<PAGE>
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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:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ATMOS ENERGY CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
ATMOS ENERGY CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] 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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO OF ATMOS ENERGY APPEARS HERE]
December 27, 1996
Dear Atmos Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders to be
held at the Four Seasons--Regent Hotel, 57 East 57th Street, New York, New
York 10022 on Wednesday, February 12, 1997, at 11:00 a.m. E.S.T.
The matters to be acted upon at the meeting are described in the attached
Notice of Annual Meeting and Proxy Statement. In addition, we will review with
you the affairs and progress of the Company during the past year and report
the results of operations for the first quarter.
Your participation at this meeting is very important -- regardless of the
number of shares you hold or whether you will be able to attend the meeting in
person. Please date, sign, and return the proxy in the enclosed envelope to
ensure that your shares are represented at the meeting.
On behalf of your Board of Directors, thank you for your continued support
and interest in Atmos Energy Corporation.
Sincerely,
[SIGNATURE OF CHARLES K. VAUGHAN]
Charles K. Vaughan
Chairman of the Board
[SIGNATURE OF ROBERT F. STEPHENS]
Robert F. Stephens
President and Chief Operating
Officer
<PAGE>
ATMOS ENERGY CORPORATION
P.O. BOX 650205
DALLAS, TEXAS 75265-0205
NOTICE OF ANNUAL MEETING
To the Shareholders:
The Annual Meeting of the Shareholders of Atmos Energy Corporation (the
"Company") will be held at the Four Seasons--Regent Hotel, 57 East 57th
Street, New York, New York 10022 on Wednesday, February 12, 1997, at 11:00
a.m., Eastern Standard Time, for the following purposes:
1. To elect four Class II directors for three-year terms expiring in 2000.
2. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Shareholders of record of the Company's Common Stock at the close of
business on December 16, 1996 will be entitled to notice of, and to vote at,
such meeting. The stock transfer books will not be closed.
By Order of the Board of Directors,
GLEN A. BLANSCET
Vice President, General Counsel
and Corporate Secretary
December 27, 1996
YOUR VOTE IS IMPORTANT
TO VOTE YOUR SHARES, PLEASE INDICATE YOUR CHOICES, SIGN AND DATE THE PROXY
CARD, AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE. YOU MAY VOTE IN
PERSON AT THE MEETING EVEN THOUGH YOU SEND IN YOUR PROXY.
<PAGE>
ATMOS ENERGY CORPORATION
P.O. BOX 650205
DALLAS, TEXAS 75265-0205
PROXY STATEMENT
SOLICITATION AND REVOCABILITY OF PROXIES
The proxy enclosed with this statement is solicited by the management of
Atmos Energy Corporation (the "Company") at the direction of the Company's
Board of Directors. These materials were first mailed to the Company's
shareholders on December 27, 1996.
Any shareholder giving a proxy has the power to revoke the proxy at any time
prior to its exercise. The Company expects to solicit proxies primarily by
mail, but directors, officers, employees, and agents of the Company may also
solicit proxies in person or by telephone or other electronic means. The cost
of preparing, assembling, and mailing the proxies and accompanying materials
for this Annual Meeting of Shareholders, including the cost of reimbursing
brokers and nominees for forwarding proxies and proxy statements to their
principals, will be paid by the Company. In addition, Morrow & Co., Inc.
("Morrow") will assist the Company in the solicitation of proxies. It is
estimated that the Company will pay approximately $3,500 in fees, plus
expenses and disbursements, to Morrow for Morrow's proxy solicitation
services.
COMMON STOCK INFORMATION; RECORD DATE
As of December 16, 1996, there were 16,118,336 shares of the Company's
Common Stock, no par value (the "Common Stock"), issued and outstanding, all
of which are entitled to vote. These shares constitute the only class of stock
of the Company issued and outstanding. As stated in the accompanying Notice of
Annual Meeting, only shareholders of record at the close of business on
December 16, 1996 will be entitled to vote at the meeting. Each share is
entitled to one vote.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners. The following table lists
the beneficial ownership, as of December 2, 1996, of the Company's Common
Stock with respect to each person known by the Company to be the beneficial
owner of more than five percent of such Common Stock.
<PAGE>
<TABLE>
<CAPTION>
AMOUNT OF PERCENTAGE OF
NAME AND ADDRESS COMMON STOCK OUTSTANDING
OF BENEFICIAL OWNER BENEFICIALLY OWNED COMMON STOCK
------------------- ------------------ -------------
<S> <C> <C>
Lee E. Schlessman....................... 1,019,534(a) 6.3%
1301 Pennsylvania St.
Suite 800
Denver, CO 80203
Employee Stock Ownership Plan........... 1,939,855 12.0%
and Trust for Employees of
Atmos Energy Corporation (the
"ESOP")(b)
</TABLE>
- --------
(a) Mr. Schlessman's shares are held in an irrevocable trust of which Mr.
Schlessman is the trustee and beneficiary.
(b) The ESOP permits Company employees who participate in the ESOP to exercise
voting power with respect to shares of the Company's Common Stock held in
their ESOP accounts. With respect to shares of Common Stock owned by the
ESOP that participating employees do not exercise such voting rights, the
ESOP Trust Committee, which is a committee appointed by the Board of
Directors currently consisting of certain officers of the Company, is
entitled to vote such shares in its discretion.
Security Ownership of Management. The following table lists the beneficial
ownership, as of December 2, 1996, of the Company's Common Stock with respect
to all directors and nominees for director of the Company, the executive
officers of the Company named in the Summary Compensation Table on page 13 of
this Proxy Statement, and all directors and executive officers of the Company
as a group.
<TABLE>
<CAPTION>
AMOUNT OF PERCENTAGE OF
COMMON STOCK OUTSTANDING
NAME BENEFICIALLY OWNED COMMON STOCK
---- ------------------ -------------
<S> <C> <C>
Travis W. Bain II............................. 1,087 (a)
Dan Busbee.................................... 3,071 (a)
J. Charles Goodman............................ 7,457 (a)
Don E. James.................................. 15,169 (a)
Mary S. Lovell................................ 13,283 (a)
Thomas C. Meredith............................ 85 (a)
Phillip E. Nichol............................. 4,500 (a)
James F. Purser............................... 16,864 (a)
Carl S. Quinn................................. 20,853 (a)
Lee E. Schlessman............................. 1,019,534(b) 6.3%
Robert F. Stephens............................ 43,463 (a)
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
AMOUNT OF PERCENTAGE OF
COMMON STOCK OUTSTANDING
NAME BENEFICIALLY OWNED COMMON STOCK
---- ------------------ -------------
<S> <C> <C>
Charles K. Vaughan............................ 94,709 (a)
Richard Ware II............................... 13,897 (a)
All directors and executive officers as a
group (15 individuals)....................... 1,276,664 7.9%
</TABLE>
- --------
(a) The percentage of shares beneficially owned by such individual does not
exceed one percent of the class so owned.
(b) Mr. Schlessman's shares are held in an irrevocable trust of which Mr.
Schlessman is the trustee and beneficiary.
