<PAGE>
As filed with the Securities and Exchange Commission on
December 11, 1997
Registration No. 333-
=================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
EnergySouth, Inc.
(Exact name of Registrant as specified in its charter)
Alabama 4924 58-2358943
(State or other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Identification
Incorporation Classification Code Number)
or Organization) Number)
---------------
2828 Dauphin Street
Mobile, Alabama 36606
(334) 476-2720
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
John S. Davis
President
EnergySouth, Inc.
2828 Dauphin Street
Mobile, Alabama 36606
(334) 476-2720
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
Copies to:
Robert B. Murphy, Esq. E.B. Peebles III, Esq.
Thomas L. Hanley, Esq. James Dale Smith, Esq.
Shulman, Rogers, Gandal, Armbrecht, Jackson, DeMouy,
Pordy & Ecker, P.A. Crowe, Holmes & Reeves, L.L.C.
11921 Rockville Pike 1300 AmSouth Center
Rockville, MD 20852 Mobile, Alabama 36602
(301) 230-5200 (334) 432-6751
----------------
Approximate Date of Proposed Sale to the Public: As soon as practicable after
this Registration Statement becomes effective and the effective time of the
merger of the Registrant and Mobile Gas Service Corporation, as described in
the Proxy Statement/ Prospectus.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.[ ]
----------------
CALCULATION OF REGISTRATION FEE
=====================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT
TITLE OF EACH OFFERING AGGREGATE OF
CLASS OF SECURITIES AMOUNT TO BE PRICE PER OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE(2) FEE(3)
- --------------------------------------------------------------------
Common Stock,
$.01 par value 3,266,666 $37.875 $123,724,970 $36,499
Shares
=====================================================================
(1) Based on the number of shares of Mobile Gas Service
Corporation expected to be outstanding at the effective time
of the merger of the Registrant and Mobile Gas Service
Corporation, as described in the Proxy Statement/Prospectus
(2) Estimated solely for the purpose of calculating the
registration fee pursuant to Rule 457(f), based upon the
average of the high and low prices of the Common Stock of
Mobile Gas Service Corporation as reported on the Nasdaq
National Market on December 9, 1997.
(3) Pursuant to Rule 457(b), the registration fee has been
reduced by $37,050.17, which was paid on November 21, 1997 in
connection with the filing by Mobile Gas Service Corporation
of preliminary proxy material relating to this transaction.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(a), MAY DETERMINE.
==============================================================================
PAGE ___ OF ___
EXHIBIT INDEX IS ON PAGE ____
<PAGE>
[Mr. Davis' letterhead]
December 12, 1997
Dear Stockholder:
On behalf of our Board of Directors, I cordially invite you to attend the 1998
Annual Meeting of Stockholders of Mobile Gas.
An important purpose of the meeting is to vote on our holding company
proposal. As we previously announced, Mobile Gas is proposing to restructure
its gas distribution operations and subsidiaries into a holding company
structure to provide us with the organizational flexibility needed in a highly
competitive environment.
The holding company structure will allow us to make full use of our experience
in serving the total energy needs of customers within and beyond the
boundaries of our traditional utility service area. We will be able to take
advantage of business opportunities in a more timely fashion and compete more
aggressively in the open marketplace. And, the holding company structure will
allow us to invest in a more broadly defined energy business without the need
for regulatory approval for each initiative taken to expand our business.
The new company will be named EnergySouth, Inc., and Mobile Gas will be its
most significant subsidiary. The existing utility and non-utility
subsidiaries of Mobile Gas will be operated as separate subsidiaries of
EnergySouth. The present directors of Mobile Gas will be the directors of
EnergySouth.
The creation of a holding company has been approved by the Alabama Public
Service Commission. We need your approval now. YOUR VOTE IS VERY IMPORTANT
TO US. Your Board of Directors has unanimously approved the proposal and
recommends that stockholders vote FOR it. The holding company structure will
be implemented through a merger into Mobile Gas of a subsidiary of EnergySouth
formed for the purpose of the reorganization. Your Mobile Gas common stock
will be converted into the right to receive shares of EnergySouth common stock
when the Merger occurs, at the ratio of three shares of EnergySouth stock for
each two shares of Mobile Gas stock that you own immediately before the
Merger. You will cease to be a stockholder of Mobile Gas at that time and
become a stockholder of EnergySouth. If you would otherwise receive a
fractional share of EnergySouth stock as a result of the conversion, you will
receive instead cash based on the price of Mobile Gas stock before the Merger.
