to the
shareholders to be voted upon at the meeting. The presence, in person or by
proxy, of the holders of a majority of the common shares outstanding on the
record date is necessary to constitute a quorum at the annual meeting.
Common shares of the Company represented by properly executed proxies
received in time for the annual meeting, unless previously revoked, will be
voted at the annual meeting as specified by the shareholders on the proxies.
If no such specification is made, shares represented by such proxies will be
voted for the election as directors of the three nominees listed below, for
approval of the proposed amendment to the Company's Articles of Incorporation
and for ratification of the Board of Directors' appointment of Arthur Andersen
LLP to audit the Company's financial statements for the year 1995. A proxy may
be revoked by giving notice to the Company in writing prior to its use.
Abstentions and broker non-votes will be counted as present or represented at
the annual meeting for the purpose of determining whether a quorum exists.
However, abstentions and broker non-votes with respect to any matter voted upon
at the annual meeting will be treated as shares not voting for the purpose of
determining whether the requisite vote has been obtained.
<PAGE> 5
SOLICITATION OF PROXIES
The cost of soliciting proxies will be borne by the Company. In
addition to the use of the mails, proxies may be solicited personally or by
telephone by the directors, officers and employees of the Company without
additional compensation. Brokerage firms, nominees, fiduciaries and other
custodians will be requested to forward, at the Company's expense, soliciting
materials to the beneficial owners of the common shares of the Company held in
their names or in those of their nominees.
ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes: Class
I, Class II and Class III. Three Class III directors are to be elected at the
annual meeting to serve until the annual meeting of shareholders to be held in
1998 and until the election and qualification of their respective successors in
office. Each of the three nominees for election as a Class III director
currently is a member of the Board of Directors and previously was elected by
the shareholders. To be elected as a director, each nominee must receive the
affirmative vote of the holders of a majority of the votes cast at the meeting
with respect to such election, provided that a quorum is present at the time
the vote is taken. Abstentions and broker non-votes will have no impact on the
outcome of the vote. If any of the nominees listed below, each of whom has
indicated his willingness to serve as a director if elected, is unable or
declines to serve, the Board of Directors will name a substitute nominee, in
which event, pursuant to the accompanying proxy, votes will be cast for such
substitute nominee.
The following information is furnished with respect to each nominee
for election as a director and each director whose term will continue after the
annual meeting.
Name, Age, Service as a Director of the Company (a), Principal Occupation,
Positions and Offices, Other Directorships and Business Experience
NOMINEES FOR ELECTION AS DIRECTORS
Class III - Term Ending in 1998
JERRY A. HOWARD
Mr. Howard, age 52, has been a director of the Company since 1985. He
is Chairman of the Board, President and Chief Executive Officer of the
Company and of Alabama-Tennessee Natural Gas Company and is Chairman
of the Board or President of each of the Company's other subsidiaries.
Mr. Howard joined the Company as President in December 1984 and was
elected to the additional positions of Chief Executive Officer of the
Company and Chairman of the Board and Chief Executive Officer of
Alabama-Tennessee Natural Gas Company in May 1985, President of
Alabama-Tennessee Natural Gas Company in May 1986, Chairman of the
Board or President of the Company's other subsidiaries at various
times in the period from May 1985 to May 1994 and Chairman of the
Board of the Company in January 1991.
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<PAGE> 6
ROGER F. STEBBING
Mr. Stebbing, age 54, has been a director of the Company since 1992.
Mr. Stebbing is President and Chief Executive Officer of Marlboro
Enterprises, Inc., a company engaged in chemical plant engineering
design, construction and operation, and has served in such capacities
since 1976. He is also President and Chief Executive Officer of
Stebbing and Associates, Inc., an engineering consulting company, and
has served in such capacities since 1986.
JOHN P. STUPP, JR.
Mr. Stupp, age 44, has been a director of the Company since 1985. He
is the Executive Vice President and Secretary of Stupp Bros., Inc., a
structural steel fabrication company, and has served in such
capacities since December 1989 and January 1979, respectively. Since
January 1992, Mr. Stupp has also been President of Stupp Corporation,
a division of Stupp Bros., Inc. He is a director of Maverick Tube
Corporation.
DIRECTORS CONTINUING IN OFFICE
Class I - Term Ending in 1996(b)
EMILE A. BATTAT
Mr. Battat, age 57, has been a director of the Company since 1987.
Mr. Battat is a private investor. Mr. Battat served as the President
and Chief Executive Officer of Minemet, Inc., a company engaged in
international trade, from August 1978 until February 1994. He is a
director of Advanced Oxygen Technologies, Inc.
J. KENNETH SMITH
Mr. Smith, age 67, has been a director of the Company since 1982. Mr.
Smith was the Director - Government Relations of Oryx Energy Company,
a company engaged in oil and gas production, from May 1982 until his
retirement in April 1986.
Class II - Term Ending in 1997
RICHARD O. JACOBSON
Mr. Jacobson, age 58, has been a director of the Company since 1992.
Mr. Jacobson is President and Chief Executive Officer of Jacobson
Warehouse Company, Inc., a company engaged in public warehousing and
distribution, and has served in such capacities for 27 years. He is a
director of Advanced Oxygen Technologies, Inc., Allied Group, Inc.,
FelCorp Hotel Suites, Inc. and Heartland Express, Inc.
JEROME J. MCGRATH
Mr. McGrath, age 72, has been a director of the Company since 1988.
Mr. McGrath is Of Counsel to the law firm of Gallagher, Boland,
Meiburger & Brosnan
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<PAGE> 7
and has held such position since January 1988. From January 1978
through December 1987, Mr. McGrath served as President of the
Interstate Natural Gas Association of America.
HUGH J. MORGAN, JR.
Mr. Morgan, age 66, has been a director of the Company since 1988.
Mr. Morgan is Chairman of the Board of National Bank of Commerce of
Birmingham and has served in such position since February 1990. From
May 1987 to February 1990, he was Vice Chairman of the Board of said
bank. From September 1984 until his retirement in 1987, Mr. Morgan
served as Vice Chairman of the Board of Sonat Inc., a diversified
energy holding company, and as Chairman of the Board of Southern
Natural Gas Company, a natural gas pipeline company and a wholly owned
subsidiary of Sonat Inc.
- - ---------------
(a) Each director also has served as a director of Alabama-Tennessee
Natural Gas Company, a Company subsidiary, since first becoming a
director of the Company, except that Mr. Smith began serving as a
director of Alabama-Tennessee Natural Gas Company in 1975, preceding
the organization of the Company in 1982.