ELECTION OF DIRECTORS
Pursuant to the Company's Bylaws, the Board of Directors is divided into
three classes, each of which class consists, as nearly as possible, of one-
third of the total number of directors constituting the entire Board of
Directors. Directors for Class II are to be elected at this Annual Meeting for
three-year terms expiring in 2000. Messrs. Carl S. Quinn and Richard Ware II
were last elected to three-year terms by the shareholders at the 1994 Annual
Meeting and have been nominated to continue serving as directors for three-
year terms ending in 2000. Mr. Robert F. Stephens was appointed by the Board
of Directors in February 1995, and Mr. Thomas C. Meredith was appointed by the
Board of Directors in October 1995. Messrs. Stephens and Meredith were
subsequently elected directors by the shareholders at the Company's 1996
Annual Meeting. The Board is nominating Messrs. Stephens and Meredith to
continue serving as Class II directors.
Mr. John W. Norris resigned from the Board of Directors on November 14,
1996. He was a Class I director whose term was scheduled to expire in 1999.
The Nominating Committee of the Board has not yet selected a person to fill
the vacancy created by Mr. Norris' resignation. The other directors listed on
the following pages will continue to serve in their positions for the
remainder of their current terms.
The names, ages, and biographical summaries of (i) the persons who have been
nominated to serve as directors of the Company and (ii) the directors who are
continuing in office until the expiration of their terms and the class in
which such nominee or other director has been designated are set forth in the
following table. Each of the nominees has consented to be a nominee and to
serve as a director if elected, and all votes authorized by the enclosed proxy
will be cast FOR all of the nominees. In order to be elected as a director,
the Company's Bylaws require a nominee to receive the vote of a majority of
all outstanding shares of the Company's Common Stock entitled to vote and
represented in person or by proxy at a meeting of shareholders at which a
quorum is present.
3
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE FOLLOWING
NOMINEES:
<TABLE>
<CAPTION>
YEAR IN WHICH
FIRST BECAME A CLASS DESIGNATION
NAME; PRINCIPAL OCCUPATION OR EMPLOYMENT DIRECTOR AND YEAR OF
DURING PAST FIVE YEARS; OTHER DIRECTORSHIPS AGE OF THE COMPANY EXPIRATION OF TERM
- ------------------------------------------- --- -------------- ------------------
<S> <C> <C> <C>
Thomas C. Meredith....................... 55 1995 Class II
President of Western Kentucky University 1997
in Bowling Green, Kentucky since 1988.
Carl S. Quinn............................ 65 1994 Class II
General Partner of Quinn Oil Company, 1997
Ltd. in New York, New York since May
1992. Formerly Chairman of the Board,
President and Chief Executive Officer of
Interstate Natural Gas Company in
Houston, Texas from January 1992 until
December 1994; Chairman of the Board and
Chief Executive Officer of Arkla
Exploration Company from October 1989
until January 1992. Also director of
Coho Energy, Inc. in Dallas, Texas.
Robert F. Stephens....................... 48 1995 Class II
President and Chief Operating Officer of 1997
the Company in Dallas, Texas since
February 1995. Formerly Executive Vice
President--Corporate Operations of the
Company from May 1989 until February
1995.
Richard Ware II.......................... 50 1994 Class II
President of Amarillo National Bank in 1997
Amarillo, Texas since 1981. Also
director of The Coca-Cola Bottling Group
(Southwest), Inc. and member of the
Board of Trustees of Southern Methodist
University in Dallas, Texas.
</TABLE>
4
<PAGE>
The following persons are directors of the Company who will be continuing in
office until the expiration of their terms as set forth below.
<TABLE>
<CAPTION>
YEAR IN WHICH
FIRST BECAME A CLASS DESIGNATION
NAME; PRINCIPAL OCCUPATION OR EMPLOYMENT DIRECTOR AND YEAR OF
DURING PAST FIVE YEARS; OTHER DIRECTORSHIPS AGE OF THE COMPANY EXPIRATION OF TERM
- ------------------------------------------- --- -------------- ------------------
<S> <C> <C> <C>
Travis W. Bain II........................ 62 1988 Class I
President of Bain Enterprises, Inc. in 1999
Plano, Texas since November 1991. Also
director of Delta Industries, Inc. in
Jackson, Mississippi.
Dan Busbee............................... 63 1988 Class I
Attorney and shareholder with Locke 1999
Purnell Rain Harrell (A Professional
Corporation) in Dallas, Texas since
1972.
*******************************************************************************************
Phillip E. Nichol........................ 61 1985 Class III
Senior Vice President and Branch Manager 1998
of PaineWebber Incorporated in Fort
Worth, Texas since May 1996. Formerly
Senior Vice President and Branch Manager
of PaineWebber Incorporated in
Cleveland, Ohio from February 1995 to
May 1996; Senior Vice President and
Manager of Kidder Peabody & Co. in
Cleveland, Ohio from September 1994
until February 1995 and Vice President
and Manager of Kidder Peabody & Co. in
Toledo, Ohio from May 1992 until
February 1995; Vice President and
Manager of Dean Witter Reynolds Inc. in
Amarillo, Texas from February 1988 until
June 1992.
James F. Purser.......................... 46 1995 Class III
Executive Vice President and Chief 1998
Financial Officer of the Company in
Dallas, Texas since 1989.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
YEAR IN WHICH
FIRST BECAME A CLASS DESIGNATION
NAME; PRINCIPAL OCCUPATION OR EMPLOYMENT DIRECTOR AND YEAR OF
DURING PAST FIVE YEARS; OTHER DIRECTORSHIPS AGE OF THE COMPANY EXPIRATION OF TERM
- ------------------------------------------- --- -------------- ------------------
<S> <C> <C> <C>
Lee E. Schlessman........................ 70 1994 Class III
President of Dolo Investment Company in 1998
Denver, Colorado since February 1994.
Formerly Chairman of the Board and Chief
Executive Officer of Greeley Gas Company
in Denver, Colorado from December 1992
until December 1993; Chairman of the
Board, President and Chief Executive
Officer of Greeley Gas Company in
Denver, Colorado from March 1976 until
December 1992. Also President of the
Board of the Rocky Mountain American
Automobile Association in Denver,
Colorado; Director of Wells Fargo Bank
in Denver, Colorado; and Treasurer of
the Board of The Scottish Rite
Foundation in Denver, Colorado.
Charles K. Vaughan....................... 59 1983 Class III
Chairman of the Board of the Company in 1998
Dallas, Texas since June 1994. Formerly
Chairman of the Board and Chief
Executive Officer of the Company in
Dallas, Texas from March 1993 until June
1994; Chairman of the Board, President
and Chief Executive Officer of the
Company from October 1983 until March
1993.