Your proportionate ownership interest will not change with this exchange of
stock (other than minor differences resulting from the payment of cash for
fractional shares).
Enclosed is our Proxy Statement/Prospectus, which includes "Questions and
Answers and Summary Information About the Holding Company Proposal and
Reorganization." The "Questions and Answers and Summary Information"
will answer important questions about how the holding company structure and
reorganization will affect you as a stockholder. More details are provided in
the Proxy Statement/Prospectus.
If you have any additional questions or need assistance in voting your shares,
please call either Mobile Gas, at (334) 450-4638, or Morrow & Co., Inc., which
is assisting in our proxy solicitation, toll free at 1-800- - .
Thank you for your confidence in Mobile Gas. We are very enthusiastic about
the proposal and are confident we will continue to grow and prosper as a
holding company.
Sincerely,
/s/ John S. Davis
John S. Davis
President and Chief Executive Officer
<PAGE>
MOBILE GAS SERVICE CORPORATION
2828 Dauphin Street
Mobile, Alabama 36606
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 30, 1998
To the Holders of Common Stock of
MOBILE GAS SERVICE CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Mobile Gas
Service Corporation, an Alabama corporation ("Mobile Gas" or the "Company"),
will be held in the Auditorium at the principal office of Mobile Gas, 2828
Dauphin Street, Mobile, Alabama, on Friday, January 30, 1998, at 10:00 o'clock
a.m., Central Standard Time, for the purpose of:
1. Considering and acting upon a proposal to approve and adopt an Agreement
and Plan of Merger (a copy of which is attached as Appendix A to the
accompanying Proxy Statement/Prospectus), to effect a reorganization of the
Company into a holding company structure (the "Reorganization") in which (a)
the holders of shares of Mobile Gas common stock will become holders of shares
of common stock of EnergySouth, Inc., with each two shares of Mobile Gas
common stock outstanding being converted into three shares of EnergySouth
common stock, (b) EnergySouth will become the parent holding company of
Mobile Gas and its existing subsidiaries, and (c) Mobile Gas and those
subsidiaries will continue to carry on their utility and other businesses as
separate subsidiaries of EnergySouth (the "Reorganization Proposal").
2. Electing four Directors of Mobile Gas to serve for three-year terms
expiring at the time of the 2001 Annual Meeting of Stockholders and until
their successors shall be duly elected and qualified.
3. Considering and acting upon such other and further business as may
properly come before the meeting or any and all adjournments thereof.
If the Agreement and Plan of Merger is adopted by Mobile Gas stockholders and
the Merger occurs, a holder of record of Mobile Gas common stock on the record
date who dissents and does not vote "FOR "the Reorganization Proposal is
entitled to receive payment in cash if that holder follows the procedures
provided in Sections 10-2B-13.01 through 10-2B-13.32 of the Alabama Business
Corporation Act, attached as Appendix C to the accompanying Proxy
Statement/Prospectus. Further information regarding voting rights and the
business to be transacted at the meeting is set forth in the annexed Proxy
Statement/Prospectus.
The Board of Directors has fixed the close of business on December 12, 1997,
as the record date for the determination of holders of the common stock of
Mobile Gas entitled to notice of and to vote at the Annual Meeting.
Accordingly, only holders of record of Mobile Gas common stock at the close of
business on December 12, 1997 will be entitled to vote at the meeting.
By Order of the Board of Directors,
G. EDGAR DOWNING, JR.
Secretary
Mobile, Alabama
December 12, 1997
IMPORTANT: EVEN IF YOU PLAN TO BE PRESENT AT THE MEETING, YOU ARE URGED TO
SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY, NO MATTER HOW SMALL YOUR
HOLDINGS, IN ORDER THAT THE PRESENCE OF A QUORUM MAY BE ASSURED. NO POSTAGE
IS REQUIRED ON THE ENCLOSED PROXY IF MAILED WITHIN THE UNITED STATES. IF YOUR
SHARES ARE HELD BY A BROKER, BANK OR NOMINEE, IT IS IMPORTANT THAT YOU GIVE
THEM YOUR VOTING INSTRUCTIONS.
