<PAGE>
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 Rule 14a-11(c) or Rule 14a-12
[_] Atmos Energy Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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>
Atmos Company Logo
DECEMBER 30, 1998
DEAR ATMOS SHAREHOLDER:
You are cordially invited to attend the Annual Meeting of Shareholders to be
held at The Westin Hermitage, 231 Sixth Avenue North, Nashville, Tennessee
37219, on Wednesday, February 10, 1999, at 11:00 a.m. Central Standard Time.
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,
/s/ ROBERT W. BEST
------------------------------------------
Robert W. Best
Chairman of the Board, President
and Chief Executive 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 Westin Hermitage, 231 Sixth Avenue North,
Nashville, Tennessee, 37219 on Wednesday, February 10, 1999, at 11:00 a.m.,
Central Standard Time, for the following purposes:
1. To elect four Class I directors for three-year terms expiring in 2002.
2. To act upon a proposal to amend the Restated Articles of Incorporation
of the Company as Amended to increase the number of authorized shares
of Common Stock from 75,000,000 to 100,000,000.
3. To act upon a proposal to approve the Company's 1998 Long-Term
Incentive Plan.
4. To act upon a proposal to approve the Company's Annual Incentive Plan
for Management.
5. To act upon a proposal to approve the Company's Equity Incentive and
Deferred Compensation Plan for Non-Employee Directors.
6. 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 14, 1998 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 30, 1998
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 30, 1998.
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. The Company
will pay $7,500 in fees, plus expenses and disbursements, to Morrow for its
proxy solicitation services.
COMMON STOCK INFORMATION; RECORD DATE
As of December 14, 1998, there were 30,526,325 shares of the Company's
common stock, no par value ("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 14, 1998 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 1, 1998, 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.
<TABLE>
<CAPTION>
AMOUNT OF PERCENTAGE OF
NAME AND ADDRESS COMMON STOCK OUTSTANDING
OF BENEFICIAL OWNER BENEFICIALLY OWNED COMMON STOCK
------------------- ------------------ -------------
<S> <C> <C>
Employee Stock Ownership Plan and Trust
for Employees of Atmos Energy
Corporation
(the "ESOP")(a)........................ 1,791,896 5.9%
</TABLE>
- --------
(a) 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 for which 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.
<PAGE>
Security Ownership of Management. The following table lists the beneficial
ownership, as of December 1, 1998, 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 7 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............................ 1,123 (a)
Robert W. Best............................... 147,057 (a)
Glen A. Blanscet............................. 11,052 (a)
Dan Busbee................................... 4,441 (a)
Richard W. Cardin............................ 1,500 (a)
Larry J. Dagley.............................. 73,576 (a)
Thomas J. Garland............................ 2,148 (a)
J. Charles Goodman........................... 7,972 (a)
Gene C. Koonce............................... 20,056 (a)
Vincent J. Lewis............................. 7,000 (a)
Thomas C. Meredith........................... 794 (a)
Wynn D. McGregor............................. 7,737 (a)
Phillip E. Nichol............................ 6,300 (a)
Carl S. Quinn................................ 22,218 (a)
Charles K. Vaughan........................... 49,709 (a)
Richard Ware II.............................. 15,262 (a)
All directors and executive officers as a
group (16 individuals)...................... 377,945 1.24%
</TABLE>
- --------
(a) The percentage of shares beneficially owned by such individual does not
exceed one percent of the class so owned.
1.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 I are to be elected at this Annual Meeting for
three-year terms expiring in 2002. Travis Bain, II, Dan Busbee, Gene C.
Koonce, and Vincent J. Lewis have been nominated to serve as Class I
directors.
Messrs. Bain and Busbee were last elected to three-year terms by the
shareholders at the 1996 Annual Meeting and have been nominated to continue to
serve as directors for three-year terms ending in 2002. Messrs. Koonce and
Lewis, formerly directors of United Cities Gas Company ("United Cities") prior
to its merger with the Company on July 31, 1997 (the "United Cities Merger"),
were elected by the shareholders at the Special Meeting of the Shareholders on
November 12, 1996 to serve as additional Class I directors of the Company
pursuant to the provisions of the Agreement and Plan of Reorganization, as
amended, between the Company and United Cities. The Board is nominating
Messrs. Bain, Busbee, Koonce and Lewis to continue serving as Class I
directors. The terms of all nominated directors will expire in 2002.
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.
2
<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>
Travis W. Bain II......................... 64 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................................ 65 1988 Class I
Of Counsel with Gibson Dunn & Crutcher in 1999
Dallas, Texas since August 1998. Formerly
Attorney and Shareholder with Locke
Purnell Rain Harrell (A Professional
Corporation) in Dallas, Texas from 1972
until August 1998.
Gene C. Koonce............................ 66 1997 Class I
Formerly Chairman of the Board, President 1999
and Chief Executive Officer of United
Cities from May 1996 until the United
Cities Merger in July 1997; President and
Chief Executive Officer of United Cities
from October 1978 until May 1996. Also
director of First American Corporation in
Nashville, Tennessee.
Vincent J. Lewis.......................... 54 1997 Class I
Senior Vice President at Legg Mason Wood 1999
Walker, Inc. in Rutherford, New Jersey
since 1987.
</TABLE>
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>
Robert W. Best............................ 52 1997 Class III
Chairman of the Board, President and 2001
Chief Executive Officer of the Company
since March 1997. Formerly Senior Vice
President--Regulated Businesses of
Consolidated Natural Gas Company from
January 1996 to March 1997; President of
Texas Gas Transmission Company from
February 1985 to May 1995 and President
of Transcontinental Gas Pipe Line
Corporation from February 1992 to May
1995.
******************************************************************************************
Richard W. Cardin......................... 63 1997 Class II
Consultant and retired partner of Arthur 2000
Andersen LLP since 1995. Formerly office
managing partner with Arthur Andersen LLP
in Nashville, Tennessee from 1980 until
1994. Also member of Board of Trustees of
CCA Prison Realty Trust and director of
United States Lime & Minerals, Inc.
*******************************************************************************************
</TABLE>
3
<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>
Thomas J. Garland......................... 64 1997 Class III
Chairman of The Tusculum Institute for 2001
Public Leadership and Policy since 1998.
Formerly Executive in Residence and
Distinguished Service Professor of the
Civic Arts at Tusculum College in
Greeneville, Tennessee and a consultant
from 1990 to 1998. Also director of
Peoples Community Bank in Johnson City,
Tennessee.
*******************************************************************************************
Thomas C. Meredith........................ 57 1995 Class II
Chancellor of the University of Alabama 2000
System in Tuscaloosa, Alabama since June
1997. Formerly President of Western
Kentucky University in Bowling Green,
Kentucky from 1988 until June 1997. Also
director of Alabama Power Company.
*******************************************************************************************
Phillip E. Nichol......................... 63 1985 Class III
Senior Vice President and Divisional 2001
Hiring Officer for Central Division of
PaineWebber Incorporated since March
1998. Formerly Senior Vice President and
Branch Manager of PaineWebber
Incorporated in Fort Worth, Texas from
May 1996 to February 1998. 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.
*******************************************************************************************
Carl S. Quinn............................. 67 1994 Class II
General Partner of Quinn Oil Company, 2000
Ltd. in East Hampton, 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.
*******************************************************************************************
Charles K. Vaughan........................ 61 1983 Class III
Formerly Chairman of the Board of the 2001
Company from June 1994 until March 1997;
Chairman of the Board and Chief Executive
Officer of the Company from March 1993
until June 1994; Chairman of the Board,
President and Chief Executive Officer of
the Company from October 1983 until March
1993.
*******************************************************************************************
Richard Ware II........................... 52 1994 Class II
President of Amarillo National Bank in 2000
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>
CERTAIN BUSINESS RELATIONSHIPS
Mr. Ware is the president and a shareholder of Amarillo National Bank,
Amarillo, Texas, which bank provides a $12 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. For a discussion of other
business relationships, see "Human Resources Committee Interlocks and Insider
Participation" on page 10.
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. Best, Koonce, Quinn and Vaughan.
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, Cardin, Lewis,
Meredith 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.
The Audit Committee held three meetings during the last fiscal year.
The Human Resources Committee consists of Messrs. Bain, Busbee, Garland,
Nichol and Quinn. Mr. Quinn serves as chairman of the committee. 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 regarding benefit packages, special bonus or
stock plans, severance agreements, and succession planning with respect to the
Company's officers. This committee also administers the Company's 1998 Long-
Term Incentive Plan and Annual Incentive Plan for Management, both of which
plans became effective October 1, 1998, subject to the approval of the
Company's shareholders, as is more fully discussed below. During the last
fiscal year, the Human Resources Committee held three meetings.
The Nominating Committee consists of Messrs. Cardin, Koonce, Lewis, Meredith
and Nichol. 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 Corporate 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, Garland,
Koonce, 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.
Attendance at Board Meetings. During the last fiscal year, the Board of
Directors of the Company held six meetings. During fiscal year 1998, 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.
5
<PAGE>
Directors' Fees. As compensation for serving as a director, each of the non-
employee directors receives an annual retainer of $20,000 and a fee of $1,000
per day for attendance at each Board and committee meeting (excluding
telephone conference meetings). The fee paid for participation in a telephonic
conference meeting of the Board or a committee is one-half of the regular
meeting fee. Committee chairmen are also paid a fee for extra work done in
connection with their committee duties.
On August 12, 1998, the Board adopted the Company's Equity Incentive and
Deferred Compensation Plan for Non-Employee Directors, representing an
amendment to the Company's Deferred Compensation Plan for Outside Directors
that was originally adopted May 10, 1990. This amended plan is subject to the
approval of the shareholders at the Annual Meeting, and will not take effect
until that time. As is more fully discussed below, should the Company's
shareholders approve this plan, each non-employee director will be allowed to
defer receipt of his annual retainer and meeting fees and to invest his
deferred compensation into either a cash account or a stock account. Under the
current plan, non-employee directors may defer payment of 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. In addition,
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. See Section 5, "Approval of Equity Incentive and Deferred
Compensation Plan for Non-Employee Directors", on page 22, for more
information on this plan.
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 Common Stock of the Company 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 Retirement Plan for Non-
Employee Directors (the "Directors Retirement Plan") covers non-employee
directors who have served on the Board (including service prior to January 1,
1994 on the Board of Greeley Gas Company and prior to August 1, 1997 on the
Board of United Cities) 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.
As discussed above, on August 12, 1998, the Board adopted the Company's
Equity Incentive and Deferred Compensation Plan for Non-Employee Directors
(the "Directors Compensation Plan"), which plan is subject to the approval of
the shareholders at the Annual Meeting. Should such plan be approved by the
shareholders, it will be effective at that time and the Directors Retirement
Plan will terminate. However, current participants in the Directors Retirement
Plan may elect to remain in such plan instead of participating in the new
Directors Compensation Plan but no persons who become directors after February
10, 1999 shall be eligible to participate in the Directors Retirement Plan.
See Section 5, "Approval of Equity Incentive and Deferred Compensation Plan
for Non-Employee Directors", beginning on page 22, for more information on the
Directors Compensation Plan.
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.
6
<PAGE>
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 agreement, Mr. Vaughan
performs such consulting services as the Board may request from time to time.
The term of the agreement may be extended for additional one-year periods upon
the agreement of the Board and Mr. Vaughan. The term of the agreement was
extended by amendment approved in 1998 for an additional one-year period,
ending September 30, 2000. The agreement provides for future payments to Mr.
Vaughan, in consideration for his consulting services, of $130,000 during
fiscal year 1999 and $130,000 during fiscal year 2000. During the 1998 fiscal
year, Mr. Vaughan received $300,000 in payment for his services under the
Consulting Agreement. The payments are made in semi-annual installments
payable on October 1 and April 1 of each fiscal year.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and persons who beneficially own more than
ten percent of the Company's Common Stock to file with the Securities and
Exchange Commission and the New York Stock Exchange initial reports of
ownership and reports of changes in their ownership in the Company's Common
Stock. Directors, executive officers, and greater-than-ten-percent beneficial
shareholders are required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file. Based solely on a review of the
copies of such reports furnished to the Company and written representations
that no Forms 5 were required, the Company believes that, during the last
fiscal year, all of the Company's directors, executive officers, and greater-
than-ten-percent beneficial owners were in compliance with the Section 16(a)
filing requirements.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth the compensation
paid by the Company for each of the Company's last three completed fiscal
years to Mr. Best and the Company's four most highly compensated executive
officers other than Mr. Best.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------- ------------
RESTRICTED
OTHER ANNUAL STOCK ALL OTHER
SALARY BONUS(A) COMPENSATION AWARDS(B) COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($) ($)
- --------------------------- ---- ------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Robert W. Best(c)........ 1998 480,786 450,000 (d) 1,262,500 8,584(e)
Chairman of the Board, 1997 266,426 487,200 (d) 1,225,000 2,184
President and Chief
Executive Officer
Larry J. Dagley(f)....... 1998 310,385 263,300 (d) 631,250 5,528(e)
Executive Vice President 1997 125,000 283,400 (d) 1,225,000 1,872
and Chief Financial
Officer
J. Charles Goodman....... 1998 184,537 108,800 (d) 126,250 8,028(e)
Executive Vice 1997 177,530 121,400 (d) 0 11,132
President,
Utility Operations 1996 171,127 45,400 (d) 91,425 7,895
Glen A. Blanscet......... 1998 135,973 58,700 (d) 65,650 6,328(e)
Vice President, General 1997 129,854 198,200 (d) 0 9,335
Counsel
and Corporate Secretary 1996 122,924 32,600 (d) 29,813 5,690
Wynn D. McGregor......... 1998 116,892 41,800 (d) 32,825 5,434(e)
Vice President, Human 1997 114,047 52,000 (d) 0 5,273
Resources
1996 109,263 22,300 (d) 19,875 5,062
</TABLE>
7
<PAGE>
- --------
(a) Some 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 W. Best, 100,000 shares with a value of
$2,856,250; Larry J. Dagley, 75,000 shares with a value of $2,142,188; J.
Charles Goodman, 5,000 shares with a value of $142,813; Glen A. Blanscet,
2,600 shares with a value of $74,263; and Wynn D. McGregor, 1,300 shares
with a value of $37,131. 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.
(c) Mr. Best became Chairman, President and Chief Executive Officer of the
Company on March 8, 1997.
(d) 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.
(e) 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 Company's 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 1998 fiscal year for each named executive officer were as
follows: Robert W. Best, $6,400 in Company matching contributions made
pursuant to the ESOP and $2,184 in term life insurance premiums; Larry J.
Dagley, $3,500 in Company matching contributions made pursuant to the ESOP
and $2,028 in term life insurance premiums; J. Charles Goodman, $6,824 in
Company matching contributions made pursuant to the ESOP and $1,204 in
term life insurance premiums; Glen A. Blanscet, $5,439 in Company matching
contributions made pursuant to the ESOP and $889 in term life insurance
premiums; and Wynn D. McGregor, $4,676 in Company matching contributions
made pursuant to the ESOP and $758 in term life insurance premiums.
(f) Mr. Dagley became Executive Vice President and Chief Financial Officer of
the Company on May 1, 1997.
Retirement Plans. The executive officers listed in the Summary Compensation
Table have been covered by the Employees' Retirement Plan of Atmos Energy
Corporation (the "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 business unit presidents of the Company. A
participant who has been an officer or business unit president for at least
two years, has five years of vesting service under the 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 Retirement
Plan or a similar plan, equals 75% of his compensation, subject to reductions
for less than ten years of vesting service and for retirement prior to age 62.
Effective January 1, 1999, the executive officers listed in the Summary
Compensation Table will be covered by the Company's new Pension Account Plan,
which covers all employees of the Company. Such executive officers will have
an opening account balance established for them as of January 1, 1999 equal to
the present value of their respective accrued benefits under the Retirement
Plan as of December 31, 1998. The present value factor is based on average
life expectancy, normal retirement age and a discount rate of seven percent.
The Pension Account Plan will credit an allocation to each participant's
account at the end of each year according to a formula based on his age,
service and total pay (excluding incentive pay).
The Pension Account Plan provides for an additional annual allocation based
upon a participant's age as of January 1, 1999 for those participants who were
participants in the Retirement Plan. The Pension Account Plan will credit this
additional allocation each year through December 31, 2008. In addition, at the
end of each year, a participant's account will be credited with interest on
the participant's prior year account balance. A special grandfather benefit
also applies through December 31, 2008, for participants who will be at least
age 50 as of January 1, 1999, and who were participants in the Retirement Plan
on December 31, 1998. Participants are fully vested in their account balances
after five years of eligibility service and may choose to receive their
account balances as a lump sum or an annuity.
8
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The following table illustrates the estimated combined annual benefits
payable under the 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
600,000.............................. 450,000 450,000 450,000 450,000 450,000
700,000.............................. 525,000 525,000 525,000 525,000 525,000
800,000.............................. 600,000 600,000 600,000 600,000 600,000
900,000.............................. 675,000 675,000 675,000 675,000 675,000
1,000,000.............................. 750,000 750,000 750,000 750,000 750,000
</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 Retirement Plan covers only the regular salary of each of its
participants, excluding bonuses (subject to the maximum covered compensation
limit of $160,000 as of January 1, 1997 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; (b) the greater
of the amount of the participant's last award under any of the Company's
annual performance bonus or incentive plans or the average of the
participant's highest three performance awards under such plan (whether or not
consecutive); and (c) the participant's annual car allowance payable by the
Company at the date of his 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 W. Best, $965,000; Larry J. Dagley, $600,900; J.
Charles Goodman, $314,400; Glen A. Blanscet, $241,044; and Wynn D. McGregor,
$173,029. Each of such executive officers has the following approximate number
of years of credited service under the retirement plans: Mr. Best, 1 year; Mr.
Dagley, 1 year; Mr. Goodman, 17 years; Mr. Blanscet, 13 years; and Mr.
McGregor, 10 years.
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 termination of the participant's employment by the Company
without "cause" (i) following a "change of control" of the Company (as both
terms are defined in the plan), (ii) in anticipation of a "change in control"
(whether or not a "change in control" ever occurs), or (iii) at the request of
a party to a pending transaction that will constitute a "change in control",
if and when the transaction is consummated, (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
9
<PAGE>
termination of the participant's employment voluntarily (with respect to
Messrs. Blanscet, Goodman and McGregor only); (e) a termination of the
participant's employment for any reason other than "cause", or (f) a
termination of the participant's participation in the plan for any reason
other than "cause" prior to the participant's termination of employment. The
approval of the United Cities Merger by the shareholders on November 12, 1996
constituted a "change in control" as defined in the Supplemental Plan, and as
a result, Messrs. Goodman, Blanscet and McGregor, who were participants in the
Supplemental Plan as of November 12, 1996, are each entitled to receive
unreduced supplemental pension benefits commencing at age 55. The
Participation Agreements set forth the specific rights of the participants to
their accrued benefits upon the occurrence of the events described above and
constitute enforceable contracts separate from the provisions of the
Supplemental Plan.
Employment Severance Compensation Agreements and Change-in-Control
Arrangements. 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. Under each of the severance agreements and
plans described below, a "change in control" of the Company is deemed to occur
if, among other things, the shareholders of the Company approve a merger or
other similar transaction, whereby the shareholders prior to the transaction
will not own at least 60% of the voting power of the Company after the
transaction.
The severance agreement for each executive officer other than Mr. Goodman
provides that if employment is terminated by the Company other than for
"cause" (as defined in the agreement), retirement, death, or disability, or by
the employee for other than "constructive termination" (as defined in the
agreement), the Company will pay such executive officer a lump sum severance
payment equal to 2.5 times such executive officer's total compensation,
comprised of the annual base salary and "Average Bonus", as such term in
defined in the agreement. If the total of such lump sum severance payment plus
all other payments, distributions or benefits of any type made to or on behalf
of the executive officer results in the imposition of the excise tax imposed
by Section 4999 of the Internal Revenue Code, the lump sum severance payment
will be increased in an amount required for the executive officer to pay any
such excise taxes due the Internal Revenue Service. In addition, such
executive officer will be entitled to all rights and benefits, if any,
provided under any other plan or agreement between him and the Company.