(b) The Board of Directors has not yet recruited a suitable replacement to
fill the vacancy existing in the Class I directors resulting from the
resignation of Simpson Russell, who was last elected by the
shareholders at the 1993 annual meeting and whose term was due to
expire at the 1996 annual meeting. Accordingly, no person has been
nominated by the Board of Directors for election as a Class I director
at the annual meeting, and the accompanying proxy will not be voted
for more than three nominees.
SECURITIES OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of common shares of the Company as of March 1, 1995 by (i) each of
the directors of the Company, three of whom are also the nominees for election
as directors at the annual meeting; (ii) one executive officer of the Company
who is not a director or nominee; and (iii) all directors and executive
officers of the Company as a group.
4
<PAGE> 8
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME BENEFICIALLY OWNED (a) OF CLASS (a)
---- ---------------------- ------------
<S> <C> <C>
Emile A. Battat 41,800 1.9%
Jerry A. Howard 31,327 (b) 1.4%
Richard O. Jacobson 54,600 2.5%
Jerome J. McGrath 1,800 *
Hugh J. Morgan, Jr. 22,600 1.0%
J. Kenneth Smith 2,080 (c) *
Roger F. Stebbing 800 *
John P. Stupp, Jr. 92,320 (d) 4.3%
George G. Petty 12,150 (e) *
All directors and executive
officers as a group 274,139 (f) 12.6%
</TABLE>
- - ---------------
*Less than 1% of class outstanding
(a) The above information is based upon information furnished by the
persons listed. For purposes of this table, the percentage of class
beneficially owned has been computed, in accordance with Rule
13d-3(d)(1) under the Securities Exchange Act of 1934, on the basis of
2,115,484 common shares outstanding on March 1, 1995, plus 55,750
common shares issuable pursuant to incentive stock options exercisable
on March 1, 1995 or within 60 days thereafter. Except as otherwise
indicated in the notes to this table, beneficial ownership includes
sole voting and investment power.
(b) Includes 1,801 shares held in Mr. Howard's account under the
Alabama-Tennessee Natural Gas Company Thrift Plan and 17,500 shares
issuable to Mr. Howard pursuant to incentive stock options exercisable
on March 1, 1995 or within 60 days thereafter.
(c) Includes 420 shares held under usufruct as to which Mr. Smith has
voting power but no dispositive power.
(d) Includes 90,000 shares held by Stupp Bros., Inc. as to which shares
Mr. Stupp shares voting power and investment power as a director and
executive officer of, and as a voting trustee of a voting trust which
owns 100% of the stock of, Stupp Bros., Inc.
(e) Includes 4,150 shares held jointly by Mr. Petty and his wife, and
8,000 shares issuable to Mr. Petty pursuant to incentive stock options
exercisable on March 1, 1995 or within 60 days thereafter.
(f) See notes (b)-(e) above. Includes 162 shares held by one officer of
the Company not listed above, 2,000 shares held by one officer of a
Company subsidiary who is not listed above and 12,500 shares issuable
to certain officers of the Company or a Company subsidiary who are not
listed above pursuant to incentive stock options exercisable on March
1, 1995 or within 60 days thereafter.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors to file initial reports of ownership
and reports of changes of ownership of the Company's common shares with the
Securities and Exchange Commission. Executive officers and directors are
required to furnish the Company with copies of Section 16(a) forms that they
file. Based upon a review of these filings and written representations from
the Company's directors and executive officers regarding the filing of such
reports, the Company believes that
5
<PAGE> 9
its directors and executive officers complied with all applicable Section 16(a)
filing requirements during 1994.
INFORMATION REGARDING BOARD OF DIRECTORS AND COMMITTEES
The Company's Board of Directors held seven meetings during 1994.
Each director attended at least 75% of the aggregate of the number of meetings
of the Board of Directors and the number of meetings of all committees on which
he served held in 1994 during the time he served as a director or as a member
of such committees.
The Board of Directors has three standing committees, the Executive
Committee, the Compensation Committee and the Audit Committee. The Executive
Committee, which is currently comprised of Jerry A. Howard, Hugh J. Morgan, Jr.
and J. Kenneth Smith, has the authority to act on matters during the intervals
between meetings of the Board of Directors. The Executive Committee met once
during 1994. The Compensation Committee, which is currently comprised of Emile
A. Battat, Richard O. Jacobson, Hugh J. Morgan, Jr., J. Kenneth Smith and John
P. Stupp, Jr., makes recommendations to the Board of Directors as to the
remuneration of all officers of the Company and its subsidiaries and
administers the AlaTenn Resources, Inc. 1990 Stock Option Plan (the "Stock
Option Plan") and the AlaTenn Resources, Inc. 1994 Key Employee Stock Incentive
Plan (the "Stock Incentive Plan"), including the selection of key employees to
participate and the determination of options and other awards to be granted
thereunder. The Compensation Committee met five times in 1994. The Audit
Committee, the current members of which are Jerome J. McGrath, Roger F.
Stebbing and John P. Stupp, Jr., has the responsibility of reviewing the
Company's financial results, the scope and result of audits and internal
accounting controls. The Audit Committee also recommends to the Board of
Directors the appointment of the Company's independent auditors. The Audit
Committee met two times in 1994.
Alabama-Tennessee Natural Gas Company, a subsidiary of the Company,
pays each director of said subsidiary who is not an employee of the Company or
any of its subsidiaries a fee of $1,000 per month and $750 for each meeting of
the Board of Directors of said subsidiary at which he is in attendance.
Alabama-Tennessee Natural Gas Company also reimburses each non-employee
director for travel and out-of-pocket expenses incurred in connection with
attending such meetings. Each of the directors of the Company also serves as a
director of Alabama-Tennessee Natural Gas Company.
Alabama-Tennessee Natural Gas Company has a deferred compensation plan
pursuant to which its non-employee directors may elect to defer receipt of all
or a portion of their monthly fees and meeting fees. Such election may be made
during certain periods of each year and the percentages specified in such
election may be changed prospectively once each year. Alabama-Tennessee
Natural Gas Company is to maintain certain bookkeeping accounts to which it is
to credit the amount of such fees which each non-employee director has elected
to defer for each year, together with interest. The balances in such accounts
are payable within 30 days after the earlier of the date specified by the
non-employee director and the date on which he ceases to be a non-employee
director.
