AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 4, 1996 REGISTRATION NO. 333- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------------- ATMOS ENERGY CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) ---------------- TEXAS 4924 75-1743247 (STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION INCORPORATION OR NUMBER) ORGANIZATION) 1800 THREE LINCOLN CENTRE 5430 LBJ FREEWAY DALLAS, TEXAS 75240 (972) 934-9227 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ---------------- GLEN A. BLANSCET VICE PRESIDENT, GENERAL COUNSEL AND CORPORATE SECRETARY 1800 THREE LINCOLN CENTRE 5430 LBJ FREEWAY DALLAS, TEXAS 75240 (972) 934-9227 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) COPIES OF ALL COMMUNICATIONS TO BE SENT TO: BRYAN E. BISHOP JONATHAN A. KOFF LOCKE PURNELL RAIN HARRELL CHAPMAN AND CUTLER (A PROFESSIONAL CORPORATION) 111 WEST MONROE STREET 2200 ROSS AVENUE, SUITE 2200 CHICAGO, ILLINOIS 60603-4080 DALLAS, TEXAS 75201-6776 (312) 845-3000 (214) 740-8000 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: [_] CALCULATION OF REGISTRATION FEE - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- PROPOSED PROPOSED AMOUNT MAXIMUM MAXIMUM AMOUNT OF TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) FEE(2) - ------------------------------------------------------------------------------------------------ Common Stock, no par value per share (includes associated Rights)(3)..................... 13,350,000 $22.25 $297,037,500 $102,427 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (1) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(f), based upon the average of the high and low prices per share reported on The Nasdaq National Market for the Common Stock of United Cities Gas Company on September 26, 1996. (2) Pursuant to Rule 457(b), the registration fee has been reduced by the $58,793.94 paid to the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended, in connection with the filing of the preliminary proxy material relating to the Merger. (3) The Registration Statement also pertains to rights to purchase shares of Common Stock of the Registrant. One right is attached to and trades with each share of Common Stock of the Registrant. Until the occurrence of certain events, the rights are not exercisable and will not be evidenced or transferred apart from the Common Stock. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- ATMOS ENERGY CORPORATION 1800 THREE LINCOLN CENTRE 5430 LBJ FREEWAY DALLAS, TEXAS 75240 [LOGO OF ATMOS APPEARS HERE] October 4, 1996 Dear Atmos Shareholder: You are cordially invited to attend a Special Meeting of Shareholders of Atmos Energy Corporation ("Atmos") to be held on November 12, 1996 at 11:00 a.m., Central time. The meeting will be held at the Doubletree Hotel at Lincoln Centre, 5410 LBJ Freeway, in Dallas, Texas. At the Special Meeting, you will be asked to consider and vote upon a proposal to ratify and approve an Agreement and Plan of Reorganization dated July 19, 1996, as amended by Amendment No. 1 to Agreement and Plan of Reorganization dated October 3, 1996 (the "Reorganization Agreement"), by and between Atmos and United Cities Gas Company, an Illinois and Virginia corporation ("United Cities"), and approve the Plan of Merger (the "Plan of Merger") and the merger of United Cities with and into Atmos (the "Merger"), with Atmos as the surviving corporation. The Merger is intended to be a tax-free reorganization and to be accounted for as a pooling of interests. In order to comply with certain requirements applicable to utilities operating in Virginia, Atmos will, following the Merger, be incorporated both in Texas and Virginia. The approval of this proposal will also, pursuant to the Reorganization Agreement and Plan of Merger, constitute the approval of (a) the issuance by Atmos of approximately 13,350,000 shares of the common stock, no par value, of Atmos (the "Atmos Stock"), which will be delivered to the shareholders of United Cities in connection with the Merger, (b) the adoption by Atmos of the United Cities Gas Company Long-Term Stock Plan of 1989 (the "United Cities Stock Plan"), (c) the adoption of certain amendments to Atmos' Restated Articles of Incorporation to conform them to Virginia law and (d) the election of four current directors of United Cities as directors of Atmos to take office at the effective time of the Merger. In the Merger, each share of common stock, no par value, of United Cities outstanding immediately prior to the consummation of the Merger (other than shares held by United Cities shareholders who properly exercise, and do not subsequently lose, their statutory dissenters' rights) will be converted into the right to receive one share of Atmos Stock (the "Exchange Ratio"). The shares of Atmos Stock to be issued in the Merger will represent approximately 45% of the total outstanding shares of Atmos Stock after the Merger. The basic terms and conditions of the Merger and the issuance of the shares of Atmos Stock are summarized in the accompanying Joint Proxy Statement/Prospectus. A copy of the Reorganization Agreement, including the proposed Plan of Merger, is also included in the Joint Proxy Statement/Prospectus. Please review and consider the enclosed materials carefully. Your Board of Directors has unanimously approved the terms and conditions of the Reorganization Agreement, the Merger and the Plan of Merger, and has determined that they are fair and in the best interests of Atmos and its shareholders. In addition, the Board of Directors has received the written opinion letter of its investment banker, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") that, based on the assumptions described in the letter, the Exchange Ratio is fair to Atmos from a financial point of view. The written opinion of Merrill Lynch is attached as Exhibit B to the accompanying Joint Proxy Statement/Prospectus and should be read carefully by Atmos shareholders. AFTER CAREFUL CONSIDERATION, YOUR BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL TO RATIFY AND APPROVE THE REORGANIZATION AGREEMENT AND APPROVE THE PLAN OF MERGER AND THE MERGER. The affirmative vote of the holders of two-thirds of the outstanding shares of Atmos Stock entitled to vote at the Special Meeting is required for approval of the proposal described above. Your vote, therefore, is very important. Regardless of the number of shares you hold or whether you plan to attend the Special Meeting, we urge you to complete, sign, date and return the enclosed proxy card immediately. If you attend the Special Meeting, you may vote in person if you wish, even if you have previously returned your proxy card. On behalf of your Board of Directors, thank you for your continued support and interest in Atmos Energy Corporation. Sincerely, /s/ Charles K. Vaughan Charles K. Vaughan Chairman of the Board /s/ Robert F. Stephens Robert F. Stephens President and Chief Operating Officer ATMOS ENERGY CORPORATION 1800 THREE LINCOLN CENTRE 5430 LBJ FREEWAY DALLAS, TEXAS 75240 NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD NOVEMBER 12, 1996 To the Shareholders of Atmos Energy Corporation: Notice is hereby given that a Special Meeting of the Shareholders of Atmos Energy Corporation ("Atmos") will be held at the Doubletree Hotel at Lincoln Centre, 5410 LBJ Freeway, in Dallas, Texas on November 12, 1996 at 11:00 a.m., Central time, for the following purposes: 1. To consider and vote upon a proposal to ratify and approve the Agreement and Plan of Reorganization dated July 19, 1996, as amended by Amendment No. 1 to Agreement and Plan of Reorganization dated October 3, 1996 (the "Reorganization Agreement"), by and between Atmos and United Cities Gas Company, an Illinois and Virginia corporation ("United Cities"), and approve the Plan of Merger (the "Plan of Merger") and the merger of United Cities with and into Atmos, with Atmos as the surviving corporation (the "Merger"). 2. To transact any other business that may properly come before the Special Meeting or any adjournment or postponement thereof. Pursuant to the Plan of Merger, each share of common stock, no par value, of United Cities ("United Cities Stock") outstanding immediately prior to the effective time of the Merger (other than shares held by United Cities shareholders who properly exercise, and do not subsequently lose, their statutory dissenters' rights) will be converted into the right to receive one share of common stock, no par value, of Atmos ("Atmos Stock"). The Reorganization Agreement and the Plan of Merger provide for the issuance of the shares of Atmos Stock to be issued in the Merger, the continuation of the United Cities Gas Company Long-Term Stock Plan of 1989 by Atmos and the substitution of Atmos Stock for United Cities Stock thereunder, the election of four members of the Board of Directors of United Cities to the Board of Directors of Atmos and the amendment of Atmos' Restated Articles of Incorporation to make certain changes necessary to conform them to Virginia law, including the incorporation of Atmos in Virginia as well as Texas. Approval of the foregoing proposal will also constitute approval of all such matters. A form of proxy and a Joint Proxy Statement/Prospectus containing detailed information about the matters to be considered at the Special Meeting accompany this notice. A copy of the Reorganization Agreement, including the Plan of Merger, is attached as Exhibit A to the accompanying Joint Proxy Statement/Prospectus. Your vote is very important. Regardless of whether you plan to attend the Special Meeting, please execute and return the accompanying proxy as soon as possible in the enclosed envelope. Any shareholder who signs and returns the accompanying proxy will have the right to revoke the same at any time before its exercise. Only shareholders of record on the books of Atmos at the close of business on October 9, 1996 will be entitled to notice of and to vote at the Special Meeting or any adjournments or postponements thereof. A list of shareholders entitled to vote at the Special Meeting will be available for inspection at the principal executive offices of Atmos, 1800 Three Lincoln Centre, 5430 LBJ Freeway, Dallas, Texas 75240. By Order of the Board of Directors Glen A. Blanscet Vice President, General Counsel and Corporate Secretary October 4, 1996 YOUR VOTE IS VERY IMPORTANT PLEASE RETURN YOUR PROXY AS SOON AS POSSIBLE [LOGO OF UNITED CITIES GAS COMPANY APPEARS HERE] United Cities Gas Company 5300 Maryland Way Brentwood, Tennessee 37027 October 4, 1996 Dear United Cities Shareholder: You are cordially invited to attend a Special Meeting of United Cities Gas Company shareholders to be held on November 12, 1996 at the Fifth Floor Auditorium of the First American Center, 326 Union Street, Nashville, Tennessee, commencing at 10:30 a.m., Central time. Your Board of Directors and management look forward to greeting personally those shareholders able to attend. At the Special Meeting, you will be asked to consider and vote upon a proposal to ratify and approve an Agreement and Plan of Reorganization dated July 19, 1996, as amended by Amendment No. 1 to Agreement and Plan of Reorganization dated October 3, 1996 (the "Reorganization Agreement"), by and between United Cities Gas Company ("United Cities") and Atmos Energy Corporation ("Atmos"), and approve the Plan of Merger ("Plan of Merger") and the merger of United Cities with and into Atmos, with Atmos being the surviving corporation (the "Merger"). In the Merger, each share of common stock, no par value, of United Cities outstanding immediately prior to the consummation of the Merger (other than shares held by United Cities shareholders who properly exercise, and do not subsequently lose, their statutory dissenters' rights) will be converted into the right to receive one share of common stock, no par value, of Atmos (the "Atmos Stock") (the "Exchange Ratio"). The shares of Atmos Stock to be issued to shareholders of United Cities in the Merger will represent approximately 45% of the total outstanding shares of Atmos Stock after the Merger. The Merger is intended to be a tax-free reorganization and to be accounted for as a pooling of interests. The basic terms and conditions of the Merger and the issuance of the shares of Atmos Stock are summarized in the accompanying Joint Proxy Statement/Prospectus. A copy of the Reorganization Agreement, including the proposed Plan of Merger, is also included in the Joint Proxy Statement/Prospectus. Please review and consider the enclosed materials carefully. After careful consideration, the Board of Directors of United Cities has unanimously approved this important transaction as being fair and in the best interests of United Cities and its shareholders and recommends a vote FOR its approval. PaineWebber Incorporated, an investment banking firm retained by United Cities, has rendered its opinion to the Board of Directors of United Cities that the Exchange Ratio is fair to United Cities' shareholders from a financial point of view. The written opinion of PaineWebber Incorporated is attached as Exhibit C to the accompanying Joint Proxy Statement/Prospectus and should be read carefully by United Cities' shareholders. REGARDLESS OF THE NUMBER OF SHARES YOU OWN, IT IS IMPORTANT THAT THEY ARE REPRESENTED AND VOTED AT THE SPECIAL MEETING WHETHER OR NOT YOU PLAN TO ATTEND. ACCORDINGLY, YOU ARE REQUESTED TO SIGN, DATE AND MAIL THE ENCLOSED PROXY AT YOUR EARLIEST CONVENIENCE. Your interest and participation in the affairs of United Cities are appreciated. Sincerely, Gene C. Koonce Chairman of the Board, President and Chief Executive Officer UNITED CITIES GAS COMPANY 5300 MARYLAND WAY BRENTWOOD, TENNESSEE 37027 NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON NOVEMBER 12, 1996 A Special Meeting of Shareholders of United Cities Gas Company ("United Cities") will be held in the Fifth Floor Auditorium of the First American Center, 326 Union Street, Nashville, Tennessee on November 12, 1996 at 10:30 a.m., Central time, for the following purposes: 1. To consider and vote upon a proposal to ratify and approve an Agreement and Plan of Reorganization dated July 19, 1996, as amended by Amendment No. 1 to Agreement and Plan of Reorganization dated October 3, 1996 (the "Reorganization Agreement"), by and between United Cities and Atmos Energy Corporation, a Texas corporation ("Atmos"), and approve the Plan of Merger ("Plan of Merger") and the merger of United Cities with and into Atmos, with Atmos as the surviving corporation (the "Merger"), as more fully described in the accompanying Joint Proxy Statement/Prospectus. A copy of the Reorganization Agreement, including the Plan of Merger, is attached as Exhibit A to the accompanying Joint Proxy Statement/Prospectus. The Joint Proxy Statement/Prospectus and the Exhibits thereto form a part of this Notice. 