Mr. Goodman's severance agreement provides that if his employment is
terminated by the Company other than for "cause" (as defined in the
agreement), retirement, death, or disability, or by the employee for "good
reason" (as defined in the agreement), the Company will pay him a lump sum
severance payment equal to 2.99 times his "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, Mr. Goodman will be entitled to all rights and benefits,
if any, provided under any other plan or agreement between him and the
Company.
Each of the executive officers listed in the Summary Compensation Table also
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 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 (age 62) or in the event of
a "change of control" (as defined in the plan) of the Company.
Human Resources Committee Interlocks and Insider Participation. The members
of the Human Resources Committee during the last fiscal year were Messrs.
Bain, Busbee, Garland, Nichol and Quinn. Mr. Busbee is of
10
<PAGE>
counsel to the law firm of Gibson, Dunn & Crutcher in Dallas, Texas, which the
Company retains from time to time to perform legal services. In addition,
during the last fiscal year until August 1998, Mr. Busbee was an attorney and
shareholder with the law firm of Locke Purnell Rain Harrell in Dallas, Texas,
which the Company has also retained from time to time to perform legal
services. There are no interlocking relationships between any executive
officer of the Company and any other company.
Human Resources Committee Report on Executive Compensation. The Human
Resources Committee of the Board of Directors is charged with the
responsibility of providing oversight and direction with respect to the
compensation programs and employee benefit plans of the Company. All members
of the Committee are non-employee directors who serve on the Board of
Directors. Specific duties and responsibilities of the Committee include:
. The establishment and oversight of the Company's executive compensation
policy and strategy.
. Development of recommendations to the Board of Directors regarding the
pay of Company officers and of the CEO's compensation.
. Development of recommendations to the Board of Directors regarding
performance targets and criteria underlying the Company's various
incentive compensation plans and approval of such targets and criteria
with respect to the Company's incentive compensation plans subject to
Section 162(m) of the Internal Revenue Code.
. Interaction with outside advisors and consultants regarding the Company's
current compensation and benefit plans as well as periodic assessments of
the competitive marketplace, emerging trends and legislative
developments, and best practices employed by other corporations.
. Review and determination, for recommendation to the Board of Directors,
of the Company's program for providing compensation to non-employee
directors.
. Assurance that the Company's compensation program for the CEO and other
officers is aligned with the Company's overall business strategy and
focuses upon the creation of value for the Company's shareholders.
This report has been prepared by the Committee immediately following the
meeting of the Committee on October 27, 1998, at which time the Committee
determined bonus awards for the most recent performance year, established new
incentive targets and performance measures for the 1999 performance year,
reviewed salary recommendations for all officers and business unit
presidents/general managers, and conducted other matters consistent with the
Committee's charter.
COMPENSATION STRATEGY. Over the course of the past 12 months, the Committee
has been working with the consultants of Towers Perrin, an international
management consulting firm, in rethinking its approach to the remuneration of
all employees. The Committee recognized that the Company needed a compensation
program that is better aligned with the Company's business plans and
strategies going forward: more focus upon growth opportunities in both
regulated and nonregulated business sectors, further emphasis upon operating
efficiencies and service levels, and preparation for a more competitive
environment in a rapidly consolidating industry. The compensation program for
all employees has been shifted to a program which focuses upon "total
rewards." Total rewards is an all-encompassing approach to compensation and
benefits which emphasizes the importance of the total package including base
salary, incentive opportunities, employee benefits, training and development
opportunities, and the corporate environment. The Company is in the process of
implementing the new total rewards program over the next several months.
11
<PAGE>
In concert with the total rewards program development for all employees, the
Committee provided direction and guidance in formulating a new executive
compensation strategy for the organization. Working with Towers Perrin, the
Company has adopted an executive compensation strategy which focuses upon the
following guiding principles:
. Key executives who are charged with the responsibility for establishing
and executing the Company's business strategy should have incentive
compensation opportunities that are aligned with the creation of
shareholder value.
. An executive compensation program should be built around an emphasis upon
total rewards.
. Stock ownership is an important component for ensuring that executives'
interests are aligned with shareholders.
. To facilitate stock ownership for executives, the Company will provide
stock options and other stock-based incentive vehicles that focus on
shareholder value creation.
. Incentive compensation opportunities should have significant upside
potential with commensurate downside risk.
. The Company's compensation strategy will place a greater emphasis upon
stock options and related long-term incentive opportunities, with limited
emphasis upon special benefits and perquisites.
In recognition of these guiding principles, the Committee worked closely
with Towers Perrin throughout the year to reposition its executive
compensation program. Key components of the new program include:
. The introduction of a more objective and performance sensitive annual
incentive plan for management that is designed to comply with Section
162(m) of the Internal Revenue Code.
. The adoption of a multi-faceted long-term incentive plan which will allow
for the granting of stock options and other forms of long-term
incentives, with elements of the plan designed to comply with Section
162(m) of the Internal Revenue Code.
. The adoption of voluntary share ownership guidelines for the Company's
officers and business unit presidents/general managers, expressed as a
multiple of the individual's base salary, and the requirement to achieve
such ownership levels within five years.
. Elimination of Company-provided automobile allowances for executives and
supplemental medical plan coverage.
. An overall compensation strategy to pay executive base salaries at the
50th percentile of the competitive market practice with targeted total
cash and targeted total direct compensation to be paid at the 75th
percentile of competitive market practice if performance targets are
reached.
In addition to its work on executive compensation, the Committee worked
closely with Towers Perrin to change its approach to its compensation program
for non-employee directors. As a result, the Board has adopted the Equity
Incentive and Deferred Compensation Plan for Non-Employee Directors, subject
to the approval of the Company's shareholders at their Annual Meeting. After
the Annual Meeting, the non-employee directors who are currently participating
in the Retirement Plan for Non-Employee Directors will be able to elect to
participate in the new plan or remain in the current Retirement Plan for Non-
Employee Directors. In addition, no persons who become directors after the
Annual Meeting on February 10, 1999 shall be eligible to participate in the
Retirement Plan for Non-Employee Directors.
12
<PAGE>
ASSESSMENT OF COMPETITIVE PRACTICES. The Committee regularly evaluates
competitive compensation data provided by management consultants to ensure
that the Company's pay policy and practices are aligned with the competitive
marketplace. Over the course of the past 12 months, the Committee reviewed on
two occasions competitive compensation levels from numerous survey sources and
analyses provided by Towers Perrin. These sources of competitive compensation
data included:
. A review of the total direct compensation of the five highest paid
executives for a select peer group of 17 gas utility companies which have
annual revenues and market capitalizations comparable to the Company.
. Published survey data of the gas utility industry provided by the
American Gas Association.
. Published survey data of the utility industry provided by the Executive
Compensation Service.
. Published and private survey data of both the utility industry and
general industry provided by Towers Perrin.
These survey sources provide a comprehensive review of national compensation
practices as well as selected companies that compete in specific geographic
markets in which the Company participates. The organizations participating in
these surveys are different than some of the companies that appear in the
Performance Graph. Specific job comparisons and access to market data for
companies included in the Performance Graph are not readily available to the
Committee.
For the most recently completed fiscal year, the Company's executive
compensation program was comprised of base salary, annual incentive
compensation, and long-term incentive compensation in the form of time-lapsed
restricted stock. The following paragraphs discuss each of these program
components.
BASE SALARY. All positions in the Company, including executive positions,
have been assigned to formal salary grades and ranges. Positions are compared
on the basis of job content to similar positions in companies of comparable
revenue size and market capitalization to the Company. Salary ranges for all
positions are reviewed on an annual basis, and proposed salary ranges are
presented to the Committee for its review and consideration each year in
October. The midpoint of each salary range is designed to approximate the 50th
percentile of base salaries of comparable companies in the marketplace, as
defined above.
The base salary for an individual executive may be more than or less than
the salary range midpoint based upon the individual's performance and his or
her level of experience in the position. In determining appropriate salary
levels, the Committee also considers current economic conditions and national
and industry trends in executive compensation.
Each year, the Chief Executive Officer and senior officers of the Company
provide the Committee with an oral presentation discussing the performance and
contributions of each executive. The Company uses a performance evaluation
process that has seven performance ratings and which considers individual
goals and areas of accountability. The individual executive's salary increase
is based upon his performance rating and the overall salary increase budget
and guidelines established by the Company for the year.
ANNUAL INCENTIVE COMPENSATION. All of the Company's officers and business
unit presidents are eligible to participate in the Executive Annual
Performance Bonus Plan (the "Bonus Plan"). The Bonus Plan is a cash-based
annual bonus plan that provides executives with awards based upon two
performance criteria: corporate-wide earnings per share and individual
performance rating. The two performance criteria are each weighted 50 percent
and are calibrated upon a performance matrix that expresses the payout
opportunity for each executive based upon a stated percentage of his or her
base salary. Annual incentive compensation targets for all participants range
from 15 percent to 60 percent of base salary, depending upon the position's
level and accountabilities within the organization. Actual awards, based upon
performance, can range from 0 percent to 150 percent of the individual target
award.
The Bonus Plan has been totally redesigned for the 1999 fiscal year into the
Annual Incentive Plan for Management (the "Incentive Plan"). The Incentive
Plan will measure performance at both the corporate and
13
<PAGE>
business unit level. Additionally, the Incentive Plan will consider
measurements of both financial and operational performance. The Incentive Plan
has been designed with the intent of full compliance with Section 162(m) of
the Internal Revenue Code. The plan is further described, including the full
text of the plan document, in a later section of this year's proxy statement.
The Company is requesting approval of the plan by shareholders for exemption
as a "performance plan" pursuant to Section 162(m).
LONG-TERM INCENTIVE COMPENSATION. The Company currently grants long-term
awards in the form of time-lapse restricted stock. The Committee believes that
restricted shares allow key executives to share fully in the interests of all
shareholders. During the restricted period, executives receive voting rights
and dividends applicable to the restricted shares that they have been granted.
Individual grants of restricted shares are made on a discretionary basis.
The timing and amount of restricted stock granted to each executive will vary
based upon the Company's performance as well as the performance of the
individual. 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 special awards
under the Restricted Stock Grant Plan beyond the typical award level. Such
recommendations may be forthcoming in instances where both Company performance
and the performance of the executive are considered to be exceptional.
The Board of Directors defines the restrictions applicable to any award
under the Restricted Stock Grant Plan. Restricted share grants made during the
1998 fiscal year and recent past require the completion of four or six years
of Company service before the award is fully vested and restrictions lapse.
Stock certificates are held in the custody of the Company by means of a trust
until restrictions are removed.
Consistent with the Company's new executive compensation strategy, the
Company has adopted an "omnibus" long-term incentive compensation plan. This
plan is also described later in this year's proxy statement and includes a
full copy of the plan text. Certain types of awards under the plan are
designed to be performance-based pursuant to Section 162(m) and will receive
such an exemption if the plan is approved by shareholders. The plan allows for
the granting and/or award of qualified and nonqualified stock options, stock
appreciation rights, restricted shares, performance-based restricted shares,
performance awards (i.e., performance shares, performance units, and
performance cash), special stock awards, and other long-term incentive
vehicles.
In the 1999 fiscal year, and predicated upon a favorable vote of
shareholders approving the 1998 Long-Term Incentive Plan, the Company
anticipates granting nonqualified stock options to key executives and
officers. At this time, the Company foresees granting only stock options under
the new long-term incentive plan. However, the omnibus plan has been designed
to allow the Committee to be able to exercise considerable discretion and
flexibility in awarding long-term incentive compensation, especially in light
of changing tax, legislative, and regulatory considerations.
Finally, the Company has adopted share ownership guidelines for key
officers. The guidelines are voluntary and should be achieved by each officer
over the course of the next five years. The Committee strongly advocates
executive share ownership as a means by which to better align executive
interests with those of all shareholders. The Chief Executive Officer has a
guideline to reach a share ownership position of five times his base salary
over the course of the next five years. Other officer positions have share
ownership guidelines ranging from 2.5 to 1.0 times the officer's base salary.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. The Committee has awarded Mr.
Robert W. Best, Chairman, President, and Chief Executive Officer of the
Company, with a base salary of $540,000 for 1999. In 1998, Mr. Best's base
salary was at the level of $500,000. The increase in base salary awarded to
Mr. Best by the Committee is in recognition of both the Company and individual
performance achieved in 1998. Specifically, the Company achieved record
earnings in fiscal year 1998 (as reported by earnings per share), and Mr. Best
was personally accountable for guiding the Company in achieving numerous
strategic objectives including the integration of United Cities, development
of a business strategy in the nonregulated sectors, and recruitment of key
individuals to the top management team.
14
<PAGE>
Mr. Best has earned an annual incentive award under the Bonus Plan of
$450,000. This award is based upon actual results compared to the performance
criteria of the Bonus Plan of earnings per share and individual performance,
each weighted 50 percent. The Company achieved earnings per share for fiscal
year 1998 of $1.84, which was above the designated maximum level of
performance pursuant to the plan. Finally, Mr. Best received a grant of 50,000
restricted shares during fiscal year 1998 in connection with his employment
with the Company in March 1997, which is consistent with the Company's past
practices.
COMPLIANCE WITH SECTION 162(m). During the past year, the Board of Directors
has decided to seek full compliance with Section 162(m) of the Internal
Revenue Code. The Company's decision to comply with the provisions of Section
162(m) will mean that the Company should maintain the tax deductibility for
performance-based compensation paid to the five proxy-named executives. The
Company seeks compliance with Section 162(m) for the 1999 fiscal year and
fiscal years thereafter, provided that Section 162(m) remains in effect in its
present form. In order to comply with Section 162(m), all actions taken by the
Committee with respect to the compensation of the five proxy-named executives
will be taken by those members who constitute a "non-employee director" as
defined in Section 162(m). One member of the present Human Resources
Committee, Dan Busbee, does not meet the Section 162(m) definition due to the
professional services provided to the Company by the law firm with which Mr.
Busbee is employed. Therefore, Mr. Busbee formally recuses himself from all
executive compensation matters discussed by the Human Resources Committee
affecting Section 162(m) compliance.
Human Resources Committee
Carl S. Quinn, Chairman
Travis W. Bain II
Dan Busbee
Thomas J. Garland
Phillip E. Nichol
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<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 comprising
the Comparison Company Index.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG ATMOS, S&P 500 INDEX
AND COMPARISON COMPANY INDEX
[PERFORMANCE GRAPH APPEARS HERE]
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
Atmos Energy Corporation $100 $ 92 $105 $132 $146 $174
S&P 500 Composite Index $100 $104 $135 $162 $227 $248
Comparison Company Index $100 $ 90 $101 $123 $145 $156
*Assumes a $100 investment on September 30, 1993, and reinvestment of
dividends.
The Comparison Company Index used in the graph is the Merrill Lynch Small,
Mid and Large Cap Index for natural gas local distribution companies, which
index Merrill Lynch utilizes to represent natural gas distribution companies
in its weekly research reports. The following companies were included in the
Comparison Company Index used in the graph: AGL Resources Inc., Cascade
Natural Gas Corporation, CMS Energy Corporation, Colonial Gas Company,
Connecticut Energy Corporation, Eastern Enterprises, Indiana Energy, Inc.,
Laclede Gas Company, MCN Energy Group Inc., New Jersey Resources Corporation,
NICOR Inc., Northwest Natural Gas Company, NUI Corporation, ONEOK, Inc.,
Peoples Energy Corporation, Piedmont Natural Gas Company, Inc., Public Service
Company of North Carolina, Inc., SEMCO Energy, Inc., Southern Union Company,
Southwest Gas Corporation, UGI Corporation, Washington Gas Light Company,
WICOR, Inc., and Yankee Energy System, Inc.
16
<PAGE>
2.INCREASE IN NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK
GENERAL DESCRIPTION OF PROPOSAL
The Board of Directors has approved a proposed amendment to Article VII of
the Restated Articles of Incorporation of the Company as Amended (the
"Articles") that increases the number of authorized shares of Common Stock
from 75,000,000 shares to 100,000,000 shares. An increase in the number of
authorized shares will not have a dilutive effect on the value of each
shareholder's Common Stock; only the actual issuance of additional Common
Stock would have such an effect. The issuance of over 13,000,000 shares of
Common Stock in the United Cities Merger as well as the issuance of shares of
Common Stock in other acquisitions, stock splits, stock dividends and
issuances of shares to the Company's stock and employee benefit plans in the
recent past has reduced the amount of shares available for use in the future.
Accordingly, the Board of Directors believes that it is desirable to increase
the number of authorized shares of Common Stock in order to ensure that the
Company has a sufficient number of authorized but unissued shares of Common
Stock available to provide the flexibility needed for future expansion of the
Company's activities. The availability of the additional authorized shares of
Common Stock will permit the Company to meet advantageous market conditions
for the sale of additional Common Stock, future acquisitions of the properties
or securities of other companies, issuances of stock pursuant to employee
benefit plans and the Company's Direct Stock Purchase Plan, as well as stock
dividends, stock splits, and other general corporate purposes.
The Board of Directors has sole discretion to issue additional shares of
Common Stock from time to time for any corporate purpose without further
action by the Company's shareholders, except as may be required by law or the
rules of any applicable exchange. The Common Stock is currently listed on the
New York Stock Exchange. The Board, however, has no current plans,
understandings, or arrangements for the issuance of any of the additional
Common Stock that would be authorized by this proposed amendment to the
Company's Articles (other than issuances to be made in the ordinary course
through employee benefit plans or the Company's Direct Stock Purchase Plan).
Holders of presently outstanding shares of Common Stock have no preemptive
rights to purchase additional shares of Common Stock.
ANTI-TAKEOVER ISSUES
Although the Board of Directors does not view the proposed amendment to
increase the number of authorized shares of Common Stock to be an anti-
takeover proposal, it may be deemed to be one. The availability of additional
shares of Common Stock may make it more difficult to effect, or may discourage
an attempt, to gain control of the Company by means of a merger, tender offer,
or proxy contest that is not approved by the Company's management. The
proposal is not the result of any knowledge of the Company of any specific
effort to accumulate the Company's securities or to obtain control of the
Company.
In addition to an increase in authorized shares of Common Stock, other
provisions of the Company's Articles and Bylaws could be viewed as having an
anti-takeover effect. These include: (i) provisions establishing a classified
Board of Directors; (ii) provisions stating that a director may be removed
only for cause and with a super-majority (75%) vote; (iii) provisions
restricting the Company's ability to enter into a business combination with a
substantial shareholder except under certain circumstances to ensure a fair
price to shareholders; and (iv) provisions requiring a super-majority (75%)
vote to amend the restrictions on business combinations with a substantial
shareholder. The Company's Shareholders' Rights Agreement may also be deemed
to have an anti-takeover effect.
EFFECTIVE DATE AND BOARD RECOMMENDATION
The proposed amendment to increase the number of authorized shares of Common
Stock, if passed, would become effective upon the filing of Articles of
Amendment with the Secretary of State of the State of Texas and the State
Corporation Commission of the Commonwealth of Virginia, which filings are
expected to be made shortly after the shareholders approve the amendment. The
affirmative vote of the holders of at least two-thirds ( 2/3) of the
outstanding shares entitled to vote is required to adopt the amendment.
Although an abstention will
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not be counted as a vote "For" or "Against" the amendment, it will in effect
constitute a vote against the proposal because each abstention is treated as a
share that is entitled to vote. Because the rules of the New York Stock
Exchange allow brokers to exercise their discretionary authority in voting on
this proposal, there will be no "broker non-votes" on this proposal. "Broker
non-votes" are shares held by brokers as to which they have no discretionary
power to vote on a particular matter and have received no instructions from
the beneficial owners or persons entitled to vote thereon.