Pursuant to the Company's Restricted Shares Compensation Plan for
Non-Employee Directors (the "Restricted Shares Plan"), which was approved by
the Board of Directors and the shareholders in 1991, the Company is to issue on
July 10 of each year 400 common shares of the Company to each person who was
serving as a non-employee director of the Company on the day before the
immediately preceding annual meeting of shareholders and who had been
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<PAGE> 10
elected to such position at least 11 months prior to such date. The aggregate
number of common shares of the Company that may be awarded pursuant to the
Restricted Shares Plan may not exceed 35,000; however, such number will be
adjusted to give proper effect to any change in the common shares of the
Company by reason of a recapitalization, stock split, stock dividend or other
change in capitalization affecting the common shares. The Restricted Shares
Plan provides that the common shares awarded to a non-employee director may not
be sold, assigned, transferred, pledged or otherwise encumbered until the
earliest of (i) the non-employee director's death, (ii) the non-employee
director's permanent and total disability or (iii) the date which is 12 months
from the date on which such common shares were issued.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
annual and long-term compensation for services in all capacities to the Company
and its subsidiaries for the years ended December 31, 1994, 1993 and 1992 of
those persons during 1994 who were (i) the Chief Executive Officer of the
Company and (ii) the only other executive officer of the Company whose salary
and bonus for the year ended December 31, 1994 exceeded $100,000 (such officers
are referred to herein as the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------- ------------
Awards
------
Other Restricted Securities
Name and Annual Stock Underlying All Other
Principal Position Year Salary Bonus Compensation(1) Awards(2) Options(2) Compensation
- - ------------------ ---- ------ ----- --------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Jerry A. Howard 1994 $394,375 $16,000 $ -- $17,500(2) 10,200 $34,066 (3)
Chairman of the 1993 379,375 15,400 -- -- 7,500 32,751
Board, President 1992 360,000 14,800 -- -- 5,000 27,513
and Chief Executive
Officer
George G. Petty 1994 $140,500 $ 5,680 $ -- -- 3,600 $12,440 (4)
Vice President- 1993 135,375 5,520 -- -- 3,000 11,988
Finance, Chief 1992 128,000 5,240 -- -- 2,000 9,952
Financial Officer
and Secretary-
Treasurer
</TABLE>
- - ---------------
(1) For the years ended December 31, 1994, 1993 and 1992, none of the
Named Executive Officers received perquisites or other personal
benefits in excess of the amounts required to be disclosed under the
revised rules on executive compensation disclosure adopted by the
Securities and Exchange Commission; accordingly, such amounts are
omitted from this column.
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<PAGE> 11
(2) The restricted stock award in the table represents an award granted
under the Stock Incentive Plan, and the dollar amount thereof is the
fair market value of the award on the date of grant, based upon the
closing price of the Company's common shares, as reported by NASDAQ,
on such date. As of December 31, 1994, Mr. Howard held 1,000
restricted shares with an aggregate value of $16,500, based upon the
closing price of the Company's common shares, as reported by NASDAQ,
on such date. Dividends are paid on the restricted shares during the
restriction period, which is one year from July 27, 1994, the date of
grant. Options granted during 1994 represent incentive stock options
granted under the Stock Incentive Plan. Options granted prior to 1994
represent incentive stock options granted under the Stock Option Plan.
See "Information Concerning Stock Options."
(3) Includes the following: (i) Alabama-Tennessee Natural Gas Company's
matching contributions to the Alabama-Tennessee Natural Gas Company
Thrift Plan in the amount of $9,240; (ii) Alabama-Tennessee Natural
Gas Company's contribution to the Alabama-Tennessee Natural Gas
Company Supplemental Executive Thrift Plan in the amount of $14,423;
and (iii) the payment by Alabama-Tennessee Natural Gas Company of life
insurance premiums in the amount of $10,403.
(4) Includes the following: (i) Alabama-Tennessee Natural Gas Company's
matching contributions to the Alabama-Tennessee Natural Gas Company
Thrift Plan in the amount of $8,430; and (ii) the payment by
Alabama-Tennessee Natural Gas Company of life insurance premiums in
the amount of $4,010.
INFORMATION CONCERNING STOCK OPTIONS
The following tables summarize certain information concerning grants
to and exercises by the Named Executive Officers during the year ended December
31, 1994 of options and the value of all unexercised options held by such
persons as of December 31, 1994.
OPTION GRANTS IN 1994
<TABLE>
<CAPTION>
Individual Grants
- - ------------------------------------------------------------------
Percentage Potential Realizable Value
of Total At Assumed Annual Rates
No. of Options of Stock Price Appreciation
Securities Granted to for Option Term (2)
Underlying Employees Exercise ---------------------------
Options in Fiscal Price Expiration
Name Granted(1) Year per share Date 5% 10%
- - ---- ---------- ---------- --------- ---------- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Jerry A. Howard 10,200 27% $17.50 7/27/04 $112,259 $284,475
George G. Petty 3,600 10% $17.50 7/27/04 $39,621 $100,403
</TABLE>
- - ---------------
(1) All options granted in 1994 are "incentive stock options" pursuant to
the Stock Incentive Plan and the applicable provisions of the Internal
Revenue Code. The exercise price of the options granted is equal to
the fair market value of the common shares on the date of grant, which
was July 27, 1994. Options are exercisable in whole or in part during
each relevant time period, with one-third exercisable one year after
grant, an additional one-third three years after grant and the
remaining one-third five years after grant. The options granted under
the Stock Incentive Plan are not
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<PAGE> 12
transferable by the optionee except by will or by the laws of descent
and distribution, and each option is exercisable during the lifetime
of the optionee, only by the optionee or, in the event of disability,
by the optionee's guardian or representative. All options terminate
three months after the optionee's termination of employment except in
case of disability, in which case the options terminate one year after
termination of employment. The number of options granted, the term
thereof and the manner in which options are to be exercised are
determined by the Compensation Committee.
(2) Potential realizable value is based upon the assumption that the
market price of the common shares of the Company will appreciate at
the compounded annual rate shown from the date of grant until the end
of the option term. The dollar amounts in the foregoing table have
been calculated based upon the requirements in the revised rules on
executive compensation disclosure adopted by the Securities and
Exchange Commission and do not reflect the Company's estimate of
future growth in the price of the Company's common shares.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Shares Year End Year End (1)
Acquired Value ----------- ------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- - ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jerry A. Howard 0 $ 0 17,500 15,200 $16,250 $ 0
George G. Petty 0 $ 0 8,000 5,600 $ 8,125 $ 0
</TABLE>
- - ---------------
(1) Such value is equal to the product of (i) the closing price of the
common shares of the Company on December 31, 1994 ($16.50 per share)
less the exercise price and (ii) the number of shares subject to the
in-the-money option.