2. To transact such other business that may properly come before the Special Meeting or any adjournment or postponement thereof. The close of business on October 2, 1996 has been fixed by the Board of Directors as the record date for the determination of shareholders entitled to notice of and to vote at the Special Meeting and at any and all adjournments or postponements thereof. Shareholders have dissenters' rights pursuant to the Illinois Business Corporation Act of 1983. The procedures shareholders must follow in order to assert such dissenters' rights are described in the Joint Proxy Statement/Prospectus under "The Reorganization Agreement and The Merger--Dissenters' Rights." By Order of the Board of Directors Shirley M. Hawkins Senior Vice President and Secretary Brentwood, Tennessee October 4, 1996 IMPORTANT EACH SHAREHOLDER IS URGED TO EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY. A BUSINESS REPLY ENVELOPE, REQUIRING NO POSTAGE, IS PROVIDED FOR YOUR USE. SHAREHOLDERS SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH THEIR PROXY CARDS. PROMPTLY FOLLOWING THE CONSUMMATION OF THE MERGER, UNITED CITIES SHAREHOLDERS WILL BE SENT A TRANSMITTAL FORM WHICH WILL INCLUDE INSTRUCTIONS FOR THE RETURN AND EXCHANGE OF STOCK CERTIFICATES. JOINT PROXY STATEMENT OF ATMOS ENERGY CORPORATION AND UNITED CITIES GAS COMPANY ---------------- PROSPECTUS OF ATMOS ENERGY CORPORATION ---------------- This Joint Proxy Statement/Prospectus (the "Joint Proxy Statement/Prospectus") relates to the proposed merger of United Cities Gas Company, an Illinois and Virginia corporation ("United Cities"), with and into Atmos Energy Corporation, a Texas corporation ("Atmos"), and is being furnished to shareholders of Atmos and United Cities in connection with the solicitation of proxies by the Atmos Board of Directors and the United Cities Board of Directors for use in connection with a Special Meeting of Shareholders of Atmos (the "Atmos Shareholders Meeting") and a Special Meeting of Shareholders of United Cities (the "United Cities Shareholders Meeting"), respectively, each of which is to be held on November 12, 1996, or any adjournments or postponements thereof. At such meetings, the shareholders of each of Atmos and United Cities will consider and vote upon a proposal to ratify and approve an Agreement and Plan of Reorganization dated July 19, 1996, as amended by Amendment No. 1 to Agreement and Plan of Reorganization dated October 3, 1996 (the "Reorganization Agreement"), by and between Atmos and United Cities, and approve the Plan of Merger (the "Plan of Merger") and the merger of United Cities with and into Atmos (the "Merger"), with Atmos as the surviving corporation. Pursuant to the Plan of Merger, each share of Common Stock, no par value, of United Cities (the "United Cities Stock") outstanding immediately prior to the effective time of the Merger (the "Effective Time") (other than shares held by United Cities shareholders who properly exercise, and do not subsequently lose, their statutory dissenters' rights) will be converted into the right to receive one share of Common Stock, no par value, of Atmos (the "Atmos Stock"). Each issued and outstanding share of Atmos Stock held by Atmos shareholders will remain outstanding after the Merger. Based on the numbers of shares outstanding as of October 2, 1996, the holders of Atmos Stock and the holders of United Cities Stock will hold in the aggregate approximately 55% and 45%, respectively, of the total number of shares of Atmos Stock to be outstanding immediately after the Effective Time. With respect to the shareholders of Atmos, the ratification and approval of the Reorganization Agreement and approval of the Plan of Merger and the Merger will also constitute the approval of the issuance by Atmos of the shares of Atmos Stock to be delivered to the shareholders of United Cities in connection with the Merger (approximately 13,350,000 shares ) and the adoption of the United Cities Gas Company Long-Term Stock Plan of 1989 ("United Cities Stock Plan") as required by the New York Stock Exchange, Inc. (the "NYSE"), the election of four current directors of United Cities as directors of Atmos to take office at the Effective Time and certain amendments to Atmos' Restated Articles of Incorporation necessary to conform them to Virginia law. In connection with the Merger, Atmos will become incorporated in Virginia as well as in Texas and thereafter be subject to the corporation laws of each such state. THE BOARDS OF DIRECTORS OF ATMOS AND UNITED CITIES EACH UNANIMOUSLY RECOMMEND TO THEIR RESPECTIVE SHAREHOLDERS THAT THEY VOTE FOR APPROVAL OF THE PROPOSAL TO RATIFY AND APPROVE THE REORGANIZATION AGREEMENT AND APPROVE THE PLAN OF MERGER AND THE MERGER. On October 2, 1996, the most recent practicable date prior to the printing of this Joint Proxy Statement/ Prospectus, the closing price of Atmos Stock as reported on the NYSE Composite Tape was $23.38 per share, and the closing price of United Cities Stock as reported on The Nasdaq National Market was $22.75 per share. This Joint Proxy Statement/Prospectus constitutes a prospectus of Atmos filed as part of the Registration Statement (as defined herein) with respect to the shares of the Atmos Stock to be issued pursuant to the Merger. This Joint Proxy Statement/Prospectus and the accompanying form of proxy are first being sent or given to the shareholders of Atmos and United Cities on or about October 7, 1996. ---------------- THE ATMOS STOCK TO BE ISSUED IN THE MERGER HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ---------------- THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS IS OCTOBER 4, 1996. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: The forward-looking statements included or incorporated by reference in this Joint Proxy Statement/Prospectus (collectively, the "Forward-Looking Statements") are based on Atmos' and United Cities' historical operating trends and other information available to the managements of Atmos and United Cities. These statements assume that no significant changes will occur in the operating environment for Atmos and United Cities prior to or following the Merger. Atmos and United Cities caution that the Forward-Looking Statements are subject to all the risks and uncertainties discussed under the captions "Summary," "Selected Historical and Pro Forma Financial Information," "Background of the Merger," "The Reorganization Agreement and The Merger" and "Unaudited Pro Forma Combined Condensed Financial Statements" and in the documents incorporated by reference herein. Moreover, Atmos or United Cities or both may make material acquisitions, execute new contracts, terminate existing contracts or enter into new financing transactions that may affect the accuracy of the Forward-Looking Statements. None of these events can be predicted with certainty and, accordingly, are not taken into consideration in the Forward-Looking Statements made herein. For all of the foregoing reasons, actual results may vary materially from the Forward-Looking Statements and there is no assurance that the assumptions used are necessarily the most likely to occur. Neither Atmos nor United Cities assumes any obligation to update the Forward-Looking Statements to reflect actual results, changes in assumptions or changes in other factors affecting the Forward-Looking Statements. ---------------- NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS IN CONNECTION WITH THE SOLICITATION OF PROXIES OR THE OFFERING COVERED BY THIS JOINT PROXY STATEMENT/PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY ATMOS, UNITED CITIES OR ANY OTHER PERSON. THIS JOINT PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ATMOS STOCK, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS JOINT PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS JOINT PROXY STATEMENT/PROSPECTUS OR IN THE AFFAIRS OF ATMOS OR UNITED CITIES OR THAT ANY INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. AVAILABLE INFORMATION Atmos and United Cities are each subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith file reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements and other information filed by Atmos and United Cities with the Commission may be inspected and copied at the public reference facilities maintained by the Commission at Judiciary Plaza, Room 1024, 450 Fifth Street, NW, Washington, D.C. 20549 and at its Regional Offices in Chicago, Illinois at 500 W. Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and in New York, New York at 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of such materials may be obtained from the Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, NW, Washington, D.C. 20549 at prescribed rates. Additionally, copies of reports, proxy statements and other information filed with the Commission electronically by each of Atmos and United Cities may be inspected by accessing the Commission's Internet site at http://www.sec.gov. Furthermore, shares of Atmos Stock are listed on the NYSE and the reports, proxy statements and other information with respect to Atmos may also be inspected at the NYSE at 20 Broad Street, New York, New York 10005. Shares of United Cities Stock are quoted on The Nasdaq National Market. Reports and other information concerning United Cities may be inspected at the offices of The Nasdaq Stock Market, Inc. Listing Section, 1735 K Street, NW, Washington, D.C. 20006. 2 Atmos has filed a Registration Statement on Form S-4 (together with all amendments, schedules and exhibits thereto, the "Registration Statement") with the Commission under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the shares of Atmos Stock to be issued in connection with the Merger. This Joint Proxy Statement/Prospectus also constitutes the Prospectus of Atmos filed as part of the Registration Statement. This Joint Proxy Statement/Prospectus contains information concerning Atmos but does not contain all of the information set forth in the Registration Statement, certain portions having been omitted pursuant to the rules and regulations of the Commission. Statements contained in this Joint Proxy Statement/Prospectus as to the contents of any contract or other document referred to herein are not necessarily complete, and, in each instance, reference is made to a copy of such contract or other document filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference. INCORPORATION OF CERTAIN INFORMATION BY REFERENCE THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES CERTAIN DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF ANY SUCH DOCUMENTS RELATING TO ATMOS, OTHER THAN EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS), ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER OF ATMOS STOCK, TO WHOM THIS JOINT PROXY STATEMENT/PROSPECTUS IS DELIVERED, UPON REQUEST FROM ATMOS ENERGY CORPORATION, 1800 THREE LINCOLN CENTRE, 5430 LBJ FREEWAY, DALLAS, TEXAS 75240, ATTENTION: INVESTOR RELATIONS, (800) 38-ATMOS (382-8667). COPIES OF ANY SUCH DOCUMENTS RELATING TO UNITED CITIES, OTHER THAN EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS), ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER OF UNITED CITIES STOCK, TO WHOM THIS JOINT PROXY STATEMENT/PROSPECTUS IS DELIVERED, UPON REQUEST FROM UNITED CITIES GAS COMPANY, 5300 MARYLAND WAY, BRENTWOOD, TENNESSEE 37027, ATTENTION: INVESTOR RELATIONS, (800) 342-4413, EXTENSION 233. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE NO LATER THAN FIVE BUSINESS DAYS PRIOR TO THE SHAREHOLDER MEETINGS. The following documents filed by Atmos (File No. 1-10042) with the Commission pursuant to the Exchange Act are incorporated in this Joint Proxy Statement/Prospectus by reference: (a) Atmos' Annual Report on Form 10-K for the fiscal year ended September 30, 1995; (b) Atmos' Quarterly Report on Form 10-Q for the quarter ended December 31, 1995; (c) Atmos' Quarterly Report on Form 10-Q for the quarter ended March 31, 1996; (d) Atmos' Quarterly Report on Form 10-Q for the quarter ended June 30, 1996; (e) Proxy Statement for Atmos' 1996 Annual Meeting of Shareholders; provided that only the following portions of such Proxy Statement are incorporated by reference in this Joint Proxy Statement/Prospectus: "Security Ownership of Certain Beneficial Owners and Management" (pages 1-2); "Election of Directors" (pages 4-6); "Certain Business Relationships" (page 6); and "Executive Compensation" (pages 10-20); and (f) Atmos' Current Report on Form 8-K dated July 19, 1996. 