The Board of Directors has approved the proposed amendment to the Company's
Articles and submits the following resolution for adoption by the shareholders
at the Annual Meeting:
RESOLVED, that it is deemed by the Board of Directors to be in the best
interests of the Company and its shareholders to amend the Restated
Articles of Incorporation of the Company as Amended to increase the total
authorized shares of Common Stock of the Company, including that which is
outstanding, from 75,000,000 shares of Common Stock, without par value, to
100,000,000 shares of Common Stock, without par value, and that, to
accomplish the foregoing, Section 1 of Article VII of the Restated Articles
of Incorporation as Amended be amended to read as follows:
"The aggregate number of shares which the Corporation shall have the
authority to issue is One Hundred Million (100,000,000) shares of Common
Stock having no par value."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE PROPOSED
AMENDMENT TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK.
3.APPROVAL OF 1998 LONG-TERM INCENTIVE PLAN
Background and Purpose. The 1998 Long-Term Incentive Plan (the "LTIP")
represents a part of the Company's total rewards strategy, which the Company
developed as a result of a study it conducted of all employee, executive and
non-employee director compensation and benefits. The Board of Directors
adopted the LTIP, subject to approval by the Company's shareholders. The LTIP
is a comprehensive, long-term incentive compensation plan, providing for
discretionary awards of incentive stock options, non-qualified stock options,
stock appreciation rights, bonus stock, restricted stock and performance-based
stock to help attract, retain, and reward employees and non-employee directors
of the Company and its subsidiaries. Any employee of the Company, including an
employee who is also a director or officer, and any non-employee director is
eligible to participate in the LTIP. However, for fiscal 1999, it is
contemplated that only officers and business unit presidents of the Company (a
total of 21 employees) will be participating in the LTIP. The LTIP is intended
to motivate participants using performance-related incentives linked to
longer-range performance goals and the interests of the Company's
shareholders. These incentives and long-range performance goals will increase
the interest of employees or non-employee directors in the Company's overall
performance and encourage such persons to continue their services for the
Company.
The complete text of the LTIP is set forth in Exhibit A to this Proxy
Statement. The summary of the LTIP contained herein is qualified in its
entirety by reference to Exhibit A.
Administration. The LTIP shall be administered and interpreted by the Human
Resources Committee of the Board (the "Committee"). Actions taken by the
Committee with respect to the LTIP will be taken by those members who are non-
employee directors and who qualify as "outside directors" under Section 162(m)
of the Internal Revenue Code (the "Code") and as "non-employee directors"
under the rules promulgated under Section 16 of the Securities Exchange Act of
1934 (the "Exchange Act"), insofar as such actions are affected by Section
162(m) or Section 16. The Committee shall determine eligible persons to whom
awards will be granted, as well as all terms, conditions, performance criteria
and restrictions applicable to each award. In addition to any other powers
and, subject to the provisions of the LTIP, the Committee shall (i) interpret
the LTIP, (ii) prescribe, amend, and rescind any rules and regulations
necessary or appropriate for the administration
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<PAGE>
of the LTIP, and (iii) make such other determinations and take other action as
it deems necessary or advisable in the administration of the LTIP. Any
interpretation, determination, or action made or taken by the Committee shall
be final, binding, and conclusive on all interested parties.
General Description of Plan. The LTIP became effective as of October 1,
1998, subject to the approval of the Company's shareholders. The LTIP shall
have a term of ten years from its effective date, subject to earlier
termination pursuant to the provisions of the LTIP. In the event of a Change
in Control (as defined in the LTIP document), all unmatured installments of
any awards outstanding shall automatically be accelerated and exercisable in
full and all restrictions on any award shall be automatically terminated. The
Board may amend, suspend or terminate the LTIP, in whole or in part, at any
time; provided, however, that any amendment shall be made with shareholder
approval when such approval is necessary to comply with Section 162(m) of the
Code.
Subject to adjustment as provided in the LTIP, the maximum aggregate number
of shares that may by issued under the LTIP shall not exceed 1,500,000 shares
of Common Stock plus shares of Common Stock previously subject to awards which
are forfeited, terminated, cancelled or rescinded, settled in cash in lieu of
Common Stock, or exchanged for awards that do not involve Common Stock, or
expired unexercised. Shares of Common Stock may be available from authorized
but unissued shares of Common Stock held by the Company in its treasury, or
Common Stock purchased by the Company on the open market or otherwise. The
LTIP allows the Company to enter into award agreements that will permit the
grant of nonqualified stock options, incentive stock options, stock
appreciation rights, restricted stock/restricted stock units, tandem awards,
performance units, performance shares, bonus stock, and other stock unit
awards or stock-based forms of awards. The type and amount of incentive
compensation to be awarded or that would have been awarded (including stock
options, if any) to any eligible participant, including any executive officer,
non-executive officer director or non-executive officer employee during the
last fiscal year had the LTIP been in effect is not determinable.
Stock Options. The Committee may grant stock options, including non-
qualified stock options ("NQSOs") and incentive stock options ("ISOs") to
employees and directors; provided, however, that non-employee directors may
receive only NQSOs. The terms applicable to each option grant, including the
exercise prices, expiration dates and other material conditions upon which the
options may be exercised, shall be detailed in an award agreement. The Company
will not require any consideration to be paid by a recipient to the Company in
exchange for the granting or extension of stock options. The Company will
require consideration to be paid by a recipient only at the time of the
exercise of the option in the amount of the exercise price. Stock option
grants will entitle the participant to purchase stock at prices not less than
100% of the fair market value on the date of grant. The Committee may not
grant ISOs under the LTIP to any employee which would permit the aggregate
fair market value of the Common Stock with respect to which ISOs are
exercisable for the first time during any calendar year to exceed $100,000.
Any stock option granted under the LTIP which is designated as an ISO that
exceeds this limit or otherwise fails to qualify as an ISO shall be a NQSO. If
an option qualifies as either an ISO or a NQSO, there will generally be no
federal income tax consequences to either the recipient or the Company upon
the issuance of such options. In the case of an ISO, there should also be no
federal income tax consequences to either the recipient or the Company upon
its exercise. However, if a stock option is qualified as a NQSO, the recipient
must recognize compensation income in the year of exercise equal to the
difference between the fair market value of the Common Stock on the date of
exercise and the exercise price, while the Company will receive a
corresponding deduction for compensation paid for the same amount. No
participant may receive during any fiscal year of the Company awards of stock
options and stock appreciation rights covering an aggregate of more than
500,000 shares of Common Stock.
Restricted Stock/Restricted Stock Units. The Committee may grant shares of
Restricted Stock or Restricted Units to participants in such amounts and for
such duration as it shall determine. Each Restricted Stock/Restricted Unit
grant shall be evidenced by an award agreement specifying the number of shares
of Common Stock and/or the number of Restricted Units awarded, the period of
restriction, the conditions and performance goals of the Company, or a
subsidiary or any division thereof that must be satisfied prior to removal of
the restriction, and
19
<PAGE>
such other provisions as the Committee shall determine. The participants
receiving Restricted Stock/Restricted Unit awards generally are not required
to pay for them (except applicable tax withholding) other than by rendering
services to the Company.
The restriction period of Restricted Stock and/or Restricted Units shall
commence on the date of grant and shall expire upon satisfaction of the
conditions set forth in the award agreement. Such conditions may provide for
vesting based on (i) length of continuous service, (ii) achievement of
specific business objectives, (iii) increases in performance compared to
specified indices, (iv) attainment of specified growth rates, or (v) other
comparable performance measurements, as may be determined by the Committee in
its sole discretion. During the restriction period, participants in whose name
Restricted Stock/Restricted Units are granted under the Plan may exercise full
voting rights with respect to those shares and shall be entitled to receive
all dividends and other distributions paid with respect to those Shares/Units.
Stock Appreciation Rights. A stock appreciation right ("SAR") entitles the
participant at his election to surrender to the Company the SAR, or portion
thereof, and to receive from the Company in exchange therefor cash or shares
in an amount equal to the excess of the fair market value per share over the
SAR price per share specified in such SAR, multiplied by the total number of
shares of the SAR being surrendered. The Company may satisfy its obligation
upon exercise of an SAR by the distribution of that number of shares of Common
Stock having an aggregate fair market value equal to the amount of cash
otherwise payable to the participant. A cash settlement would be made for any
fractional share interests. In addition, the Committee may grant two or more
incentives in one award in the form of a "tandem award," so that the right of
the participant to exercise one incentive shall be cancelled if, and to the
extent, the other incentive is exercised.
Performance-Based Awards. The Committee may issue performance awards in the
form of either Performance Units or Performance Shares, subject to the
performance goals and performance period it determines. The extent to which
performance measures are met will determine the value of each Performance Unit
or the number of Performance Shares earned by the participant. The terms and
conditions of each performance award will be set forth in an award agreement.
Payment of the amount due upon settlement of a performance award shall be made
in a lump sum or installments in cash, shares of Common Stock, or a
combination thereof as determined by the Committee.
Bonus Stock. The Committee may award shares of Bonus Stock to participants
under the LTIP without cash consideration. In the event the Committee assigns
restrictions on the shares of Bonus Stock awarded under the LTIP, then such
shares may not be sold, transferred, pledged, assigned or otherwise alienated
or hypothecated if the restrictions have not lapsed or vested. If any vesting
condition is not met on the shares, then such shares must be returned to the
Company, without any payment from the Company, within 60 days.
Other Stock-Based Awards. The Committee may issue to participants, either
alone or in addition to other awards made under the LTIP, Stock Unit Awards,
which may be in the form of Common Stock or other securities. The value of
such award shall be based, in whole or in part, on the value of the underlying
Common Stock or other securities. The Committee, in its sole and complete
discretion, may determine that an award may provide to the Participant (i)
dividends or dividend equivalents (payable on a current or deferred basis) and
(ii) cash payments in lieu of or in addition to an award. Subject to the
provisions of the LTIP, the Committee shall determine the terms, restrictions,
conditions, vesting requirements, and payment rules of the award that shall be
specified in an award agreement.
BOARD RECOMMENDATION TO APPROVE 1998 LONG-TERM INCENTIVE PLAN
On August 12, 1998, the Board of Directors approved and adopted the LTIP,
which became effective October 1, 1998, subject to the approval of the
shareholders of the Company at the Annual Meeting of Shareholders on February
10, 1999. The Board of Directors believes that the LTIP will accomplish its
purpose of motivating employees and non-employee directors using performance-
related incentives linked to longer-range performance goals and the interests
of the Company's shareholders.
20
<PAGE>
The LTIP is being submitted to the shareholders of the Company for their
approval pursuant to the provisions of the LTIP and to comply with Section
162(m) of the Code. According to the Company's Bylaws, this proposal to adopt
the LTIP requires the affirmative vote of the holders of a majority of the
shares of Common Stock entitled to vote on the matter and present or
represented by proxy at a meeting at which a quorum is present. Abstentions
and broker non-votes will be included in the total shares present or
represented by proxy for purposes of determining if a quorum exists, but
neither abstentions nor broker non-votes will be counted as a vote "For" or
"Against" the amendment. However, unlike an abstention that will in effect
constitute a vote against the proposal, a broker non-vote will not have such
effect because brokers do not have discretionary power to vote on this
proposal under the rules of the New York Stock Exchange.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE 1998 LONG-
TERM INCENTIVE PLAN.
4.APPROVAL OF ANNUAL INCENTIVE PLAN FOR MANAGEMENT
General Description and Purpose. The Annual Incentive Plan for Management
(the "Incentive Plan") represents another part of the Company's total rewards
strategy, which the Company developed as a result of a study it has conducted
of all employee, executive and non-employee director compensation and
benefits. The Board of Directors adopted the Incentive Plan, effective October
1, 1998, subject to approval by the Company's shareholders. The purpose of the
Incentive Plan is to promote the interests of the Company and its shareholders
by attracting, motivating, and retaining executives and senior managers. The
Incentive Plan is also intended to establish a sense of personal commitment on
the part of its executives and senior managers in the growth, development, and
financial success of the Company and reward these key employees accordingly.
Any employee of the Company, including an employee who is also a director or
an officer, is eligible to participate in the Incentive Plan. However, for
fiscal 1999, it is contemplated that only officers, business unit presidents
and other key employees of the Company (a total of approximately 83 employees)
will be participating in the Incentive Plan. An employee must be a participant
in the Incentive Plan for a minimum of six months during the plan year to be
eligible for an award for that plan year. The Committee, upon its own action,
may make, but shall not be required to make, an award to any employee.
The complete text of the Incentive Plan is set forth in Exhibit B to this
Proxy Statement. The summary of the Incentive Plan contained herein is
qualified in its entirety by reference to Exhibit B.
Subject to the approval of the Company's shareholders, the Incentive Plan
shall be effective as of October 1, 1998 and shall expire on October 1, 2003.
All awards made prior to, and outstanding on that date, shall remain valid in
accordance with their terms and conditions. In the event of a Change in
Control (as defined in the text of the Incentive Plan), all awards for the
performance period shall be deemed earned at the maximum performance goal
level and payment of the maximum award shall be made within 10 days after the
effective date of the Change in Control. The Company will require any
successor to assume and agree to perform the Company's obligation under the
Incentive Plan in the same manner and to the same extent that the Company
would be required to perform them if no such succession had taken place. The
Board may at any time amend, suspend or terminate the Incentive Plan;
provided, however, that any amendment shall be made with shareholder approval
where such approval is necessary to comply with Section 162(m) of the Code.
Administration. The Incentive Plan shall be administered and interpreted by
the Human Resources Committee unless otherwise determined by the Board.
Actions taken by the Committee with respect to the Incentive Plan will be
taken by those members who are non-employee directors and who qualify as
"outside directors" under Section 162(m) of the Code and as "non-employee
directors" under the rules promulgated under Section 16 of the Exchange Act,
insofar as such actions are affected by Section 162(m) or Section 16. The
Committee shall determine and designate the eligible persons to whom awards
will be made. The Committee shall also have the following specific powers: (i)
interpret the Incentive Plan, (ii) prescribe, amend, and waive any rules and
regulations necessary for the administration of the Incentive Plan, and (iii)
make such other
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<PAGE>
determinations and take such other action as it deems necessary or advisable
in the administration of the Incentive Plan. All interpretations,
determinations or actions made or taken by the Committee shall be final,
binding, and conclusive on all interested parties.
Performance Goals and Measurement. Performance goals shall be established by
the Committee in writing not later than 90 days after the beginning of the
applicable performance period. Performance goals may be the same for all
participants or, at the discretion of the Committee, may differ to reflect
more appropriate measures of individual performance. Performance goals may be
based on one or more business and/or financial criteria. In establishing
performance goals for the plan year, the Committee may include one or any
combination of many criteria such as total shareholder return; return on
assets, equity, capital, or investment, earnings per share; cash flow; levels
of operating expense; and measures of customer satisfaction and service. The
Committee also has the discretion to make adjustments in calculating the
attainment of performance goals in recognition of extraordinary items or
changes in the law or financial reporting.
Awards. Awards are generally paid in cash. However, the Committee may choose
to pay awards in the form of stock issued under the LTIP. In addition, if the
Committee permits and if the participant makes an election in advance, the
participant may elect to convert his or her award in 25 percent increments, in
whole or part, into the following forms: (a) defer receipt of the award of all
or a part of the deferred compensation under the Executive Nonqualified
Deferred Compensation Plan; (b) convert the award to unrestricted stock in the
form of Bonus Shares (value equal to 110% of amount of award) granted under
the LTIP; (c) convert the award to restricted stock (value equal to 150% of
amount of award) granted pursuant to the LTIP; or (d) convert the award to
stock options (with value equal to 250% of amount of award) granted pursuant
to the LTIP. The maximum cash award for any performance period is $1,000,000.
The amount of incentive compensation to be awarded or that would have been
awarded to any eligible participant, including any executive officer or non-
executive officer employee, during the last fiscal year had the Incentive Plan
been in effect is not determinable.
BOARD RECOMMENDATION TO APPROVE ANNUAL INCENTIVE PLAN FOR MANAGEMENT
On August 12, 1998, the Board of Directors approved and adopted the
Incentive Plan, which will become effective only upon the approval of the
shareholders of the Company at the Annual Meeting of Shareholders on February
10, 1999. The Board of Directors believes that the Incentive Plan will
accomplish its purpose of promoting the interests of the Company and its
shareholders by attracting, motivating, and retaining executives and senior
managers.
The Incentive Plan is being submitted to the shareholders of the Company for
their approval pursuant to the provisions of the plan and to comply with
Section 162(m) of the Code. According to the Company's Bylaws, this proposal
to adopt the Incentive Plan requires the affirmative vote of the holders of a
majority of the shares of Common Stock entitled to vote on the matter and
present or represented by proxy at a meeting at which a quorum is present.
Abstentions and broker non-votes will be included in the total shares present
or represented by proxy for purposes of determining if a quorum exists, but
neither abstentions nor broker non-votes will be counted as a vote "For" or
"Against" the amendment. However, unlike an abstention that will in effect
constitute a vote against the proposal, a broker non-vote will not have such
effect because brokers do not have discretionary power to vote on this
proposal under the rules of the New York Stock Exchange.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE ANNUAL
INCENTIVE PLAN FOR MANAGEMENT.
5. APPROVAL OF EQUITY INCENTIVE AND DEFERRED
COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
General Description and Purpose. The Equity Incentive and Deferred
Compensation Plan for Non-Employee Directors (the "Directors Compensation
Plan") represents another part of the Company's total rewards strategy, which
includes compensation and benefits for non-employee directors. Only the non-
employee
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directors of the Company are eligible to participate in the Directors
Compensation Plan. There are currently eleven members of the Board who qualify
as non-employee directors. The Directors Compensation Plan represents an
amendment to the Atmos Energy Corporation Deferred Compensation Plan for
Outside Directors adopted by the Company on May 10, 1990 and will replace the
pension payable under the Company's Retirement Plan for Non-Employee Directors
(the "Directors Retirement Plan"). However, current participants in the
Directors Retirement Plan may elect to remain in such plan instead of
participating in the new Directors Compensation Plan.
Currently, non-employee directors receive compensation in the form of an
annual retainer and committee and meeting fees and also participate in the
Directors Retirement Plan. However, the Company believes it is important to
align the interests between the non-employee directors with the Company's
other shareholders by compensating non-employee directors with shares of
Common Stock or share unit equivalents. The purpose of the Directors
Compensation Plan is to provide non-employee directors with the opportunity to
defer receipt of compensation for services rendered to the Company, invest
deferred compensation into either a cash account or a stock account, and to
receive an annual grant of share units for each year of service on the Board.
The Directors Compensation Plan should aid the Company in attracting and
retaining non-employee directors, as well as align the interests of directors
and other Company shareholders.
The complete text of the Directors Compensation Plan is set forth in Exhibit
C to this Proxy Statement. The summary of the Directors Compensation Plan
contained herein is qualified in its entirety by reference to Exhibit C.
The Directors Compensation Plan shall become effective upon approval of the
shareholders of the Company. In the event of a Change in Control, as such term
is defined in the plan document, the Company or its successor shall be
required to fully pay plan benefits through a grantor trust arrangement. The
Board may amend, alter, suspend, discontinue, or terminate the Directors
Compensation Plan without the consent of shareholders of the Company or
individual directors; provided, however, that, without the consent of an
affected director, no amendment, alteration, suspension, discontinuation, or
termination of the Directors Compensation Plan may materially impair the
rights or, in any other manner, materially and adversely affect the rights of
such director hereunder to the amounts or share units then credited to his
sub-account.
Administration. The Directors Compensation Plan shall be administered by the
Board, which has full authority to interpret the plan. All directors of the
Company, who are not also officers or employees of the Company or its
subsidiaries, will be eligible to participate in the Directors Compensation
Plan. Each plan year, the Board shall determine the number of share units to
grant to each director, which will be credited to each director's account 30
days after the Annual Meeting of Shareholders each year. Any action taken by
the Board with respect to the Directors Compensation Plan shall be final,
conclusive, and binding on all persons. The total number of shares of Common
Stock reserved for issuance under the Directors Compensation Plan shall be
150,000.