RETIREMENT PLANS
The Company's subsidiary, Alabama-Tennessee Natural Gas Company,
maintains a non-contributory pension plan (the "Pension Plan") that applies to
all its employees and the employees of Ryder International Corp., another
Company subsidiary, including officers, meeting certain age and service
requirements. The Pension Plan provides benefits for retirement at age 65, for
early retirement and for disability retirement, and provides for death benefits
under certain circumstances. Any employee can qualify to become a participant
in the Pension Plan by completing one year of employment in which he has 1,000
or more hours of service. Under the Pension Plan, an employee of
Alabama-Tennessee Natural Gas Company who retires at age 65, which is the
normal retirement age provided in the Pension Plan, will be eligible to receive
a monthly benefit payable throughout his lifetime in an amount based on such
employee's compensation for the preceding five years and years of credited
service. An employee of Ryder International Corp. will be entitled to receive
a monthly benefit equal to the product of his years of credited service and a
fixed amount. The benefits payable under the Pension Plan are not
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<PAGE> 13
subject to Social Security or other offset. Alabama-Tennessee Natural Gas
Company also has a supplemental non-contributory pension plan (the
"Supplemental Executive Retirement Plan") for its eligible employees, including
officers. The Supplemental Executive Retirement Plan provides for benefit
payments in addition to those payable under the Pension Plan and is intended to
provide benefits that would otherwise be denied participants by reason of
certain Internal Revenue Code limitations on qualified plan benefits.
The following table illustrates the estimated maximum annual benefits
payable under the Pension Plan and the Supplemental Executive Retirement Plan
under the life annuity option, assuming retirement in 1994 at age 65, and
without considering any additional benefits for years of credited service in
excess of 30.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
FINAL AVERAGE
ANNUAL
COMPENSATION YEARS OF SERVICE
-----------------------------------------------------------------
5 10 15 20 25 30
------ ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
$100,000 9,295 18,590 27,885 37,180 46,475 55,770
150,000 14,295 28,590 42,885 57,180 71,475 85,770
200,000 19,295 38,590 57,885 77,180 96,475 115,770
250,000 24,295 48,590 72,885 97,180 121,475 145,770
300,000 29,295 58,590 87,885 117,180 146,475 175,770
350,000 34,295 68,590 102,885 137,180 171,475 205,770
400,000 39,295 78,590 117,885 157,180 196,475 235,770
450,000 44,295 88,590 132,885 177,180 221,475 265,770
500,000 49,295 98,590 147,885 197,180 246,475 295,770
</TABLE>
The compensation used to calculate the retirement benefits under the
Pension Plan and the Supplemental Executive Retirement Plan is to be determined
on the basis of salary and bonus as shown in the Summary Compensation Table.
As of December 31, 1994, Messrs. Howard and Petty had 10 1/12 years and 7 11/12
years, respectively, of credited service.
SEVERANCE COMPENSATION AGREEMENTS
The Company is a party to agreements with Messrs. Howard and Petty
which are intended to encourage each such officer to continue to carry out his
duties with the Company in the event of a potential change in control of the
Company. The agreements provide that if, following a change in control of the
Company (as defined in the agreements), the officer's employment with the
Company is terminated either by the Company for other than cause or permanent
disability or by such officer for good reason (as defined in the agreements),
then the officer will receive (a) a lump sum payment equal to three times the
greater of (i) the highest annual salary plus bonus paid by the Company to the
officer in the five fiscal years of the Company preceding the year in which the
termination of employment occurs and (ii) the officer's "annualized includable
compensation" as defined in the Internal Revenue Code, (b) certain other
payments respecting, among other things, the Company's retirement plans and
relocation costs or losses and (c) various welfare benefits for a specified
period of time after termination of employment. The Internal Revenue Code
imposes certain excise taxes on the recipient of, and limits the deductibility
of, certain compensatory payments made by a corporation to or for the benefit
of certain individuals if such payments are contingent upon a change in
ownership of a substantial portion of the assets, or a change in control, of
such corporation. The agreements limit the compensation payments thereunder to
amounts which can be paid by the Company
10
<PAGE> 14
without such adverse tax consequences. The agreements also provide that, while
the officer is employed by the Company for a period up to four years following
the change in control, such officer is to continue to receive (i) annual
compensation in an amount not less than the officer's annual fixed or base
salary as in effect immediately prior to the change in control, (ii) an annual
amount not less than the aggregate annual bonus or incentive pay made to the
officer for the calendar year preceding the year in which the change in control
occurs, and (iii) full participation in all employee retirement income and
welfare benefit policies and programs of the Company.
The Supplemental Executive Retirement Plan and the Alabama-Tennessee
Natural Gas Company Supplemental Executive Thrift Plan provide that upon a
change in control of the Company, participants therein whose employment
terminates may elect to receive immediately their benefits thereunder and
account balances therein, respectively. Under the Stock Option Plan and the
Stock Incentive Plan, in the event of a change in control of the Company all
outstanding options are to become fully exercisable and all restricted shares
are to become fully vested, and the value of the outstanding options and
restricted shares is to be cashed out, unless otherwise determined by the
Compensation Committee.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Compensation Committee, all the members of which are non-employee directors of
the Company. This program is designed to attract, retain and motivate
management and includes compensation that is tied to enhanced shareholder
value. The Compensation Committee is responsible for recommendations for base
salaries, salary increases and bonuses and for the administration of the
Company's stock incentive program, including the granting of stock options and
restricted stock awards.
Compensation Policies
In 1993, the Compensation Committee conducted a comprehensive review
of the Company's executive officers compensation program and concluded that
base salary and stock option awards would be the principal components of
compensation for the Company's executive officers. The Compensation Committee
concluded, however, that it would continue to review other forms of executive
compensation, and, in 1994, restricted stock awards were added as a form of
executive compensation to be utilized in appropriate situations.
Base salaries of the Company's executive officers are reviewed
annually and adjustments made on the basis of the Company's performance as
measured by certain financial and non-financial criteria, various survey
information respecting compensation of executive officers, compensation levels
for executive officers in a broad range of companies in the energy and
utilities industries, cost-of-living information and individual performance of
the particular executive officer. The Compensation Committee has not assigned
relative weights or values to any of such criteria. With respect to all
executive officers other than Mr. Howard, the Compensation Committee takes into
consideration a review of individual performance provided by Mr. Howard and
recommendations regarding adjustments of compensation provided by him. With
respect to the financial performance of the Company, the Compensation Committee
takes into consideration the Company's operating income, net income (both
inclusive and exclusive of one-time items), return on invested capital and
total shareholder return, both compared to the Edward D. Jones Diversified
Natural Gas Index and on a stand-alone basis. The Compensation Committee has
also concluded that in evaluating the Company's performance it will give
consideration to certain non-financial criteria including customer relations,
safety record,
11
<PAGE> 15
corporate citizenship and environmental awareness. A new executive's base
salary is determined on the basis of the responsibilities of the position, the
experience of the new executive and the competitive marketplace for management
talent. The Compensation Committee has also acknowledged that, in fixing base
salaries and adjustments, consideration is to be given to the cost of living in
the Sheffield, Alabama area as compared to the cost of living in larger
population areas where many companies engaged in the transportation, marketing
and distribution segments of the natural gas industry are located.