3 The following documents filed by United Cities (File No. 0-1284) with the Commission pursuant to the Exchange Act are incorporated in this Joint Proxy Statement/Prospectus by reference: (a) United Cities' Annual Report on Form 10-K for the fiscal year ended December 31, 1995; (b) United Cities' Quarterly Report on Form 10-Q for the quarter ended March 31, 1996; (c) United Cities' Quarterly Report on Form 10-Q for the quarter ended June 30, 1996; (d) United Cities' Amendment to Quarterly Report on Form 10-Q/A for the quarter ended June 30, 1996; (e) Proxy Statement for United Cities' 1996 Annual Meeting of Shareholders; provided that only the following portions of such Proxy Statement are incorporated by reference in this Joint Proxy Statement/Prospectus: "Proposal 1--Election of Directors" (pages 2-5); "Security Ownership of Certain Beneficial Owners" (page 6) and "Security Ownership of Management" (page 6); and "Executive Compensation" (pages 8-11); (f) United Cities' Current Report on Form 8-K dated May 3, 1996; (g) United Cities' Current Report on Form 8-K dated May 24, 1996; (h) United Cities' Current Report on Form 8-K dated May 31, 1996; (i) United Cities' Current Report on Form 8-K dated July 1, 1996; (j) United Cities' Current Report on Form 8-K dated July 19, 1996; and (k) United Cities' Current Report on Form 8-K dated August 2, 1996. All documents filed by Atmos or United Cities pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Joint Proxy Statement/Prospectus and prior to the date of the Atmos and United Cities shareholder meetings shall be deemed to be incorporated by reference in this Joint Proxy Statement/ Prospectus and to be a part hereof from the date of filing such documents. Any statement contained herein or in a document incorporated or deemed to be incorporated by reference herein shall be modified or superseded, for purposes of this Joint Proxy Statement/Prospectus, to the extent that a statement contained herein (or in any subsequently filed document which is deemed to be incorporated by reference herein) modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Joint Proxy Statement/Prospectus. All information contained in this Joint Proxy Statement/Prospectus relating to Atmos has been supplied by Atmos and all information relating to United Cities has been supplied by United Cities. Neither Atmos nor United Cities makes any representation as to the accuracy or completeness of information relating to the other. 4 TABLE OF CONTENTS SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS........................... 2 AVAILABLE INFORMATION....................................................... 2 INCORPORATION OF CERTAIN INFORMATION BY REFERENCE........................... 3 SUMMARY..................................................................... 7 The Parties to the Merger................................................. 7 The Shareholders Meetings................................................. 7 Terms of the Merger....................................................... 8 Recommendations of the Boards of Directors................................ 11 Reasons for the Merger.................................................... 11 Opinions of Financial Advisors............................................ 12 Certain Federal Income Tax Consequences................................... 12 Accounting Treatment...................................................... 13 Management Following the Merger........................................... 13 Interests of Certain Persons in the Merger................................ 14 Shareholder Rights........................................................ 15 Rights of Dissenting Shareholders......................................... 15 Standstill Agreement...................................................... 16 Comparative Market Prices and Dividends................................... 16 SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION..................... 17 Atmos Selected Historical Financial Information........................... 17 United Cities Selected Historical Financial Information................... 19 Selected Unaudited Pro Forma Combined Financial Information............... 21 PARTIES TO THE MERGER....................................................... 22 Business of Atmos......................................................... 22 Business of United Cities................................................. 23 The Natural Gas Distribution Industry..................................... 23 GENERAL INFORMATION REGARDING THE ATMOS SHAREHOLDERS MEETING................ 24 Place, Time and Date of Atmos Shareholders Meeting........................ 24 Purpose of the Atmos Shareholders Meeting................................. 24 Vote Required for Approval; Record Date................................... 24 Solicitation and Revocability of Proxies.................................. 26 GENERAL INFORMATION REGARDING THE UNITED CITIES SHAREHOLDERS MEETING........ 27 Place, Time and Date of United Cities Shareholders Meeting................ 27 Purpose of the United Cities Shareholders Meeting......................... 27 Vote Required for Approval; Record Date................................... 27 Solicitation and Revocability of Proxies.................................. 28 BACKGROUND OF THE MERGER.................................................... 30 History of the Merger Negotiations........................................ 30 Reasons for the Merger; Recommendations of the Boards of Directors........ 34 Opinion of Atmos' Financial Advisor....................................... 37 Opinion of United Cities' Financial Advisor............................... 41 THE REORGANIZATION AGREEMENT AND THE MERGER................................. 45 General................................................................... 45 Effective Time; Effect of Merger.......................................... 45 Conversion of Shares; Fractional Shares................................... 46 5 Exchange of Certificates................................................. 46 Treatment of United Cities Options....................................... 46 Directors and Officers................................................... 46 Charter and Bylaws; Effect of Dual Incorporation......................... 47 Conditions to the Merger................................................. 47 Representations, Warranties and Covenants................................ 49 Amendment, Termination and Waiver........................................ 51 Non-Survival of Representations, Warranties and Agreements; Effect of Termination............................................................. 52 No-Solicitation Covenant, Fiduciary Duties, Termination Fee and Ex- penses.................................................................. 52 Federal Income Tax Consequences.......................................... 54 Accounting Treatment..................................................... 55 Election of Directors.................................................... 55 Interests of Certain Persons in the Merger............................... 56 Standstill Agreement..................................................... 60 Woodward Marketing, L.L.C................................................ 61 Regulatory Matters....................................................... 61 Environmental Matters.................................................... 63 Restrictions on Resales of Atmos Stock................................... 64 Dissenters' Rights....................................................... 64 UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS................ 67 MANAGEMENT OF ATMOS FOLLOWING THE MERGER................................... 75 Directors................................................................ 75 Officers................................................................. 76 UNITED CITIES STOCK PLAN................................................... 78 COMPARISON OF SHAREHOLDER RIGHTS........................................... 81 Post-Merger Articles of Incorporation and Bylaws......................... 81 Authorized Capital Stock................................................. 82 Amendments to Charter.................................................... 83 Amendments to Bylaws..................................................... 83 Election and Removal of Directors........................................ 84 Special Shareholder Voting Requirements.................................. 85 Shareholder Meetings..................................................... 86 Action By Written Consent................................................ 86 Limitation of Liability; Indemnification................................. 86 Dissenters' Rights....................................................... 88 Anti-Takeover Provisions................................................. 88 LEGAL MATTERS.............................................................. 92 EXPERTS.................................................................... 92 SHAREHOLDER PROPOSALS...................................................... 93 EXHIBITS A--Agreement and Plan of Reorganization and Plan of Merger, as amended by Amendment No. 1 to Agreement and Plan of Reorganization B--Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated C--Opinion of PaineWebber Incorporated D--Sections 11.65 and 11.70 of the Illinois Business Corporation Act of 1983 6 SUMMARY The following is a summary of certain information included or incorporated by reference in this Joint Proxy Statement/Prospectus. The information contained in this summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information appearing elsewhere in this Joint Proxy Statement/Prospectus, the exhibits hereto and the documents incorporated herein by reference. Shareholders are encouraged to read carefully all of the information included or incorporated by reference in this Joint Proxy Statement/Prospectus. THE PARTIES TO THE MERGER Atmos. Atmos is primarily engaged in the distribution and sale of natural gas to approximately 673,000 residential, commercial, industrial, agricultural and other customers in over 400 cities, towns and communities in parts of Texas, Kentucky, Colorado, Kansas, Missouri and Louisiana. The principal executive offices of Atmos are located at 1800 Three Lincoln Centre, 5430 LBJ Freeway, Dallas, Texas 75240, and the telephone number at that address is (972) 934- 9227. See "Parties to the Merger." United Cities. United Cities' predominant business is the distribution of natural gas. United Cities supplies natural gas service to approximately 314,000 customers in Tennessee, Illinois, Missouri, Kansas, Iowa, Georgia, South Carolina and Virginia. United Cities also serves approximately 26,000 propane customers in Tennessee, North Carolina and Virginia. United Cities' principal executive offices are located at 5300 Maryland Way, Brentwood, Tennessee 37027, and its telephone number is (615) 373-5310. See "Parties to the Merger." THE SHAREHOLDERS MEETINGS Atmos. The Atmos Shareholders Meeting will be held on November 12, 1996 at the Doubletree Hotel at Lincoln Centre, 5410 LBJ Freeway, Dallas, Texas, commencing at 11:00 a.m., Central time, for the purpose of considering and voting on a proposal to ratify and approve the Reorganization Agreement and approve the Plan of Merger and the Merger. The Reorganization Agreement and the Plan of Merger provide for the issuance by Atmos of shares of Atmos Stock that will be delivered to the shareholders of United Cities in connection with the Merger, the adoption of the United Cities Stock Plan, the adoption of certain amendments to Atmos' Restated Articles of Incorporation necessary to comply with Virginia law and the election of four current directors of United Cities as directors of Atmos to take office at the Effective Time. Only holders of record of Atmos Stock at the close of business on October 9, 1996 will be entitled to notice of and to vote at the meeting. As of October 9, 1996, there were 16,029,581 shares of Atmos Stock issued and outstanding, each of which is entitled to one vote. Ratification and approval of the proposal will require the affirmative vote of the holders of two-thirds of the issued and outstanding shares of Atmos Stock entitled to vote at the meeting. Such vote will be sufficient to satisfy (i) the requirements under Texas law and Atmos' Restated Articles of Incorporation for approval of the Plan of Merger and (ii) the requirements under Atmos' listing agreement with the NYSE for approval of the issuance of Atmos Stock in the Merger and adoption of the United Cities Stock Plan. As of October 9, 1996, Atmos' directors and executive officers beneficially owned approximately 8.2% of the outstanding Atmos Stock entitled to vote at the Atmos Shareholders Meeting. ALL SUCH DIRECTORS AND EXECUTIVE OFFICERS HAVE INDICATED THAT THEY WILL VOTE THEIR SHARES OF ATMOS STOCK FOR THE RATIFICATION AND APPROVAL OF THE REORGANIZATION AGREEMENT AND APPROVAL OF THE PLAN OF MERGER AND THE MERGER. See "General Information Regarding the Atmos Shareholders Meeting." 