<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:
[X] Preliminary Proxy Statement [_] Confidential, For Use of the Commission
Only (as Permitted by Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[_] 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-b(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
LOGO
December 23, 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 23, 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 23, 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 [___________] 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.
AMOUNT OF PERCENTAGE OF
NAME AND ADDRESS COMMON STOCK OUTSTANDING
OF BENEFICIAL OWNER BENEFICIALLY OWNED Common Stock
------------------- ------------------ -------------
Employee Stock Ownership Plan and [________________] [______]%
Trust for Employees of Atmos
Energy Corporation (the "ESOP") (a)
(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.
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 8 of this Proxy
Statement, and all directors and executive officers of the Company as a group.
<PAGE>
<TABLE>
<CAPTION>
AMOUNT OF PERCENTAGE OF
COMMON STOCK OUTSTANDING
NAME BENEFICIALLY OWNED COMMON STOCK
- ---- ------------------ -------------
<S> <C> <C>
Travis W. Bain II............................... ------ (a)
Robert W. Best.................................. ------ (a)
Glen A. Blanscet................................ ------ (a)
Dan Busbee...................................... ------ (a)
Richard W. Cardin............................... ------ (a)
Larry J. Dagley................................. ------ (a)
Thomas J. Garland............................... ------ (a)
J. Charles Goodman.............................. ------ (a)
Gene C. Koonce.................................. ------ (a)
Vincent J. Lewis................................ ------ (a)
Thomas C. Meredith.............................. ------ (a)
Wynn D. McGregor................................ ------ (a)
Phillip E. Nichol............................... ------ (a)
Carl S. Quinn................................... ------ (a)
Charles K. Vaughan.............................. ------ (a)
Richard Ware II.................................
All directors and executive officers as a group ------
(16 individuals)................................
</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
2
<PAGE>
July 31, 1997 (the "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.
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 Plano, 1999
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 and 1999
Chief Executive Officer of United Cities from
May 1996 until the 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>
3
<PAGE>
The following persons are directors of the Company who will be continuing in
office until the expiration of their terms as set forth below.
<TABLE>
<CAPTION>
YEAR IN WHICH
FIRST BECAME A CLASS DESIGNATION
NAME; PRINCIPAL OCCUPATION OR EMPLOYMENT DIRECTOR AND YEAR OF
DURING PAST FIVE YEARS; OTHER DIRECTORSHIPS AGE OF THE COMPANY EXPIRATION OF TERM
------------------------------------------- --- -------------- ------------------
<S> <C> <C> <C>
Robert W. Best........................................ 52 1997 Class III
Chairman of the Board, President and Chief 2001
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 Andersen LLP 2000
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.
Thomas J. Garland..................................... 64 1997 Class III
Chairman of The Tusculum Institute for Public 2001
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 System in 2000
Tuscaloosa, Alabama since June 1997. Formerly
President of Western Kentucky University in Bowling
Green, Kentucky from 1988 until June 1997. Director
of Alabama Power Company.
Phillip E. Nichol..................................... 63 1985 Class III
Senior Vice President and Divisional Hiring Officer for 2001
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.
</TABLE>
4
<PAGE>
<TABLE>
<S> <C> <C> <C>
Carl S. Quinn......................................... 67 1994 Class II
General Partner of Quinn Oil Company, Ltd. in 2000
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 Company from 2001
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>
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 11.
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.
5
<PAGE>
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.
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 23, 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
6
<PAGE>
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 23, 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.
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 $300,000 in payment for his services under the Consulting Agreement.
The payments are made in semi-annual installments payable on October 1 and April
1 of each fiscal year.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and persons who beneficially own more than ten
percent of the Company's Common Stock to file with the Securities and Exchange
Commission and the New York Stock Exchange initial reports of ownership and
reports of changes in their ownership in the Company's Common Stock. Directors,
executive officers, and greater-than-ten-percent beneficial shareholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file. Based solely on a review of the copies of such reports
furnished to the Company and written representations that no Forms 5 were
required, the Company believes that, during the last fiscal year, all of the
Company's directors, executive officers, and greater-than-ten-percent beneficial
owners were in compliance with the Section 16(a) filing requirements.