Stock options and restricted stock awards are the components of
executive compensation which are designed to motivate executives to improve the
long term performance of the Company's common shares in the market, to
encourage them to achieve superior results over the long term and to align
executive officer and shareholder interests. Decisions respecting the
restricted stock awards are made on the basis of the criteria referred to
above, and decisions respecting the grant of stock options are made using the
same criteria as well as the number of unexercised options held by key
employees. The Compensation Committee has also concluded that, where
appropriate, it will stagger the exercise dates for options and the restriction
period for restricted stock over a period of time so that the key employee
receiving stock option or restricted stock awards will be rewarded only if he
remains with the Company for an extended period and in order to emphasize the
significance of the Company's long term performance.
Compensation of Chief Executive Officer
In reaching its decisions respecting Mr. Howard's base salary in 1994
and stock option and restricted stock awards, the Compensation Committee
reviewed Mr. Howard's base salary, bonuses and stock option awards for 1991,
1992 and 1993, the changes in such compensation made during such period and
certain of the factors considered by the Company when those changes in
compensation were made. Additionally, the Compensation Committee took into
consideration the Company's performance measured by the Company's operating
income, net income (both inclusive and exclusive of one-time items), return on
invested capital and total shareholder return, both compared to the Edward D.
Jones Diversified Natural Gas Index and on a stand-alone basis, but did not
assign relative weights or values to any of such criteria in assessing the
Company's performance. The Compensation Committee noted that operating income
in 1993 was down 3.7% from 1992, net income including one-time items was up
57.2% from 1992, net income excluding one-time items was down 4.6%, return on
invested capital in 1993 including one-time items was 32.7% and excluding
one-time items was 20.1%, and total shareholder return in 1993 was a negative
6.4% as compared to total shareholder return of 15% reflected by the Edward D.
Jones Diversified Natural Gas Index. The Compensation Committee also took into
account that in 1992 total shareholder return for the Company was 53% while the
total shareholder return reflected by the Edward D. Jones Diversified Natural
Gas Index was 9.2%. In addition, the Compensation Committee considered surveys
of executive officer compensation, information respecting the compensation
levels for chief executive officers in the energy and utilities industries, Mr.
Howard's individual performance and the number of unexercised stock options
held by Mr. Howard. In reaching its conclusions respecting Mr. Howard's base
salary and stock incentive awards, the Compensation Committee concluded that,
notwithstanding certain negative factors, the criteria reviewed by it reflected
that overall the Company had achieved a strong financial and non-financial
performance in 1993 and noted Mr. Howard's leadership and his ability to
attract, manage and retain highly-qualified executive officers for the Company
and its subsidiaries. While acknowledging such performance and leadership, the
Compensation Committee concluded that Mr. Howard's base salary should be
increased by only 3.9% in light of increases put into effect over the past
several years. In further recognition of the Company's performance, reflected
by the above criteria, and Mr. Howard's
12
<PAGE> 16
individual performance and to further align Mr. Howard's interests with those
of the Company's other shareholders, the Compensation Committee awarded Mr.
Howard options to purchase 10,200 common shares exercisable in equal amounts
after one, three and five years and made a restricted stock award to him of
1,000 common shares. In taking such action, the Compensation Committee
concluded that by deferring the dates on which the options could first be
exercised and the restrictions on the 1,000 shares would lapse, additional
emphasis would be placed on Mr. Howard's remaining with the Company and on the
Company's long-term performance and the long-term performance of the Company's
common shares in the market. Mr. Howard, like all other employees of
Alabama-Tennessee Natural Gas Company, was also awarded a bonus in December
1994 equal to 4% of base salary. The Compensation Committee recommended this
award in light of the general practice of the Company to award bonuses equal to
such percent of base salary to all employees of Alabama-Tennessee Natural Gas
Company in December of each year and in light of the Company's financial
performance for the first nine months of 1994.
Members of the Compensation Committee
Emile A. Battat J. Kenneth Smith
Richard O. Jacobson John P. Stupp, Jr.
Hugh J. Morgan, Jr.
PERFORMANCE OF COMMON SHARES
The following graph compares the cumulative total return on investment
(the change in year-end stock price plus reinvestment of dividends), for each
of the last five fiscal years, assuming that $100 was invested on December 31,
1989 in each of (i) the Company, (ii) a group of stocks consisting of all
companies whose stocks are included in the S&P 500 Composite Index and (iii) a
group of stocks consisting of 21 diversified natural gas companies in the
Edward D. Jones Diversified Natural Gas Index. The companies included in such
industry index are, in addition to the Company, the following: Chesapeake
Utilities Corp.; The Columbia Gas System, Inc.; Consolidated Natural Gas Co.;
Eastern Enterprises; Energen Corp.; Enserch Corp.; Equitable Resources, Inc.; K
N Energy, Inc.; National Fuel Gas Co.; National Gas & Oil Co.; Noram Energy
Corp.; Oneok, Inc.; Pacific Enterprises; Pennsylvania Enterprises, Inc.;
Questar Corp.; South Jersey Industries, Inc.; Southwest Gas Corp.; Southwestern
Energy Co.; UGI Corp.; and Valley Resources, Inc.
<TABLE>
<CAPTION>
OTHER (USED ONLY FOR
COMPANY STOCK INDEX INDUSTRY GROUP INDEX BOWNE GRAPH 4)
------- ----------- -------------------- --------------------
<S> <C> <C> <C>
1989 100 100 100
1990 137 97 88
1991 162 126 75
1992 249 136 79
1993 233 150 90
1994 202 152 78
</TABLE>
CERTAIN TRANSACTIONS
During 1994, AlaTenn Credit Corp., a wholly owned subsidiary of the
Company, was a party to a loan agreement (the "Loan Agreement") with Third
National Bank in Nashville and The First National Bank of Florence, pursuant to
which such lenders agreed to make revolving loans from time to time up to a
commitment amount which was $10,000,000 throughout 1994 and which, upon
satisfying certain requirements, could have been increased to any amount up to
$20,000,000. Borrowings under the Loan Agreement were unsecured but were
guaranteed by the Company and each of its other subsidiaries. The maximum
principal balance outstanding under the Loan Agreement during 1994 and during
the period from January 1, 1995 until termination of the Loan Agreement on
January 20, 1995 was $6,562,132. During the period from January 1, 1994 until
termination of the Loan Agreement on January 20, 1995, AlaTenn
13
<PAGE> 17
Credit Corp. made interest payments in the aggregate amount of $121,826 and
paid fees in the aggregate amount of $26,696. On January 20, 1995, AlaTenn
Credit Corp. repaid the then-outstanding indebtedness under, and terminated,
the Loan Agreement and entered into a $20,000,000 revolving loan agreement with
a different bank. Simpson Russell, who served as a director of the Company
from 1986 until June 1994, is Chairman of the Board and Chief Executive Officer
of The First National Bank of Florence and is also the Chairman of the Board,
President and Chief Executive Officer of its holding company, First United
Bancorp, Inc.