7 United Cities. The United Cities Shareholders Meeting will be held on November 12, 1996 at the Fifth Floor Auditorium of the First American Center, 326 Union Street, Nashville, Tennessee, commencing at 10:30 a.m., Central time, for the purpose of considering and voting on a proposal to ratify and approve the Reorganization Agreement and approve the Plan of Merger and the Merger. The affirmative vote of the holders of a majority of the outstanding shares of United Cities Stock entitled to vote thereon at the meeting is required to ratify and approve the Reorganization Agreement and approve the Plan of Merger and the Merger. Only holders of record of United Cities Stock at the close of business on October 2, 1996 will be entitled to vote at the meeting. As of October 2, 1996, there were 13,174,794 shares of United Cities Stock issued and outstanding, each of which is entitled to one vote. As of October 2, 1996, United Cities' directors and executive officers beneficially owned approximately 2.6% of the outstanding United Cities Stock entitled to vote at the United Cities Shareholders Meeting, excluding shares that such persons have the right to acquire within 60 days of such date pursuant to options or other rights. ALL SUCH DIRECTORS AND EXECUTIVE OFFICERS HAVE INDICATED THAT THEY WILL VOTE THEIR SHARES OF UNITED CITIES STOCK FOR THE RATIFICATION AND APPROVAL OF THE REORGANIZATION AGREEMENT AND APPROVAL OF THE PLAN OF MERGER AND THE MERGER. See "General Information Regarding the United Cities Shareholders Meeting." TERMS OF THE MERGER General Terms. Upon consummation of the transactions contemplated by the Reorganization Agreement, United Cities will be merged with and into Atmos, with Atmos as the surviving corporation. A copy of the Reorganization Agreement, together with the Plan of Merger, is attached as Exhibit A to this Joint Proxy Statement/Prospectus. In accordance with the Reorganization Agreement and the Plan of Merger, upon the Merger becoming effective, each share of United Cities Stock outstanding immediately prior to the Effective Time (other than shares held by United Cities shareholders who properly exercise, and do not subsequently lose, their statutory dissenters' rights) will be converted into the right to receive one share of Atmos Stock (the "Exchange Ratio"). Holders of options to acquire United Cities Stock under the United Cities Stock Plan will, after the Effective Time, be allowed to exercise their options for Atmos Stock at the same Exchange Ratio of one share of Atmos Stock for each share of United Cities Stock. Holders of stock appreciation rights under the United Cities Stock Plan will also be allowed to exercise such rights based on the price of Atmos Stock. Each share of Atmos Stock outstanding prior to the Effective Time of the Merger will remain outstanding after the Merger. See "The Reorganization Agreement and The Merger--Conversion of Shares; Fractional Shares" and "--Exchange of Certificates." As of October 2, 1996, 16,029,581 shares of Atmos Stock were outstanding and 13,174,794 shares of United Cities Stock were outstanding. Accordingly, the holders of Atmos Stock and the holders of United Cities Stock will hold in the aggregate approximately 55% and 45%, respectively, of the total number of shares of Atmos Stock to be outstanding immediately after the Effective Time. The Merger will become effective at a date to be specified in the filings to be made with the Secretary of State of Texas, the Secretary of State of Illinois and the State Corporation Commission of the Commonwealth of Virginia. Filings for the issuance of Certificates of Merger will be made upon the closing of the Merger (the "Closing" and the "Closing Date") and will specify a date of effectiveness that closely follows the filings. The Closing will take place as soon as practicable following the ratification and approval of the Reorganization Agreement and the approval of the Plan of Merger and the Merger by the Atmos and United Cities shareholders and the satisfaction or waiver of the other conditions to each party's obligations to consummate the Merger, 8 including the receipt of all necessary regulatory approvals and consents. Due to the time that may be required to obtain such approvals and consents, the Merger may not be consummated for a period of time after the meetings of the Atmos and United Cities shareholders. Atmos and United Cities do not currently expect to receive all necessary approvals and consents prior to March 1, 1997, and, accordingly, do not currently expect the Merger to occur prior to such time. At the Effective Time of the Merger, all of the assets and liabilities of United Cities will be transferred to and assumed by Atmos. After the Effective Time, Atmos will operate United Cities' assets and business as an unincorporated division of Atmos, and Atmos will be incorporated under the laws of Texas and Virginia. See "The Reorganization Agreement and The Merger-- Effective Time; Effect of Merger" and "--Charter and Bylaws; Effect of Dual Incorporation." Atmos Dividends. Under the Reorganization Agreement, Atmos has agreed to cause to be declared and paid for a period of not less than four quarters, commencing with the first regularly scheduled meeting of the Board of Directors of Atmos following the Merger, quarterly cash dividends at an annual rate of not less than $1.02 per share, unless limited by applicable law or the fiduciary duty of the Atmos directors as determined by Atmos and its counsel in their sole discretion. This dividend is equal to the dividend paid by United Cities immediately prior to execution of the Reorganization Agreement. The indicated annual dividend of $1.02 per share will represent an annual increase of $.06 per share over the annual dividend paid by Atmos during the fiscal year ended September 30, 1996. See "The Reorganization Agreement and The Merger-- Atmos Dividends." Conditions to the Merger. The obligations of Atmos and United Cities to effect the Merger are subject to certain conditions, including, among other things, receipt of regulatory approvals and consents of the state public utility commissions having jurisdiction over the companies and, in the case of United Cities, the Federal Energy Regulatory Commission. Such approvals and consents must be received without conditions that in the reasonable judgment of Atmos would result in a material adverse change to either party's business, operations, properties, condition (financial or otherwise), assets or liabilities. While the parties believe that they will receive the requisite regulatory approvals and consents relating to the Merger and the issuance of the Atmos Stock, there can be no assurance as to the timing of such approvals and consents or as to the ability to obtain such approvals and consents on satisfactory terms. See "The Reorganization Agreement and The Merger-- Regulatory Matters." The expiration or early termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), is required in order to consummate the Merger. See "The Reorganization Agreement and The Merger--Regulatory Matters." In addition to the regulatory approvals, the parties' respective obligations to effect the Merger are subject to the ratification and approval of the Reorganization Agreement and approval of the Plan of Merger and the Merger by the requisite votes of the shareholders of Atmos and the shareholders of United Cities. Other conditions to the parties' obligations include (a) registration of the Atmos Stock issuable in the Merger under the Securities Act, (b) the registration or exemption of such Atmos Stock under applicable state securities laws, (c) the listing, upon official notice of issuance, on the NYSE of such Atmos Stock, (d) the receipt of all material third party consents, (e) the absence of material litigation, (f) receipt by Atmos of a written opinion from Ernst & Young LLP ("Ernst & Young") stating that Ernst & Young concurs in the accounting treatment of the Merger as a pooling of interests, (g) the absence of material adverse changes in the business, operations, properties, condition (financial or otherwise), assets or liabilities of the other party, (h) the absence of any material undisclosed fact, error, misstatement or omission by the other party, (i) receipt by Atmos and by United Cities of written opinions from their respective tax counsels to the effect that, for federal income tax purposes, the Merger will constitute a tax-free reorganization within the meaning of Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code"), (j) the receipt of an opinion of counsel as to certain matters from the other party's counsel, (k) the accuracy of the representations and warranties of the other party in the Reorganization Agreement as of the Closing Date, (l) the performance by the other party in all material respects of its obligations under the Reorganization Agreement to be performed at or prior to the Closing Date, (m) in the case of United 9 Cities, the execution by Atmos of employment contracts with three officers of United Cities, (n) the holders of no more than 10% of the outstanding shares of United Cities Stock having exercised their statutory dissenters' rights and (o) the receipt by Atmos and United Cities of comfort letters from Ernst & Young and Arthur Andersen LLP ("Arthur Andersen") regarding financial information contained or incorporated by reference herein. See "The Reorganization Agreement and The Merger--Conditions to the Merger," "--Interests of Certain Persons in the Merger" and "--Woodward Marketing, L.L.C." Other Proposals. The Reorganization Agreement provides that United Cities will not, except as discussed below, initiate, solicit or encourage (including by way of providing information or assistance), or take any other action to facilitate, any inquiries concerning, or the making or implementation of, any proposal relating to, or that might reasonably be expected to lead to, any Competing Transaction (as defined herein under "The Reorganization Agreement and The Merger--No-Solicitation Covenant, Fiduciary Duties, Termination Fee and Expenses"). United Cities may, however, furnish information to any other person that makes an unsolicited contact in connection with a bona fide Competing Transaction, if such party executes a confidentiality agreement with United Cities, and may enter into negotiations with such person and take and disclose to shareholders of United Cities a position with respect to any such Competing Transaction or the Merger, if the Board of Directors of United Cities determines in good faith, based on, among other matters, the written advice of independent legal counsel that such action is required of the Board of Directors to comply with fiduciary duties to shareholders imposed by law and United Cities keeps Atmos informed concerning the same. If the Reorganization Agreement is terminated (a) by United Cities in the exercise of its fiduciary duties in respect to a Competing Transaction, (b) by Atmos if the Board of Directors of United Cities has taken a position recommending a Competing Transaction or fails to recommend the Merger to the shareholders of United Cities or (c) by Atmos because the United Cities shareholders approve a Competing Transaction, then United Cities must pay Atmos a fee equal to $15,000,000 within two business days after such termination. In addition, under certain circumstances, each of the parties must pay the expenses of the other party in connection with the transaction in the event of the termination of the Reorganization Agreement. See "Background of the Merger" and "The Reorganization Agreement and The Merger--No-Solicitation Covenant, Fiduciary Duties, Termination Fee and Expenses." Termination. Under certain conditions, the Reorganization Agreement may be terminated at any time prior to the Merger becoming effective, whether prior to or after approval by the shareholders of Atmos or United Cities. The conditions under which the Reorganization Agreement may be terminated include termination (a) by mutual consent of the Boards of Directors of Atmos and United Cities, (b) by either party if the Merger has not been consummated on or before March 31, 1997, or such later date as may be agreed to by both parties (unless caused by the willful failure of the terminating party to fulfill a material obligation under the Reorganization Agreement), (c) by Atmos if the Board of Directors of United Cities has taken a position recommending a Competing Transaction or whereby it fails to recommend the Merger, (d) by either party if a court or regulatory agency has prohibited the transaction in a final, non- appealable order (if the terminating party has used all reasonable efforts to remove such prohibition), (e) by either party if the shareholders of the other party have failed to approve the Merger at their respective meetings, (f) by either party if there is a material breach by the other party of its representations, warranties or covenants that is not cured after 20 days written notice or (g) by United Cities in the exercise of United Cities' Board of Directors' fiduciary duties with respect to a Competing Transaction. See "The Reorganization Agreement and The Merger--Amendment, Termination and Waiver" and "--Interests of Certain Persons in the Merger." Amendment; Waiver. The Reorganization Agreement may be amended by mutual consent of Atmos and United Cities at any time prior to the Closing Date, except that after shareholder approval no amendment may increase or decrease the amount or change the type of consideration into which the United Cities Stock will be converted in the Merger, alter any terms of the Plan of Merger if such alteration would adversely affect the shares of any class or series of United Cities, or alter any term of the articles of incorporation of United Cities. In addition, the parties may waive compliance with any of the covenants and conditions in the Reorganization Agreement and inaccuracies in representations and warranties. See "The Reorganization Agreement and The Merger--Amendment, Termination and Waiver." 