Sub-Account Credits and Investments. Each director participating in the
Directors Compensation Plan will have two deferred compensation sub-accounts:
a cash account and a stock account. The director shall designate the sub-
account to which any retainer, meeting fees, or other compensation for
services as a director shall be credited by an advance election in increments
of ten percent. The amount of retainer, meeting fees, and other compensation
allocated to the cash account shall be converted to a cash balance to be
credited with interest monthly. The annual interest rate, beginning on January
1 of the calendar year, will be equal to the sum of 2.0 percent plus the
annual yield reported on a 30-year Treasury Bond for the first business day of
January for each plan year. The amount of retainer, meeting fees, and other
compensation allocated to the stock account shall be converted to a whole
number of share units on the last trading day of that month or quarterly
period. Share units shall be credited with dividend equivalents when dividends
are declared on shares of Common Stock. Plan benefits paid from the cash
account shall be paid in cash and plan benefits paid from the stock account
shall be paid in the form of Common Shares equal to the number of share units
in the stock account. The plan benefits of a director shall be distributed
either (i) in a single lump sum at the time of termination of service on the
Board, or (ii) in up to 15 equal annual installments beginning at the time of
termination of service on the Board.
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As discussed above in "The Board of Directors: Committees, Meetings and
Directors' Fees" on page 5, due to the Company's decision to establish the
Directors Compensation Plan, participants in the Directors Retirement Plan as
of February 10, 1999 may elect to either remain in the Directors Retirement
Plan or participate in the Directors Compensation Plan. However, no persons
who become directors after February 10, 1999 shall be eligible to participate
in the Directors Retirement Plan. Any participants electing to participate in
the Directors Compensation Plan will, as of February 11, 1999, immediately
cease their participation in the Directors Retirement Plan but any credits
they earned in the Directors Retirement Plan will be converted to a balance in
their respective stock accounts based upon the average high and low share
price of Common Stock over the twelve month period ended November 11, 1998.
The cumulative balance of the present value of the respective stock accounts
as January 1, 1999, assuming a discount rate of seven and one-half percent and
assuming that all eligible non-employee directors elect to participate in the
Directors Compensation Plan, is set forth below in the New Benefits Table.
The Board has approved the allocation of 200 share units to each non-
employee director for his service each calendar year or a total of 2,200 units
to be allocated to the eleven non-employee directors each calendar year.
Assuming that all eleven non-employee directors elect to participate in the
Directors Compensation Plan, the amount of benefits to be allocated to all
non-employee directors as a group during the next fiscal year is set forth
below in the New Plan Benefits table. The value of such units, for purposes of
the disclosure in the Table, is also based upon the average high and low share
price of Common Stock over the twelve month period ended November 11, 1998 of
$28.375 per share.
NEW PLAN BENEFITS
ATMOS ENERGY CORPORATION EQUITY INCENTIVE AND
DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
<TABLE>
<CAPTION>
DOLLAR VALUE
NAME AND POSITION ($) SHARE UNITS
- ----------------- --------------- -----------
<S> <C> <C>
Non-Executive*
Director Group
Accrued Balance at January 1, 1999.................. $886,435 31,240
(present value)
Maximum Number of Units Anticipated to be Awarded in
Fiscal 1999........................................ $ 62,425 2,200
</TABLE>
- --------
* This group also represents all current non-employee directors of the
Company.
BOARD RECOMMENDATION TO APPROVE EQUITY INCENTIVE AND DEFERRED COMPENSATION
PLAN FOR NON-EMPLOYEE DIRECTORS
On August 12, 1998, the Board of Directors approved and adopted the
Directors Compensation Plan, which will become effective only upon the
approval of the shareholders of the Company at the Annual Meeting of
Shareholders on February 10, 1999. No persons who become directors after
February 10, 1999 shall be eligible to participate in the Directors Retirement
Plan. The Board of Directors believes that the Directors Compensation Plan
will accomplish its purpose of attracting and retaining non-employee
directors, as well as aligning the interests of directors and other Company
shareholders.
The Directors Compensation Plan is being submitted to the shareholders of
the Company for their approval pursuant to the provisions of the plan.
According to the Company's Bylaws, this proposal to adopt the Directors
Compensation Plan requires the affirmative vote of the holders of a majority
of the shares of Common Stock entitled to vote on the matter and present or
represented by proxy at a meeting at which a quorum is present. Abstentions
and broker non-votes will be included in the total shares present or
represented by proxy for
24
<PAGE>
purposes of determining if a quorum exists, but neither abstentions nor broker
non-votes will be counted as a vote "For" or "Against" the amendment. However,
unlike an abstention that will in effect constitute a vote against the
proposal, a broker non-vote will not have such effect because brokers do not
have discretionary power to vote on this proposal under the rules of the New
York Stock Exchange.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE EQUITY
INCENTIVE AND DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS.
AUDITORS
Upon the recommendation of 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, 1999. 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 Annual
Meeting of Shareholders on February 10, 1999, he or she must be a shareholder
of record on the Record Date, December 14, 1998, who shall continue to be
entitled to vote at the Annual Meeting and who mails a notice of such proposal
so that it is received at the principal executive offices of the Company by
January 9, 1999. In the event a shareholder intends to present a proposal at
the Year 2000 Annual Meeting of Shareholders, in order for such proposal to be
included in the Company's Proxy Statement relating to such meeting, it must be
received at the principal executive offices of the Company no later than
September 1, 1999.
By Order of the Board of Directors,
GLEN A. BLANSCET
Vice President, General Counsel
and Corporate Secretary
Dallas, Texas
December 30, 1998
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EXHIBIT A
ATMOS ENERGY CORPORATION
1998 LONG-TERM INCENTIVE PLAN
The Atmos Energy Corporation 1998 Long-Term Incentive Plan (hereinafter
called the "Plan") was adopted by the Board of Directors of Atmos Energy
Corporation, a Texas and Virginia corporation (hereinafter called the
"Company") on August 12, 1998 to be effective October 1, 1998, and will be
submitted to the Company's stockholders for approval on February 10, 1999.
ARTICLE 1
PURPOSE
The purpose of the Plan is to attract and retain the services of able
persons as employees of the Company and its Subsidiaries and as Non-employee
Directors (as herein defined), to provide such persons with a proprietary
interest in the Company through the granting of incentive stock options, non-
qualified stock options, stock appreciation rights, or restricted stock, and
to motivate employees and Non-employee Directors using performance-related
incentives linked to longer-range performance goals and the interests of the
Company's shareholders, whether granted singly, or in combination, or in
tandem, that will
(a) increase the interest of such persons in the Company's welfare;
(b) furnish an incentive to such persons to continue their services for
the Company; and
(c) provide a means through which the Company may attract able persons as
employees and Non-employee Directors.
With respect to Reporting Participants, the Plan and all transactions under
the Plan are intended to comply with all applicable conditions of Rule 16b-3
promulgated under the Securities Exchange Act of 1934 (the "1934 Act"). To the
extent any provision of the Plan or action by the Committee fails to so
comply, it shall be deemed null and void ab initio, to the extent permitted by
law and deemed advisable by the Committee. Further, any Awards granted under
the Plan to a Non-employee Director shall be solely to compensate said
Director for his services to the Company as a Non-employee Director.
ARTICLE 2
DEFINITIONS
For the purpose of the Plan, unless the context requires otherwise, the
following terms shall have the meanings indicated:
2.1 "Award" means the grant of any Incentive Stock Option, Non-qualified
Stock Option, SAR, Restricted Stock, Restricted Stock Unit, Performance Unit,
Performance Share, Bonus Stock or other Stock Unit Award whether granted
singly, in combination or in tandem (each individually referred to herein as
an "Incentive"). "Award" also means any Incentive to which an award under the
Management Incentive Plan is made or converted.
2.2 "Award Agreement" means a written agreement between a Participant and
the Company which sets out the terms of the grant of an Award.
2.3 "Award Period" means the period during which one or more Incentives
granted under an Award may be exercised or earned.
2.4 "Board" means the Board of Directors of the Company.
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2.5 "Bonus Stock" means an Award granted pursuant to Section 6.8 of the Plan
expressed as a share of Common Stock which may or may not be subject to
restrictions.
2.6 (a) "Change in Control" of the Company shall be deemed to have occurred
if:
(i) Any "Person" (as defined in Section 2.6(b)(i) below), other than
(1) the Company or any of its Subsidiaries, (2) a trustee or other
fiduciary holding securities under an employee benefit plan of the
Company or any of its Affiliates, (3) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (4) a
corporation owned, directly or indirectly, by the shareholders of the
Company in substantially the same proportions as their ownership of
stock of the Company, is or becomes the "beneficial owner" (as defined
in Section 2.6(b)(ii) below), directly or indirectly, of securities of
the Company (not including in the securities beneficially owned by such
person any securities acquired directly from the Company or its
Affiliates) representing 33 1/3% or more of the combined voting power
of the Company's then outstanding securities, or 33 1/3% or more of the
then outstanding common stock of the Company, excluding any Person who
becomes such a beneficial owner in connection with a transaction
described in subparagraph (iii)(A) below.
(ii) During any period of two consecutive years (the "Period"),
individuals who at the beginning of the Period constitute the Board of
Directors of the Company and any "new director" (as defined in Section
2.6(b)(iii) below) cease for any reason to constitute a majority of the
Board of Directors.
(iii) There is consummated a merger or consolidation of the Company
or any direct or indirect subsidiary of the Company with any other
corporation, except if:
(A) the merger or consolidation would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or any
parent thereof) at least sixty percent (60%) of the combined voting
power of the voting securities of the Company or such surviving
entity or any parent thereof outstanding immediately after such
merger or consolidation; or
(B) the merger or consolidation is effected to implement a
recapitalization of the Company (or similar transaction) in which no
Person is or becomes the beneficial owner, directly or indirectly,
of securities of the Company (not including in the securities
beneficially owned by such Person any securities acquired directly
from the Company or its Affiliates other than in connection with the
acquisition by the Company or its Affiliates of a business)
representing 60% or more of the combined voting power of the
Company's then outstanding securities;
(iv) The shareholders of the Company approve a plan of complete
liquidation or dissolution of the Company or an agreement for the sale
or disposition by the Company of all or substantially all the Company's
assets, other than a sale or disposition by the Company of all or
substantially all of the Company's assets to an entity, at least 60% of
the combined voting power of the voting securities of which are owned
by the stockholders of the Company in substantially the same
proportions as their ownership of the Company immediately prior to such
sale.
(b) Definitions. For purposes of Section 2.6(a) above,
(i) "Person" shall have the meaning given in Section 3(a)(9) of the
1934 Act as modified and used in Sections 13(d) and 14(d) of the 1934
Act.
(ii) "Beneficial owner" shall have the meaning provided in Rule 13d-3
under the 1934 Act.
(iii) "New director" shall mean an individual whose election by the
Company's Board of Directors or nomination for election by the
Company's shareholders was approved by a vote of at least two-thirds (
2/3) of the directors then still in office who either were directors at
the beginning of the Period or whose election or nomination for
election was previously so approved or recommended. However, "new
director" shall not include a director whose initial assumption of
office is in connection with an actual or threatened election contest,
including but not limited to a consent solicitation relating to the
election of directors of the Company.
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(iv) "Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under Section 12 of the 1934 Act.
2.7 "Code" means the Internal Revenue Code of 1986, as amended, together
with the published rulings, regulations, and interpretations duly promulgated
thereunder.
2.8 "Committee" means the committee appointed or designated by the Board to
administer the Plan in accordance with Article 3 of this Plan.
2.9 "Common Stock" means the common stock, with no par value (stated value
of $.005 per share), which the Company is currently authorized to issue or may
in the future be authorized to issue.
2.10 "Company" means Atmos Energy Corporation, a Texas and Virginia
corporation, and any successor entity.
2.11 "Covered Participant" means a Participant who is a "covered employee"
as defined in Section 162(m)(3) of the Code, and the regulations promulgated
thereunder, or who the Committee believes will be such a covered employee for
a Performance Period, and who the Committee believes will have remuneration in
excess of $1,000,000 for the Performance Period, as provided in Section 162(m)
of the Code.
2.12 "Date of Grant" means the effective date on which an Award is made to a
Participant as set forth in the applicable Award Agreement; provided, however,
that solely for purposes of Section 16 of the 1934 Act and the rules and
regulations promulgated thereunder, the Date of Grant of an Award shall be the
date of stockholder approval of the Plan if such date is later than the
effective date of such Award as set forth in the Award Agreement.
2.13 "Employee" means common law employee (as defined in accordance with the
Regulations and Revenue Rulings then applicable under Section 3401(c) of the
Code) of the Company or any Subsidiary of the Company.
2.14 "Fair Market Value" of a share of Common Stock is the mean of the
highest and lowest prices per share on the New York Stock Exchange
Consolidated Tape, or such reporting service as the Board may select, on the
appropriate date, or in the absence of reported sales on such day, the most
recent previous day for which sales were reported.
2.15 "Incentive Stock Option" or "ISO" means an incentive stock option
within the meaning of Section 422 of the Code, granted pursuant to this Plan.
2.16 "Management Incentive Plan" means the Atmos Energy Corporation Annual
Incentive Plan For Management, as amended from time to time.
2.17 "Non-employee Director" means a member of the Board who is not an
Employee and who satisfies the requirements of Rule 16b-3(b)(3) promulgated
under the 1934 Act or any successor provision.
2.18 "Non-qualified Stock Option" or "NQSO" means a non-qualified stock
option, granted pursuant to this Plan.
2.19 "Option Price" means the price which must be paid by a Participant upon
exercise of a Stock Option to purchase a share of Common Stock.
2.20 "Participant" shall mean an Employee or Non-employee Director to whom
an Award is granted under this Plan.
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2.21 "Performance Award" means a performance-based Award, which may be in
the form of either Performance Shares or Performance Units.
2.22 "Performance Criteria" or "Performance Goals" or "Performance Measures"
mean the objectives established by the Committee for a Performance Period, for
the purpose of determining when an Award subject to such objectives is earned.
2.23 "Performance Period" means the time period designated by the Committee
during which performance goals must be met.
2.24 "Performance Share" means an Award, designated as a Performance Share,
granted to a Participant pursuant to Section 6.7 hereof, the value of which is
determined, in whole or in part, by the value of Common Stock in a manner
deemed appropriate by the Committee and described in the Agreement.
2.25 "Performance Unit" means an Award, designated as a Performance Unit,
granted to a Participant pursuant to Section 6.7 hereof, the value of which is
determined, in whole or in part, by the attainment of pre-established goals
relating to Company financial or operating performance as deemed appropriate
by the Committee and described in the Award Agreement.
2.26 "Plan" means The Atmos Energy Corporation 1998 Long-Term Incentive
Plan, as amended from time to time.
2.27 "Reporting Participant" means a Participant who is subject to the
reporting requirements of Section 16 of the 1934 Act.
2.28 "Restricted Stock" means shares of Common Stock issued or transferred
to a Participant pursuant to Section 6.4 of this Plan which are subject to
restrictions or limitations set forth in this Plan and in the related Award
Agreement.
2.29 "Restricted Stock Unit" means a fixed or variable dollar denominated
right to acquire Common Stock, which may or may not be subject to
restrictions, contingently awarded under Section 6.4 of the Plan.
2.30 "Retirement" means any Termination of Service solely due to retirement
upon attainment of age 65, or permitted early retirement as determined by the
Committee.
2.31 "SAR" means the right to receive a payment, in cash and/or Common
Stock, equal to the excess of the Fair Market Value of a specified number of
shares of Common Stock on the date the SAR is exercised over the SAR Price for
such shares.
2.32 "SAR Price" means the Fair Market Value of each share of Common Stock
covered by an SAR, determined on the Date of Grant of the SAR.
2.33 "Stock Option" means a Non-qualified Stock Option or an Incentive Stock
Option.
2.34 "Stock Unit Award" means awards of Common Stock or other awards
pursuant to Section 6.9 hereof that are valued in whole or in part by
reference to, or are otherwise based on, shares of Common Stock or other
securities of the Company.
2.35 "Subsidiary" means (i) any corporation in an unbroken chain of
corporations beginning with the Company, if each of the corporations other
than the last corporation in the unbroken chain owns stock possessing a
majority of the total combined voting power of all classes of stock in one of
the other corporations in the chain, (ii) any limited partnership, if the
Company or any corporation described in item (i) above owns a majority of the
general partnership interest and a majority of the limited partnership
interests entitled to vote on the removal and replacement of the general
partner, and (iii) any partnership or limited liability company, if the
partners or
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members thereof are composed only of the Company, any corporation listed in
item (i) above or any limited partnership listed in item (ii) above.
"Subsidiaries" means more than one of any such corporations, limited
partnerships, partnerships or limited liability companies.
2.36 "Termination of Service" occurs when a Participant who is an Employee
or Non-employee Director shall cease to serve as an Employee or Non-employee
Director for any reason.
2.37 "Total and Permanent Disability" means a Participant is qualified for
long-term disability benefits under The Atmos Energy Corporation Group Long-
Term Disability Plan as in effect from time to time; or, if such Plan is not
then in existence, that the Participant, because of ill health, physical or
mental disability or any other reason beyond his or her control, is unable to
perform his or her duties of employment for a period of six (6) continuous
months, as determined in good faith by the Committee; provided that, with
respect to any Incentive Stock Option, Total and Permanent Disability shall
have the meaning given it under the rules governing Incentive Stock Options
under the Code.
ARTICLE 3
ADMINISTRATION
The Plan shall be administered by the Human Resources Committee of the Board
(the "Committee") unless otherwise determined by the Board. If said Human
Resources Committee does not so serve, the Committee shall consist of not
fewer than two persons; any member of the Committee may be removed at any
time, with or without cause, by resolution of the Board; and any vacancy
occurring in the membership of the Committee may be filled by appointment by
the Board.
All actions to be taken by the Committee under this Plan, insofar as such
actions affect compliance with Section 162(m) of the Code, shall be limited to
those members of the Board who are Non-employee Directors and who are "outside
directors" under Section 162(m). The Committee shall select one of its members
to act as its Chairman. A majority of the Committee shall constitute a quorum,
and the act of a majority of the members of the Committee present at a meeting
at which a quorum is present shall be the act of the Committee.
The Committee shall determine and designate from time to time the eligible
persons to whom Awards will be granted and shall set forth in each related
Award Agreement the Award Period, the Date of Grant, and such other terms,
provisions, limitations, and performance requirements, as are approved by the
Committee, but not inconsistent with the Plan, including, but not limited to,
any rights of the Committee to cancel or rescind any such Award. The Committee
shall determine whether an Award shall include one type of Incentive, two or
more Incentives granted in combination, or two or more Incentives granted in
tandem (that is, a joint grant where exercise of one Incentive results in
cancellation of all or a portion of the other Incentive).
The Committee, in its discretion, shall (i) interpret the Plan, (ii)
prescribe, amend, and rescind any rules and regulations necessary or
appropriate for the administration of the Plan, and (iii) make such other
determinations and take such other action as it deems necessary or advisable
in the administration of the Plan. Any interpretation, determination, or other
action made or taken by the Committee shall be final, binding, and conclusive
on all interested parties.
With respect to restrictions in the Plan that are based on the requirements
of Rule 16b-3 promulgated under the 1934 Act, Section 422 of the Code, Section
162(m) of the Code, the rules of any exchange or inter-dealer quotation system
upon which the Company's securities are listed or quoted, or any other
applicable law, rule or restriction (collectively, "applicable law"), to the
extent that any such restrictions are no longer required by applicable law,
the Committee shall have the sole discretion and authority to grant Awards
that are not subject to such mandated restrictions and/or to waive any such
mandated restrictions with respect to outstanding Awards.
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ARTICLE 4
ELIGIBILITY
Any Employee (including an Employee who is also a director or an officer)
and any Non-employee Director is eligible to participate in the Plan. The
Committee, upon its own action, may grant, but shall not be required to grant,
an Award to any Employee or any Non-employee Director. Awards may be granted
by the Committee at any time and from time to time to new Participants, or to
then Participants, or to a greater or lesser number of Participants, and may
include or exclude previous Participants, as the Committee shall determine.