<PAGE>
TABLE OF CONTENTS
PAGE
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . .iii
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE. . . . . . . . . . . iv
QUESTIONS AND ANSWERS AND SUMMARY ABOUT THE HOLDING
COMPANY PROPOSAL AND REORGANIZATION. . . . . . . . . . . . . . . . . . .1
Summary of Other Selected Information . . . . . . . . . . . . . . .6
INTRODUCTION; PROXIES AND VOTING . . . . . . . . . . . . . . . . . . . .8
PROPOSAL 1: APPROVAL OF HOLDING COMPANY AND ADOPTION OF THE MERGER
AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
REASONS FOR THE HOLDING COMPANY STRUCTURE AND REORGANIZATION. . . 10
CERTAIN CONSIDERATIONS. . . . . . . . . . . . . . . . . . . . . . 12
THE REORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Merger Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 13
Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Regulatory Approvals. . . . . . . . . . . . . . . . . . . . . . . 14
Conditions to Effectiveness of the Reorganization . . . . . . . . 14
Exchange of Stock Certificates; Cash in Lieu of Fractional Shares.14
Transfer of Mobile Gas Subsidiaries to EnergySouth. . . . . . . . 16
Dividend Reinvestment and Stock Purchase Plan . . . . . . . . . . 16
Mobile Gas Employee Stock Plans . . . . . . . . . . . . . . . . . 16
Amendment or Termination of the Merger Agreement. . . . . . . . . 17
Listing of EnergySouth Common Stock . . . . . . . . . . . . . . . 17
MOBILE GAS COMMON STOCK MARKET PRICES AND DIVIDENDS. . . . . . . . . . 18
DIVIDEND POLICY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
CERTAIN FEDERAL INCOME TAX CONSEQUENCES. . . . . . . . . . . . . . . . 19
DESCRIPTION OF ENERGYSOUTH CAPITAL STOCK . . . . . . . . . . . . . . . 20
Dividends; Repurchase of Shares . . . . . . . . . . . . . . . . . 20
Liquidation Rights. . . . . . . . . . . . . . . . . . . . . . . . 21
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Transfer Agent and Registrar. . . . . . . . . . . . . . . . . . . 21
INDEMNIFICATION AND LIMITATION OF LIABILITY. . . . . . . . . . . . . . 21
POSSIBLE EFFECTS OF CERTAIN PROVISIONS OF ENERGYSOUTH ARTICLES OF
INCORPORATION AND BYLAWS . . . . . . . . . . . . . . . . . . . . . . . 21
COMPARATIVE STOCKHOLDERS' RIGHTS . . . . . . . . . . . . . . . . . . . 23
Authorized Shares . . . . . . . . . . . . . . . . . . . . . . . . 23
Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . 23
Classified Board. . . . . . . . . . . . . . . . . . . . . . . . . 24
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
REGULATION OF ENERGYSOUTH AND MOBILE GAS AND CERTAIN SUBSIDIARIES
Regulation of EnergySouth . . . . . . . . . . . . . . . . . . . . 25
Regulation of Mobile Gas and Certain Subsidiaries . . . . . . . . 26
RIGHT OF DISSENTING STOCKHOLDERS TO RECEIVE PAYMENT FOR SHARES . . . . 26
MANAGEMENT OF ENERGYSOUTH
Directors of EnergySouth. . . . . . . . . . . . . . . . . . . . . 27
Officers of EnergySouth . . . . . . . . . . . . . . . . . . . . . 27
OTHER INFORMATION
Validity of EnergySouth Common Stock. . . . . . . . . . . . . . . 28
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
PROPOSAL 2: ELECTION OF DIRECTORS. . . . . . . . . . . . . . . . . . . 28
INFORMATION REGARDING THE BOARD OF DIRECTORS . . . . . . . . . . . . . 31
REPORTS UNDER SECTION 16 OF THE SECURITIES AND EXCHANGE ACT. . . . . . 32
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . 33
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . 34
COMPENSATION AND PLANNING COMMITTEE REPORT . . . . . . . . . . . . . . 37
Compensation Committee Interlocks and Insider Participation . . . 38