10 RECOMMENDATIONS OF THE BOARDS OF DIRECTORS Atmos. The Board of Directors of Atmos has approved the Reorganization Agreement, the Plan of Merger and the Merger and determined that the Merger is fair to, and in the best interests of, Atmos and the shareholders of Atmos. The Board of Directors has also approved the issuance of the shares of Atmos Stock to be issued in the Merger, believes the adoption of the United Cities Stock Plan as provided in the Reorganization Agreement and Plan of Merger is appropriate, has approved the four United Cities directors nominated to become directors of Atmos at the Effective Time and has approved the amendments to Atmos' Restated Articles of Incorporation to be effected by the Plan of Merger, as described herein. THE ATMOS BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF ATMOS VOTE FOR APPROVAL OF THE PROPOSAL TO RATIFY AND APPROVE THE REORGANIZATION AGREEMENT AND APPROVE THE PLAN OF MERGER AND THE MERGER. See "Background of the Merger--Reasons for the Merger; Recommendations of the Boards of Directors." United Cities. The Board of Directors of United Cities has approved the Reorganization Agreement, the Plan of Merger and the Merger and determined that the Merger is fair to, and in the best interests of, United Cities and the shareholders of United Cities. THE UNITED CITIES BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF UNITED CITIES VOTE FOR APPROVAL OF THE PROPOSAL TO RATIFY AND APPROVE THE REORGANIZATION AGREEMENT AND APPROVE THE PLAN OF MERGER AND THE MERGER. See "Background of the Merger--Reasons for the Merger; Recommendations of the Boards of Directors." REASONS FOR THE MERGER United Cities and Atmos believe that the Merger offers strategic and financial benefits to each company and to their respective shareholders, as well as to their employees and customers and the communities in which they do business, including the following: (i) the surviving company will be more effective in meeting the challenges of the increasingly competitive environment in the utility industry than either United Cities or Atmos standing alone; (ii) the combined service territories of United Cities and Atmos will be larger and more diverse than either of the service territories of United Cities or Atmos; (iii) the combined company will have a well-balanced mix of income from regulated versus non-regulated businesses; and (iv) the surviving entity, because of its larger size and other factors, will be able to take advantage of certain opportunities resulting from the combination. See "Background of the Merger--Reasons for the Merger; Recommendations of the Boards of Directors." Atmos. The Atmos Board of Directors believes that the terms of the Reorganization Agreement, the Plan of Merger and the Merger are fair to, and in the best interests of, Atmos and its shareholders. Accordingly, the Atmos Board has unanimously approved the Reorganization Agreement, the Plan of Merger and the Merger. In addition to the joint benefits described above, the Board of Directors of Atmos believes that the Merger is consistent with Atmos' continuing long-term corporate development strategy of increasing the value of Atmos through external growth and that the Merger will create a stronger company from both a financial and operational viewpoint. Over the long-term, this combination is expected to add stability and predictability to earnings and cash flow. United Cities is recognized as a financially sound and well- managed company and is well regarded in the industry, and the Board of Directors of Atmos believes that the Merger represents a logical and natural extension of Atmos' business. The Board believes that the Merger is consistent with Atmos' long-term goals of expanding its customer base and diversifying the weather patterns, local economic conditions and regulatory environments to which its operations are subject. See "Background of the Merger--Reasons for the Merger; Recommendations of the Board of Directors." United Cities. The United Cities Board has unanimously approved the Reorganization Agreement and the Plan of Merger and has determined that the Merger is fair to, and in the best interests of, United Cities and United Cities' shareholders. The United Cities Board believes that the Merger affords United Cities' shareholders the opportunity to realize significant value on their investment and also gives them the option of participating in 11 opportunities for growth that the United Cities Board believes the Merger makes possible. In addition to the joint benefits described above, the United Cities Board took into account the fact that Atmos has agreed to increase its indicated annual dividend so that it is equal to United Cities' annual dividend of $1.02 per share (subject to certain qualifications) for a period of not less than four quarters following the consummation of the Merger. In reaching its determination that the Reorganization Agreement is fair to, and in the best interests of, United Cities and United Cities' shareholders, the United Cities Board considered a number of factors, from both a short-term and a long-term perspective, in addition to the ones described above. See "Background of the Merger--Reasons for the Merger; Recommendations of the Boards of Directors." For a description of the background of the Merger, see "Background of the Merger." OPINIONS OF FINANCIAL ADVISORS The Board of Directors of Atmos has received the written opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), Atmos' financial advisor in connection with the Merger, that, as of the date of this Joint Proxy Statement/Prospectus, the Exchange Ratio is fair to Atmos from a financial point of view. For information on the assumptions made, matters considered and limits of the reviews by Merrill Lynch, see "Background of the Merger--Opinion of Atmos' Financial Advisor." Holders of Atmos Stock are urged to read carefully and in its entirety the opinion of Merrill Lynch, a copy of which appears as Exhibit B to this Joint Proxy Statement/Prospectus. The Board of Directors of United Cities has received the written opinion of PaineWebber Incorporated ("PaineWebber"), United Cities' financial advisor in connection with the Merger, that, as of the date of this Joint Proxy Statement/Prospectus, the Exchange Ratio is fair to United Cities' shareholders from a financial point of view. For information on the assumptions made, matters considered and limits of the reviews by PaineWebber, see "Background of the Merger--Opinion of United Cities' Financial Advisor." Holders of United Cities Stock are urged to read carefully and in its entirety the opinion of PaineWebber, a copy of which appears as Exhibit C to this Joint Proxy Statement/Prospectus. CERTAIN FEDERAL INCOME TAX CONSEQUENCES No ruling has been (or will be) sought from the Internal Revenue Service as to the anticipated federal income tax consequences of the Merger. It is a condition precedent to the consummation of the Merger that Atmos receive the opinion of its counsel, Locke Purnell Rain Harrell (A Professional Corporation), and United Cities receive the opinion of its counsel, Chapman and Cutler, each to the effect that, based on certain facts, representations and assumptions, the Merger will qualify as a tax-free reorganization within the meaning of Section 368(a)(1)(A) of the Code. Assuming such qualification, neither Atmos nor United Cities will recognize any gain or loss as a result of the Merger, no gain or loss will be recognized by shareholders of Atmos as a result of the Merger and holders of United Cities Stock who exchange their United Cities Stock for Atmos Stock will not recognize any gain or loss in the Merger (except with respect to cash received in lieu of a fractional interest in Atmos Stock). United Cities shareholders who dissent from the Merger in accordance with statutory requirements and receive cash for the value of their United Cities Stock will be treated as having received such cash as a distribution from United Cities in redemption of such stock, subject to the provisions and limitations of Section 302 of the Code. To the extent a cash payment to a dissenting shareholder represents interest due from the Effective Time, such payment will constitute income to the dissenting shareholder within the meaning of Section 61 of the Code. See "The Reorganization Agreement and The Merger--Federal Income Tax Consequences" and "--Dissenters' Rights." 12 THE OPINIONS THAT THE MERGER CONSTITUTES A TAX-FREE REORGANIZATION WILL BE BASED UPON CERTAIN ASSUMPTIONS AS WELL AS UPON REPRESENTATIONS RECEIVED FROM ATMOS AND UNITED CITIES. NO RULINGS HAVE BEEN OR WILL BE REQUESTED FROM THE INTERNAL REVENUE SERVICE WITH RESPECT TO ANY TAX MATTERS. SHAREHOLDERS OF ATMOS AND UNITED CITIES SHOULD READ CAREFULLY THE DISCUSSION UNDER THE CAPTION "THE REORGANIZATION AGREEMENT AND THE MERGER--FEDERAL INCOME TAX CONSEQUENCES" AND ARE URGED TO CONSULT THEIR OWN ADVISORS AS TO SPECIFIC CONSEQUENCES TO THEM OF THE MERGER UNDER FEDERAL, STATE, LOCAL, FOREIGN OR ANY OTHER APPLICABLE TAX LAWS. ACCOUNTING TREATMENT It is a condition to the consummation of the Merger that Atmos receive the written opinion of its independent accountants stating that they concur in the accounting treatment of the Merger as a pooling of interests. The pooling of interests method of accounting assumes that the combining companies have been merged from inception and the historical financial statements for periods prior to consummation of the Merger are restated as though the companies had been combined from inception. While Atmos and United Cities intend to conduct their respective businesses and pursue the consummation of the Merger in a manner that will satisfy the conditions for pooling of interests accounting, there can be no assurance that circumstances or events beyond the control of Atmos or United Cities will not prevent the application of such accounting treatment. See "The Reorganization Agreement and The Merger--Accounting Treatment." MANAGEMENT FOLLOWING THE MERGER At the Effective Time, the number of directors of Atmos will be set by the Plan of Merger at 15. The directors of Atmos after the Effective Time will, under the Plan of Merger, be the 11 directors of Atmos in office at the Effective Time (who will continue to serve in the classes and for the terms in which they are serving at the Effective Time) and four of the current directors of United Cities: Mr. Gene C. Koonce (who will be elected to a term expiring in 1999), Mr. Vincent J. Lewis (who will be elected to a term expiring in 1999), Mr. Thomas J. Garland (who will be elected to a term expiring in 1998) and Mr. Richard W. Cardin (who will be elected to a term expiring in 1997, if the Merger is consummated prior to the annual meeting of shareholders of Atmos scheduled to be held on February 12, 1997, and if not, to a term expiring in 2000). Accordingly, a vote by Atmos' shareholders to ratify and approve the Reorganization Agreement and approve the Plan of Merger and the Merger will also result in the election of Messrs. Koonce, Lewis, Garland and Cardin as directors of Atmos (the "United Cities Designees"). After the Merger, the officers of Atmos will be the officers of Atmos immediately prior to the consummation of the Merger as well as three officers of United Cities. See "The Reorganization Agreement and The Merger--Directors and Officers," "--Election of Directors" and "Management of Atmos Following the Merger." 13 INTERESTS OF CERTAIN PERSONS IN THE MERGER The Reorganization Agreement and the Plan of Merger contemplate that certain employees and members of the management and the Boards of Directors of Atmos and United Cities will be entitled to receive the benefits described below. United Cities Personnel. Retention of United Cities Employees; Employee Plans. At the Effective Time, all United Cities Employees (as defined herein under "The Reorganization Agreement and The Merger--Interests of Certain Persons in the Merger") will become employees of Atmos, and Atmos has agreed to retain all of such employees, and to continue in effect all of the United Cities employee benefit plans and arrangements, for one year, subject to certain exceptions and subject to the rights and obligations set forth in any collective bargaining agreement or the National Labor Relations Act. Atmos will become the successor plan sponsor under the United Cities Qualified Retirement Plan and expects to make ongoing contributions to such plan in the amounts necessary to satisfy the minimum funding requirements for such plan. Executive Employment Agreements. Atmos has agreed to enter into employment agreements with Messrs. Gene C. Koonce, James B. Ford and Thomas R. Blose, Jr., the Chairman of the Board, President and Chief Executive Officer, the Senior Vice President and Treasurer, and the Senior Vice President--Operations and Engineering, respectively, of United Cities, upon the consummation of the Merger. Mr. Koonce will become an officer of Atmos and the Vice Chairman of the Atmos Board of Directors for a term of six months following the Effective Time, and each of Messrs. Ford and Blose will become officers of Atmos. Supplemental Executive Retirement Plan. United Cities maintains the Supplemental Executive Retirement Plan (the "SERP") for the benefit of certain management and key employees. It is a condition to the consummation of the Merger that United Cities shall have terminated the SERP and obtained waivers and releases from all active participants therein (excluding Mr. Koonce). United Cities will make certain payments, not to exceed $5,100,000 in the aggregate, to the active participants (excluding Mr. Koonce) who waive their rights under the SERP. Indemnification and Insurance for United Cities' Directors and Officers. Under the Reorganization Agreement, Atmos agreed that, with respect to matters occurring prior to the Effective Time, all rights to indemnification and advancement of expenses existing in favor of the present or former directors, officers, employees, fiduciaries and agents of United Cities as provided in United Cities' Articles of Incorporation or Bylaws as in effect as of the date of the Reorganization Agreement will survive the Merger and will continue in full force and effect for periods not less than those provided by the statutes of limitations applicable to such matters. The Reorganization Agreement also contemplates that, with respect to matters occurring prior to the Effective Time, the United Cities directors and officers would continue to have coverage under a policy of directors' and officers' liability insurance for a period of five years after the Effective Time. Atmos' existing insurance policy will cover the United Cities directors and officers who become directors or officers of Atmos as to matters occurring after the Effective Time and a supplemental policy will be obtained covering all of the United Cities directors and officers for matters involving United Cities occurring prior to the Effective Time. United Cities Stock Plan. The United Cities Stock Plan will be continued and benefits granted thereunder will be exercisable for or based on the value of Atmos Stock following the Merger. See "The Reorganization Agreement and The Merger--Interests of Certain Persons in the Merger" and "United Cities Stock Plan." Atmos Personnel. Severance Agreements. Atmos has severance agreements with seven of its executive officers that require Atmos to take certain actions for the benefit of such officers in the event there occurs a "potential change in control" of Atmos and to make severance payments to such officers if their employment with Atmos is terminated in certain circumstances within three years following a "change in control" of Atmos. Under all but one of these severance agreements, the execution of the Reorganization Agreement by Atmos and United Cities 14 constituted a "potential change in control" of Atmos and approval of the Merger by the Atmos shareholders will constitute a "change in control" of Atmos. A "change in control" is deemed to