Except as required by this Plan, different Awards need not contain similar
provisions. The Committee's determinations under the Plan (including without
limitation determinations of which Employees or Non-employee Directors, if
any, are to receive Awards, the form, amount and timing of such Awards, the
terms and provisions of such Awards and the agreements evidencing same) need
not be uniform and may be made by it selectively among Employees and Non-
employee Directors who receive, or are eligible to receive, Awards under the
Plan.
ARTICLE 5
SHARES SUBJECT TO PLAN
Subject to adjustment as provided in Articles 14 and 15, the maximum number
of shares of Common Stock that may be delivered pursuant to Awards granted
under the Plan is (a) 1,500,000 shares; plus (b) shares of Common Stock
previously subject to Awards which are forfeited, terminated, cancelled or
rescinded, settled in cash in lieu of Common Stock, or exchanged for Awards
that do not involve Common Stock, or expired unexercised.
Shares to be issued may be made available from authorized but unissued
Common Stock, Common Stock held by the Company in its treasury, or Common
Stock purchased by the Company on the open market or otherwise. During the
term of this Plan, the Company will at all times reserve and keep available
the number of shares of Common Stock that shall be sufficient to satisfy the
requirements of this Plan.
ARTICLE 6
GRANT OF AWARDS
6.1 IN GENERAL. The grant of an Award shall be authorized by the Committee
and shall be evidenced by an Award Agreement setting forth the Incentive or
Incentives being granted, the total number of shares of Common Stock subject
to the Incentive(s), the Option Price (if applicable), the Award Period, the
Date of Grant, and such other terms, provisions, limitations, and performance
objectives, as are approved by the Committee, but not inconsistent with the
Plan. The Company shall execute an Award Agreement with a Participant after
the Committee approves the issuance of an Award. Any Award granted pursuant to
this Plan must be granted within ten (10) years of the date of adoption of
this Plan. The Plan shall be submitted to the Company's stockholders for
approval; however, the Committee may grant Awards under the Plan prior to the
time of stockholder approval. Any such Award granted prior to such stockholder
approval shall be made subject to such stockholder approval. The grant of an
Award to a Participant shall not be deemed either to entitle the Participant
to, or to disqualify the Participant from, receipt of any other Award under
the Plan.
If the Committee establishes a purchase price for an Award, the Participant
must accept such Award within a period of 30 days (or such shorter period as
the Committee may specify) after the Date of Grant by executing the applicable
Award Agreement and paying such purchase price.
6.2 MAXIMUM ISO GRANTS. The Committee may not grant Incentive Stock Options
under the Plan to any Employee which would permit the aggregate Fair Market
Value (determined on the Date of Grant) of the Common Stock with respect to
which Incentive Stock Options (under this and any other plan of the Company
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and its Subsidiaries) are exercisable for the first time by such Employee
during any calendar year to exceed $100,000. To the extent any Stock Option
granted under this Plan which is designated as an Incentive Stock Option
exceeds this limit or otherwise fails to qualify as an Incentive Stock Option,
such Stock Option shall be a Non-qualified Stock Option. The Committee may not
grant Incentive Stock Options to Non-employee Directors.
6.3 MAXIMUM INDIVIDUAL GRANTS. No Participant may receive during any fiscal
year of the Company Awards of Stock Options and SARs covering an aggregate of
more than five hundred thousand (500,000) shares of Common Stock.
6.4 RESTRICTED STOCK/RESTRICTED STOCK UNITS. If Restricted Stock and/or
Restricted Stock Units are granted to a Participant under an Award, the
Committee shall set forth in the related Award Agreement: (i) the number of
shares of Common Stock and/or the number of Restricted Stock Units awarded,
(ii) the price, if any, to be paid by the Participant for such Restricted
Stock and/or Restricted Stock Units, (iii) the time or times within which such
Award may be subject to forfeiture, (iv) specified Performance Goals of the
Company, a Subsidiary, any division thereof or any group of Employees of the
Company, or other criteria, which the Committee determines must be met in
order to remove any restrictions (including vesting) on such Award, and (v)
all other terms, limitations, restrictions, and conditions of the Restricted
Stock and/or Restricted Stock Units, which shall be consistent with this Plan.
The provisions of Restricted Stock and/or Restricted Stock Units need not be
the same with respect to each Participant.
(a) Legend on Shares. Each Participant who is awarded Restricted Stock
shall be issued a stock certificate or certificates in respect of such
shares of Common Stock. Such certificate(s) shall be registered in the name
of the Participant, and shall bear an appropriate legend referring to the
terms, conditions, and restrictions applicable to such Restricted Stock,
substantially as provided in Section 18.12 of the Plan. The Committee may
require that the stock certificates evidencing shares of Restricted Stock
be held in custody by the Company until the restrictions thereon shall have
lapsed, and that the Participant deliver to the Committee a stock power or
stock powers, endorsed in blank, relating to the shares of Restricted
Stock.
(b) Restrictions and Conditions. Shares of Restricted Stock and
Restricted Stock Units shall be subject to the following restrictions and
conditions:
(i) Subject to the other provisions of this Plan and the terms of the
particular Award Agreements, during such period as may be determined by
the Committee commencing on the Date of Grant (the "Restriction
Period"), the Participant shall not be permitted to sell, transfer,
pledge or assign shares of Restricted Stock and/or Restricted Stock
Units. Except for these limitations, the Committee may in its sole
discretion, remove any or all of the restrictions on such Restricted
Stock and/or Restricted Stock Units whenever it may determine that, by
reason of changes in applicable laws or other changes in circumstances
arising after the date of the Award, such action is appropriate.
(ii) Except as provided in subparagraph (i) above, the Participant
shall have, with respect to his or her Restricted Stock, all of the
rights of a stockholder of the Company, including the right to vote the
shares, and the right to receive any dividends thereon. Certificates
for shares of Common Stock free of restriction under this Plan shall be
delivered to the Participant promptly after, and only after, the
Restriction Period shall expire without forfeiture in respect of such
shares of Common Stock. Certificates for the shares of Common Stock
forfeited under the provisions of the Plan and the applicable Award
Agreement shall be promptly returned to the Company by the forfeiting
Participant. Each Award Agreement shall require that (x) each
Participant, by his or her acceptance of Restricted Stock, shall
irrevocably grant to the Company a power of attorney to transfer any
shares so forfeited to the Company and agrees to execute any documents
requested by the Company in connection with such forfeiture and
transfer, and (y) such provisions regarding returns and transfers of
stock certificates with respect to forfeited shares of Common Stock
shall be specifically performable by the Company in a court of equity
or law.
(iii) The Restriction Period of Restricted Stock and/or Restricted
Stock Units shall commence on the Date of Grant and, subject to Article
15 of the Plan, unless otherwise established by the Committee
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in the Award Agreement setting forth the terms of the Restricted Stock
and/or Restricted Stock Units, shall expire upon satisfaction of the
conditions set forth in the Award Agreement; such conditions may
provide for vesting based on (i) length of continuous service, (ii)
achievement of specific business objectives, (iii) increases in
specified indices, (iv) attainment of specified growth rates, or (v)
other comparable Performance Measurements, as may be determined by the
Committee in its sole discretion.
(iv) Subject to the provisions of the particular Award Agreement,
upon Termination of Service for any reason during the Restriction
Period, the nonvested shares of Restricted Stock and/or Restricted
Stock Units shall be forfeited by the Participant. In the event a
Participant has paid any consideration to the Company for such
forfeited Restricted Stock and/or Restricted Stock Units, the Company
shall, as soon as practicable after the event causing forfeiture (but
in any event within 5 business days), pay to the Participant, in cash,
an amount equal to the total consideration paid by the Participant for
such forfeited shares and/or units. Upon any forfeiture, all rights of
a Participant with respect to the forfeited shares of the Restricted
Stock shall cease and terminate, without any further obligation on the
part of the Company.
6.5 SAR. An SAR shall entitle the Participant at his election to surrender
to the Company the SAR, or portion thereof, as the Participant shall choose,
and to receive from the Company in exchange therefor cash in an amount equal
to the excess (if any) of the Fair Market Value (as of the date of the
exercise of the SAR) per share over the SAR Price per share specified in such
SAR, multiplied by the total number of shares of the SAR being surrendered. In
the discretion of the Committee, the Company may satisfy its obligation upon
exercise of an SAR by the distribution of that number of shares of Common
Stock having an aggregate Fair Market Value (as of the date of the exercise of
the SAR) equal to the amount of cash otherwise payable to the Participant,
with a cash settlement to be made for any fractional share interests, or the
Company may settle such obligation in part with shares of Common Stock and in
part with cash.
6.6 TANDEM AWARDS. The Committee may grant two or more Incentives in one
Award in the form of a "tandem award," so that the right of the Participant to
exercise one Incentive shall be canceled if, and to the extent, the other
Incentive is exercised. For example, if a Stock Option and an SAR are issued
in a tandem Award, and the Participant exercises the SAR with respect to 100
shares of Common Stock, the right of the Participant to exercise the related
Stock Option shall be canceled to the extent of 100 shares of Common Stock.
6.7 PERFORMANCE BASED AWARDS.
(a) Grant of Performance Awards. The Committee may issue Performance
Awards in the form of either Performance Units or Performance Shares to
Participants subject to the Performance Goals and Performance Period as it
shall determine. The terms and conditions of each Performance Award will be
set forth in the related Award Agreement. The Committee shall have complete
discretion in determining the number and value of Performance Units or
Performance Shares granted to each Participant. Participants receiving
Performance Awards are not required to pay the Company thereof (except for
applicable tax withholding) other than the rendering of services.
(b) Value of Performance Awards. The Committee shall set performance
goals in its discretion for each Participant who is granted a Performance
Award. Such Performance Goals may be particular to a Participant, may
relate to the performance of the Subsidiary which employs him or her, may
be based on the division which employs him or her, may be based on the
performance of the Company generally, or a combination of the foregoing.
The Performance Goals may be based on achievement of balance sheet or
income statement objectives, or any other objectives established by the
Committee. The Performance Goals may be absolute in their terms or measured
against or in relationship to other companies comparably, similarly or
otherwise situated. The extent to which such Performance Goals are met will
determine the value of the Performance Unit or Performance Share to the
Participant.
(c) Form of Payment. Payment of the amount to which a Participant shall
be entitled upon the settlement of a Performance Award shall be made in a
lump sum or installments in cash, shares of Common Stock, or a combination
thereof as determined by the Committee.
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6.8 BONUS STOCK. The Committee may award shares of Bonus Stock to
Participants under the Plan without cash consideration. The Committee shall
determine and indicate in the related Award Agreement whether such shares of
Bonus Stock awarded under the Plan shall be unencumbered of any restrictions
(other than those advisable to comply with law) or shall be subject to
restrictions and limitations similar to those referred to in Section 6.7
hereof. In the event the Committee assigns any restrictions on the shares of
Bonus Stock awarded under the Plan, then such shares shall be subject to at
least the following restrictions:
(a) No shares of Bonus Stock may be sold, transferred, pledged, assigned
or otherwise alienated or hypothecated if such shares are subject to
restrictions which have not lapsed or have not been vested.
(b) If any condition of vesting of the shares of Bonus Stock are not met,
all such shares subject to such vesting shall be delivered to the Company
(in a manner determined by the Committee) within 60 days of the failure to
meet such conditions without any payment from the Company.
6.9 OTHER STOCK BASED AWARDS.
(a) Grant of Other Stock Based Awards. The Committee may issue to
Participants, either alone or in addition to other Awards made under the
Plan, Stock Unit Awards which may be in the form of Common Stock or other
securities. The value of each such Award shall be based, in whole or in
part, on the value of the underlying Common Stock or other securities. The
Committee, in its sole and complete discretion, may determine that an
Award, either in the form of a Stock Unit Award under this Section 6.9 or
as an Award granted pursuant to the other provisions of this Article 6, may
provide to the Participant (i) dividends or dividend equivalents (payable
on a current or deferred basis) and (ii) cash payments in lieu of or in
addition to an Award. The Committee shall determine the terms,
restrictions, conditions, vesting requirements, and payment rules (all of
which are sometimes hereinafter collectively referred to as "rules") of the
Award and shall set forth those rules in the related Award Agreement.
(b) Rules. The Committee, in its sole and complete discretion, may grant
a Stock Unit Award subject to the following rules:
(i) Common Stock or other securities issued pursuant to Stock Unit
Awards may not be sold, transferred, pledged, assigned or otherwise
alienated or hypothecated by a Participant until the expiration of at
least six months from the Award Date, except that such limitation shall
not apply in the case of death or disability of the Participant. To the
extent Stock Unit Awards are deemed to be derivative securities within
the meaning of Rule 16b-3 under the 1934 Act, a Participant's rights
with respect to such Awards shall not vest or be exercisable until the
expiration of at least six months from the Award Date. To the extent a
Stock Unit Award granted under the Plan is deemed to be a derivative
security within the meaning of Rule 16b-3 under the 1934 Act, it may
not be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, otherwise than by will or by laws of descent and
distribution. All rights with respect to such Stock Unit Awards granted
to a Participant under the Plan shall be exercisable during his or her
lifetime only by such Participant or his or her guardian or legal
representative.
(ii) Stock Unit Awards may require the payment of cash consideration
by the Participant in receipt of the Award or provide that the Award,
and any Common Stock or other securities issued in conjunction with the
Award be delivered without the payment of cash consideration.
(iii) The Committee, in its sole and complete discretion, may
establish certain Performance Criteria that may relate in whole or in
part to receipt of the Stock Unit Awards.
(iv) Stock Unit Awards may be subject to a deferred payment schedule
and/or vesting over a specified employment period.
(v) The Committee as a result of certain circumstances, may waive or
otherwise remove, in whole or in part, any restriction or condition
imposed on a Stock Unit Award at the time of Award.
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ARTICLE 7
OPTION PRICE; SAR PRICE
The Option Price for any share of Common Stock which may be purchased under
a Stock Option and the SAR Price for any share of Common Stock subject to an
SAR shall be at least One Hundred Percent (100%) of the Fair Market Value of
the share on the Date of Grant. If an Incentive Stock Option is granted to an
Employee who owns or is deemed to own (by reason of the attribution rules of
Section 424(d) of the Code) more than 10% of the combined voting power of all
classes of stock of the Company (or any parent or Subsidiary), the Option
Price shall be at least 110% of the Fair Market Value of the Common Stock on
the Date of Grant.
ARTICLE 8
AWARD PERIOD; VESTING
8.1 AWARD PERIOD. Subject to the other provisions of this Plan, the
Committee may, in its discretion, provide that an Incentive may not be
exercised in whole or in part for any period or periods of time or beyond any
date specified in the Award Agreement. Except as provided in the Award
Agreement, an Incentive may be exercised in whole or in part at any time
during its term. The Award Period for an Incentive shall be reduced or
terminated upon Termination of Service in accordance with this Article 8 and
Article 9. No Incentive granted under the Plan may be exercised at any time
after the end of its Award Period. No portion of any Incentive may be
exercised after the expiration of ten (10) years from its Date of Grant.
However, if an Employee owns or is deemed to own (by reason of the attribution
rules of Section 424(d) of the Code) more than 10% of the combined voting
power of all classes of stock of the Company (or any parent or Subsidiary) and
an Incentive Stock Option is granted to such Employee, the term of such
Incentive Stock Option (to the extent required by the Code at the time of
grant) shall be no more than five (5) years from the Date of Grant.
8.2 VESTING. The Committee, in its sole discretion, may determine that an
Incentive will be immediately exercisable, in whole or in part, or that all or
any portion may not be exercised until a date, or dates, subsequent to its
Date of Grant, or until the occurrence of one or more specified events,
subject in any case to the terms of the Plan. If the Committee imposes
conditions upon exercise, then subsequent to the Date of Grant, the Committee
may, in its sole discretion, accelerate the date on which all or any portion
of the Incentive may be exercised.
ARTICLE 9
TERMINATION OF SERVICE
In the event of Termination of Service of a Participant, an Incentive may
only be exercised as determined by the Committee and provided in the Award
Agreement.
ARTICLE 10
EXERCISE OF INCENTIVE
10.1 IN GENERAL. A vested Incentive may be exercised during its Award
Period, subject to limitations and restrictions set forth therein and in
Article 9. A vested Incentive may be exercised at such times and in such
amounts as provided in this Plan and the applicable Award Agreement, subject
to the terms, conditions, and restrictions of the Plan.
In no event may an Incentive be exercised or shares of Common Stock be
issued pursuant to an Award if a necessary listing or quotation of the shares
of Common Stock on a stock exchange or inter-dealer quotation system or any
registration under state or federal securities laws required under the
circumstances has not been
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accomplished. No Incentive may be exercised for a fractional share of Common
Stock. The granting of an Incentive shall impose no obligation upon the
Participant to exercise that Incentive.
(a) Stock Options. Subject to such administrative regulations as the
Committee may from time to time adopt, a Stock Option may be exercised by
the delivery of written notice to the Committee setting forth the number of
shares of Common Stock with respect to which the Stock Option is to be
exercised and the date of exercise thereof (the "Exercise Date") which
shall be at least three (3) days after giving such notice unless an earlier
time shall have been mutually agreed upon. On the Exercise Date, the
Participant shall deliver to the Company consideration with a value equal
to the total Option Price of the shares to be purchased, payable as
follows: (a) cash, check, bank draft, or money order payable to the order
of the Company, (b) Common Stock (including Restricted Stock) owned by the
Participant on the Exercise Date, valued at its Fair Market Value on the
Exercise Date, (c) by delivery (including by FAX) to the Company or its
designated agent of an executed irrevocable option exercise form together
with irrevocable instructions from the Participant to a broker or dealer,
reasonably acceptable to the Company, to sell certain of the shares of
Common Stock purchased upon exercise of the Stock Option or to pledge such
shares as collateral for a loan and promptly deliver to the Company the
amount of sale or loan proceeds necessary to pay such purchase price,
and/or (d) in any other form of valid consideration that is acceptable to
the Committee in its sole discretion. In the event that shares of
Restricted Stock are tendered as consideration for the exercise of a Stock
Option, a number of shares of Common Stock issued upon the exercise of the
Stock Option equal to the number of shares of Restricted Stock used as
consideration therefor shall be subject to the same restrictions and
provisions as the Restricted Stock so submitted.
Upon payment of all amounts due from the Participant, the Company shall
cause certificates for the Common Stock then being purchased to be
delivered as directed by the Participant (or the person exercising the
Participant's Stock Option in the event of his death) at its principal
business office promptly after the Exercise Date; provided that if the
Participant has exercised an Incentive Stock Option, the Company may at its
option retain physical possession of the certificate evidencing the shares
acquired upon exercise until the expiration of the holding periods
described in Section 422(a)(1) of the Code. The obligation of the Company
to deliver shares of Common Stock shall, however, be subject to the
condition that if at any time the Committee shall determine in its
discretion that the listing, registration, or qualification of the Stock
Option or the Common Stock upon any securities exchange or inter-dealer
quotation system or under any state or federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as
a condition of, or in connection with, the Stock Option or the issuance or
purchase of shares of Common Stock thereunder, the Stock Option may not be
exercised in whole or in part unless such listing, registration,
qualification, consent, or approval shall have been effected or obtained
free of any conditions not acceptable to the Committee.
If the Participant fails to pay for any of the Common Stock specified in
such notice or fails to accept delivery thereof, the Participant's right to
purchase such Common Stock may be terminated by the Company.
(b) SARs. Subject to the conditions of this Section 10.1(b) and such
administrative regulations as the Committee may from time to time adopt, an
SAR may be exercised by the delivery (including by FAX) of written notice
to the Committee setting forth the number of shares of Common Stock with
respect to which the SAR is to be exercised and the date of exercise
thereof (the "Exercise Date") which shall be at least three (3) days after
giving such notice unless an earlier time shall have been mutually agreed
upon. On the Exercise Date, the Participant shall receive from the Company
in exchange therefor cash in an amount equal to the excess (if any) of the
Fair Market Value (as of the date of the exercise of the SAR) per share of
Common Stock over the SAR Price per share specified in such SAR, multiplied
by the total number of shares of Common Stock of the SAR being surrendered.