</TABLE>
PENDING MERGER WITH UNITED CITIES GAS COMPANY
At a Special Meeting held on November 12, 1996, the shareholders of the
Company ratified and approved an Agreement and Plan of Reorganization, dated
as of July 19, 1996, as amended by Amendment No. 1 to Agreement and Plan of
Reorganization, dated as of October 3, 1996 (the "Reorganization Agreement"),
providing for the merger (the "Merger") of United Cities Gas Company, an
Illinois and Virginia corporation ("United Cities"), with and into the
Company. The shareholders of United Cities also ratified and approved the
Reorganization Agreement and approved the Plan of Merger and the Merger on
such date. Consummation of the Merger is subject to several additional
conditions and events, including the receipt of certain regulatory and other
approvals. While the Company expects that the Merger will be consummated, the
Company cannot predict whether the Merger will occur prior to the Annual
Meeting, if at all.
6
<PAGE>
If the Merger is consummated, the Company's Board of Directors will be
increased by four additional members. By approving the Plan of Merger, the
Company's shareholders have approved such increase in the number of directors
and have elected four members of United Cities' Board of Directors (the
"United Cities Designees") to fill the four new directorships as of the
effective time of the Merger. The United Cities Designees were proposed by
United Cities and nominated by the Nominating Committee of the Company's Board
of Directors and the Board of Directors.
One of the United Cities Designees, Mr. Richard W. Cardin, has been elected,
subject to the consummation of the Merger, to serve as a director in Class II,
which is the class standing for election at the Annual Meeting. Accordingly,
if the Merger is consummated prior to the Annual Meeting and Mr. Cardin has
taken office as a director serving in Class II, then his term will expire at
the Annual Meeting. In such event, the Board of Directors intends to appoint
him to continue to serve in such class following the Annual Meeting, and he
will stand for re-election by the shareholders at the 1998 Annual Shareholders
Meeting. Certain information concerning Mr. Cardin, including a biographical
summary, is included in this Proxy Statement in the following table. If the
Merger is consummated after the Annual Meeting, then Mr. Cardin will join the
Board at that time and will become a director serving in Class II with a term
expiring in 2000.
Certain information, including biographical summaries, class designations
and the year of expiration of term, concerning the three additional United
Cities Designees--Messrs. Gene C. Koonce, Vincent J. Lewis, and Thomas J.
Garland--is included in this Proxy Statement in the following table. If the
Merger is consummated, these United Cities Designees will commence to serve as
directors in the classes indicated for the remainder of their respective
terms.
<TABLE>
<CAPTION>
CLASS DESIGNATION
NAME; PRINCIPAL OCCUPATION OR EMPLOYMENT AND YEAR OF
DURING PAST FIVE YEARS; OTHER DIRECTORSHIPS AGE EXPIRATION OF TERM*
------------------------------------------- --- -------------------
<S> <C> <C>
Richard W. Cardin...................................... 60 Class II
Consultant and private investor since 1995. Formerly
office managing partner with Arthur Andersen, LLP in
Nashville, Tennessee from 1980 until 1994.
Gene C. Koonce......................................... 64 Class I
Chairman of the Board, President and Chief Executive 1999
Officer of United Cities in Brentwood, Tennessee since
May 1996. Formerly President and Chief Executive
Officer of United Cities in Brentwood, Tennessee from
October 1978 until May 1996. Also director of First
American Corporation in Nashville, Tennessee and of
the American Gas Association.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
CLASS DESIGNATION
NAME; PRINCIPAL OCCUPATION OR EMPLOYMENT AND YEAR OF
DURING PAST FIVE YEARS; OTHER DIRECTORSHIPS AGE EXPIRATION OF TERM*
------------------------------------------- --- -------------------
<S> <C> <C>
Vincent J. Lewis....................................... 52 Class I
Senior Vice President at Legg Mason Wood Walker, Inc. 1999
in Rutherford, New Jersey since 1987.
Thomas J. Garland...................................... 62 Class III
Executive in Residence and Distinguished Service 1998
Professor of the Civic Arts at Tusculum College in
Greeneville, Tennessee and consultant since 1990. Also
director of Peoples Community Bank and of Johnson City
Medical Center in Johnson City, Tennessee.
</TABLE>
- --------
*The United Cities Designees will become directors of the Company upon the
consummation of the Merger.
It is a condition to United Cities' obligation to consummate the Merger that
the Company enter into an employment agreement with Mr. Koonce pursuant to
which, among other things, he will serve as an officer of the Company and Vice
Chairman of the Board for a period of six months following the Merger. The
employment agreement provides that Mr. Koonce will receive an annual base
salary, and will receive coverage under, or participation in, all of the
Company's executive and other employee welfare, benefit, and similar plans on
the same basis as other Company executives. In addition, the employment
agreement provides that Mr. Koonce will receive a one-time retention payment
of $60,000 payable six months after the consummation of the Merger, subject to
certain conditions. Mr. Koonce's employment may be terminated by the Company
during the term of the employment agreement only for "cause" (as defined
therein).
It is a further condition to United Cities' obligation to consummate the
Merger that the Company enter into employment agreements with Mr. James B.
Ford, who is currently the Senior Vice President and Treasurer of United
Cities, and Mr. Thomas R. Blose, Jr., who is currently the Senior Vice
President-Operations and Engineering of United Cities. The employment
agreements provide that Mr. Ford will be the Senior Vice President-Finance of
the Company and Mr. Blose will be President of the United Cities operating
division of the Company and Vice President of the Company for a period of
three years following the Merger. Both individuals will also receive coverage
under, or participation in, all of the Company's executive and other employee
welfare, benefit, and similar plans on the same basis as other similarly
situated Company executives, as well as be entitled to a $60,000 retention
payment payable six months after the consummation of the Merger, subject to
certain conditions. The employment agreements may not be terminated by the
Company except for "cause" (as defined therein).
8
<PAGE>
CERTAIN BUSINESS RELATIONSHIPS
Mr. Schlessman and members of his immediate family are partners in various
partnerships that are mortgage lenders to an unaffiliated third party who
purchased several real property holdings of the partnerships in Colorado and
Kansas. The Company leases those real properties from the third party for
office or warehouse space in its Greeley Gas Company division operations. The
partnerships continue to hold a mortgage interest in the properties.
Mr. Ware is the president and a shareholder of Amarillo National Bank,
Amarillo, Texas, which bank provides a $10 million short-term line of credit
to the Company, serves as a depository bank for the Company, and is trustee
for the Company's Restricted Stock Grant Plan. In addition, the bank, as
trustee, is the holder of a $10 million master note issued by the Company's
wholly owned subsidiary, Enermart, Inc., and guaranteed by the Company.
THE BOARD OF DIRECTORS: COMMITTEES, MEETINGS, AND DIRECTORS' FEES
Standing Committees. The Company has certain standing committees, each of
which is described below.
The Executive Committee consists of Messrs. Stephens and Vaughan. (Mr.
Norris was a member of the Executive Committee until his resignation in
November 1996.) Mr. Vaughan serves as chairman of the committee. In accordance
with the Bylaws of the Company, the Executive Committee has, and may exercise,
all of the powers of the Board during the intervals between the Board's
meetings, subject to certain limitations and restrictions as set forth in the
Bylaws or as may be established by resolution of the Board of Directors from
time to time. The Executive Committee held no meetings during the last fiscal
year.