7
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth the compensation
paid by the Company for each of the Company's last three completed fiscal years
to Mr. Best and the Company's four most highly compensated executive officers
other than Mr. Best.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION Compensation
---------------------------------- ------------
RESTRICTED
OTHER ANNUAL STOCK ALL OTHER
SALARY BONUS (a) COMPENSATION AWARDS (B) COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($) ($)
--------------------------- ---- -------- --------- ------------- -------------- --------------
<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, President 1997 266,426 487,200 (d) 1,225,000 2,184
and Chief Executive Officer
Larry J. Dagley (f)...................... 1998 310,385 263,300 (d) 631,250 5,528(e)
Executive Vice President and 1997 125,000 283,400 (d) 1,225,000 1,872
Chief Financial Officer
J. Charles Goodman....................... 1998 184,537 108,800 (d) 126,250 8,028(e)
Executive Vice President, 1997 177,530 121,400 (d) 0 11,132
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 Counsel 1997 129,854 198,200 (d) 0 9,335
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 Resources 1997 114,047 52,000 (d) 0 5,273
1996 109,263 22,300 (d) 19,875 5,062
</TABLE>
(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.
8
<PAGE>
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 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
employee'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.
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.
9
<PAGE>
PENSION PLAN TABLE (a)
<TABLE>
<CAPTION>
YEARS OF SERVICE
<S> <C> <C> <C> <C> <C>
REMUNERATION 15 20 25 30 35
$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: Robert W. Best, 1 year; Larry J. Dagley, 1 year; J. Charles
Goodman, 17 years; Glen A. Blanscet, 13 years; and Wynn D. 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 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
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<PAGE>
the 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 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 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. There are no interlocking relationships between any
executive officer of the Company and any other company.
11
<PAGE>
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.
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:
12
<PAGE>
. 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.
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
13
<PAGE>
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 business unit level.
Additionally, the Incentive Plan will consider measurements of both financial
and operational
14
<PAGE>
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.
15
<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
16
<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.
17
<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 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 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 the 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
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<PAGE>
outstanding shares entitled to vote is required to adopt the amendment. Although
an abstention will 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 present and 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 as Amended of the Company 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 such persons 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
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<PAGE>
rescind any rules and regulations necessary or appropriate for the
administration 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 at the Annual Meeting.
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 immediately 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, which must be satisfied prior to removal of
the restriction, and such other provisions as the Committee shall determine.
The participants receiving Restricted Stock/Restricted Unit
20
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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. 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.
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
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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 or nominees 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 LTIP. 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 Incentive Plan document), 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 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.
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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. 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
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
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"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.
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 either elect to 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
24
<PAGE>
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 $28.375 per share.
NEW PLAN BENEFITS
ATMOS ENERGY CORPORATION EQUITY INCENTIVE AND
DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
----------------------------------------------------------------------
Name and Position Dollar Value ($) Share Units
----------------------------------------------------------------------
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
----------------------------------------------------------------------
*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 purposes of
determining if a quorum exists, but neither abstentions nor broker non-votes
will be counted as a vote "For" or
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"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 1999 Annual
Meeting of Shareholders, 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 2, 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 August 25, 1999.