In the discretion of the Committee, the Company may satisfy its obligation
upon exercise of an SAR by the distribution of that number of shares of
Common Stock having an aggregate Fair Market Value (as of the date of the
exercise of the SAR) equal to the amount of cash otherwise payable to the
Participant, with a cash settlement to be made for any fractional share
interests, or the Company may settle such obligation in part with shares of
Common Stock and in part with cash.
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10.2 DISQUALIFYING DISPOSITION OF ISO. If shares of Common Stock acquired
upon exercise of an Incentive Stock Option are disposed of by a Participant
prior to the expiration of either two (2) years from the Date of Grant of such
Stock Option or one (1) year from the transfer of shares of Common Stock to
the Participant pursuant to the exercise of such Stock Option, or in any other
disqualifying disposition within the meaning of Section 422 of the Code, such
Participant shall notify the Company in writing of the date and terms of such
disposition. A disqualifying disposition by a Participant shall not affect the
status of any other Stock Option granted under the Plan as an Incentive Stock
Option within the meaning of Section 422 of the Code.
ARTICLE 11
SPECIAL PROVISIONS APPLICABLE TO COVERED PARTICIPANTS
Awards subject to Performance Criteria paid to Covered Participants under
this Plan shall be governed by the conditions of this Section 11 in addition
to the requirements of Sections 6.4, 6.7, 6.8 and 6.9 above. Should conditions
set forth under this Section 11 conflict with the requirements of Sections
6.4, 6.7, 6.8 and 6.9, the conditions of this Section 11 shall prevail.
(a) All Performance Measures, Goals, or Criteria relating to Covered
Participants for a relevant Performance Period shall be established by the
Committee in writing prior to the beginning of the Performance Period, or
by such other later date for the Performance Period as may be permitted
under Section 162(m) of the Code. The Performance Goals may be identical
for all Participants or, at the discretion of the Committee, may be
different to reflect more appropriate measures of individual performance.
(b) The Performance Goals relating to Covered Participants for a
Performance Period shall be established by the Committee in writing.
Performance Goals may include alternative and multiple Performance Goals
and may be based on one or more business and/or financial criteria. In
establishing the Performance Goals for the Performance Period, the
Committee in its discretion may include one or any combination of the
following criteria in either absolute or relative terms, for the Company or
any Subsidiary:
(i)Total shareholder return;
(ii)Return on assets, equity, capital, or investment;
(iii) Pre-tax or after-tax profit levels, including: earnings per
share; earnings before interest and taxes; earnings before
interest, taxes, depreciation and amortization; net operating
profits after tax, and net income;
(iv)Cash flow and cash flow return on investment;
(v)Economic value added and economic profit;
(vi)Growth in earnings per share;
(vii) Levels of operating expense or other expense items as reported
on the income statement, including operating and maintenance
expense; or
(viii) Measures of customer satisfaction and customer service as
surveyed from time to time, including the relative
improvement therein.
(c) The Performance Goals must be objective and must satisfy third party
"objectivity" standards under Section 162(m) of the Code, and the
regulations promulgated thereunder.
(d) The Committee is authorized to make adjustments in the method of
calculating attainment of Performance Goals in recognition of: (i)
extraordinary or non-recurring items, (ii) changes in tax laws, (iii)
changes in generally accepted accounting principles or changes in
accounting principles, (iv) charges related to restructured or discontinued
operations, (v) restatement of prior period financial results, and (vi) any
other unusual, non-recurring gain or loss that is separately identified and
quantified in the Company's financial
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statements. Notwithstanding the foregoing, the Committee may, at its sole
discretion, reduce the performance results upon which Awards are based
under the Plan, to offset any unintended result(s) arising from events not
anticipated when the Performance Goals were established, provided that such
adjustment is permitted by Section 162(m) of the Code.
(e) The Performance Goals shall not allow for any discretion by the
Committee as to an increase in any Award, but discretion to lower an Award
is permissible.
(f) The Award and payment of any Award under this Plan to a Covered
Participant with respect to a relevant Performance Period shall be
contingent upon the attainment of the Performance Goals that are applicable
to such Covered Participant. The Committee shall certify in writing prior
to payment of any such Award that such applicable Performance Goals
relating to the Award are satisfied. Approved minutes of the Committee may
be used for this purpose.
(g) The maximum Award that may be paid to any Covered Participant under
the Plan pursuant to Sections 6.4, 6.7, 6.8 and 6.9 for any Performance
Period shall be (i) if in cash, One Million Dollars ($1,000,000.00) and
(ii) if in shares of Common Stock, five hundred thousand (500,000) shares.
(h) All Awards to Covered Participants under this Plan shall be further
subject to such other conditions, restrictions, and requirements as the
Committee may determine to be necessary to carry out the purpose of this
Section 11.
ARTICLE 12
AMENDMENT OR DISCONTINUANCE
Subject to the limitations set forth in this Article 12, the Board may at
any time and from time to time, without the consent of the Participants,
alter, amend, revise, suspend, or discontinue the Plan in whole or in part;
provided, however, that no amendment which requires stockholder approval in
order for the Plan and Incentives awarded under the Plan to continue to comply
with Section 162(m) of the Code, including any successors to such Section,
shall be effective unless such amendment shall be approved by the requisite
vote of the stockholders of the Company entitled to vote thereon. Any such
amendment shall, to the extent deemed necessary or advisable by the Committee,
be applicable to any outstanding Incentives theretofore granted under the
Plan, notwithstanding any contrary provisions contained in any Award
Agreement. In the event of any such amendment to the Plan, the holder of any
Incentive outstanding under the Plan shall, upon request of the Committee and
as a condition to the exercisability thereof, execute a conforming amendment
in the form prescribed by the Committee to any Award Agreement relating
thereto. Notwithstanding anything contained in this Plan to the contrary,
unless required by law, no action contemplated or permitted by this Article 12
shall adversely affect any rights of Participants or obligations of the
Company to Participants with respect to any Incentive theretofore granted
under the Plan without the consent of the affected Participant.
ARTICLE 13
TERM
The Plan shall be effective as set forth in Section 18.11. Unless sooner
terminated by action of the Board, the Plan will terminate on October 1, 2008,
but Incentives granted before that date will continue to be effective in
accordance with their terms and conditions.
ARTICLE 14
CAPITAL ADJUSTMENTS
If at any time while the Plan is in effect, or Incentives are outstanding,
there shall be any increase or decrease in the number of issued and
outstanding shares of Common Stock resulting from (1) the declaration or
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payment of a stock dividend, (2) any recapitalization resulting in a stock
split-up, combination, or exchange of shares of Common Stock, or (3) other
increase or decrease in such shares of Common Stock effected without receipt
of consideration by the Company, then and in such event:
(a) An appropriate adjustment shall be made in the maximum number of
shares of Common Stock then subject to being awarded under the Plan and in
the maximum number of shares of Common Stock that may be awarded to a
Participant to the end that the same proportion of the Company's issued and
outstanding shares of Common Stock shall continue to be subject to being so
awarded.
(b) Appropriate adjustments shall be made in the number of shares of
Common Stock and the Option Price thereof then subject to purchase pursuant
to each such Stock Option previously granted and unexercised, to the end
that the same proportion of the Company's issued and outstanding shares of
Common Stock in each such instance shall remain subject to purchase at the
same aggregate Option Price.
(c) Appropriate adjustments shall be made in the number of SARs and the
SAR Price thereof then subject to exercise pursuant to each such SAR
previously granted and unexercised, to the end that the same proportion of
the Company's issued and outstanding shares of Common Stock in each
instance shall remain subject to exercise at the same aggregate SAR Price.
(d) Appropriate adjustments shall be made in the number of outstanding
shares of Restricted Stock with respect to which restrictions have not yet
lapsed prior to any such change.
(e) Appropriate adjustments shall be made with respect to shares of
Common Stock applicable to any other Incentives previously awarded under
the Plan as the Committee, in its sole discretion, deems appropriate,
consistent with the event.
Except as otherwise expressly provided herein, the issuance by the Company
of shares of its capital stock of any class, or securities convertible into
shares of capital stock of any class, either in connection with direct sale or
upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such
shares or other securities, shall not affect, and no adjustment by reason
thereof shall be made with respect to (i) the number of or Option Price of
shares of Common Stock then subject to outstanding Stock Options granted under
the Plan, (ii) the number of or SAR Price or SARs then subject to outstanding
SARs granted under the Plan, (iii) the number of outstanding shares of
Restricted Stock, or (iv) the number of shares of Common Stock otherwise
payable under any other Incentive.
Upon the occurrence of each event requiring an adjustment with respect to
any Incentive, the Company shall mail to each affected Participant its
computation of such adjustment which shall be conclusive and shall be binding
upon each such Participant.
ARTICLE 15
RECAPITALIZATION, MERGER AND
CONSOLIDATION; CHANGE IN CONTROL
(a) The existence of this Plan and Incentives granted hereunder shall not
affect in any way the right or power of the Company or its stockholders to
make or authorize any or all adjustments, recapitalizations,
reorganizations, or other changes in the Company's capital structure and
its business, or any merger or consolidation of the Company, or any issue
of bonds, debentures, preferred or preference stocks ranking prior to or
otherwise affecting the Common Stock or the rights thereof (or any rights,
options, or warrants to purchase same), or the dissolution or liquidation
of the Company, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a similar
character or otherwise.
(b) Subject to any required action by the stockholders, if the Company
shall be the surviving or resulting corporation in any merger,
consolidation or share exchange, any Incentive granted hereunder shall
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pertain to and apply to the securities or rights (including cash, property,
or assets) to which a holder of the number of shares of Common Stock
subject to the Incentive would have been entitled.
(c) In the event of any merger, consolidation or share exchange pursuant
to which the Company is not the surviving or resulting corporation, there
shall be substituted for each share of Common Stock subject to the
unexercised portions of such outstanding Incentives, that number of shares
of each class of stock or other securities or that amount of cash,
property, or assets of the surviving, resulting or consolidated company
which were distributed or distributable to the stockholders of the Company
in respect to each share of Common Stock held by them, such outstanding
Incentives to be thereafter exercisable for such stock, securities, cash,
or property in accordance with their terms. Notwithstanding the foregoing,
however, all Stock Options and SARs may be canceled by the Company
immediately prior to the effective date of any such reorganization, merger,
consolidation, share exchange or any dissolution or liquidation of the
Company by giving notice to each holder thereof or his personal
representative of its intention to do so and by permitting the purchase
during the thirty (30) day period next preceding such effective date of all
or any portion of all of the shares of Common Stock subject to such
outstanding Incentives whether or not such Incentives are then vested or
exercisable.
(d) In the event of a Change in Control, notwithstanding any other
provision in this Plan to the contrary all unmatured installments of
Incentives outstanding and not otherwise canceled in accordance with
Section 15(c) above, shall thereupon automatically be accelerated and
exercisable in full and all Restriction Periods applicable to Awards of
Restricted Stock and/or Restricted Stock Units shall automatically expire.
The determination of the Committee that any of the foregoing conditions has
been met shall be binding and conclusive on all parties.
ARTICLE 16
LIQUIDATION OR DISSOLUTION
In case the Company shall, at any time while any Incentive under this Plan
shall be in force and remain unexpired, (i) sell all or substantially all of
its property, or (ii) dissolve, liquidate, or wind up its affairs, then each
Participant shall be thereafter entitled to receive, in lieu of each share of
Common Stock of the Company which such Participant would have been entitled to
receive under the Incentive, the same kind and amount of any securities or
assets as may be issuable, distributable, or payable upon any such sale,
dissolution, liquidation, or winding up with respect to each share of Common
Stock of the Company. If the Company shall, at any time prior to the
expiration of any Incentive, make any partial distribution of its assets, in
the nature of a partial liquidation, whether payable in cash or in kind (but
excluding the distribution of a cash dividend payable out of earned surplus
and designated as such) then in such event the Option Prices or SAR Prices
then in effect with respect to each Stock Option or SAR shall be reduced, on
the payment date of such distribution, in proportion to the percentage
reduction in the tangible book value of the shares of the Company's Common
Stock (determined in accordance with generally accepted accounting principles)
resulting by reason of such distribution.
ARTICLE 17
INCENTIVES IN SUBSTITUTION FOR
INCENTIVES GRANTED BY OTHER CORPORATIONS
Incentives may be granted under the Plan from time to time in substitution
for similar instruments held by employees of a corporation who become or are
about to become Employees of the Company or any Subsidiary as a result of a
merger or consolidation of the employing corporation with the Company or the
acquisition by the Company of stock of the employing corporation. The terms
and conditions of the substitute Incentives so granted may vary from the terms
and conditions set forth in this Plan to such extent as the Board at the time
of grant may deem appropriate to conform, in whole or in part, to the
provisions of the Incentives in substitution for which they are granted.
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ARTICLE 18
MISCELLANEOUS PROVISIONS
18.1 INVESTMENT INTENT. The Company may require that there be presented to
and filed with it by any Participant under the Plan, such evidence as it may
deem necessary to establish that the Incentives granted or the shares of
Common Stock to be purchased or transferred are being acquired for investment
and not with a view to their distribution.
18.2 NO RIGHT TO CONTINUED EMPLOYMENT. Neither the Plan nor any Incentive
granted under the Plan shall confer upon any Participant any right with
respect to continuance of employment by the Company or any Subsidiary.
18.3 INDEMNIFICATION OF BOARD AND COMMITTEE. No member of the Board or the
Committee, nor any officer or employee of the Company acting on behalf of the
Board or the Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to
the Plan, and all members of the Board or the Committee and each and any
officer or employee of the Company acting on their behalf shall, to the extent
permitted by law, be fully indemnified and protected by the Company in respect
of any such action, determination, or interpretation.
18.4 EFFECT OF THE PLAN. Neither the adoption of this Plan nor any action of
the Board or the Committee shall be deemed to give any person any right to be
granted an Award or any other rights except as may be evidenced by an Award
Agreement, or any amendment thereto, duly authorized by the Committee and
executed on behalf of the Company, and then only to the extent and upon the
terms and conditions expressly set forth therein.
18.5 COMPLIANCE WITH OTHER LAWS AND REGULATIONS. Notwithstanding anything
contained herein to the contrary, the Company shall not be required to sell or
issue shares of Common Stock under any Incentive if the issuance thereof would
constitute a violation by the Participant or the Company of any provisions of
any law or regulation of any governmental authority or any national securities
exchange or inter-dealer quotation system or other forum in which shares of
Common Stock are quoted or traded (including without limitation Section 16 of
the 1934 Act and Section 162(m) of the Code); and, as a condition of any sale
or issuance of shares of Common Stock under an Incentive, the Committee may
require such agreements or undertakings, if any, as the Committee may deem
necessary or advisable to assure compliance with any such law or regulation.
The Plan, the grant and exercise of Incentives hereunder, and the obligation
of the Company to sell and deliver shares of Common Stock, shall be subject to
all applicable federal and state laws, rules and regulations and to such
approvals by any government or regulatory agency as may be required.
18.6 TAX REQUIREMENTS. The Company shall have the right to deduct from all
amounts hereunder paid in cash or other form, any Federal, state, or local
taxes required by law to be withheld with respect to such payments. The
Participant receiving shares of Common Stock issued under the Plan shall be
required to pay the Company the amount of any taxes which the Company is
required to withhold with respect to such shares of Common Stock.
Notwithstanding the foregoing, in the event of an assignment of a Non-
qualified Stock Option or SAR pursuant to Section 18.7, the Participant who
assigns the Non-qualified Stock Option or SAR shall remain subject to
withholding taxes upon exercise of the Non-qualified Stock Option or SAR by
the transferee to the extent required by the Code or the rules and regulations
promulgated thereunder. Such payments shall be required to be made prior to
the delivery of any certificate representing such shares of Common Stock. Such
payment may be made in cash, by check, or through the delivery of shares of
Common Stock owned by the Participant (which may be effected by the actual
delivery of shares of Common Stock by the Participant or by the Company's
withholding a number of shares to be issued upon the exercise of a Stock
Option, if applicable), which shares have an aggregate Fair Market Value equal
to the required minimum withholding payment, or any combination thereof.
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18.7 ASSIGNABILITY. Incentive Stock Options may not be transferred or
assigned other than by will or the laws of descent and distribution and may be
exercised during the lifetime of the Participant only by the Participant or
the Participant's legally authorized representative, and each Award Agreement
in respect of an Incentive Stock Option shall so provide. The designation by a
Participant of a beneficiary will not constitute a transfer of the Stock
Option. The Committee may waive or modify any limitation contained in the
preceding sentences of this Section 18.7 that is not required for compliance
with Section 422 of the Code. The Committee may, in its discretion, authorize
all or a portion of a Non-qualified Stock Option or SAR to be granted to a
Participant to be on terms which permit transfer by such Participant to (i)
the spouse, children or grandchildren of the Participant ("Immediate Family
Members"), (ii) a trust or trusts for the exclusive benefit of such Immediate
Family Members, or (iii) a partnership in which such Immediate Family Members
are the only partners, (iv) an entity exempt from federal income tax pursuant
to Section 501(c)(3) of the Code or any successor provision, or (v) a split
interest trust or pooled income fund described in Section 2522(c)(2) of the
Code or any successor provision, provided that (x) there shall be no
consideration for any such transfer, (y) the Award Agreement pursuant to which
such Non-qualified Stock Option or SAR is granted must be approved by the
Committee and must expressly provide for transferability in a manner
consistent with this Section, and (z) subsequent transfers of transferred Non-
qualified Stock Options or SARs shall be prohibited except those by will or
the laws of descent and distribution or pursuant to a qualified domestic
relations order as defined in the Code or Title I of the Employee Retirement
Income Security Act of 1974, as amended. Following transfer, any such Non-
qualified Stock Option and SAR shall continue to be subject to the same terms
and conditions as were applicable immediately prior to transfer, provided that
for purposes of Articles 10, 12, 14, 16 and 18 hereof the term "Participant"
shall be deemed to include the transferee. The events of Termination of
Service shall continue to be applied with respect to the original Participant,
following which the Non-qualified Stock Options and SARs shall be exercisable
by the transferee only to the extent and for the periods specified in the
Award Agreement. The Committee and the Company shall have no obligation to
inform any transferee of a Non-qualified Stock Option or SAR of any
expiration, termination, lapse or acceleration of such Option. The Company
shall have no obligation to register with any federal or state securities
commission or agency any Common Stock issuable or issued under a Non-qualified
Stock Option or SAR that has been transferred by a Participant under this
Section 18.7.
18.8 USE OF PROCEEDS. Proceeds from the sale of shares of Common Stock
pursuant to Incentives granted under this Plan shall constitute general funds
of the Company.
18.9 GOVERNING LAW. The validity, construction and effect of the Plan and
any actions taken or relating to the Plan shall be determined in accordance
with the laws of the State of Texas and applicable Federal law.
18.10 SUCCESSORS AND ASSIGNS. The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of the Company,
expressly to assume and agree to perform the Company's obligation under this
Plan in the same manner and to the same extent that the Company would be
required to perform them if no such succession had taken place. As used
herein, the "Company" shall mean the Company as hereinbefore defined and any
aforesaid successor to its business and/or assets.
18.11 EFFECTIVE DATE. The Plan shall be effective as of October 1, 1998.
Notwithstanding the foregoing, the adoption of this Plan is expressly
conditioned upon the approval by the Company's shareholders at the annual
meeting of the Company's shareholders held in 1999. Subject to earlier
termination pursuant to Article 12, the Plan shall have a term of ten (10)
years from its effective date. After termination of the Plan, no future Awards
may be made.
18.12 LEGEND. Each certificate representing shares of Restricted Stock
issued to a Participant shall bear the following legend, or a similar legend
deemed by the Company to constitute an appropriate notice of the provisions
hereof (any such certificate not having such legend shall be surrendered upon
demand by the Company and so endorsed):
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On the face of the certificate:
"Transfer of this stock is restricted in accordance with
conditions printed on the reverse of this certificate."