occur under these provisions and under the Atmos SEBP, SBP and Restricted Stock Grant Plan (described below) because the present Atmos shareholders will not own at least 60% of the outstanding Atmos Stock following the Merger. The severance agreement of Mr. Robert F. Stephens, President and Chief Operating Officer of Atmos (under which the "change in control" provisions would be satisfied as described above), further provides that he is entitled to receive full severance benefits if he resigns for any reason within 180 days following a "change in control." Supplemental Executive Benefits Plan and Supplemental Benefits Plan for Key Management Employees. All of Atmos' officers participate in Atmos' Supplemental Executive Benefits Plan (the "SEBP") and the presidents of each of Atmos' four operating divisions participate in Atmos' Supplemental Benefits Plan for Key Management Employees (the "SBP"). The SEBP and the SBP provide for the payment of death, supplemental disability and/or supplemental retirement benefits if a participant meets certain length of service and other requirements. The approval of the Merger by the Atmos shareholders will constitute a "change in control" under the SEBP and the SBP, and if a participant's employment is terminated in certain circumstances following a "change in control," then such participant's right to a supplemental pension vests immediately, regardless of whether he or she has satisfied the length of service or other criteria for vesting. Restricted Stock Grant Plan. All of Atmos' officers and division presidents, and one retired officer, have been awarded shares of restricted stock pursuant to Atmos' Restricted Stock Grant Plan, which are subject to transfer restrictions. The approval of the Merger by Atmos shareholders will constitute a "change in control" under the Restricted Stock Grant Plan, and at such time the transfer restrictions on all of such shares will lapse. See "The Reorganization Agreement and the Merger--Interests of Certain Persons in the Merger." SHAREHOLDER RIGHTS The rights of United Cities' shareholders are currently governed by Illinois and Virginia law and by United Cities' Articles of Incorporation and Bylaws. The rights of Atmos' shareholders are currently governed by Texas law and by Atmos' Restated Articles of Incorporation and Bylaws. Upon the Merger becoming effective, United Cities' shareholders will become, and Atmos' shareholders will remain, shareholders of Atmos, and Atmos will become a corporation incorporated in Texas and Virginia and be subject to the corporation laws of each such state. The rights of Atmos' shareholders after the Merger will be governed by Texas and Virginia law and by Atmos' Restated Articles of Incorporation (which will be amended in certain respects to conform to Virginia law) and Bylaws. In general, where differences between Texas and Virginia corporate law exist, shareholders will be entitled to the benefit of the provision most favorable to them, and, in the case of corporate action requiring a shareholder vote, the corporation laws of the state with the higher voting requirement will govern. For a summary of the significant differences between the rights of Atmos' shareholders and United Cities' shareholders, see "Comparison of Shareholder Rights." RIGHTS OF DISSENTING SHAREHOLDERS Atmos Shareholders. Holders of Atmos Stock will not have dissenters' rights of appraisal with respect to the Merger under the Texas Business Corporation Act ("TBCA"). United Cities Shareholders. Any shareholder of United Cities who objects to the Merger and who follows the procedures prescribed by Sections 11.65 and 11.70 of the Illinois Business Corporation Act of 1983 ("IBCA") is entitled, in lieu of receiving shares of Atmos Stock as a result of the Merger, to receive cash equal to the "fair value" of such shareholder's shares. See "The Reorganization Agreement and The Merger--Dissenters' Rights" for a further discussion of dissenters' rights and Exhibit D attached to this Joint Proxy Statement/Prospectus for a copy of the text of Sections 11.65 and 11.70 of the IBCA. Holders of United Cities Stock will not have dissenters' rights of appraisal with respect to the Merger under the Virginia Stock Corporation Act ("VSCA"). 15 STANDSTILL AGREEMENT Atmos and United Cities have entered into a Standstill Agreement (the "Standstill Agreement") which, among other matters, until July 13, 1998, restricts the parties from acquiring each others' securities except in certain limited circumstances. In addition, neither party may solicit proxies or consents or become a participant in a solicitation of proxies or consents with respect to the securities of the other party or take certain other actions to acquire control of the other party. See "The Reorganization Agreement and The Merger--Standstill Agreement." COMPARATIVE MARKET PRICES AND DIVIDENDS Atmos Stock trades on the NYSE under the trading symbol "ATO." United Cities Stock trades on The Nasdaq National Market under the trading symbol "UCIT." The following table sets forth, for the periods indicated, the high and low closing sales prices of Atmos Stock, as reported on the NYSE Composite Tape, the high and low closing sales prices of United Cities Stock, as reported by The Nasdaq National Market, and dividends declared on the Atmos Stock and the United Cities Stock. ATMOS COMMON STOCK UNITED CITIES COMMON STOCK ----------------------- -------------------------------- HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS ------ ------ --------- --------- --------- ------------ Calendar 1994 First Quarter......... $20.00 $17.75 $.22 $ 18.75 $ 16.00 $ .250 Second Quarter........ 20.25 18.00 .22 17.25 15.50 .250 Third Quarter......... 19.00 16.38 .22 17.75 15.50 .250 Fourth Quarter........ 18.00 15.88 .23 17.25 15.44 .255 Calender 1995 First Quarter......... 18.50 16.13 .23 16.25 15.25 .255 Second Quarter........ 20.25 17.50 .23 16.25 14.50 .255 Third Quarter......... 20.63 19.00 .23 16.50 14.75 .255 Fourth Quarter........ 23.00 18.00 .24 18.75 15.75 .255 Calender 1996 First Quarter......... 23.00 22.00 .24 18.50 15.75 .255 Second Quarter........ 31.00 22.75 .24 17.00 14.75 .255 Third Quarter......... 29.38 21.00 .24 23.00 15.00 .255 Fourth Quarter (through October 2, 1996)................ 23.63 22.38 -- 22.75 22.38 -- As indicated above, Atmos has agreed to increase its dividend to an annual rate of $1.02 per share for a minimum period of four quarters following the Effective Time, subject to requirements of law and the fiduciary duties of Atmos' directors. See "The Reorganization Agreement and The Merger-- Representations, Warranties and Covenants." On July 19, 1996, the last full trading day prior to the public announcement of the Merger, the closing sales price of Atmos Stock was $25.88 per share, as reported on the NYSE Composite Tape, and the closing sales price of United Cities Stock was $17.00 per share, as reported by The Nasdaq National Market. The closing sales prices of Atmos Stock and United Cities Stock on October 2, 1996, the most recent practicable date prior to the printing of this Joint Proxy Statement/Prospectus, were $23.38 per share, as reported on the NYSE Composite Tape, and $22.75 per share, as reported by The Nasdaq National Market, respectively. Shareholders are urged to obtain current market quotations. 16 SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION ATMOS SELECTED HISTORICAL FINANCIAL INFORMATION The selected historical financial information presented below has been derived from the audited consolidated financial statements of Atmos for the five fiscal years ended September 30, 1995. The historical information is not necessarily indicative of results to be expected after the Merger is consummated and should be read in conjunction with the separate consolidated financial statements and notes thereto of Atmos incorporated by reference herein. YEAR ENDED SEPTEMBER 30, -------------------------------------------- 1991 1992 1993 1994 1995 -------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) INCOME STATEMENT DATA Operating revenues.............. $399,667 $403,353 $459,641 $499,808 $435,820 Operating income................ $ 22,605 $ 23,569 $ 30,277 $ 26,466 $ 32,377 Net income...................... $ 9,612 $ 10,998 $ 17,544 $ 14,679 $ 18,873 Average shares outstanding...... 13,486 13,789 14,338 15,195 15,416 PER SHARE DATA Net income per share............ $ 0.71 $ 0.80 $ 1.22 $ 0.97 $ 1.22 Dividends per share............. $ 0.80 $ 0.83 $ 0.85 $ 0.88 $ 0.92 SEPTEMBER 30, -------------------------------------------- 1991 1992 1993 1994 1995 -------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) BALANCE SHEET DATA Net property, plant and equip- ment........................... $259,187 $276,924 $299,275 $327,407 $363,252 Total assets.................... $338,714 $358,363 $391,618 $416,678 $445,783 CAPITALIZATION Shareholders' equity............ $110,958 $117,248 $139,429 $149,556 $158,278 Long-term debt, excluding cur- rent maturities................ $116,461 $112,153 $105,853 $138,303 $131,303 -------- -------- -------- -------- -------- Total capitalization............ $227,419 $229,401 $245,282 $287,859 $289,581 ======== ======== ======== ======== ======== Book value per share at end of period......................... $ 8.12 $ 8.39 $ 9.38 $ 9.78 $ 10.20 17 ATMOS SELECTED HISTORICAL FINANCIAL INFORMATION The selected historical financial information presented below for the nine month and twelve month periods ended June 30, 1995 and 1996, respectively, has been derived from Atmos' unaudited financial statements and includes, in the opinion of Atmos' management, all adjustments necessary to present fairly the information for such periods. Such adjustments consisted only of normal recurring accruals. The historical information is not necessarily indicative of results to be expected after the Merger is consummated and should be read in conjunction with the separate consolidated financial statements and notes thereto of Atmos incorporated by reference herein. Because of seasonal and other factors, the results of operations for the nine month period ended June 30, 1996 is not indicative of expected results of operations for the year ending September 30, 1996. NINE MONTHS ENDED TWELVE MONTHS ENDED JUNE 30, JUNE 30, ------------------- ----------------------- (UNAUDITED) (UNAUDITED) 1995 1996 1995 1996 --------- --------- ----------------------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) INCOME STATEMENT DATA Operating revenues.................. $ 359,827 $ 415,143 $ 437,177 $ 491,136 Operating income.................... $ 30,462 $ 39,176 $ 28,848 $ 41,091 Net income.......................... $ 20,503 $ 27,932 $ 16,076 $ 26,302 Average shares outstanding.......... 15,386 15,855 15,358 15,767 PER SHARE DATA Net income per share................ $ 1.33 $ 1.76 $ 1.05 $ 1.67 Dividends per share................. $ 0.69 $ 0.72 $ 0.91 $ 0.95 JUNE 30, --------------------- (UNAUDITED) 1995 1996 ---------- ---------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) BALANCE SHEET DATA Net property, plant and equipment...................... $ 351,452 $ 398,695 Total assets........................................... $ 424,193 $ 488,285 CAPITALIZATION Shareholders' equity................................... $ 162,600 $ 179,056 Long-term debt, excluding current maturities........... $ 131,303 $ 125,303 ---------- ---------- Total capitalization................................... $ 293,903 $ 304,359 ========== ========== Book value per share at end of period.................. $ 10.50 $ 11.20 18 UNITED CITIES SELECTED HISTORICAL FINANCIAL INFORMATION The selected historical financial information presented below has been derived from the audited consolidated financial statements of United Cities for the five fiscal years ended December 31, 1995. This historical information is not necessarily indicative of results to be expected after the Merger is consummated and should be read in conjunction with the separate consolidated financial statements and notes thereto of United Cities incorporated by reference herein. YEAR ENDED DECEMBER 31, -------------------------------------------- 1991 1992 1993 1994 1995 -------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) INCOME STATEMENT DATA Operating revenues.............. $272,598 $305,615 $335,253 $326,495 $313,736 Operating income................ $ 22,223 $ 23,412 $ 28,191 $ 27,436 $ 23,406 Common stock earnings........... $ 7,741 $ 10,104 $ 12,120 $ 12,093 $ 9,935 Average shares outstanding...... 8,000 9,459 10,197 10,409 11,792 PER SHARE DATA Common stock earnings per share.......................... $ 0.97 $ 1.07 $ 1.19 $ 1.16 $ 0.84 Dividends per share............. $ 0.93 $ 0.97 $ 0.99 $ 1.01 $ 1.02 DECEMBER 31, -------------------------------------------- 1991 1992 1993 1994 1995 -------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) BALANCE SHEET DATA Net property, plant, and equip- ment........................... $264,024 $276,651 $294,588 $312,356 $335,012 Total assets.................... $368,283 $370,150 $401,520 $421,200 $460,377 CAPITALIZATION Common shareholders' equity..... $ 85,953 $106,206 $111,888 $118,028 $146,071 Long-term debt, excluding cur- rent maturities................ $127,430 $157,734 $151,843 $144,344 $163,160 Preferred and Preference Stock.. $ 1,352 -- -- -- -- -------- -------- -------- -------- -------- Total capitalization............ $214,735 $263,940 $263,731 $262,372 $309,231 ======== ======== ======== ======== ======== Book value per share at end of period......................... $ 10.09 $ 10.57 $ 10.85 $ 11.12 $ 11.48 19 UNITED CITIES SELECTED HISTORICAL FINANCIAL INFORMATION The selected historical financial information presented below for the six month and twelve month periods ended June 30, 1995 and 1996, respectively, has been derived from United Cities' unaudited financial statements and includes, in the opinion of United Cities' management, all adjustments necessary to present fairly the information for such periods. Such adjustments consisted only of normal recurring accruals. The historical information is not necessarily indicative of results to be expected after the Merger is consummated and should be read in conjunction with the separate consolidated financial statements and notes thereto of United Cities incorporated by reference herein. Because of seasonal and other factors, the results of operations for the six month period ended June 30, 1996 is not indicative of expected results of operations for the year ending December 31, 1996. SIX MONTHS ENDED TWELVE MONTHS ENDED JUNE 30, JUNE 30, ------------------- ----------------------- (UNAUDITED) (UNAUDITED) 1995 1996 1995 1996 --------- --------- ----------------------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) INCOME STATEMENT DATA Operating revenues.................. $ 168,107 $ 247,840 $ 297,576 $ 393,469 Operating income.................... $ 16,114 $ 20,511 $ 25,308 $ 27,802 Net income.......................... $ 9,365 $ 14,411 $ 10,542 $ 14,981 Average shares outstanding.......... 10,937 13,007 10,700 12,819 PER SHARE DATA Net income per share................ $ 0.86 $ 1.11 $ 0.99 $ 1.17 Dividends per share................. $ 0.51 $ 0.51 $ 1.02 $ 1.02 JUNE 30, --------------------- (UNAUDITED) 1995 1996 ---------- ---------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) BALANCE SHEET DATA Net property, plant and equipment...................... $ 324,448 $ 346,917 Total assets........................................... $ 407,205 $ 443,180 CAPITALIZATION Common shareholders' equity............................ $ 149,345 $ 158,963 Long-term debt, excluding current maturities........... $ 137,637 $ 158,192 ---------- ---------- Total capitalization................................... $ 286,982 $ 317,155 ========== ========== Book value per share at end of period.................. $ 11.90 $ 12.13 20 SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION The following table sets forth certain unaudited pro forma financial information for Atmos and United Cities on a pooling of interests basis. The pooling of interests method of accounting assumes that the combining companies were merged from inception and the historical financial statements for periods prior to consummation of the Merger are restated as though the companies had been combined from inception. This pro forma information is derived from the unaudited pro forma combined condensed financial statements appearing elsewhere herein and should be read in conjunction with those statements and the notes thereto. The unaudited pro forma financial data is not necessarily indicative of the operating results or financial position that would have been achieved had the Merger been effective at the date or during the periods presented or the results that may be obtained in the future. See "Unaudited Pro Forma Combined Condensed Financial Statements." The pro forma combined condensed statements of income for the nine month and twelve month periods ended June 30, 1996 include Atmos' and United Cities' results of operations for the periods then ended. The pro forma combined condensed statements of income for the years ended September 30, 1993, 1994, and 1995 include Atmos' results of operations for its fiscal years then ended and United Cities' results of operations for its fiscal years ended December 31, 1993, 1994, and 1995, respectively. As a result, United Cities' results of operations for the three months ended December 31, 1995 (operating revenue of $105,446,000 and net income of $7,486,000) are included in the pro forma combined condensed statements of income for the year ended September 30, 1995 and the nine month and twelve month periods ended June 30, 1996. YEAR ENDED SEPTEMBER 30, -------------------------- NINE MONTHS ENDED TWELVE MONTHS ENDED 1993 1994 1995 JUNE 30, 1996 JUNE 30, 1996 -------- -------- -------- ----------------- ------------------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) INCOME STATEMENT DATA Operating revenues.... $794,894 $826,303 $749,556 $768,429 $884,605 Operating income...... $ 58,468 $ 53,902 $ 55,783 $ 70,637 $ 68,893 Net income............ $ 29,694 $ 26,772 $ 28,808 $ 49,829 $ 41,283 Average shares out- standing............. 24,535 25,604 27,208 28,752 28,586 PER SHARE DATA Net income per share.. $ 1.21 $ 1.05 $ 1.06 $ 1.73 $ 1.44 Dividends per share... $ 0.82 $ 0.91 $ 0.96 $ 0.74 $ 0.98 JUNE 30, 1996 --------------------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) BALANCE SHEET DATA Net property, plant and equipment....................... $745,612 Total assets............................................ $930,442 CAPITALIZATION Shareholders' equity.................................... $338,019 Long-term debt, excluding current maturities............ $283,495 -------- Total capitalization.................................... $621,514 ======== Book value per share at end of period................... $ 11.62 21 PARTIES TO THE MERGER BUSINESS OF ATMOS Atmos was organized under the laws of the State of Texas in 1983 as a subsidiary of Pioneer Corporation ("Pioneer") for the purposes of owning and operating Pioneer's natural gas distribution business in Texas. Immediately following the transfer of such business, which had been operated by Pioneer and its predecessors since 1906, Pioneer distributed the outstanding stock of Atmos, then known as Energas Company, to the Pioneer shareholders. In September 1988, the name was changed from Energas Company to Atmos Energy Corporation. Atmos' principal executive offices are located at 1800 Three Lincoln Centre, 5430 LBJ Freeway, Dallas, Texas 75240, and its telephone number is (972) 934-9227. Atmos distributes and sells natural gas to approximately 673,000 residential, commercial, industrial, agricultural and other customers in over 400 cities, towns and communities in parts of Texas, Kentucky, Colorado, Kansas, Missouri and Louisiana. Atmos also transports gas for others through parts of its distribution system. Atmos' Texas distribution system is operated through its Energas Company division (the "Energas Division") and is located in the western part of Texas covering an area having a population of approximately 950,000 people. The principal cities served by the Energas Division include Amarillo, Lubbock, Midland and Odessa. Atmos' Kentucky distribution system is operated through its Western Kentucky Gas Company division (the "Western Kentucky Division") and covers an area having a population of approximately 680,000 people. The principal cities served by the Western Kentucky Division include Bowling Green, Owensboro and Paducah. Atmos' Colorado, Kansas and Missouri distribution system is operated through its Greeley Gas Company division (the "Greeley Gas Division"). It serves customers in areas of Colorado, Kansas and Missouri having a combined population of approximately 228,000 people. The principal cities served include Greeley, Durango and Lamar, Colorado and Bonner Springs, Herington and Ulysses, Kansas. Atmos' Louisiana distribution system is operated through its Trans Louisiana Gas Company division (the "Trans La Division") and covers an area having a population of approximately 250,000 people. The principal cities served by the Trans La Division are Lafayette, Pineville and Natchitoches. Since its organization in 1983, Atmos has sought to expand its customer base and to diversify the weather patterns, local economic conditions and regulatory environments to which its operations are subject. As part of this strategy, Atmos acquired Trans Louisiana Gas Company, Inc. in January 1986, Western Kentucky Gas Utility Corporation in December 1987, Greeley Gas Company of Denver, Colorado in December 1993 and Oceana Heights Gas Company of Thibodaux, Louisiana in November 1995. Atmos continues to consider and pursue, where appropriate, additional acquisitions or mergers of natural gas distribution properties or companies and other business opportunities. Additional information concerning Atmos' business, assets, management, results of operations and other matters is included in Atmos' reports filed under the Exchange Act that are incorporated by reference in this Joint Proxy Statement/Prospectus, including Atmos' Annual Report on Form 10-K for its fiscal year ended September 30, 1995. See "Incorporation of Certain Information by Reference" and "The Reorganization Agreement and The Merger-- Directors and Officers." 22 BUSINESS OF UNITED CITIES United Cities was incorporated under the laws of Illinois in 1929 and was domesticated under the laws of Virginia in 1966. United Cities' principal executive offices are located at 5300 Maryland Way, Brentwood, Tennessee 37027, and its telephone number is (615) 373-5310. United Cities' predominant business is the distribution of natural gas. United Cities supplies natural gas service to approximately 314,000 customers in the states of Tennessee, Kansas, Georgia, Illinois, Virginia, Missouri, Iowa and South Carolina. In addition to its natural gas distribution business, United Cities sells and installs gas appliances and performs certain appliance service work. United Cities has two wholly-owned subsidiaries. One subsidiary, UCG Energy Corporation ("UCG Energy"), is a broker procuring natural gas for United Cities and certain of United Cities' industrial customers, local distribution companies and others, and is engaged in exploration and production activities. In addition, UCG Energy leases appliances, real estate, equipment and vehicles to United Cities and others. UCG Energy also owns a 45% interest in Woodward Marketing, L.L.C. which provides natural gas marketing services to industrial customers, municipalities and local distribution companies, including United Cities. UCG Energy has two wholly-owned subsidiaries, United Cities Propane Gas of Tennessee, Inc. and UCG Leasing, Inc. United Cities Propane Gas of Tennessee, Inc. is engaged in the retail distribution of propane (LP) gas. The propane operation serves approximately 26,000 customers in Tennessee, North Carolina and Virginia. UCG Leasing, Inc. leases vehicles, equipment and real estate to United Cities. United Cities' other subsidiary, United Cities Gas Storage Company ("UCG Storage"), was formed in 1989 to provide natural gas storage services. A natural gas storage field in Kentucky supplements natural gas provided to United Cities' customers in Tennessee. In addition, natural gas storage fields located in Kansas and included in United Cities' 1989 acquisition of Union Gas System, Inc. were sold to UCG Storage. These fields supplement natural gas provided to United Cities' Kansas customers. Additional information concerning United Cities' business, assets, management, results of operations and other matters is included in United Cities' reports filed under the Exchange Act that are incorporated by reference in this Joint Proxy Statement/Prospectus, including United Cities' Annual Report on Form 10-K for its fiscal year ended December 31, 1995. See "Incorporation of Certain Information by Reference." THE NATURAL GAS DISTRIBUTION INDUSTRY The natural gas distribution industry is subject to a number of factors, many of which affect Atmos and United Cities from time to time. These include: (i) the ongoing need to obtain adequate and timely rate relief from regulatory authorities to recover costs of service and earn a fair return on invested capital; (ii) inherent seasonality of the business in local gas distribution service areas; (iii) competition with alternative fuels; (iv) competition with other gas sources for industrial customers, including the ability of some customers to bypass Atmos' or United Cities' facilities; and (v) possible volatility in the supply and price of natural gas. 23 GENERAL INFORMATION REGARDING THE ATMOS SHAREHOLDERS MEETING PLACE, TIME AND DATE OF ATMOS SHAREHOLDERS MEETING The Atmos Shareholders Meeting will be held on Tuesday, November 12, 1996 at the Doubletree Hotel at Lincoln Centre, 5410 LBJ Freeway, in Dallas, Texas beginning at 11:00 a.m., Central time. This Joint Proxy Statement/Prospectus is furnished in connection with the solicitation of proxies by the Board of Directors of Atmos for use at the Atmos Shareholders Meeting and at any adjournments or postponements thereof. PURPOSE OF THE ATMOS SHAREHOLDERS MEETING The purpose of the Atmos Shareholders Meeting is to consider and vote upon a proposal to ratify and approve the Reorganization Agreement and approve the Plan of Merger and the Merger. The Reorganization Agreement and the Plan of Merger also provide for the issuance by Atmos of shares of Atmos Stock to the shareholders of United Cities in connection with the Merger, the adoption of the United Cities Stock Plan, the adoption of certain amendments to Atmos' Restated Articles of Incorporation necessary to conform them to Virginia law and the election of four current directors of United Cities as directors of Atmos to take office at the Effective Time. See "The Reorganization Agreement and The Merger--Directors and Officers," "--Charter and Bylaws; Effect of Dual Incorporation," "--Election of Directors" and "--Interests of Certain Persons in the Merger." THE BOARD OF DIRECTORS OF ATMOS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO RATIFY AND APPROVE THE REORGANIZATION AGREEMENT AND APPROVE THE PLAN OF MERGER AND THE MERGER. VOTE REQUIRED FOR APPROVAL; RECORD DATE The affirmative vote of the holders of at least two-thirds of the issued and outstanding shares of Atmos Stock entitled to vote at the Atmos Shareholders Meeting is required for the approval of the proposal to ratify and approve the Reorganization Agreement and approve the Plan of Merger and the Merger. Such vote will be sufficient to satisfy (i) the requirements under Texas law and Atmos' Restated Articles of Incorporation for approval of the Plan of Merger and (ii) the requirements under Atmos' listing agreement with the NYSE for approval of the issuance of shares of Atmos Stock in the Merger and adoption of the United Cities Stock Plan, as described below. Abstentions and broker non-votes will not be counted as votes "For" or "Against" the proposal and therefore have the effect of votes "Against" the proposal. The