The Audit Committee consists of Messrs. Bain, Busbee, Meredith, Schlessman,
and Ware. Mr. Busbee serves as chairman of the committee. The Audit Committee
reviews the scope and procedures of internal auditing work, the results of
independent audits, and the accounting policies of management, and it
recommends to the Board the appointment of the Company's outside auditors.
During the last fiscal year, the Audit Committee held three meetings.
The Human Resources Committee consists of Messrs. Bain, Busbee, Nichol, and
Quinn. (Mr. Norris was a member and chairman of the committee until his
resignation in November 1996.) This committee reviews and makes
recommendations to the Board of Directors regarding compensation for officers
of the Company. In addition to compensation matters, the committee determines,
develops, and makes recommendations to the Board
9
<PAGE>
regarding benefit packages, special bonus or stock plans, severance
agreements, and succession planning with respect to the Company's officers.
During the last fiscal year, the Human Resources Committee held four meetings.
The Nominating Committee consists of Messrs. Meredith, Nichol, Quinn,
Schlessman, and Ware. Mr. Nichol serves as chairman of the committee. This
committee selects candidates for consideration by the full Board to fill any
vacancies on the Board which may occur from time to time. The Nominating
Committee held one meeting during the last fiscal year. The Nominating
Committee also considers sound and meritorious nomination suggestions for
directors from shareholders. All letters of recommendation for nomination
should be sent to the Secretary of the Company at the Company's headquarters
and should include, in addition to the nominee's name and address, a listing
of the nominee's background and qualifications. A signed statement from the
nominee should accompany the letter of recommendation indicating that he or
she consents to being considered as a nominee and that, if nominated by the
Board and elected by the shareholders, he or she will serve as a director.
The Work Session/Annual Meeting Committee consists of Messrs. Bain, Nichol,
and Ware. Mr. Bain serves as chairman of the committee. This committee plans
the meeting and agenda for the special meeting of the Board held each year for
the purpose of focusing on long-range planning and corporate strategy issues
and selects the site for the Annual Shareholders Meeting. During the last
fiscal year, the Work Session/Annual Meeting Committee held two meetings.
Other Committees. In addition to the standing committees described above,
the Board of Directors has formed an executive search committee for the
purpose of selecting a candidate to fill the vacant position of Chief
Executive Officer for the Company. The search committee has commenced its
search, and the Company anticipates filling that position in the near future.
Attendance at Board Meetings. During the last fiscal year, the Board of
Directors of the Company held nine meetings. During fiscal year 1996, each
director attended at least seventy-five percent of the aggregate of (a) all
meetings of the Board and (b) all meetings of the committees of the Board on
which such director served.
Directors' Fees. As compensation for serving as a director during fiscal
year 1996, each of the non-employee directors received an annual retainer of
$16,000 and a fee of $800 per day for attendance at each Board meeting
(excluding telephone conference meetings). Non-employee directors were also
paid $800 per day for their attendance at each committee meeting that is held
on a day different from a Board meeting. The annual
10
<PAGE>
retainer will be increased to $18,000 commencing on January 1, 1997, and the
meeting fees were increased to $1,000 per meeting commencing on November 12,
1996. The fee paid for participation in a telephone conference meeting of the
Board or a committee is one-half of the regular meeting fee. Commencing on
October 1, 1996, committee chairmen were paid a meeting fee while engaged in
special activities relating to their committee assignments. Directors may
elect to defer all or a part of their compensation earned as a director until
the earlier of a date specified by the director or the date he or she ceases
to be a director. The Company will pay interest on amounts deferred at a rate
equal to 100 basis points above the New York Federal Reserve Bank discount
rate in effect as of each January 15.
In November 1994, the Board adopted the Outside Directors Stock-for-Fee
Plan, which plan was approved by the shareholders of the Company in February
1995. The plan permits non-employee directors to receive all or part of their
annual retainer and meeting fees in stock rather than in cash. An election by
a director to receive his or her fees in stock does not alter the amount of
fees payable but results in the deferral of payment of the stock portion of
the fees until after the end of each quarter in which the fees were earned.
The number of shares of Common Stock issued at such time will be equal to (a)
the dollar amount of the fees to be paid in stock divided by (b) the fair
market value of the Company's Common Stock on the last day of the applicable
quarter. The fair market value is the closing price of a share of Common Stock
of the Company as reported by the New York Stock Exchange. Only whole numbers
of shares are issued; fractional shares are paid in cash.
Other Compensation for Non-Employee Directors. The Board has adopted a
Retirement Plan for Non-Employee Directors, which covers non-employee
directors who have served on the Board (including service prior to January 1,
1994 on the Board of Greeley Gas Company) for at least five years and who have
attained age 65. Upon retirement, a participating non-employee director is
entitled to an annual pension benefit equal to the sum of (a) 50% of the
amount of the participant's final annual retainer plus (b) 10% of the amount
of the participant's final annual retainer for each year of service on the
Board in excess of five years. In no event may the annual pension benefit
exceed 100% of a director's final annual retainer. The pension benefit is
payable for the participant's life. The plan is unfunded.
In addition, the Company provides business travel accident insurance for
non-employee directors and their spouses. The policy provides $100,000
coverage to directors and $50,000 coverage to their spouses per accident while
traveling on Company business.
Other Arrangements with Mr. Vaughan. Effective October 1, 1994, Mr. Vaughan
retired as an officer and employee of the Company and entered into a five-year
Consulting Agreement with the Company. Under the
11
<PAGE>
agreement, Mr. Vaughan performs such consulting services as the Board may
request from time to time. The agreement provides for future payments to Mr.
Vaughan, in consideration for his consulting services, of $240,000 during
fiscal year 1997, $160,000 during fiscal year 1998, and $100,000 during fiscal
year 1999. During fiscal year 1996, Mr. Vaughan received $280,000 in payment
for his services under the Consulting Agreement. The payments are made in
semi-annual installments payable on October 1 and April 1 of each fiscal year.
The term of the agreement may be extended for additional one-year periods upon
the agreement of the Board and Mr. Vaughan.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and persons who own more than ten percent of
the Company's Common Stock to file with the Securities and Exchange Commission
and the New York Stock Exchange initial reports of ownership and reports of
changes in their ownership in the Company's Common Stock. Executive officers,
directors, and greater-than-ten-percent shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file. Based solely on a review of the copies of such reports furnished to the
Company and written representations that no Forms 5 were required, the Company
believes that, during the last fiscal year, all of the Company's executive
officers, directors, and greater-than-ten-percent beneficial owners were in
compliance with the Section 16(a) filing requirements.