On the reverse:
"The shares of stock evidenced by this certificate are subject
to and transferrable only in accordance with that certain
Atmos Energy Corporation 1998 Long-Term Incentive Plan, a copy
of which is on file at the principal office of the Company in
Dallas, Texas. No transfer or pledge of the shares evidenced
hereby may be made except in accordance with and subject to
the provisions of said Plan. By acceptance of this
certificate, any holder, transferee or pledgee hereof agrees
to be bound by all of the provisions of said Plan."
The following legend shall be inserted on a certificate evidencing Common
Stock issued under the Plan if the shares were not issued in a transaction
registered under the applicable federal and state securities laws:
"Shares of stock represented by this certificate have been
acquired by the holder for investment and not for resale,
transfer or distribution, have been issued pursuant to
exemptions from the registration requirements of applicable
state and federal securities laws, and may not be offered for
sale, sold or transferred other than pursuant to effective
registration under such laws, or in transactions otherwise in
compliance with such laws, and upon evidence satisfactory to
the Company of compliance with such laws, as to which the
Company may rely upon an opinion of counsel satisfactory to
the Company."
A copy of this Plan shall be kept on file in the principal office of the
Company in Dallas, Texas.
* * * * * * * * * *
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IN WITNESS WHEREOF, the Company has caused this instrument to be executed as
of August 12, 1998, by its President pursuant to prior action taken by the
Board.
Atmos Energy Corporation
/s/ ROBERT W. BEST
By:__________________________________
Robert W. Best
Chairman of the Board, President
and Chief Executive Officer
Attest:
/s/ GLEN A. BLANSCET
_____________________________________
Secretary
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EXHIBIT B
ATMOS ENERGY CORPORATION
ANNUAL INCENTIVE PLAN FOR MANAGEMENT
The Atmos Energy Corporation Annual Incentive Plan for Management
(hereinafter called the "Plan") was adopted by the Board of Directors of Atmos
Energy Corporation, a Texas and Virginia corporation (hereinafter called the
"Company"), on August 12, 1998 to be effective October 1, 1998 and will be
submitted to the Company's stockholders for approval on February 10, 1999.
ARTICLE 1
PURPOSE
The Plan is intended to provide the Company a means by which it can engender
and sustain a sense of personal commitment on the part of its executives and
senior managers in the continued growth, development, and financial success of
the Company and encourage them to remain with and devote their best efforts to
the business of the Company, thereby advancing the interests of the Company
and its shareholders. Accordingly, the Company may award to executives and
senior managers annual incentive compensation on the terms and conditions
established herein.
ARTICLE 2
DEFINITIONS
For the purposes of the Plan, unless the context requires otherwise, the
following terms shall have the meanings indicated:
2.1 "Annual Incentive Award" or "Award" means the compensation payable under
this Plan to a Participant by the Committee pursuant to such terms,
conditions, restrictions, and limitations established by the Committee and
Plan.
2.2 "Board" means the Board of Directors of the Company.
2.3 "Bonus Stock" or "Bonus Shares" means shares of Common Stock of the
Company awarded to a Participant as permitted and pursuant to the terms of the
Long Term Incentive Plan.
2.4 (a) "Change in Control" of the Company shall be deemed to have occurred
if:
(i) Any "Person" (as defined in Section 2.4(b)(i) below), other than
(1) the Company or any of its Subsidiaries, (2) a trustee or other
fiduciary holding securities under an employee benefit plan of the
Company or any of its Affiliates, (3) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (4) a
corporation owned, directly or indirectly, by the shareholders of the
Company in substantially the same proportions as their ownership of
stock of the Company, is or becomes the "beneficial owner" (as defined
in Section 2.4(b)(ii) below), directly or indirectly, of securities of
the Company (not including in the securities beneficially owned by such
person any securities acquired directly from the Company or its
Affiliates) representing 33 1/3% or more of the combined voting power
of the Company's then outstanding securities, or 33 1/3% or more of the
then outstanding common stock of the Company, excluding any Person who
becomes such a beneficial owner in connection with a transaction
described in subparagraph (iii)(A) below.
(ii) During any period of two consecutive years (the "Period"),
individuals who at the beginning of the Period constitute the Board of
Directors of the Company and any "new director" (as defined in
Section 2.4(b)(iii) below) cease for any reason to constitute a
majority of the Board of Directors.
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(iii) There is consummated a merger or consolidation of the Company
or any direct or indirect subsidiary of the Company with any other
corporation, except if:
(A) the merger or consolidation would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or any
parent thereof) at least sixty percent (60%) of the combined voting
power of the voting securities of the Company or such surviving
entity or any parent thereof outstanding immediately after such
merger or consolidation; or
(B) the merger or consolidation is effected to implement a
recapitalization of the Company (or similar transaction) in which no
Person is or becomes the beneficial owner, directly, or indirectly,
of securities of the Company (not including in the securities
beneficially owned by such Person any securities acquired directly
from the Company or its Affiliates other than in connection with the
acquisition by the Company or its Affiliates of a business)
representing 60% or more of the combined voting power of the
Company's then outstanding securities;
(iv) The shareholders of the Company approve a plan of complete
liquidation or dissolution of the Company or an agreement for the sale
or disposition by the Company of all or substantially all the Company's
assets, other than a sale or disposition by the Company of all or
substantially all of the Company's assets to an entity, at least 60% of
the combined voting power of the voting securities of which are owned
by the stockholders of the Company in substantially the same
proportions as their ownership of the Company immediately prior to such
sale.
(b) Definitions. For purposes of Section 2.4(a) above,
(i) "Person" shall have the meaning given in Section 3(a)(9) of the
Securities Exchange Act of 1934 (the "1934 Act") as modified and used
in Sections 13(d) and 14(d) of the 1934 Act.
(ii) "Beneficial owner" shall have the meaning provided in Rule 13d-3
under the 1934 Act.
(iii) "New director" shall mean an individual whose election by the
Company's Board of Directors or nomination for election by the
Company's shareholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were directors
at the beginning of the Period or whose election or nomination for
election was previously so approved or recommended. However, "new
director" shall not include a director whose initial assumption of
office is in connection with an actual or threatened election contest,
including but not limited to a consent solicitation relating to the
election of directors of the Company.
(iv) "Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under Section 12 of the 1934 Act.
2.5 "Code" means the Internal Revenue Code of 1986, as amended, together
with the published rulings, regulations, and interpretations duly promulgated
thereunder.
2.6 "Committee" means the committee appointed or designated by the Board to
administer the Plan in accordance with Article 3 of this Plan.
2.7 "Common Stock" or "Common Shares" means the Common Stock of the Company,
with no par value (stated value of $.005 per share), or such other security or
right or instrument into which such common stock may be changed or converted
in the future.
2.8 "Company" means Atmos Energy Corporation, a Texas and Virginia
corporation, and any successor entity.
2.9 "Covered Participant" means a Participant who is a "covered employee" as
defined in Section 162(m)(3) of the Code, and the regulations promulgated
thereunder, or who the Committee believes will be such a covered employee for
a Performance Period, and who the Committee believes may have remuneration in
excess of $1,000,000 for the Performance Period, as provided in Section 162(m)
of the Code.
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2.10 "Date of Conversion" means the date on which the Committee determines
and approves Awards; this is also the effective Date of Conversion for
Restricted Stock or Restricted Shares, and for Stock Options.
2.11 "Employee" means common law employee (as defined in accordance with the
Regulations and Revenue Rulings then applicable under Section 3401(c) of the
Code) of the Company and any Subsidiary of the Company.
2.12 "Executive Nonqualified Deferred Compensation Plan" is the Atmos Energy
Corporation Executive Nonqualified Deferred Compensation Plan, as amended from
time to time.
2.13 "Fair Market Value" of a share of Common Stock is the mean of the
highest and lowest prices per share on the New York Stock Exchange
Consolidated Tape, or such reporting service as the Board may select, on the
appropriate date, or in the absence of reported sales on such day, the most
recent previous day for which sales were reported.
2.14 "Long-Term Incentive Plan" is the Atmos Energy Corporation 1998 Long-
Term Incentive Compensation Plan, as amended from time to time.
2.15 "Participant" means an Employee who is selected by the Committee to
participate in the Plan.
2.16 "Performance Criteria" or "Performance Goals" or "Performance Measures"
mean the objectives established by the Committee for the Performance Period
pursuant to Article V hereof, for the purpose of determining Awards under the
Plan.
2.17 "Performance Period" means the consecutive 12 month period that
constitutes the Company's fiscal year.
2.18 "Plan" means the Atmos Energy Corporation Annual Incentive Plan for
Management, dated effective October 1, 1998, as amended from time to time.
2.19 "Restricted Stock" or "Restricted Shares" means shares of Common Stock
of the Company contingently granted to a Participant as permitted and pursuant
to the terms and provisions of the Long-Term Incentive Plan.
2.20 "Section 162(m)" means Section 162(m) of the Code and the regulations
promulgated thereunder.
2.21 "Stock Option" or "Option" means an option to purchase Common Shares of
the Company as permitted and pursuant to the terms and provisions of the Long-
Term Incentive Plan.
2.22 "Subsidiary" means (i) any corporation in an unbroken chain of
corporations beginning with the Company, if each of the corporations other
than the last corporation in the unbroken chain owns stock possessing a
majority of the total combined voting power of all classes of stock in one of
the other corporations in the chain, (ii) any limited partnership, if the
Company or any corporation described in item (i) above owns a majority of the
general partnership interest and a majority of the limited partnership
interests entitled to vote on the removal and replacement of the general
partner, and (iii) any partnership or limited liability company, if the
partners or members thereof are composed only of the Company, any corporation
listed in item (i) above or any limited partnership listed in item (ii) above.
"Subsidiaries" means more than one of any such corporations, limited
partnerships, partnerships or limited liability companies.
2.23 "Termination of Service" occurs when a Participant who is an Employee
of the Company or any Subsidiary shall cease to serve as an Employee of the
Company and its Subsidiaries, for any reason.
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ARTICLE 3
ADMINISTRATION
The Plan shall be administered by the Human Resources Committee of the Board
unless otherwise determined by the Board. If said Human Resources Committee
does not so serve, the Committee shall consist of not fewer than two persons;
any member of the Committee may be removed at any time, with or without cause,
by resolution of the Board; and any vacancy occurring in the membership of the
Committee may be filled by appointment by the Board.
All actions to be taken by the Committee under this Plan, insofar as such
actions affect compliance with Section 162(m) of the Code, shall be limited to
those members of the Board who are Non-employee Directors and who are "outside
directors" under Section 162(m). The Committee shall select one of its members
to act as its Chairman. A majority of the Committee shall constitute a quorum,
and the act of a majority of the members of the Committee present at a meeting
at which a quorum is present shall be the act of the Committee.
The Committee shall determine and designate from time to time the eligible
persons to whom Awards will be made. The Committee, in its discretion, shall
(i) interpret the Plan, (ii) prescribe, amend, and rescind any rules and
regulations necessary or appropriate for the administration of the Plan, and
(iii) make such other determinations and take such other action as it deems
necessary or advisable in the administration of the Plan. Any interpretation,
determination, or other action made or taken by the Committee shall be final,
binding, and conclusive on all interested parties.
With respect to restrictions in the Plan that are based on the requirements
of Section 162(m) of the Code or any other applicable law, rule or restriction
(collectively, "applicable law"), to the extent that any such restrictions are
no longer required by applicable law, the Committee shall have the sole
discretion and authority to make Awards hereunder that are no longer subject
to such restrictions.
ARTICLE 4
ELIGIBILITY
Any Employee (including an Employee who is also a director or an officer) is
eligible to participate in the Plan. The Committee, upon its own action, may
make, but shall not be required to make, an Award to any Employee. Awards may
be made by the Committee at any time and from time to time to new
Participants, or to then Participants, or to a greater or lesser number of
Participants, and may include or exclude previous Participants, as the
Committee shall determine. The Committee's determinations under the Plan
(including without limitation determinations of which Employees, if any, are
to receive Awards, the form, amount and timing of such Awards, the terms and
provisions of such Awards, and the agreements evidencing same) may be made by
the Committee selectively among Employees who receive, or are eligible to
receive, Awards under the Plan. An Employee must be a Participant in the Plan
for a minimum of six months during the Plan Year to be eligible for an Award
for that Plan Year.
ARTICLE 5
PERFORMANCE GOALS AND MEASUREMENT
5.1 Performance Goals Establishment. Performance Goals shall be established
by the Committee not later than 90 days after commencement of the Performance
Period. The Performance Goals may be identical for all Participants or, at the
discretion of the Committee, may be different to reflect more appropriate
measures of individual performance.
5.2 Awards. Awards shall be made annually in accordance with actual
performance compared to the Performance Goals previously established by the
Committee for the Performance Period.
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5.3 Performance Goals. Performance Goals relating to Covered Participants
for a Performance Period shall be established by the Committee in writing.
Performance Goals may include alternative and multiple Performance Goals and
may be based on one or more business and/or financial criteria. In
establishing the Performance Goals for the Plan Year, the Committee in its
discretion may include one or any combination of the following criteria in
either absolute or relative terms, for either the Company or any of its
Subsidiary organizations:
(a) Total shareholder return
(b) Return on assets, equity, capital, or investment
(c) Pre-tax or after-tax profit levels, including: earnings per share;
earnings before interest and taxes; earnings before interest,
taxes, depreciation and amortization; net operating profits after
tax, and net income
(d) Cash flow and cash flow return on investment
(e) Economic value added and economic profit
(f) Growth in earnings per share
(g) Levels of operating expense or other expense items as reported on
the income statement, including operating and maintenance expense
(h) Measures of customer satisfaction and customer service as surveyed
from time to time, including the relative improvement therein.
5.4 Adjustments for Extraordinary Items. The Committee shall be authorized
to make adjustments in the method of calculating attainment of Performance
Goals in recognition of: (i) extraordinary or non-recurring items, (ii)
changes in tax laws, (iii) changes in generally accepted accounting principles
or changes in accounting policies, (iv) charges related to restructured or
discontinued operations, (v) restatement of prior period financial results,
and (vi) any other unusual, non-recurring gain or loss that is separately
identified and quantified in the Company's financial statements.
Notwithstanding the foregoing, the Committee may, at its sole discretion,
reduce the performance results upon which Awards are based under the Plan, to
offset any unintended result(s) arising from events not anticipated when the
Performance Goals were established, provided that such adjustment is permitted
by Section 162(m).
5.5 Determination of Awards. The Award and payment of any Award under this
Plan to a Covered Participant with respect to the Performance Period shall be
contingent upon the attainment of the Performance Goals that are applicable to
such Covered Participant. The Committee shall certify in writing prior to
payment of any such Award that such applicable Performance Goals relating to
the Award are satisfied. Approved minutes of the Committee may be used for
this purpose. The Performance Goals shall not allow for any discretion by the
Committee as to an increase in any Award, but discretion to lower an Award is
permissible.
ARTICLE 6
AWARDS
6.1 Timing of Awards. At the first meeting of the Committee after the
completion of the Performance Period, the Committee shall review the prior
year's performance in relation to the Performance Goals. The first meeting of
the Committee shall occur within 60 days following the completion of the
Performance Period.
6.2 Form of Awards. Awards are paid in cash or, at the Committee's
discretion, in whole or in part, in stock options. The value of any stock
options paid in lieu of a cash Award will be determined as set forth in
Section 6.2(d) below. Such stock options will be granted pursuant to the Long-
Term Incentive Plan. In addition, if and as the Committee so permits and
depending upon the Participant's voluntary election prior to the
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commencement of the Performance Period, the Participant may elect to convert
any Award paid to him in cash in 25 percent increments, in whole or part, into
the following forms:
(a) Deferred Compensation. The Participant may elect to defer receipt of
all or a portion of the Award under provisions of the Executive
Nonqualified Deferred Compensation Plan.
(b) Bonus Stock. The Participant may elect to convert all or a portion of
the Award to Bonus Shares, with the value of the Bonus Shares (based on the
Fair Market Value of such Bonus Shares as of the Date of Conversion) being
equal to 110% of the amount of the Award. Such Bonus Shares shall be
unrestricted and shall be granted pursuant to the Long-Term Incentive Plan.
(c) Restricted Stock Awards. The Participant may elect to convert all or
a portion of the Award to Company Restricted Shares, with the value of the
Restricted Shares (based on the Fair Market Value of such Restricted Shares
as of the Date of Conversion) being equal to 150% of the amount of the
Award. Such Restricted Stock will have a restriction period of not less
than 3 years from the Date of Conversion. These Restricted Shares will be
granted pursuant to the Long-Term Incentive Plan.
(d) Non Qualified Stock Options. The Participant may elect to convert all
or a portion of the Award to Stock Options, with the value of the Stock
Options (determined on the Date of Conversion using the Black-Scholes
option pricing model) being equal to 250% of the amount of the Award. The
term of the Stock Option shall not be greater than 10 years, and the Stock
Option will not be fully vested until 3 years have passed from the Date of
Conversion. All Stock Options shall be granted at 100 percent of the Common
Stock's Fair Market Value on the Date of Conversion. These Stock Options
will be granted pursuant to the Long-Term Incentive Plan.
6.3 Maximum Awards. The maximum cash Award that may be made to a Covered
Participant under the Plan for any Performance Period shall be $1.0 million.
ARTICLE 7
WITHHOLDING TAXES
The Company shall have the right to deduct from any payment to be made
pursuant to the Plan the amount of any taxes required by law to be withheld
with respect to such payments.
ARTICLE 8
NO RIGHT TO CONTINUED EMPLOYMENT OR AWARDS
No Employee shall have any claim or right to be made an Award, and the
making of an Award shall not be construed as giving a Participant the right to
be retained in the employ of the Company or any of its Subsidiaries. Further,
the Company and its Subsidiaries expressly reserve the right at any time to
terminate the employment of any Participant free from any liability under the
Plan; except that a Participant, who meets or exceeds the Performance Goals
for the Performance Period and was actively employed for the full term of the
Performance Period, will be eligible for an Award even though the Participant
is not an active employee of the Company at the time the Committee makes
Awards under the Plan.
ARTICLE 9
CHANGE IN CONTROL
Immediately upon a Change in Control, notwithstanding any other provision of
this Plan, all Awards for the Performance Period in which the Change in
Control occurs shall be deemed earned at the maximum Performance Goal level,
and the Company shall make a payment in cash to each Participant within ten
(10) days after the effective date of the Change in Control in the amount of
such maximum Award. The making of Awards under the Plan shall in no way affect
the right of the Company to adjust, reclassify, reorganize, or otherwise
change its capital or business structure, or to merge, consolidate, dissolve,
liquidate, sell or transfer all or any portion of its businesses or assets.
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ARTICLE 10
AMENDMENT, MODIFICATION, SUSPENSION, OR TERMINATION
Subject to the limitations set forth in the Article 10, the Board may at any
time and from time to time, without the consent of the Participants, alter,
amend, revise, suspend, or discontinue the Plan in whole or in part; provided,
however, that no amendment which requires stockholder approval in order for
the Plan and Awards under the Plan to continue to comply with Section 162(m)
of the Code, including any successors to such Section, shall be effective
unless such amendment shall be approved by the requisite vote of the
stockholders of the Company entitled to vote thereon.
ARTICLE 11
GOVERNING LAW
The validity, construction and effect of the Plan and any actions taken or
relating to the Plan shall be determined in accordance with the laws of the
State of Texas and applicable Federal law.
ARTICLE 12
SUCCESSORS AND ASSIGNS
The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company, expressly to assume and agree to
perform the Company's obligation under this Plan in the same manner and to the
same extent that the Company would be required to perform them if no such
succession had taken place. As used herein, the "Company" shall mean the
Company as hereinbefore defined and any aforesaid successor to its business
and/or assets.