presence at the Atmos Shareholders Meeting, whether in person or by proxy, of the holders of a majority of the outstanding shares of Atmos Stock entitled to vote constitutes a quorum for the transaction of business. Abstentions and broker non-votes will be counted as present for purposes of determining a quorum at the Atmos Shareholders Meeting. Atmos' listing agreement with the NYSE, among other things, generally requires the approval of Atmos' shareholders as a prerequisite to the listing on the NYSE of shares of Atmos Stock to be issued in a transaction or series of related transactions if such shares have, or will have upon issuance, voting power equal to or in excess of 20% of the voting power of Atmos before such issuance or if the number of shares of Atmos Stock to be issued is or will be equal to or in excess of 20% of the number of shares of Atmos Stock outstanding before such issuance. The shares of Atmos Stock issuable in the Merger represent more than 20% of the voting power and number of shares currently outstanding. The NYSE also requires shareholder approval of the adoption by Atmos of the United Cities Stock Plan because it will become an employee plan pursuant to which Atmos Stock may be issued to officers or directors. The Atmos Board of Directors has fixed the close of business on October 9, 1996 as the record date for the determination of the Atmos shareholders entitled to receive notice of, and to vote at, the Atmos Shareholders Meeting. Only holders of record of Atmos Stock at the close of business on that date will be entitled to notice 24 of, and to vote at, the Atmos Shareholders Meeting or any adjournments or postponements thereof. As of October 9, 1996, 16,029,581 shares of Atmos Stock were issued and outstanding. These shares constitute the only class of stock of Atmos issued and outstanding. Each share is entitled to one vote. The following table lists the beneficial ownership, as of October 9, 1996, of shares of Atmos Stock by each of the Atmos directors and executive officers, all directors and executive officers as a group and by each person known to Atmos to be a beneficial owner of more than 5% of the outstanding shares of Atmos Stock: AMOUNT OF ATMOS PERCENTAGE OF STOCK OUTSTANDING NAME BENEFICIALLY OWNED ATMOS STOCK ---- ------------------ ------------- Travis W. Bain II....................... 1,087 (a) Glen A. Blanscet........................ 9,029(b)(c) (a) Dan Busbee.............................. 3,071 (a) J. Charles Goodman...................... 9,225(b)(c) (a) H.F. Harber............................. 18,281(b)(c) (a) Don E. James............................ 15,137(b)(c) (a) Mary S. Lovell.......................... 14,548(b)(c) (a) Thomas C. Meredith...................... 85 (a) Phillip E. Nichol....................... 4,500 (a) John W. Norris, Jr...................... 725 (a) James F. Purser......................... 24,392(b)(c) (a) Carl S. Quinn........................... 10,853 (a) Lee E. Schlessman(d).................... 1,019,534 6.4% Robert F. Stephens...................... 52,773(b)(c) (a) Charles K. Vaughan...................... 110,774(b) (a) Richard Ware II......................... 13,897 (a) All directors and executive officers as a group (16 persons)........................... 1,307,911(e)(c) 8.2% Employee Stock Ownership Plan and Trust for Employees of Atmos Energy Corporation(f)......................... 1,914,296 11.9% - -------- (a) The percentage of shares beneficially owned by such individual does not exceed 1% of the outstanding Atmos Stock. (b) Includes shares granted pursuant to Atmos' Restricted Stock Grant Plan on which the restrictions have not lapsed, the numbers of which, as of October 9, 1996, are as follows: Glen A. Blanscet, 4,000 shares; J. Charles Goodman, 4,600 shares; H. F. Harber, 8,000 shares; Don E. James, 150 shares; Mary S. Lovell, 3,749 shares; James F. Purser, 17,813 shares; Robert F. Stephens, 22,475 shares; and Charles K. Vaughan, 38,250 shares. Such restrictions will lapse upon approval of the Merger by the Atmos shareholders. See "The Reorganization Agreement and The Merger--Interests of Certain Persons in the Merger." (c) Also includes shares of Atmos Stock held in the executive officers' ESOP accounts. (d) Mr. Schlessman's shares are held in an irrevocable trust of which Mr. Schlessman is the trustee and beneficiary. (e) Includes a total of 99,037 shares granted pursuant to Atmos' Restricted Stock Grant Plan on which the restrictions have not lapsed. Such restrictions will lapse upon approval of the Merger by the Atmos shareholders. See "The Reorganization Agreement and The Merger--Interests of Certain Persons in the Merger." (f) The Employee Stock Ownership Plan and Trust for Employees of Atmos Energy Corporation (the "ESOP") permits Atmos employees who participate in the ESOP to exercise voting power with respect to shares of Atmos Stock held in their ESOP accounts. For Atmos Shares owned by the ESOP with respect to which participating employees do not exercise such voting rights, the ESOP Trust Committee, which is a committee whose current members are Atmos officers, is entitled to vote such shares in its discretion. 25 The directors and executive officers of Atmos have stated that they intend to vote all shares of Atmos Stock over which they exercise voting control in favor of the proposal to ratify and approve the Reorganization Agreement and approve the Plan of Merger and the Merger. SOLICITATION AND REVOCABILITY OF PROXIES Atmos expects to solicit proxies primarily by mail, but directors, officers, employees and agents of Atmos 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 the Atmos Shareholders Meeting, including the cost of reimbursing brokers and nominees for forwarding proxies and proxy statements to their principals, will be paid by Atmos. In addition, Morrow & Co., Inc. ("Morrow") will assist Atmos in the solicitation of proxies. It is estimated that Atmos will pay approximately $5,000 in fees, plus expenses and disbursements, to Morrow for Morrow's proxy solicitation services. Shares of Atmos Stock represented by properly executed proxies received prior to or at the Atmos Shareholders Meeting, unless such proxies have been revoked, will be voted in accordance with the instructions indicated in the proxies. If no instructions are indicated on an executed form of proxy, the shares covered by such proxy will be voted "For" the proposal to ratify and approve the Reorganization Agreement and approve the Plan of Merger and the Merger. It is not expected that any matters other than those referred to herein will be brought before the Atmos Shareholders Meeting. However, if any other matters are properly presented at the Atmos Shareholders Meeting for consideration, including, among other things, consideration of a motion to adjourn the meeting to another time or place (including, without limitation, for the purpose of soliciting additional proxies), the persons named in the form of proxy and acting thereunder will have discretion to vote the shares of Atmos Stock covered by validly executed proxies in accordance with their best judgment. As of the date hereof, the Atmos Board of Directors knows of no such other matters. Any proxy given pursuant to this solicitation or otherwise may be revoked by the person giving such proxy by delivery, at any time prior to the time the shares are voted, of written notice of revocation bearing a later date than the proxy or a later dated proxy relating to the same shares of Atmos Stock to the Corporate Secretary of Atmos or by attending the Atmos Shareholders Meeting and voting in person. Attendance at the Atmos Shareholders Meeting will not in itself constitute the revocation of a proxy. ATMOS SHAREHOLDERS ARE REQUESTED TO PROMPTLY SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PAID, PRE-ADDRESSED ENVELOPE. FAILURE TO RETURN A PROPERLY EXECUTED PROXY CARD OR TO VOTE AT THE MEETING WILL HAVE THE SAME EFFECT AS A VOTE AGAINST RATIFICATION AND APPROVAL OF THE REORGANIZATION AGREEMENT AND APPROVAL OF THE PLAN OF MERGER AND THE MERGER. 26 GENERAL INFORMATION REGARDING THE UNITED CITIES SHAREHOLDERS MEETING PLACE, TIME AND DATE OF UNITED CITIES SHAREHOLDERS MEETING The United Cities Shareholders Meeting will be held on Tuesday, November 12, 1996 at the Fifth Floor Auditorium of the First American Center, 326 Union Street, Nashville, Tennessee beginning at 10:30 a.m., Central time. This Joint Proxy Statement/Prospectus is being furnished in connection with the solicitation of proxies by the Board of Directors of United Cities for use at the United Cities Shareholders Meeting and at any adjournments or postponements thereof. PURPOSE OF THE UNITED CITIES SHAREHOLDERS MEETING The purpose of the United Cities Shareholders Meeting is to consider and vote upon a proposal to ratify and approve the Reorganization Agreement and approve the Plan of Merger and the Merger. THE BOARD OF DIRECTORS OF UNITED CITIES RECOMMENDS A VOTE "FOR" THE PROPOSAL TO RATIFY AND APPROVE THE REORGANIZATION AGREEMENT AND APPROVE THE PLAN OF MERGER AND THE MERGER. VOTE REQUIRED FOR APPROVAL; RECORD DATE The affirmative vote of the holders of a majority of the outstanding shares of United Cities Stock entitled to vote thereon is required for the approval of the proposal to ratify and approve the Reorganization Agreement and approve the Plan of Merger and the Merger. Abstentions and broker non-votes will not be counted as votes "For" or "Against" the proposal and therefore have the effect of votes "Against" the proposal. The presence at the United Cities Shareholders Meeting, whether in person or by proxy, of the holders of a majority of the outstanding shares of United Cities Stock entitled to vote constitutes a quorum for the transaction of business. Abstentions and broker non-votes will be counted as present for purposes of determining a quorum at the United Cities Shareholders Meeting. Holders of United Cities Stock who dissent from the Merger and who comply with the required statutory procedures will have certain dissenters' rights. See "The Reorganization Agreement and The Merger--Dissenters' Rights." The United Cities Board of Directors has fixed the close of business on October 2, 1996 as the record date for the determination of the United Cities shareholders entitled to receive notice of, and to vote at, the United Cities Shareholders Meeting. Only holders of record of United Cities Stock at the close of business on that date will be entitled to notice of, and to vote at, the United Cities Shareholders Meeting or any adjournments or postponements thereof. As of October 2, 1996, 13,174,794 shares of United Cities Stock were issued and outstanding. These shares constitute the only class of stock of United Cities issued and outstanding. Each share is entitled to one vote. In the Reorganization Agreement, United Cities agreed not to issue any additional shares of United Cities Stock or other ownership interests in United Cities prior to the Effective Time, except for issuances pursuant to plans in effect prior to the date of the Reorganization Agreement. 27 The following table lists the beneficial ownership, as of October 2, 1996, of shares of United Cities Stock by each of the United Cities directors and executive officers, all directors and executive officers as a group and by each person known to United Cities to be a beneficial owner of more than 5% of the outstanding shares of United Cities Stock: PERCENTAGE OF AMOUNT OF UNITED CITIES STOCK OUTSTANDING NAME BENEFICIALLY OWNED(A) UNITED CITIES STOCK ---- ----------------------------- ------------------- Jerry H. Ballengee....... 500 (b) Dwight C. Baum........... 230,322 1.7% Thomas R. Blose, Jr. .... 12,537(c) (b) Richard W. Cardin........ 1,000 (b) James B. Ford............ 8,025(c) (b) Thomas J. Garland........ 2,016 (b) Shirley M. Hawkins....... 8,675(c) (b) Dale A. Keasling......... 482 (b) Gene C. Koonce........... 30,710(c) (b) Vincent J. Lewis......... 8,149 (b) Dennis L. Newberry, II... 4,450 (b) Stirton Oman, Jr. ....... 1,760 (b) Glenn B. Rogers.......... 28,182(c) (b) Timothy W. Triplett...... 3,547 (b) George C. Woodruff, Jr. .................... 1,691 (b) All directors and executive officers as a group (15 Persons)...... 342,046(c) 2.6% Southern Union Company... 854,300(d) 6.5% 504 Lavaca, Suite 800 Austin, TX 78701-2939 - -------- (a) Beneficial holdings shown herein include shares held by spouses and minor children; the directors and officers neither affirm nor deny that such shares are in fact beneficially owned by them. (b) The percentage of shares beneficially owned by such person does not exceed 1% of the outstanding United Cities Stock. (c) Includes shares that may be acquired pursuant to the exercise of stock options exercisable within 60 days of October 2, 1996, as follows: 8,600 shares for Mr. Blose, 2,600 shares for Mr. Ford, 2,600 shares for Ms. Hawkins, 12,000 shares for Mr. Koonce and 14,600 shares for Mr. Rogers and 40,400 shares for all directors and executive officers as a group. (d) Based on a Schedule 13D filed by Southern Union Company with the Commission on August 1, 1996. For further information regarding the shares of United Cities Stock held by Southern Union Company, see "Background of the Merger." The directors and executive officers of United Cities who, as of October 2, 1996, beneficially owned in the aggregate 301,646 shares of United Cities Stock (excluding shares that such persons have the right to acquire within 60 days of such date pursuant to options or other rights) have stated that they intend to vote all shares of United Cities Stock over which they exercise voting control in favor of the proposal to ratify and approve the Reorganization Agreement and approve the Plan of Merger and the Merger. SOLICITATION AND REVOCABILITY OF PROXIES United Cities expects to solicit proxies primarily by mail, but directors, officers, employees and agents of United Cities 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 the United Cities Shareholders Meeting, including the cost of reimbursing brokers and nominees for forwarding proxies and pr