12
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth the compensation
paid by the Company for each of the Company's last three completed fiscal
years to Mr. Stephens and the Company's four most highly compensated executive
officers other than Mr. Stephens.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------ ------------
RESTRICTED
OTHER ANNUAL STOCK ALL OTHER
SALARY BONUS (A) COMPENSATION AWARDS (B) COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($) ($)
- --------------------------- ---- ------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Robert F. Stephens....... 1996 263,436 140,100 (c) 99,375 7,601(d)
President and Chief
Operating 1995 240,845 121,900 (c) 0 7,388
Officer 1994 215,361 72,900 (c) 305,000 14,073
James F. Purser.......... 1996 219,383 106,400 (c) 0 7,354(d)
Executive Vice President
and Chief 1995 209,694 81,700 (c) 0 7,304
Financial Officer 1994 198,809 67,900 (c) 305,000 13,352
J. Charles Goodman(e).... 1996 171,127 45,400 (c) 91,425 7,170(d)
Executive Vice
President-- 1995 138,704 63,700 55,484(f) 0 6,486
Corporate Operations
Don E. James............. 1996 160,476 43,700 (c) 0 7,048(d)
Senior Vice President-- 1995 154,304 45,000 (c) 0 7,136
Public Affairs 1994 147,690 28,800 (c) 0 10,234
Mary S. Lovell (g)....... 1996 146,878 46,800 (c) 59,625 6,624(d)
Senior Vice President-- 1995 132,431 35,400 (c) 0 5,736
Utility Services
</TABLE>
- --------
(a) Bonuses were actually paid after the end of the fiscal year in which they
are reported. Because their payment relates to services rendered in the
fiscal year prior to payment, the Company has consistently reported bonus
payments in such prior fiscal year.
(b) The number and value of the aggregate restricted stock holdings at the end
of the last fiscal year for each of the executive officers listed above
were as follows: Robert F. Stephens, 22,475 shares with a value of
$525,353; James F. Purser, 17,812 shares with a value of $416,356; J.
Charles Goodman, 4600 shares with a value of $107,525; Don E. James, 150
shares with a value of $3,506; and Mary S.
13
<PAGE>
Lovell, 3,749 shares with a value of $87,633. Dividends are paid on the
restricted stock reported in the Table at the same rate they are paid on all
of the Company's Common Stock. The approval of the Merger by the
shareholders on November 12, 1996 caused all of the restrictions on the
shares of restricted stock to lapse. See "Executive Compensation--Employment
Severance Compensation Agreements and Change-in-Control Arrangements."
(c) The total dollar value of perquisites and other personal benefits for the
named executive officer was less than the reporting thresholds established
by the Securities and Exchange Commission.
(d) This amount reflects the amount of Company matching contributions made
during the last fiscal year to the named executive officer's account
pursuant to the ESOP and the amount of insurance premiums paid by the
Company during the last fiscal year with respect to term life insurance
for the benefit of the named executive officer. The amounts paid during
the 1996 fiscal year for each named executive officer were as follows:
Robert F. Stephens, $6,000 in ESOP matching contributions and $1,601 in
life insurance premiums; James F. Purser, $6,000 in ESOP matching
contributions and $1,354 in life insurance premiums; J. Charles Goodman,
$6,827 in ESOP matching contributions and $343 in life insurance premiums;
Don E. James, $6,197 in ESOP matching contributions and $851 in life
insurance premiums; and Mary S. Lovell, $5,875 in ESOP matching
contributions and $749 in life insurance premiums.
(e) Mr. Goodman became Executive Vice President-Corporate Operations of the
Company on April 1, 1995. Prior to that date, he was not serving as an
executive officer of the Company; therefore, no compensation figures are
shown for prior fiscal years.
(f) Other Annual Compensation paid to Mr. Goodman during the 1995 fiscal year
included the purchase by the Company of a country club membership in the
amount of $42,771.
(g) Ms. Lovell became Senior Vice President-Utility Services of the Company on
May 2, 1995. Prior to that date, she was not serving as an executive
officer of the Company; therefore, no compensation figures are shown for
prior fiscal years.
Retirement Plans. The executive officers listed in the Summary Compensation
Table are covered by the Employees' Retirement Plan of Atmos Energy
Corporation (the "Atmos Retirement Plan"), a defined benefit pension plan
pursuant to which all participants automatically accrue pension credits after
completing one year of service with the Company. Each of the executive
officers listed in the Summary Compensation Table also participates in the
Company's Supplemental Executive Benefits Plan (the "Supplemental Plan"),
which provides retirement benefits (as well as supplemental disability and
death benefits) to all officers and division presidents of the Company. A
participant who has been an officer or division president for at least two
years, has five years of vesting service under the Atmos Retirement Plan or a
similar plan, and attained age 55 is entitled to a supplemental pension in an
amount that, when added to his or her pension payable under the Atmos
Retirement Plan or a similar plan, equals 75% of his or her compensation,
subject to reductions for less than ten years of vesting service and for
retirement prior to age 62.
14
<PAGE>
The following table illustrates the estimated combined annual benefits
payable under the Atmos Retirement Plan and the Supplemental Plan upon
retirement at age 62 or later to persons in specified compensation categories
and years-of-service classifications as determined in such person's last year
of employment.
PENSION PLAN TABLE (A)
<TABLE>
<CAPTION>
YEARS OF SERVICE
---------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$125,000................................ 93,750 93,750 93,750 93,750 93,750
150,000................................ 112,500 112,500 112,500 112,500 112,500
175,000................................ 131,250 131,250 131,250 131,250 131,250
200,000................................ 150,000 150,000 150,000 150,000 150,000
225,000................................ 168,750 168,750 168,750 168,750 168,750
250,000................................ 187,500 187,500 187,500 187,500 187,500
300,000................................ 225,000 225,000 225,000 225,000 225,000
350,000................................ 262,500 262,500 262,500 262,500 262,500
400,000................................ 300,000 300,000 300,000 300,000 300,000
450,000................................ 337,500 337,500 337,500 337,500 337,500
500,000................................ 375,000 375,000 375,000 375,000 375,000
</TABLE>
- --------
(a) The benefit amounts listed in the Pension Plan Table are not subject to
any deduction for Social Security or offset amounts and are computed based
upon payment as a joint and 50% survivor annuity.
The Atmos Retirement Plan covers only the regular salary of its
participants, excluding bonuses (subject to the maximum covered compensation
limit of $150,000 as of January 1, 1994 established by the Internal Revenue
Code for qualified plans). The Supplemental Plan covers compensation in an
amount equal to the sum of (a) the greater of the participant's annual base
salary at the date of termination of employment or the average of the
participant's annual base salary for the highest of three calendar years
(whether or not consecutive) of employment with the Company, plus (b) the
greater of the amount of the participant's last award under the Company's
Annual Performance Bonus Plan or the average of the participant's highest
three performance awards under such plan (whether or not consecutive), plus
(c) the participant's annual car allowance payable by the Company at the date
of his or her termination of employment. The amount of current compensation
covered by the Supplemental Plan as of the end of the last fiscal year for
each of the executive officers listed in the Summary Compensation Table is as
follows: Robert F. Stephens, $423,115; James F. Purser, $360,637; J. Charles
15
<PAGE>
Goodman, $230,989; Don E. James, $232,701; and Mary S. Lovell, $206,076. Each
of such executive officers has the following approximate number of years of
credited service under the retirement plans: Robert F. Stephens, 13 years;
James F. Purser, 10 years; J. Charles Goodman, 15 years; Don E. James, 16
years; and Mary S. Lovell, 9 years.