PROPOSAL TO AMEND THE COMPANY'S
ARTICLES OF INCORPORATION
INTRODUCTION
The Board of Directors has approved and recommended unanimously that
the shareholders adopt an amendment to the Company's Articles of Incorporation
(the "Amendment") as permitted by the recently revised Alabama Business
Corporation Act. The proposed Amendment would add a new Section 9.2 to the
Articles of Incorporation which would eliminate the personal liability of the
Company's directors to the Company and its shareholders for money damages in
the event of certain breaches of fiduciary duty.
The proposed Amendment is consistent with Ala. Code Section
10-2B-2.02(b)(3), which is part of the new Alabama Business Corporation Act
effective January 1, 1995. That section permits Alabama corporations to
include in their articles of incorporation a provision eliminating or limiting,
subject to certain exceptions, the liability of directors to a corporation or
its shareholders for money damages for any action taken, or any failure to take
any action, as a director. The Alabama statutory provision is not unique.
Other states also include in their statutes provisions permitting corporations
to limit or reduce the personal risks inherent in serving as a director of a
corporation.
The statutory provision is designed generally to allow Alabama
corporations to limit the liability of directors in situations involving
unintentional errors or the directors' exercise of judgment and is not designed
to limit or eliminate liability in situations involving intentional wrongdoing
or bad faith. The Board of Directors believes that the proposed Amendment is
in the best interests of the Company and its shareholders in that it will make
the Company better able to attract and retain qualified directors. Because the
provisions for elimination of such liability under certain circumstances must
be contained in the Company's Articles of Incorporation, an amendment thereto
must be adopted by the shareholders.
BACKGROUND AND REASONS FOR THE PROPOSED AMENDMENT
Under Alabama law, directors of an Alabama corporation are deemed to
stand in a fiduciary relation to such corporation and its shareholders and are
to discharge their duties in good faith, with the care which an ordinarily
prudent person in a like position would exercise under similar circumstances
and in a manner the director believes to be in the best interests of the
corporation. In appropriate cases, a corporation or its shareholders may bring
an action to recover monetary damages from a director for breach of such
fiduciary duty and may also seek equitable relief enjoining or rescinding a
transaction resulting from such a breach. In recent years, directors of public
companies have increasingly become subject to substantial personal liability
for actions taken or omitted by them as directors, as well as to significant
expenses in defending such actions. The Alabama legislature apparently has
recognized the importance of
14
<PAGE> 18
allowing Alabama corporations to provide protection against the risk to the
personal resources of their directors occasioned by their service in such
positions. For example, Alabama corporations are allowed, subject to certain
limitations, to indemnify directors and officers against expenses, judgments,
settlement payments and other costs incurred in connection with litigation and
similar proceedings. Alabama corporations are also authorized to obtain
insurance to protect directors and officers from certain liabilities, whether
or not a corporation would have the power to indemnify its directors and
officers against such liabilities. However, the proliferation of litigation in
recent years has in large part made it difficult and expensive to obtain
directors' and officers' liability insurance. Over the past several years,
some insurance carriers have ceased to write directors' and officers' liability
insurance policies and other insurance carriers that have remained in the
business have curtailed the coverage they are willing to provide and in some
instances have significantly increased premiums.
Although the Company has to date been able to obtain insurance
coverage for directors on a basis which it believes acceptable, the Company has
experienced increases in premiums. So long as directors' and officers'
liability insurance remains available at a reasonable cost in relation to the
risk covered, the Company intends to maintain such insurance. The proposed
Amendment is designed to ensure that directors of the Company continue to have
protection to the fullest extent available under Alabama law, even if insurance
coverage decreases in the future or becomes unavailable.
The Company believes that the proposed Amendment will enable the
Company to continue to attract and retain qualified directors. The Board of
Directors believes that concerns over possible personal liability can hamper
the decision-making process to the detriment of the Company. The Board of
Directors further believes that adoption of the proposed Amendment will permit
the directors of the Company to exercise more freely their business judgment by
reducing their concern over potential personal liability with respect to their
decisions which may be challenged with the benefit of hindsight. The Board of
Directors believes that the level of scrutiny, diligence and care exercised by
directors of the Company will not be lessened by adoption of the proposed
Amendment. Generally, the Company has not experienced difficulty in recruiting
and retaining qualified directors, and the proposed Amendment is not being
proposed in response to any resignation or threat of resignation of any
director, or in response to any refusal by any director to continue to serve or
to stand for reelection. The Company is not aware of any pending or threatened
claim which would be covered by the proposed Amendment, and the Company is not
submitting the proposed Amendment for shareholder approval in anticipation of
any such claim. However, the Board of Directors believes that the Company
should take every step to ensure that the Company will be able to attract and
retain the best possible directors.
The proposed Amendment is consistent with the recently enacted
provision of the revised Alabama Business Corporation Act described in more
detail below. It should be noted that the present directors will benefit at
the potential expense of the Company and its shareholders by adoption of the
proposed Amendment, inasmuch as the proposed Amendment will reduce potential
monetary liability of directors with respect to conduct subsequent to the
effective date of the proposed Amendment.
DESCRIPTION AND EFFECT OF THE PROPOSED AMENDMENT
Ala. Code Section 10-2B-2.20(b)(3) authorizes Alabama corporations to
provide in their articles of incorporation a provision eliminating or limiting
the liability of a director to the corporation or its shareholders for money
damages for any action taken, or any failure to take any action,
15
<PAGE> 19
as a director, except liability for (i) the amount of a financial benefit
received by a director to which he or she is not entitled; (ii) an intentional
infliction of harm on the corporation or the shareholders; (iii) a violation of
Ala. Code Section 10-2B-8.33 (which imposes liability for unlawful
distributions); (iv) an intentional violation of criminal law; or (v) any
breach of such director's duty of loyalty to the corporation or its
shareholders. The text of the proposed Amendment, which would be added as a
new Section 9.02 to the Company's Articles of Incorporation, is as follows:
"9.02. A director of the Corporation shall have no
personal liability to the Corporation or its
shareholders for money damages for any action taken,
or any failure to take any action, as a director,
except liability for (i) the amount of any financial
benefit received by a director to which he or she is
not entitled; (ii) an intentional infliction of harm
on the Corporation or the shareholders; (iii) a
violation of Section 10-2B-8.33 of the Alabama
Business Corporation Act as the same now exists or
may hereafter be amended; (iv) an intentional violation
of criminal law; or (v) a breach of the director's
duty of loyalty to the Corporation or its shareholders.