By Order of the Board of Directors,
GLEN A. BLANSCET
Vice President, General Counsel
and Corporate Secretary
Dallas, Texas
December 23, 1998
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EXHIBIT A
---------
ATMOS ENERGY CORPORATION
------------------------
1998 LONG-TERM INCENTIVE PLAN
-----------------------------
Effective: October 1, 1998
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1 PURPOSE........................................................... 1
ARTICLE 2 DEFINITIONS....................................................... 1
ARTICLE 3 ADMINISTRATION.................................................... 6
ARTICLE 4 ELIGIBILITY....................................................... 7
ARTICLE 5 SHARES SUBJECT TO PLAN............................................ 7
ARTICLE 6 GRANT OF AWARDS................................................... 8
6.1 In General.......................................................... 8
6.2 Maximum ISO Grants.................................................. 8
6.3 Maximum Individual Grants........................................... 8
6.4 Restricted Stock/Restricted Stock Units............................. 8
6.5 SAR................................................................. 10
6.6 Tandem Awards....................................................... 10
6.7 Performance Based Awards............................................ 11
6.8 Bonus Stock......................................................... 11
6.9 Other Stock Based Awards............................................ 12
ARTICLE 7 OPTION PRICE; SAR PRICE........................................... 13
ARTICLE 8 AWARD PERIOD; VESTING............................................. 13
8.1 Award Period........................................................ 13
8.2 Vesting............................................................. 13
ARTICLE 9 TERMINATION OF SERVICE............................................ 13
ARTICLE 10 EXERCISE OF INCENTIVE............................................ 14
10.1 In General.......................................................... 14
10.2 Disqualifying Disposition of ISO.................................... 15
ARTICLE 11 SPECIAL PROVISIONS APPLICABLE TO COVERED
PARTICIPANTS..................................................... 16
ARTICLE 12 AMENDMENT OR DISCONTINUANCE...................................... 18
ARTICLE 13 TERM............................................................. 18
ARTICLE 14 CAPITAL ADJUSTMENTS.............................................. 18
ARTICLE 15 RECAPITALIZATION, MERGER AND CONSOLIDATION;
CHANGE IN CONTROL................................................ 20
ARTICLE 16 LIQUIDATION OR DISSOLUTION....................................... 21
ARTICLE 17 INCENTIVES IN SUBSTITUTION FOR INCENTIVES
GRANTED BY OTHER CORPORATIONS.................................... 21
ARTICLE 18 MISCELLANEOUS PROVISIONS......................................... 21
18.1 Investment Intent................................................... 21
18.2 No Right to Continued Employment.................................... 21
18.3 Indemnification of Board and Committee.............................. 22
18.4 Effect of the Plan.................................................. 22
18.5 Compliance With Other Laws and Regulations.......................... 22
18.6 Tax Requirements.................................................... 22
18.7 Assignability....................................................... 22
18.8 Use of Proceeds..................................................... 23
18.9 Governing Law....................................................... 23
18.10 Successors and Assigns.............................................. 23
18.11 Effective Date...................................................... 23
18.12 Legend.............................................................. 24
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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
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(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.
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
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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.
(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.
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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.
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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 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
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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.
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
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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
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
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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.
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(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 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.
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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.
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.
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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.
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(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.
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.
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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 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
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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.
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.
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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.
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(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 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.
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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 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.
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(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.
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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
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.
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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.
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.
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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.
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
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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.
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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):
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
By: /s/ Robert W. Best
--------------------------------
Robert W. Best
Chairman of the Board, President
and Chief Executive Officer
Attest:
/s/ Glen A. Blanscet
- -------------------------
Secretary
A-25
<PAGE>
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
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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.
(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.
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(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.
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.
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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.
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.
B-4
<PAGE>
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.
B-5
<PAGE>
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
B-6
<PAGE>
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
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
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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.
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.
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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.
* * * * *
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
By: /s/ Robert W. Best
---------------------------------
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
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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 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
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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, 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.
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.
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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.
(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
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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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<PAGE>
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
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<PAGE>
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.
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
By: /s/ Robert W. Best
--------------------------------
Robert W. Best
Chairman of the Board, President
and Chief Executive Officer
Attest:
/s/ Glen A. Blanscet
- --------------------
Secretary
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<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, 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, 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.
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 and personnel of
United Cities.
. The Company continued the implementation of its customer service initiative
project, including a centralized customer call center operation 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 APPROVAL OF THE AMENDMENT TO
THE ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES
OF COMMON STOCK TO 100,000,000 SHARES FROM 75,000,000 SHARES.
Approval of FOR AGAINST ABSTAIN
Increase in Authorized Shares [ ] [ ] [ ]
3. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE 1998 LONG-TERM
INCENTIVE PLAN.
Approval of FOR AGAINST ABSTAIN
1998 Long-Term Incentive Plan [ ] [ ] [ ]
4. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE ANNUAL
INCENTIVE PLAN FOR MANAGEMENT.
Approval of FOR AGAINST ABSTAIN
Annual Incentive Plan [ ] [ ] [ ]
for Management
<PAGE>
5. The Board of Directors recommends a vote FOR approval of the Equity
Incentive and Deferred Compensation Plan for Non-Employee Directors.
Approval of FOR AGAINST ABSTAIN
Equity Incentive and
Deferred Compensation Plan [ ] [ ] [ ]
for Non-Employee Directors
MARK HERE
FOR ADDRESS CHANGE
AND NOTE AT LEFT [___]
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.
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_________