Employment Severance Compensation Agreements and Change-in-Control
Arrangements. The execution of the Reorganization Agreement and the approval
by the shareholders of the Merger have triggered "change in control"
provisions in certain of the Company's agreements and plans involving its
executive officers. Under each of the agreements and plans described below, a
"change in control" of the Company is deemed to occur if, among other things,
the shareholders approve a merger or other similar transaction, such as the
Merger, whereby the shareholders prior to the transaction will not own at
least 60% of the voting power of the Company after the transaction.
The Company has entered into severance agreements with each of the executive
officers named in the Summary Compensation Table to provide certain severance
benefits for them in the event of the termination of their employment within
three years following a "change in control" (as defined in the agreements) of
the Company. The severance agreements provide that if employment is terminated
by the Company other than for "cause" (as defined in the agreements),
retirement, death, or disability, or by the employee for "good reason" (as
defined in the agreements), or, in the case of Mr. Stephens, for any reason
within 180 days after the date of a change in control, the Company will pay to
each such executive officer a lump sum severance payment equal to 2.99 times
such executive officer's "base amount" compensation, as defined in Section
280G of the Internal Revenue Code. If the total of such lump sum severance
payment plus all other payments made in connection with a change in control
pursuant to any other plan, arrangement, or agreement results in the
imposition of the excise tax imposed by Section 4999 of the Internal Revenue
Code, such lump sum severance payment will be reduced to the extent necessary
to make the total of all such payments not be subject to such excise tax
unless the total of all such payments as reduced by the amount of such excise
tax is greater than the lump sum severance payment described above. In
addition, the executive officer will be entitled to all rights and benefits,
if any, provided under any other plan or agreement between such executive
officer and the Company.
The approval of the Merger by the shareholders constituted a "change in
control" under the severance agreements. In addition, the execution of the
Reorganization Agreement by the Company and United Cities constituted a
"potential change in control" of the Company under the severance agreements,
which required the Company to establish letters of credit (the "Letters of
Credit") for the benefit of six executive officers in the amounts that would
be payable under such agreements if such executive officers were immediately
entitled to
16
<PAGE>
payment of full severance benefits. On July 24, 1996, the Company established
the Letters of Credit in an aggregate amount of $5,153,613. The Letters of
Credit for the executive officers listed in the Summary Compensation Table
were established in the following amounts: Mr. Stephens, $1,398,529; Mr.
Purser, $1,322,308; Mr. Goodman, $539,591; Mr. James, $795,671; and Ms.
Lovell, $552,949. The Letters of Credit must be maintained by the Company for
two years from the date of issue or three years following a "change in
control," whichever is later. The Company is required to increase the amounts
available to be drawn upon under the Letters of Credit every six months to
match any increases in the amount of severance benefits then payable.
Each of the executive officers listed in the Summary Compensation Table has
also entered into a Participation Agreement with the Company as required by
the Supplemental Plan. The Supplemental Plan provides that the accrued
benefits, as calculated pursuant to the plan, of each participant will vest in
the event of (a) a "change in control" (as defined in the plan) of the
Company, (b) a termination of the plan, (c) an amendment to the plan resulting
in a decrease in the benefits otherwise payable to the participant, (d) a
termination of the participant's employment without "cause" (as defined in the
plan), or (e) a termination of the participant's participation in the plan for
any reason other than resignation or termination of employment for "cause."
The Participation Agreements set forth the rights of the participants to their
accrued benefits upon the occurrence of the events described in the foregoing
sentence and constitute enforceable contracts separate from the provisions of
the Supplemental Plan.
The approval of the Merger by the shareholders constituted a "change in
control" under the Supplemental Plan; however, all of the executive officers
listed in the Summary Compensation Table were fully vested in their benefits
under the Supplemental Plan prior to the date that the shareholders approved
the Merger.
Each of the executive officers listed in the Summary Compensation Table
participates in the Company's Restricted Stock Grant Plan and has received,
from time to time, awards of stock that are restricted with respect to their
transferability. The restrictions lapse pursuant to a schedule established by
the non-employee members of the Board of Directors at the date of the grant.
Notwithstanding any established schedule for the removal of restrictions,
however, the restrictions are immediately removed in the event of the
participant's death, disability, or retirement at normal retirement age or in
the event of a "change of control" (as defined in the plan) of the Company.
The approval of the Merger by the shareholders constituted a "change in
control" under the Restricted Stock Grant Plan, and accordingly, all of the
restrictions on shares previously granted by the Company lapsed as of November
12, 1996.
17
<PAGE>
Human Resources Committee Interlocks and Insider Participation. The members
of the Human Resources Committee during the last fiscal year were Travis W.
Bain, Dan Busbee, Phillip E. Nichol, John W. Norris, Jr., and Carl S. Quinn.
Mr. Busbee is a member and shareholder of the law firm of Locke Purnell Rain
Harrell (A Professional Corporation) in Dallas, Texas, which the Company
retains from time to time to perform legal services. Mr. Nichol is a senior
vice president and branch manager of PaineWebber Incorporated, the investment
banking firm retained by United Cities as its financial advisor in connection
with the Merger. Mr. Nichol had no involvement in the Merger on behalf of
PaineWebber Incorporated or United Cities. There are no interlocking
relationships between any executive officer of the Company and any other
company.
Human Resources Committee Report on Executive Compensation. The Company is
required to provide specific information regarding the compensation and
benefits paid to the Company's President and four most highly compensated
executive officers of the Company. The Human Resources Committee of the Board
of Directors (the "Committee"), which is composed entirely of outside
directors, has prepared this report which describes the philosophy followed by
the Company in establishing compensation and benefit practices for officers of
the Company. This report was prepared by the Committee after its meeting on
September 16, 1996, and the Committee presented this report to the Board of
Directors at its meeting held November 13, 1996.
EXECUTIVE COMPENSATION PHILOSOPHY AND PRINCIPLES. The Company's philosophy
is that total compensation for its officers should be established by the same
process used for its other employees with the following exceptions:
. Officers should have a greater portion of their compensation at risk than
all other employees;
. A significant portion of officer compensation should be directly tied to
the performance of the business, and
. Officers of the Company should share in the same risks and rewards as do
stockholders of the Company.
To accomplish these goals, the Committee continuously compares its executive
compensation levels and performance with selected cross-industry groups of
industrial organizations. National market data for Company executive pay
comparisons was obtained from a variety of private industry surveys, including
the Top Management Report published by Watson Wyatt Data Services, which
covers over 1200 industrial organizations, including companies in the natural
gas distribution industry. These surveys were used for compensation comparison
purposes because the Board believes they most closely represent the
marketplace within which the Company must compete for executive talent. The
organizations participating in these surveys are different than the companies
that appear in the performance graph. Job comparisons and access to market
data for companies
18
<PAGE>
included in the performance graph are not readily available to the Company
through known market surveys. However, compensation information from the
annual American Gas Association Survey is also monitored on an annual basis,
and for 1996, Atmos base salary and total compensation approximated or
slightly exceeded the average pay practice for gas companies in its size
group.