If the Alabama Business Corporation Act, or any
successor statute thereto, is hereafter amended to
authorize the further elimination or limitation of the
liability of a director of a corporation, then the
liability of a director of the Corporation, in addition
to the limitations on liability provided herein, shall
be limited to the fullest extent permitted by the
Alabama Business Corporation Act, as amended, or any
successor statute thereto. No amendment to or repeal
of this Section 9.02 shall apply to or have any effect
on the liability or alleged liability of any director
of the Corporation for or with respect to any acts or
omissions of such director occurring prior to such
amendment or repeal."
If adopted, the proposed Amendment would eliminate the liability of
the Company's directors for money damages for breach of their fiduciary duty to
the fullest extent provided under Section 10-2B-2.20(b)(3) as described above.
The proposed Amendment would have the effect of eliminating directors'
liability for money damages arising from breaches of their fiduciary duty of
care. If adopted by the Company's shareholders, the proposed Amendment would
absolve directors of liability for money damages for negligence in the
performance of their duties. The amendment also provides that if the Alabama
Business Corporation Act is amended after the statutory amendment becomes
effective so as to permit the further limitation on or elimination of the
personal liability of directors, then the liability of the Company's directors
will be limited or eliminated to the fullest extent permitted by law, without
further approval of the Company's shareholders. The Company is not aware of
any proposed or anticipated changes to the Alabama Business Corporation Act
which would affect the personal liability of directors. Furthermore, an
amendment to or repeal of the proposed Amendment would not affect the
protection afforded a director for acts or omissions occurring prior to the
time of such amendment or repeal.
While the Board of Directors believes that the proposed Amendment is
in the best interests of the Company and its shareholders, the shareholders
should note that adoption of the proposed Amendment will abrogate certain
rights and remedies of shareholders that might otherwise exist under Alabama
law. The proposed Amendment will not, however, eliminate or change the duty of
care. It will only eliminate monetary damage awards occasioned by a breach
16
<PAGE> 20
of such duty. Thus, adoption of the proposed Amendment will not eliminate or
limit the right of the Company or any shareholder to seek an injunction or any
other non-monetary relief in the event of a breach of a director's fiduciary
duty, although in some circumstances injunctive relief may not be available as
a practical matter. The proposed Amendment will apply only to claims against a
director arising out of his or her role as a director and not in any other
capacity and will not apply to any liability which such director might incur
under the federal securities laws. The proposed Amendment does not eliminate
or limit liability of the Company's directors for breach of such directors'
duty of loyalty, intentional infliction of harm on the Company or its
shareholders, a knowing violation of law, an illegal dividend, distribution or
stock repurchase, or an improper personal benefit.
Because Ala. Code Section 10-2B-2.02 has been so recently enacted,
there has not been any judicial interpretation regarding its precise scope or
its validity. As a result, the potential outcome of any litigation arising out
of interpretations of Section 10-2B-2.02 cannot be predicted.
The directors of the Company acknowledge that they have a direct
personal interest in having the proposed Amendment adopted. If adopted, the
proposed Amendment may reduce the likelihood of derivative litigation against
directors and may discourage or deter shareholders or the Company from bringing
a lawsuit against directors for breach of their fiduciary duty even though such
an action, if successful, might otherwise have benefitted the Company and its
shareholders.
VOTE REQUIRED
Adoption of the proposed Amendment requires the affirmative vote of
the holders of a majority of the common shares cast for or against the proposed
Amendment at the meeting, provided that a quorum is present when the vote is
taken. Abstentions and broker non-votes will have no impact on the outcome of
the vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ADOPTION OF THE PROPOSED
AMENDMENT.
RATIFICATION OF APPOINTMENT OF AUDITORS
Subject to shareholder ratification, the Board of Directors, upon
recommendation of the Audit Committee, has appointed the firm of Arthur
Andersen LLP as independent accountants to audit the financial statements of
the Company for the year 1995. Arthur Andersen LLP has audited the Company's
financial statements for many years. A representative of Arthur Andersen LLP
will attend the annual meeting, will have an opportunity to make a statement,
and will be available to respond to appropriate questions. Ratification of the
appointment of auditors requires the affirmative vote of the holders of a
majority of the common shares cast thereon, provided that a quorum is present
when the vote is taken. Abstentions and broker non-votes will have no impact
on the outcome of the vote. If the shareholders do not ratify the appointment
of Arthur Andersen LLP, the selection of independent auditors will be
reconsidered by the Board of Directors.
17
<PAGE> 21
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL
TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS
INDEPENDENT ACCOUNTANTS TO AUDIT THE FINANCIAL STATEMENTS
OF THE COMPANY FOR THE YEAR 1995.
INFORMATION REGARDING CERTAIN BENEFICIAL OWNERS OF COMMON SHARES
The following table sets forth information regarding the beneficial
ownership of common shares of the Company as of March 1, 1995 by the only
persons known by the Company to be the beneficial owners of more than 5% of the
outstanding common shares of the Company.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENT OF
OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS (a)
- - ------------------- ------------------ ----------
<S> <C> <C>
Dimensional Fund Advisors Inc. (b) 18,800 (b) 5.5%
1299 Ocean Avenue
Suite 650
Santa Monica, California 90401
T. Rowe Price Associates, Inc. (c) 120,000 (c) 5.5%
100 E. Pratt Street
Baltimore, Maryland 21202
</TABLE>
- - ---------------
(a) For purposes of this table, the percentage of class beneficially owned
has been computed, in accordance with Rule 13d-3(d)(1) under the
Securities Exchange Act of 1934, on the basis of 2,115,484 common
shares outstanding on March 1, 1995, plus 55,750 common shares
issuable pursuant to incentive stock options exercisable on March 1,
1995 or within 60 days thereafter.