ARTICLE 13
EFFECTIVE DATE
This Plan shall be effective as of October 1, 1998. Notwithstanding the
foregoing, the adoption of this Plan is expressly conditioned upon the
approval by the Company's shareholders at the annual meeting of the Company's
shareholders held in 1999. Subject to earlier termination pursuant to Article
10, the Plan shall have a term of 5 years from its effective date. After
termination of the Plan, no future Awards may be made.
ARTICLE 14
INTERPRETATION
The Plan is designed to comply with Section 162(m) of the Code, and all
provisions hereof shall be construed in a manner consistent with that intent.
ARTICLE 15
INDEMNIFICATION
No member of the Board or the Committee, nor any officer or Employee of the
Company acting on behalf of the Board or the Committee, shall be personally
liable for any action, determination, or interpretation taken or made in good
faith with respect to the Plan, and all members of the Board or the Committee
and each and any officer or Employee of the Company acting on their behalf
shall, to the extent permitted by law, be fully indemnified and protected by
the Company in respect of any such action, determination, or interpretation.
* * * * *
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IN WITNESS WHEREOF, the Company has caused this instrument to be executed as
of August 12, 1998 by its President pursuant to prior action taken by the
Board.
ATMOS ENERGY CORPORATION
/s/ ROBERT W. BEST
By:__________________________________
Robert W. Best
Chairman of the Board, President
and Chief Executive Officer
Attest:
/s/ GLEN A. BLANSCET
_____________________________________
Secretary
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EXHIBIT C
ATMOS ENERGY CORPORATION EQUITY INCENTIVE
AND DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
The Atmos Energy Corporation Equity Incentive and Deferred Compensation Plan
for Non-Employee Directors (the "Plan") is an amendment to the Atmos Energy
Corporation Deferred Compensation Plan for Outside Directors adopted by the
Company on May 10, 1990. This Plan document is designed to supersede the prior
plan document and includes all terms and provisions of the Plan. This Plan was
adopted by the Board of Directors of Atmos Energy Corporation, a Texas and
Virginia corporation (hereinafter called the "Company"), on August 12, 1998.
ARTICLE 1
PURPOSE
The Plan, as amended, allows each non-employee Director to defer receipt of
his annual retainer and meeting fees, to invest his deferred compensation into
either a cash account or a stock account, and to receive an annual grant of
share units for each year the non-employee Director serves on the Company's
Board of Directors. The Plan, as amended, is intended to encourage qualified
individuals to accept nominations as Directors of Atmos Energy Corporation and
to strengthen the mutuality of interests between the non-employee Directors
and Atmos Energy Corporation's other shareholders.
ARTICLE 2
DEFINITIONS
The following are defined terms wherever they appear in the Plan:
2.1 "Board of Directors" or "Board" shall mean the Board of Directors of
Atmos Energy Corporation.
2.2 (a) "Change in Control" of the Company shall be deemed to have occurred
if:
(i) Any "Person" (as defined in Section 2.2(b)(i) below), other
than (1) the Company or any of its Subsidiaries, (2) a trustee or other
fiduciary holding securities under an employee benefit plan of the
Company or any of its Affiliates, (3) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (4) a
corporation owned, directly or indirectly, by the shareholders of the
Company in substantially the same proportions as their ownership of
stock of the Company, is or becomes the "beneficial owner" (as defined
in Section 2.4(b)(ii) below), directly or indirectly, of securities of
the Company (not including in the securities beneficially owned by such
person any securities acquired directly from the Company or its
Affiliates) representing 33 1/3% or more of the combined voting power
of the Company's then outstanding securities, or 33 1/3% or more of the
then outstanding common stock of the Company, excluding any Person who
becomes such a beneficial owner in connection with a transaction
described in subparagraph (iii)(A) below.
(ii) During any period of two consecutive years (the "Period"),
individuals who at the beginning of the Period constitute the Board of
Directors of the Company and any "new director" (as defined in Section
2.2(b)(iii) below) cease for any reason to constitute a majority of the
Board of Directors.
(iii) There is consummated a merger or consolidation of the Company
or any direct or indirect subsidiary of the Company with any other
corporation, except if:
(A) the merger or consolidation would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity or
any parent thereof) at least
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sixty percent (60%) of the combined voting power of the voting
securities of the Company or such surviving entity or any parent
thereof outstanding immediately after such merger or consolidation;
or
(B) the merger or consolidation is effected to implement a
recapitalization of the Company (or similar transaction) in which
no Person is or becomes the beneficial owner, directly, or
indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities
acquired directly from the Company or its Affiliates other than in
connection with the acquisition by the Company or its Affiliates of
a business) representing 60% or more of the combined voting power
of the Company's then outstanding securities;
(iv) The shareholders of the Company approve a plan of complete
liquidation or dissolution of the Company or an agreement for the sale
or disposition by the Company of all or substantially all the Company's
assets, other than a sale or disposition by the Company of all or
substantially all of the Company's assets to an entity, at least 60% of
the combined voting power of the voting securities of which are owned
by the stockholders of the Company in substantially the same
proportions as their ownership of the Company immediately prior to such
sale.
(b) Definitions. For purposes of Section 2.2(a) above,
(i) "Person" shall have the meaning given in Section 3(a)(9) of the
Securities Exchange Act of 1934 (the "1934 Act") as modified and used
in Sections 13(d) and 14(d) of the 1934 Act.
(ii) "Beneficial owner" shall have the meaning provided in Rule 13d-3
under the 1934 Act.
(iii) "New director" shall mean an individual whose election by the
Company's Board of Directors or nomination for election by the
Company's shareholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were directors
at the beginning of the Period or whose election or nomination for
election was previously so approved or recommended. However, "new
director" shall not include a director whose initial assumption of
office is in connection with an actual or threatened election contest,
including but not limited to a consent solicitation relating to the
election of directors of the Company.
(iv) "Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under Section 12 of the 1934 Act.
2.3 "Cash Account" shall be a Sub-Account pursuant to the Plan to which the
Director may voluntarily elect to defer annual retainer and meeting fees for
payment at a specified future date, under the terms and provisions of the
Plan.
2.4 "Code" means the Internal Revenue Code of 1986, as amended, together
with the published rulings, regulations, and interpretations duly promulgated
thereunder.
2.5 "Company" means Atmos Energy Corporation, a Texas and Virginia
Corporation, and any successor entity.
2.6 "Common Stock" or "Common Shares" means the Common Stock of the Company,
with no par value (stated value of $.005 per share), or such other security or
right or instrument into which such Common Stock may be changed or converted
in the future.
2.7 "Director" means a member of the Board of Directors who is not employed
by the Company or any of its Subsidiaries.
2.8 "Fair Market Value" of a share of Common Stock is the mean of the
highest and lowest prices per share on the New York Stock Exchange
Consolidated Tape, or such reporting service as the Board may select, on the
appropriate date, or in the absence of reported sales on such day, the most
recent previous day for which sales were reported.
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2.9 "Plan" means the Atmos Energy Corporation Equity Incentive and Deferred
Compensation Plan for Non-Employee Directors, as described herein and as
amended from time to time.
2.10 "Plan Benefits" means the benefits described in Articles 5 and 6
hereof.
2.11 "Plan Year" means the calendar year.
2.12 "Share Unit" shall mean a notional share that is not an actual share,
but is a fictitious share whose value at any point in time is always equal to
the Fair Market Value of a Common Share of the Company at such time.
2.13 "Stock Account" shall be a Sub-Account pursuant to the Plan to which
the Director may voluntarily elect to defer annual retainer and meeting fees,
as well as receive periodic grants of Share Units, for payment to a specified
future date, under the terms and provisions of the Plan described hereunder.
2.14 "Sub-Account" shall be one of two accounts to which the Director may
have credited compensation for services rendered: (1) Cash Account and (2)
Stock Account.
ARTICLE 3
ADMINISTRATION
The Plan shall be administered by the Board of Directors. The Board of
Directors shall have the full authority to construe and interpret the Plan,
and any action of the Board of Directors with respect to the Plan shall be
final, conclusive, and binding on all persons. Subject to adjustment as
provided in Section 7.8 hereof, the total number of Common Shares reserved for
issuance under the Plan shall be 150,000.
ARTICLE 4
GRANTS OF SHARE UNITS
After the effective date of the Plan (as defined in Section 7.11), each Plan
Year, the Board may grant to each Director such number of Share Units, if any,
as the Board may determine. The grants will occur on the 30th day following
the Company's Annual Meeting of Shareholders each Plan Year.
ARTICLE 5
SUB-ACCOUNT CREDITS AND INVESTMENTS
5.1 Sub-Accounts. Each Director participating in the Plan will have a
deferred compensation arrangement comprised of two Sub-Accounts: a Cash
Account and a Stock Account. The Director shall designate the Sub-Account to
which any retainer, meeting fees, or other compensation for services as a
Director shall be credited by an advance election. Such election must occur on
or before December 31 of the calendar year immediately preceding the start of
the Plan Year. The Director may elect to have the retainer, meeting fees, and
other compensation credited to either Sub-Account in increments of ten percent
(10%), provided that fees may only be allocated to the Stock Account in whole
Share Units. Except as otherwise provided herein, retainer, meeting fees, and
other compensation allocated to a Sub-Account may not thereafter be allocated
to the other Sub-Account.
5.2 Cash Account. The amount of retainer, meeting fees, and other
compensation allocated as a credit to the Cash Account shall be converted to a
cash balance to be credited with interest in the means set forth below.
(a) The balance in the Cash Account prior to any additional allocations
or credits of compensation for such month, if any, shall be credited with
interest equal to one-twelfth of the Annual Interest Rate.
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(b) The Annual Interest Rate for each applicable calendar year, beginning
on January 1 of the calendar year, will be equal to the sum of (i) 2.0
percent, plus (ii) the annual yield reported on a 30-year Treasury Bond for
the first business day of January for each Plan Year, as reported in the
Wall Street Journal.
5.3 Stock Account. The amount of retainer, meeting fees, and other
compensation allocated as a credit to the Stock Account shall be converted to
Share Units as described below. Any retainer, meeting fees, and other
compensation payable for services in any month or fiscal year quarter shall be
converted to a number of whole Share Units on the last trading day of that
month or quarterly period. The amount attributable to any fractional Share
Units remaining after conversion shall be reallocated to the Cash Account.
Share Units shall be credited with dividend equivalents as and when dividends
are declared on shares of Common Stock. Such credits shall be converted to
whole Share Units on the last trading day of the month in which such dividends
are paid. The amount attributable to any fractional Share Units remaining
after conversion shall be reallocated to the Cash Account.
ARTICLE 6
PLAN BENEFITS
6.1 Form. Plan Benefits of a Director shall be comprised of two forms. Plan
Benefits paid from the Cash Account shall be paid in the form of cash. Plan
Benefits for the Stock Account shall be paid in the form of Common Shares
equal in number to the Share Units in the Director's Stock Account.
6.2 Distribution.
(a) The Plan Benefits of a Director, payable under either the Cash Account
or the Stock Account, shall be distributed either (i) in a single lump sum at
the time of termination of the Director's service on the Board, or (ii) in up
to 15 equal annual installments beginning at the time of termination of the
Director's service on the Board. Each Director may elect the form of
distribution, and such election must be made in the form designated by the
Company from time to time, must be made within 30 days after the Director
first becomes eligible to participate in the Plan, and shall be irrevocable
once filed with the Company; provided, however, that Director may file a new
election as to the form of distribution if such election is filed at least one
year in advance of termination of service on the Board. In the absence of a
timely election by a Director hereunder, the Director shall be deemed to have
elected to have his Plan Benefits distributed in a single lump sum at the time
of termination of the Director's service on the Board.
(b) In the case of the death of a Director, the Director's Plan Benefits
shall be distributed, within a reasonable time as determined by the Company,
after the Director's death to the Director's beneficiary or beneficiaries, as
specified by the Director on a form furnished by and filed with the Secretary
of the Company. If no beneficiary has been designated by the Director or if no
designated beneficiary survives the Director, the undistributed balance of his
Plan Benefit shall be distributed to the Director's surviving spouse as
beneficiary if such spouse is still living or, if not living, in equal amounts
to the then living children of the Director as beneficiaries or, if none, to
the Director's estate as beneficiary.
ARTICLE 7
GENERAL PROVISIONS AND TERMS
7.1 Change in Control. In the event of an occurrence of a Change in Control
as defined herein, the Company or its successor organization shall be required
to fully pay the Cash Account and Stock Account Plan Benefits through a
grantor trust arrangement established by the Company for the express purpose
of the Plan. Such financing of the grantor trust shall occur within 20 days
following the date of the Change in Control and within 10 days following any
subsequent increase in the value of the Cash Account or Stock Account.
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7.2 Nontransferability. Except as provided in Article 6.2(b) above, no
payment of any Plan Benefit of a Director shall be anticipated, assigned,
attached, garnished, optioned, transferred or made subject to any creditor's
process, whether voluntarily or involuntarily or by operation of law. Any act
in violation of this subsection shall be void.
7.3 Compliance with Legal and Trading Requirements. The Plan shall be
subject to all applicable laws, rules and regulations, including but not
limited to, federal and state laws, rules and regulations, and to such
approvals by any regulatory or governmental agency as may be required. No
provision of the Plan shall be interpreted or construed to obligate the
Company to register any Shares under federal or state securities laws. The
transfer by a Director of Common Shares distributed pursuant to the Plan will
be subject to such restrictions as the Company deems necessary or desirable in
connection with federal or state securities laws, and Common Share
certificates will bear a legend setting forth any such restriction.
7.4 Taxes. The Company is authorized to withhold from any payment made under
this Plan any amount of withholding and other taxes due in connection
therewith, and to take such other action as the Company may deem advisable to
enable the Company and a Director to satisfy obligations for the payment of
any withholding taxes and other tax obligations relating thereto.
7.5 Amendment or Termination. The Board may amend, alter, suspend,
discontinue, or terminate the Plan without the consent of shareholders of the
Company or individual Directors; provided, however, that, without the consent
of an affected Director, no amendment, alteration, suspension,
discontinuation, or termination of the Plan may materially impair the rights
or, in any other manner, materially and adversely affect the rights of such
Director hereunder to the amounts or Share Units then credited to his Sub-
Accounts.
7.6 Unfunded Status of Awards. This Plan is intended to constitute an
"unfunded" plan of deferred compensation. With respect to any payments not yet
made to a Director, nothing contained in the Plan shall give any such Director
any rights that are greater than those of a general creditor of the Company;
provided, however, subject to Article 7.1 hereof, that the Company may
authorize the creation of trusts or make other arrangements to meet the
Company's obligations under the Plan to deliver cash or other property, which
trusts or other arrangements shall be consistent with the "unfunded" status of
the Plan unless the Company otherwise determines with the consent of each
affected Director.
7.7 Nonexclusivity of the Plan. The adoption of the Plan by the Board shall
not be construed as creating any limitations on the power of the Board to
adopt such other compensation arrangements as it may deem desirable, including
without limitation, the granting of options on Common Shares and other awards
otherwise than under the Plan, and such arrangements may be either applicable
generally or only in specific cases.
7.8 Adjustments. In the event that subsequent to the effective date of the
Plan any dividend in Common Shares, recapitalization, Common Share split,
reverse split, reorganization, merger, consolidation, spin-off, combination,
repurchase, or exchange, or other such change, affects the Common Shares such
that they are increased or decreased or changed into or exchanged for a
different number or kind of Common Shares, other securities of the Company or
of another corporation or other consideration, then in order to maintain the
proportionate interest of the Directors and preserve the value of the
Directors' Share Units and to maintain the value of the Plan there shall
automatically be substituted (i) for each Share Unit a new Share Unit and (ii)
for the number of Common Shares set forth in Section 3 above a number of
Common Shares or other consideration, in the case of (i) and (ii) above,
representing the number and kind of Common Shares, other securities or other
consideration into which each outstanding Common Share shall be changed or for
which each Common Share shall be exchanged. The substituted units shall be
subject to the same terms and conditions as the original Share Units.
7.9 No Right to Remain on the Board. Neither the Plan nor the crediting of
Share Units under the Plan shall be deemed to give any individual a right to
remain a Director of the Company or create any obligation on the part of the
Board to nominate any Director for reelection by the shareholders of the
Company.
5
<PAGE>
7.10 Governing Law. The validity, construction, and effect of the Plan shall
be determined in accordance with the laws of Texas without giving effect to
principles of conflict of laws.
7.11 Effective Date. The Plan shall become effective upon approval of this
Plan by the shareholders of the Company.
7.12 Titles and Headings. The titles and heading of those Articles in the
Plan are for convenience of reference only. In the event of any conflict, the
text of the Plan, rather than such titles or headings, shall control.
7.13 Indemnification. No member of the Board, nor any officer or Employee of
the Company acting on behalf of the Board, shall be personally liable for any
action, determination, or interpretation taken or made in good faith with
respect to the Plan, and all members of the Board and each and any officer or
Employee of the Company acting on their behalf shall, to the extent permitted
by law, be fully indemnified and protected by the Company in respect of any
such action, determination, or interpretation.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed as
of August 12, 1998 by its President pursuant to prior action taken by the
Board.
Atmos Energy Corporation
/s/ ROBERT W. BEST
By:__________________________________
Robert W. Best
Chairman of the Board, President
and Chief Executive Officer
Attest:
/s/ GLEN A. BLANSCET
_____________________________________
Secretary
6
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3100-PS-98
<PAGE>
APPENDIX 1
PROXY
ATMOS ENERGY CORPORATION
Proxy Solicited on Behalf of the Board of Directors of
the Company for Annual Meeting, February 10, 1999
The undersigned hereby constitutes and appoints Robert W. Best, Dan Busbee,
Charles K. Vaughan and each of them, his or her true and lawful agents and
proxies, with full power of substitution in each, to represent the undersigned
at the Annual Meeting of Shareholders of ATMOS ENERGY CORPORATION, to be held at
The Westin Hermitage, 231 Sixth Avenue North, Nashville, Tennessee 37219, on
Wednesday, February 10, 1999, at 11:00 a.m. Central Standard Time, and at any
postponements or adjournment 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.
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, FOR APPROVAL OF THE
AMENDMENT TO THE ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF SHARES OF
AUTHORIZED COMMON STOCK, FOR APPROVAL OF THE PROPOSAL TO APPROVE THE 1998 LONG-
TERM INCENTIVE PLAN, FOR APPROVAL OF THE ANNUAL INCENTIVE PLAN FOR MANAGEMENT,
AND FOR APPROVAL OF THE EQUITY INCENTIVE AND DEFERRED COMPENSATION PLAN FOR NON-
EMPLOYEE DIRECTORS.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE>
ATMOS LOGO 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. If you wish to change your address, please
mark the box below, vote and return your proxy by mail.
COMPANY HIGHLIGHTS DURING 1998
. The Company achieved record net income of over $55,000,000 and record earnings
per share of $1.84.
. The Company completed the integration of the operations of United Cities Gas
Company.
. The Company continued the implementation of its customer service initiative,
including a central customer support center in Amarillo, Texas.
. The Company successfully completed its first public debt offering in July 1998
in the amount of $150,000,000.
<PAGE>
DETACH HERE
- --------------------------------------------------------------------------------
[X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
1. The Board of Directors recommends a vote FOR the election of all nominees for
director.
Nominees for Director: Class I: Travis W. Bain II, Dan Busbee, Gene C. Koonce
and Vincent J. Lewis
FOR ALL NOMINEES WITHHELD FROM ALL NOMINEES
|_| |_|
For, except vote withheld from the following nominee(s):
|_| -----------------------------
2. The Board of Directors recommends a vote FOR proposals 2-5.
Approval of FOR AGAINST ABSTAIN
Increase in Authorized Shares |_| |_| |_|
3. Approval of FOR AGAINST ABSTAIN
1998 Long-Term Incentive Plan |_| |_| |_|
4. Approval of FOR AGAINST ABSTAIN
Annual Incentive Plan |_| |_| |_|
for Management
5. Approval of FOR AGAINST ABSTAIN
Equity Incentive and
Deferred Compensation Plan |_| |_| |_|
for Non-Employee Directors
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_________