During 1996, the Committee retained the services of a nationally recognized
compensation consulting firm, Watson Wyatt Worldwide, to conduct an
independent review of officer compensation. The Committee reviews the analysis
of executive compensation provided by the consultants, evaluates the
recommendations made by the consultants, and assesses the performance of
officers as a group and the contributions of each executive to the success of
the Company. The Committee provides officer compensation and benefits
recommendations to the Board of Directors to support the level of achievement
of Company objectives as attained by the officer group over the last fiscal
year.
At the present time, executive compensation programs consist of base salary,
an annual cash incentive plan, and long-term incentives in the form of
restricted stock. Each of these compensation arrangements is briefly reviewed
in the following sections.
CASH COMPENSATION--ANNUAL BASE SALARY. All positions within the Company
including officer level positions have formal salary ranges. Positions are
compared on the basis of job content to similar positions in companies of
approximately the same size and complexity as the Company. Salary ranges for
all jobs are reviewed on an annual basis, and proposed salary ranges are
presented to the Committee for the review and consideration each year in
October. The midpoint of each salary range is designed to approximate the 60th
percentile of actual base salaries for comparable positions in the market, as
defined above.
Pay for individual officers may be greater than or less than the salary
range midpoint based on performance of the officer and level of the officer's
experience in the executive position. In determining the appropriate salary
levels and salary increase recommendations for officers, the Committee also
considers current economic conditions and national and industry trends in
executive compensation.
The President and most senior executive officers of the Company provide the
Committee with an oral presentation relative to the contributions and
performance of each officer of the Company. Seven performance rating
categories were used in 1996 to assess individual officer performance in
relation to assigned accountabilities. Salary increase recommendations for
officers are based upon the resulting performance rating and the position of
each officer's salary within the applicable salary range.
19
<PAGE>
CASH COMPENSATION--SHORT TERM INCENTIVE COMPENSATION. All corporate officers
are considered eligible to participate in the Annual Performance Bonus Plan,
which provides for cash payments based on criteria the Committee recommends to
the Board as critical to the short term success of the Company. The Executive
Annual Performance Bonus Plan (formerly called the Annual Performance Bonus
Plan for Corporate Officers) (the "Bonus Plan") consists of two parts, each
weighted 50%. One portion is determined by Company performance as measured by
a targeted earnings per share (EPS) figure as set by the Board of Directors at
the beginning of each fiscal year; the other portion is measured by
achievement of specific, measurable individual performance goals. The Board of
Directors currently considers EPS as the most appropriate measure of Company
performance since it is so closely linked to shareholder value. Earnings per
share must be equal to or greater than the annual dividend rate before any
award may be made to any officers under the Bonus Plan.
Target award levels are established under the Bonus Plan and are expressed
as a percentage of annual base salary. Target award levels will vary among
officers based upon the level of responsibility and ability to impact overall
Company performance. These levels vary by salary grade. An officer must be
rated "competent" or above to be considered eligible for an award under the
Bonus Plan. Incentive opportunity for the lowest level officer ranges from
zero (0) to twenty-four percent (24%) of annual base salary. The President and
Chief Operating Officer of the Company is eligible for an incentive award of
zero (0) to sixty percent (60%) of annual base salary. The Board of Directors
retains the discretion to award bonus payments outside the Bonus Plan
guidelines in the event of exceptional operating results or under special
circumstances which result in outstanding Company performance for the fiscal
period.
Total cash compensation opportunity for the Company is defined as the salary
range midpoint for each position plus the maximum possible bonus award. In the
event that maximum awards were paid under the Bonus Plan, total cash
compensation for executives of the Company as a group would approximate the
75th percentile of actual total cash compensation in industrial companies.
Corporate performance must significantly exceed stated goals and objectives to
support maximum incentive awards under the Bonus Plan, and each executive must
not only achieve but far exceed assigned individual goals and objectives.
While this level of Company performance is possible, probability of attainment
of the required earnings per share growth to fund a maximum incentive award
pool would be the exception. If Company performance does not meet the required
threshold of earnings per share and bonus awards are not paid, total cash
compensation for Company officers would approximate the 25th percentile of
actual total cash compensation in industrial organizations.
LONG-TERM INCENTIVE COMPENSATION--RESTRICTED STOCK GRANT PLAN. The Board of
Directors of the Company believes that long-term incentive awards strengthen
the ability of the Company to
20
<PAGE>
attract, motivate, and retain executives of superior capability and more
closely align the interests of the executive management group with the
interest of the stockholder. The Company's long-term incentive compensation
plan consists of grants of Company stock to officers under the Restricted
Stock Grant Plan where such grants are contingent upon several factors. These
factors are:
. The Company must achieve an earnings per share equivalent to the annual
dividend rate before any awards may be granted under the Restricted Stock
Grant Plan.
. Each officer level position has a targeted amount of restricted stock to
be delivered to position incumbents over time. The timing and amount of
restricted stock granted will vary based on the performance of the
Company and the executive.
. The performance of an officer of the Company must be rated competent or
above to be considered eligible for an award under the Restricted Stock
Grant Plan.
Recommendations for awards under the Restricted Stock Grant Plan are
submitted by the Committee to the Board of Directors for approval. From time
to time the Committee, in its discretion, may recommend awards under the
Restricted Stock Grant Plan beyond the target level. Such recommendations may
be forthcoming in instances where both Company performance and the performance
of the officer are considered to be exceptional.
During the 1996 fiscal year, restricted stock grants were awarded to nine of
the sixteen officers of the Company. This group of sixteen officers of the
Company does not include the President of the Company. These awards were
granted to recognize the outstanding achievement of both individual and
corporate objectives.
The Board of Directors, based upon recommendations from the Committee,
defines the restrictions applicable to any award under the Restricted Stock
Grant Plan. Restricted stock grants made in the recent past and in 1996
require the completion of three years of service with the Company after the
date of grant of the award to vest any portion of the award of stock. The
restricted stock award will vest 25% on the third anniversary date of grant
and will vest 25% per year on each subsequent anniversary thereof. The Board
of Directors, in its discretion, may change the vesting period for new awards
under the Restricted Stock Grant Plan and may accelerate the vesting of awards
previously made under the Restricted Stock Grant Plan.
Stock certificates are held in the custody of the Company by means of a
trust until restrictions are removed. As beneficiaries of restricted stock
grants, the officers of the Company have the right to vote the restricted
stock held in their accounts and to received all dividends paid.
21
<PAGE>
To the extent readily determinable and as one of the factors in its
consideration of compensation matters, the Committee considers the anticipated
tax treatment to the Company and the executives of various payments and
benefits. Some types of compensation payments and their deductibility depend
on the timing of an executive's vesting or exercise of previously granted
rights. Further, interpretations of and changes in tax laws and other factors
beyond the Committee's control also affect the deductibility of compensation.
For these reasons, the Committee will consider various alternatives to
preserving the deductibility of compensation payments and benefits to the
extent reasonably practicable and to the extent consistent with its other
compensation objectives.