(b) Based upon a Schedule 13G filed with the Securities and Exchange
Commission and furnished to the Company by Dimensional Fund Advisors
Inc. ("Dimensional"), a registered investment adviser, reporting that
Dimensional is deemed to have beneficial ownership of said 118,800
common shares of the Company and that all of said common shares are
held in portfolios of DFA Investment Dimensions Group Inc., a
registered open-end investment company, or in series of the DFA
Investment Trust Company, a Delaware business trust, or the DFA Group
Trust and DFA Participation Group Trust, investment vehicles for
qualified employee benefit plans, all of which Dimensional serves as
investment manager. In said Schedule 13G, Dimensional has reported
that it has sole power to vote or direct the vote of 77,600 common
shares of the Company included in said 118,800 common shares listed
above, that persons who are officers of Dimensional also serve as
officers of DFA Investment Dimensions Group Inc. and The DFA
Investment Trust Company and, in such capacity, have the power to vote
or direct the vote of 41,200 common shares of the Company held by such
investment companies and included in the 118,800 common shares listed
above, and that Dimensional has the sole power to dispose or direct
the disposition of said 118,800 common shares of the Company.
Dimensional has disclaimed beneficial ownership of all such common
shares of the Company.
(c) Based upon a Schedule 13G filed with the Securities and Exchange
Commission and furnished to the Company by T. Rowe Price Associates,
Inc. ("Price Associates") and T. Rowe Price Small Cap Value Fund, Inc.
reporting that T. Rowe Price Small Cap Value Fund, Inc. has sole power
to vote or direct the vote of such common shares and that Price
Associates, which serves as investment adviser for T. Rowe Price Small
Cap Value Fund, Inc., has the power to dispose or direct the
disposition of such common shares. For purposes of the reporting
requirements of the Securities Exchange Act of 1934, Price Associates
is deemed to be a beneficial owner of such common shares;
18
<PAGE> 22
however, Price Associates has expressly disclaimed beneficial
ownership of all such common shares.
SHAREHOLDER PROPOSALS
Shareholder Proposals in the Company's Proxy Statement
In order for proposals by shareholders to be considered for inclusion
in the Company's proxy material relating to the 1996 annual meeting of
shareholders, such proposals must be received by the Company on or before
November [ ], 1995.
Shareholder Proposals to be Presented at Meetings
The Company's Bylaws provide that a shareholder who desires to propose
any business at a meeting of shareholders must give the Company written notice,
which must be received by the Company not later than ten days following the
date on which the Company first gives written or printed notice to shareholders
of such meeting, or, if the meeting is adjourned and the Company is required by
Alabama law to give notice of the adjourned meeting date, within five days
after the date on which the Company first gives written or printed notice to
shareholders of such adjourned meeting, setting forth (a) a brief description
of the business desired to be brought before the meeting and the reasons for
conducting such business at the meeting; (b) the name and address of the
shareholder who intends to propose such business; (c) a representation that the
shareholder is a holder of record of shares of the Company entitled to vote at
such meeting and intends to appear in person or by proxy at such meeting to
propose such business; and (d) any material interest of the shareholder in such
business. The Chairman of the meeting may refuse to transact any business
presented at any meeting without compliance with the foregoing procedure. The
ten-day period referred to above will expire ten days after the date on which
the accompanying notice of annual meeting of shareholders is first mailed to
shareholders of the Company.
Shareholder Nominations for Directors
The Company's Bylaws provide that a shareholder who desires to
nominate directors at a meeting of shareholders must give the Company written
notice, which must be received by the Company not later than ten days following
the date on which the Company first gives written or printed notice to
shareholders of such meeting, or, if the meeting is adjourned and the Company
is required by Alabama law to give notice of the adjourned meeting date, within
five days after the date on which the Company first gives written or printed
notice to shareholders of such adjourned meeting, setting forth (a) the name
and address of the shareholder who intends to make the nomination and of the
person or persons to be nominated; (b) a representation that the shareholder is
a holder of record of shares of the Company entitled to vote at such meeting
and intends to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice; (c) a description of all
arrangements or understandings between the shareholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the shareholder; (d) such other
information regarding each nominee proposed by such shareholder as would have
been required to be included in a proxy statement filed pursuant to the proxy
rules of the Securities and Exchange Commission had each nominee been
nominated, or intended to be nominated, by the Board of Directors; and (e) the
consent of each nominee to serve as a director of the Company if so elected.
The Chairman of the meeting may refuse to acknowledge the nomination of any
person if a shareholder has failed to comply with the foregoing procedure. The
ten-day period referred to above will expire ten days after the date on
19
<PAGE> 23
which the accompanying notice of annual meeting of shareholders is first mailed
to shareholders of the Company.
OTHER BUSINESS
The Board of Directors does not intend to bring any business before
the meeting other than that stated herein and is not aware of any other matters
that may be presented for action at the meeting. However, if any other matters
should properly come before the meeting, or any adjournments thereof, it is the
intention of the persons named in the accompanying proxy to vote on such
matters as they, in their discretion, may determine.
By Order of the Board of Directors
George G. Petty
Vice President - Finance, Chief
Financial Officer and
Secretary-Treasurer
March [ ], 1995
20
<PAGE> 24
APPENDIX A
ALATENN RESOURCES, INC. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
Emile A. Battat, Jerome J. McGrath and J. Kenneth Smith, or any of them,
proxies of the undersigned, with full power of substitution, to represent and
to vote all common shares of AlaTenn Resources, Inc. which the undersigned
would be entitled to vote at the annual meeting of shareholders of AlaTenn
Resources, Inc., to be held at the offices of the Company, 100 East Second
Street, Sheffield, Alabama, on Monday, May 1, 1995 at 10:00 a.m., Central Time,
and at any adjournment or postponement thereof, in the following manner:
1. ELECTION OF DIRECTORS.
[ ] FOR all nominees listed [ ] AUTHORITY WITHHELD to below
(except as otherwise vote for all nominees
below listed below) instructed
Jerry A. Howard, Roger F. Stebbing and John P. Stupp, Jr.
To withhold authority to vote for any nominee, write that nominee's name in the
space provided below.
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2. PROPOSAL TO AMEND THE COMPANY'S ARTICLES OF INCORPORATION.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be signed on other side)
<PAGE> 25
(Continued from other side)
3. PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP
AS INDEPENDENT ACCOUNTANTS OF THE COMPANY.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. IN THEIR DISCRETION, UPON SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING.
The Board of Directors recommends a vote FOR Items 1, 2 and 3. If
this proxy is properly signed and returned, the shares represented will be
voted FOR Items 1, 2 and 3 unless you otherwise specify herein.
Dated: 1995
--------------------------
------------------------------------
Signature
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Signature
PLEASE SIGN THIS PROXY EXACTLY AS YOUR
NAME APPEARS HEREON. WHEN SIGNING AS
EXECUTOR, ADMINISTRATOR, TRUSTEE,
CORPORATE OFFICER, ETC., PLEASE GIVE
FULL TITLE. IN CASE OF JOINT OWNERS,
EACH JOINT OWNER SHOULD SIGN.
Please Date, Sign and Return TODAY in the Enclosed Envelope.
No Postage Required if Mailed in the United States.