MOBILE GAS SERVICE CORPORATION STOCK PERFORMANCE GRAPH . . . . . . . . 39
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . . 39
STOCKHOLDER PROPOSALS. . . . . . . . . . . . . . . . . . . . . . . . . 40
POSSIBLE ADJOURNMENT OF MEETING. . . . . . . . . . . . . . . . . . . . 40
OTHER PROPOSALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
APPENDIX A
AGREEMENT AND PLAN OF MERGER. . . . . . . . . . . . . . . . . . . A-1
APPENDIX B
ARTICLES OF RESTATEMENT OF THE ARTICLES OF INCORPORATION
OF ENERGYSOUTH, INC . . . . . . . . . . . . . . . . . . . . . . . B-1
APPENDIX C
SECTIONS 10-2B-13.01 THROUGH 10-2B-32 OF THE ALABAMA BUSINESS
CORPORATION ACT . . . . . . . . . . . . . . . . . . . . . . . . . C-1
<PAGE>
Proxy Statement
of
MOBILE GAS SERVICE CORPORATION
and
Prospectus
for
ENERGYSOUTH, INC.
Common Stock, $.01 par value per share
This Proxy Statement/Prospectus is being furnished to holders of outstanding
shares of common stock, $.01 par value per share ("Mobile Gas Common Stock")
of Mobile Gas Service Corporation, an Alabama corporation ("Mobile Gas" or the
"Company"), in connection with the solicitation of proxies by the Board of
Directors of Mobile Gas for use at the Annual Meeting of Stockholders of
Mobile Gas to be held on January 30, 1998 (the "Annual Meeting"), commencing
at 10:00 a.m. in the Auditorium at the principal office the Company, 2828
Dauphin Street, Mobile, Alabama, and at any adjournments or postponements
thereof. This Proxy Statement/Prospectus also constitutes the Prospectus of
EnergySouth, Inc., an Alabama corporation ("EnergySouth"), relating to the
offer and issuance of shares of common stock, par value $.01 per share, of
EnergySouth ("EnergySouth Common Stock"), pursuant to an Agreement and Plan of
Merger, dated as of December 10, 1997 (the "Merger Agreement"), a copy of
which is attached as Appendix A to this Proxy Statement/Prospectus. The Merger
Agreement generally provides for a merger ("Merger") in which outstanding
shares of Mobile Gas Common Stock would be converted into shares of
EnergySouth Common Stock as part of a reorganization of the Company into a
holding company structure (the "Reorganization"). Upon effectiveness of the
Merger, every two shares of Mobile Gas Common Stock will automatically be
converted into, and, without any action on the part of the holders thereof
become, three shares of EnergySouth Common Stock, with fractional interests
being settled in cash.
The Board of Directors of Mobile Gas has unanimously approved the
Reorganization proposal. As a result of the Reorganization, EnergySouth would
become a holding company owned by the former holders of Mobile Gas Common
Stock; EnergySouth would become the sole owner of the stock of Mobile Gas;
Mobile Gas would continue to carry on its utility business as a subsidiary of
EnergySouth; and existing Mobile Gas subsidiaries would become separate
subsidiaries of EnergySouth.
The Reorganization cannot be completed unless the holders of at least
two-thirds of the Mobile Gas Common Stock approve and adopt the Merger
Agreement. The Board of Directors of Mobile Gas believes that the
Reorganization is in the best interests of Mobile Gas and its stockholders,
and recommends that stockholders vote "FOR" the Reorganization at the Annual
Meeting.
Directors of Mobile Gas will also be elected at the Annual Meeting; these
persons also serve as the directors of EnergySouth and would continue to do so
after the Reorganization.
This Proxy Statement/Prospectus and form of proxy are first being mailed to
the stockholders of Mobile Gas on or about December 12, 1997.