CHIEF EXECUTIVE OFFICER COMPENSATION. The Board of Directors did not elect
to fill the position of Chief Executive Officer during 1996. Mr. Robert F.
Stephens became the President and Chief Operating Officer of the Company on
February 21, 1995. Mr. Stephens received a 1996 salary increase of 5.5% on
January 1, 1996 associated with his performance as President and Chief
Operating Officer. Mr. Stephen's annual base salary following this increase
was $266,915, which represents 92% of the 1996 salary range midpoint for the
position of President and Chief Operating Officer.
Mr. Stephens received a bonus award for fiscal 1996 of $140,100 in
conformance with the provisions and performance objectives established through
the Bonus Plan. This incentive award payment is considered appropriate and
reasonable given the 1996 earnings per share of $1.51. The Company's total
return to shareholders for fiscal 1996, as calculated for purposes of the
performance graph, was 25.9% compared to the weighted average total return of
21.56% for the gas distribution companies used as the comparison companies in
the performance graph. Mr. Stephens received a restricted stock grant award of
5000 shares in fiscal 1996.
HUMAN RESOURCES COMMITTEE
John W. Norris, Jr., Chairman
Travis W. Bain
Dan Busbee
Phillip E. Nichol
Carl S. Quinn
22
<PAGE>
Performance Graph. The following graph compares the yearly percentage change
in the Company's total return to shareholders for the last five fiscal years
with the total return of the Standard and Poor's 500 Stock Index and the
cumulative total return of other natural gas distribution companies, each of
which receives at least 90% of its gross revenues from the distribution and
sale of natural gas to end users and has a September 30 fiscal year-end.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG ATMOS, S&P 500 INDEX,
AND COMPARISON COMPANY INDEX
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Atmos Energy Corporation $100 $113 $162 $148 $170 $214
- ----------------------------------------------------------------------------
S & P 500 Index $100 $111 $125 $130 $169 $203
- ----------------------------------------------------------------------------
Comparison Company Index $100 $121 $149 $131 $146 $178
- ----------------------------------------------------------------------------
</TABLE>
*Assumes a $100 investment on September 30, 1991 and reinvestment of dividends.
23
<PAGE>
The following companies were included in the comparison company index used
in the graph: AGL Resources Inc., Bay State Gas Company, The Brooklyn Union
Gas Company, Energen Corporation, Laclede Gas Company, Mobile Gas Service
Corporation, National Fuel Gas Company, New Jersey Resources Corporation,
North Carolina Natural Gas Corporation, NUI Corporation, Peoples Energy
Corporation, Public Service Company of North Carolina, Incorporated, and
Providence Energy Corporation.
AUDITORS
Upon the recommendation by the Audit Committee, the Board of Directors
selected Ernst & Young, LLP to continue as the Company's auditors for the
fiscal year ending September 30, 1997. The firm of Ernst & Young, LLP and its
predecessors have been the independent auditors of the Company since the
Company's incorporation in 1983. It is expected that representatives of Ernst
& Young, LLP will be present at the Annual Meeting. The representatives will
have the opportunity to make a statement if they desire to do so and are
expected to be available to respond to appropriate questions.
OTHER MATTERS
OTHER BUSINESS
The Company does not know of any other business that may come before the
Annual Meeting. However, if any other matters are properly brought before the
meeting by the management or any shareholder, it is the intention of each
person named in the accompanying proxy to vote such proxy in accordance with
his judgment on such matters. The enclosed proxy confers discretionary
authority to take action with respect to any additional matters that may come
before the meeting.
SHAREHOLDER PROPOSALS
In the event a shareholder intends to present a proposal at the 1998 Annual
Meeting of Shareholders, it must be received at the offices of the Company no
later than August 29, 1997.
By Order of the Board of Directors,
GLEN A. BLANSCET
Vice President, General Counsel
and Corporate Secretary
Dallas, Texas
December 27, 1996
24
<PAGE>
DETACH HERE
ATMOS ENERGY CORPORATION
P PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR ANNUAL MEETING, FEBRUARY 12, 1997
R
The undersigned hereby constitutes and appoints Dan Busbee, Robert F.
O Stephens, and Charles K. Vaughan, and each of them, his or her true and
lawful agents and proxies with full power of substitution in each, to
X represent the undersigned at the Annual Meeting of Shareholders of ATMOS
ENERGY CORPORATION ("Atmos"), to be held at the Four Seasons-Regent Hotel,
Y 57 East 57th Street, New York, New York 10022 on Wednesday, February 12,
1997, and at any adjournments or postponements thereof, on all matters
coming before said meeting.
You are encouraged to specify your choice by marking the appropriate box,
SEE REVERSE SIDE, but you need not mark any box if you wish to vote in
accordance with the Board of Directors' recommendations. The Proxies cannot
vote your shares unless you sign and return this card.
-------------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE |See Reverse|
| Side |
-------------
<PAGE>
[ATMOS LOGO APPEARS HERE] THIS IS YOUR PROXY.
YOUR VOTE IS IMPORTANT.
Regardless of whether you plan to attend the Annual Meeting of Shareholders, you
can be sure your shares are represented at the meeting by promptly returning
your proxy in the enclosed envelope.
COMPANY HIGHLIGHTS DURING 1996
. In November 1996, the Company announced its ninth consecutive annual dividend
increase of $.04 per share, a 4.2 percent increase of its previous annual
common stock dividend rate.
. On November 12, 1996, the Company's shareholders voted in favor of the merger
with United Cities Gas Company of Brentwood, Tennessee, which serves
approximately 335,000 customers. The Company currently is continuing the
regulatory approval process required before completion of the merger. Over 98%
of the Atmos and United Cities shareholders voting in each of the meetings
voted in favor of the transaction.
. The Company reported a 26% increase in earnings in fiscal 1996 over the
previous fiscal year.
. During fiscal 1996, the Company received rate increases totaling $3.3 million
annually. On November 1, 1996, the Company implemented an annual rate increase
of $5.3 million that will affect about 200,000 customers in the Company's west
Texas service area.
DETACH HERE
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
AND AUTHORIZES THE PROXIES TO TAKE ACTION IN THEIR DISCRETION UPON OTHER MATTERS
THAT MAY PROPERLY COME BEFORE THE MEETING. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES FOR DIRECTOR.
The Board of Directors recommends a vote FOR the election of all nominees for
director.
Nominees for Director: CLASS II: Thomas C. Meredith, Carl S. Quinn, Robert F.
Stephens, Richard Ware II
[_] FOR [_] WITHHELD
ALL FROM ALL
NOMINEES NOMINEES
FOR, EXCEPT VOTE WITHHELD FROM THE FOLLOWING NOMINEE(S):
MARK HERE [_]
______________________________________________________ FOR ADDRESS
CHANGE AND
NOTE AT LEFT
Please sign exactly as your name appears
hereon. Joint owners should each sign.
When signing as attorney, executor,
administrator, trustee, or guardian,
please give full title as such.
Signature:________________Date:________Signature:_______________Date:_________