The principal executive offices of Mobile Gas are located at 2828 Dauphin
Street, Mobile, Alabama 36606, and its telephone number is (334) 476-2720.
EnergySouth's principal executive offices are at the same address; its
telephone number is (334) 450-4774.
_______________________________
THESE SECURITIES HAVE 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 OF OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
_______________________________
This Proxy Statement/Prospectus is dated December 12, 1997.
<PAGE>
AVAILABLE INFORMATION
Mobile Gas is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files periodic reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information concerning Mobile Gas may be inspected
and copied at the Commission's Public Reference Section, Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, where copies may be obtained at
prescribed rates, as well as at the following regional offices: Northeast
Regional Office, 7 World Trade Center, Suite 1300, New York, New York 10048;
and Midwest Regional Office, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. The Commission maintains a Web site (http://www.sec.gov)
that contains reports, proxy and information statements, and other information
regarding Mobile Gas. Mobile Gas common stock is listed on the NASDAQ
National Market. Copies of reports, proxy statements and other information
concerning Mobile Gas may also be inspected at the offices of the National
Association of Securities Dealers, Inc. (the "NASD"), 1735 K Street, N.W.,
Washington, D.C. 20006. Following the Merger, EnergySouth will file such
reports and information under the Exchange Act with the Commission and with
the NASD. Upon completion of the Merger, the class of Mobile Gas Common
Stock will be withdrawn from listing and registration under the Exchange Act.
EnergySouth has filed a Registration Statement on Form S-4 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), with the Commission with respect to the shares of EnergySouth Common
Stock to be issued in the Merger. This Proxy Statement/Prospectus constitutes
the prospectus of EnergySouth that is filed as part of such Registration
Statement. As permitted by the rules and regulations of the Commission, this
Proxy Statement/Prospectus omits certain information contained in the
Registration Statement and reference is hereby made to the Registration
Statement for further information with respect to EnergySouth and the
EnergySouth Common Stock.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following document filed with the Commission by Mobile Gas (File No.
0-234) accompany this Proxy Statement/Prospectus and is incorporated herein
by reference and made a part hereof:
Mobile Gas's Annual Report on Form 10-K for the fiscal year ended
September 30, 1997.
All reports and other documents filed by Mobile Gas after the date of this
Proxy Statement/Prospectus pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act and prior to the date of the Annual Meeting shall be deemed
to be incorporated by reference herein and to be a part hereof from the dates
of filing of such reports or documents. Any statement contained herein or in
a document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for the purposes of this Proxy
Statement/Prospectus to the extent that a statement contained herein or in
another document which also is or 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 Proxy Statement/Prospectus.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE OTHER DOCUMENTS
RELATING TO MOBILE GAS WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH.
THOSE DOCUMENTS, INCLUDING EXHIBITS WHICH ARE SPECIFICALLY INCORPORATED BY
REFERENCE INTO THOSE DOCUMENTS (BUT EXCLUDING EXHIBITS NOT SPECIFICALLY
INCORPORATED BY REFERENCE INTO THOSE DOCUMENTS), ARE AVAILABLE TO EACH PERSON,
INCLUDING ANY BENEFICIAL OWNER, TO WHOM A COPY OF THIS PROXY
STATEMENT/PROSPECTUS IS DELIVERED. WRITTEN OR TELEPHONE REQUESTS SHOULD BE
DIRECTED TO MOBILE GAS SERVICE CORPORATION, 2828 DAUPHIN STREET, MOBILE,
ALABAMA 36606, ATTENTION: CHARLES P. HUFFMAN, VICE PRESIDENT, CHIEF FINANCIAL
OFFICER AND TREASURER; (334) 450-4638. IN ORDER TO ASSURE TIMELY DELIVERY OF
THE INCORPORATED DOCUMENTS, ANY REQUESTS SHOULD BE MADE BY
January 23, 1998.
No person has been authorized to give any information or make any
representation not contained or incorporated by reference in this Proxy
Statement/Prospectus and, if so given or made, such information or
representation must not be relied upon as having been authorized by the
Company or EnergySouth. This Proxy Statement/Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any securities other
than those to which it relates or an offer to sell or a solicitation of an
offer to buy any securities in any jurisdiction in which, or to any person to
whom, it is unlawful to make such offer or solicitation.
Neither the delivery of this Proxy Statement/Prospectus nor the distribution
of securities hereunder shall, under any circumstances, create any implication
that there has been no change in the affairs of Mobile Gas or EnergySouth
since the date hereof or that the information herein or in the documents
incorporated herein by reference is correct as of any time subsequent to the
date hereof or the dates thereof.
<PAGE>
QUESTIONS AND ANSWERS AND SUMMARY INFORMATION ABOUT
THE HOLDING COMPANY PROPOSAL AND REORGANIZATION
The following Questions and Answers and Summary Information highlight selected
information about the holding company proposal and proposed Reorganization,
and may not contain all of the information that is important to you. For a
more complete discussion of the holding company proposal and the proposed
Reorganization, you should carefully read this entire document and the
attached appendices and the documents referred to in this document. For
example, the Agreement and Plan of Merger attached to this Proxy
Statement/Prospectus as Appendix A provides for the Merger which is part of
the proposed Reorganization, and EnergySouth's restated articles of
incorporation (Appendix B attached hereto) set out, among other things,
provisions governing certain rights of EnergySouth's stockholders. See also
"AVAILABLE INFORMATION" on page iv of this Proxy Statement/Prospectus.
1. What is the Holding Company Proposal? Why is it Being Proposed?
Mobile Gas is proposing a corporate reorganization into a holding company
structure in which Mobile Gas stockholders would become stockholders of a new
holding company called EnergySouth, Inc. After the Reorganization, Mobile Gas
would continue to operate its present utility business as a subsidiary of
EnergySouth, and the existing subsidiaries of Mobile Gas would be transferred
to and become subsidiaries of EnergySouth.
The Reorganization is intended to give Mobile Gas the financial and regulatory
flexibility to compete more effectively in the increasingly competitive energy
industry. The holding company structure would allow the Company to pursue
unregulated business, and to act more rapidly in an industry where unregulated
competitors do not have the same constraints as regulated entities. We also
believe that a holding company structure should provide greater opportunities
for growth and enhanced values, greater flexibility in developing new
businesses, and greater flexibility regarding the timing, method and amount of
financings and acquisitions, through the separation of the utility and
non-utility businesses of Mobile Gas. The holding company would also make it
possible for the Company to pursue utility business outside the State of
Alabama, which Mobile Gas cannot do under its present structure.
The Board of Directors of Mobile Gas has unanimously approved the holding
company proposal and the Reorganization and believes their adoption is in the
best interests of Mobile Gas and its stockholders. The Board recommends that
you vote "FOR" the approval and adoption of the Agreement and Plan of Merger
at the Annual Meeting.
2. What will the EnergySouth Holding Company Structure Look Like? What Type
of Businesses will EnergySouth Engage in?
The following chart shows our present and proposed structures:
CURRENT CORPORATE STRUCTURE
PROPOSED HOLDING COMPANY STRUCTURE
In addition to becoming the parent holding company of Mobile Gas, EnergySouth
would own the present Mobile Gas subsidiaries, which are engaged in businesses
which include gas pipeline transportation and storage, marketing and other
energy-related services. EnergySouth will also be able to invest in certain
other businesses and ventures that should strengthen the ability of the
Company to provide total energy services in an increasingly competitive
marketplace.
3. What is the Reorganization?
The Reorganization is the means by which the new holding company structure
will be established. It would take place in two steps. First, if
stockholders approve the holding company proposal and adopt the related
Agreement and Plan of Merger at the Annual Meeting, Mobile Gas and EnergySouth
will carry out a merger (the "Merger") in which Mobile Gas stockholders will
become holders of EnergySouth common stock on the basis of three shares of
EnergySouth for every two shares of Mobile Gas (with cash being paid for
fractional shares). As soon as practicable following the Merger, current
Mobile Gas subsidiaries will be transferred to EnergySouth, so that they will
be subsidiaries of the holding company instead of Mobile Gas.
4. If My Shares are Registered in My Name, Will I Have to Send in My Mobile
Gas Stock Certificates to Get New EnergySouth Certificates?
Yes, but not now. You will have to send in your Mobile Gas stock certificates
later in order to get the EnergySouth stock and/or cash in lieu of fractional
shares that you are entitled to receive, as well as any dividends declared by
EnergySouth after the Merger. HOWEVER, you should not send any stock
certificates now. If the Merger is approved and becomes effective, you will
automatically be sent instructions on how to surrender your Mobile Gas stock
certificates, so that you can receive new EnergySouth stock certificates
representing three shares of EnergySouth Common Stock for each two shares of
Mobile Gas Common Stock that you owned immediately before the Merger. If you
would otherwise receive a fractional share of EnergySouth Common Stock as a
result of this three-for-two conversion, you will receive cash in lieu of the
fractional share, equal to two-thirds of the average of the closing prices for
Mobile Gas Common Stock on the Nasdaq National Market for the 5 business days
preceding the Merger.
5. My Shares are Held in My Broker's Name. How Do I Vote on the Merger
Agreement and Exchange My Shares?
Copies of the Proxy Statement/Prospectus have been sent to your broker, who
will forward one to you. The broker will request instruction from you as to
how you want your shares to be voted, and the broker will vote your shares
according to your instructions. If the Merger becomes effective, instructions
on surrendering the Mobile Gas stock held in your brokerage account, to effect
the exchange of such stock for EnergySouth Common Stock, will be sent to your
broker.
6. When will the Reorganization Occur?
We expect the Reorganization to occur in the first quarter of 1998, assuming
stockholder approval of the Reorganization at the Annual Meeting.
7. Where will My EnergySouth Common Stock be Traded? What will be the Ticker
Symbol?
EnergySouth Common Stock will be traded on the Nasdaq National Market, and
will trade under the ticker symbol "ENSI".
Mobile Gas Common Stock is presently principally traded on the Nasdaq National
Market. The reported closing price for Mobile Gas common stock on December 9,
1997 was $38.25. After the Reorganization, all of the Mobile Gas Common
Stock will be owned by EnergySouth and will no longer be eligible for trading
and quotation on the Nasdaq National Market.
8. Will My Dividends be Affected?
While future dividends on EnergySouth Common Stock will depend on the
earnings, financial condition and capital requirements of EnergySouth and its
subsidiaries, and the dividends Mobile Gas and other EnergySouth subsidiaries
may pay to EnergySouth, the Company expects to continue the current Mobile Gas
policy of paying an appropriate percentage of earnings to stockholders. The
long-term debt instruments of Mobile Gas contain certain debt to equity ratio
requirements and restrictions on the payment of cash dividends, which will
continue in effect after the Reorganization. EnergySouth presently expects
to pay quarterly per-share common stock dividends at least equal to two-thirds
of the dividend most recently declared on Mobile Gas Common Stock (to take
into account the three-for-two ratio for conversion of Mobile Gas Common Stock
into EnergySouth Common Stock), and to pay dividends on approximately the same
schedule as dividends have been paid on Mobile Gas Common Stock.
(SEE PAGES 12 and 19)
9. What are the Federal Income Tax Consequences to Mobile Gas Stockholders?
If a stockholder exchanges solely Mobile Gas Common Stock solely for
EnergySouth Common Stock, that stockholder will not recognize any gain or loss
under Federal income tax laws. A stockholder who receives cash in lieu of a
fractional share will be treated as if Mobile Gas had issued a fractional
share to the stockholder and then immediately redeemed the fractional share
for cash. Such stockholder should generally recognize gain or loss, as the
case may be, measured by the difference between the amount of cash received
and the basis of the Mobile Gas Common Stock allocable to such fractional
share, had it actually been issued. Such gain or loss will be capital gain or
loss if such stockholder's Mobile Gas common stock was held as a capital
asset, and any such capital gain or loss would generally be either short-term,
mid-term or long-term capital gain or loss, depending on such stockholder's
holding period for the Mobile Gas Common Stock. If the holding period is not
more than 12 months, such gain or loss is considered short-term, if more than
12 months but not more than 18 months, such gain or loss is considered
mid-term, and if more than 18 months, such gain or loss is considered
long-term. (SEE PAGES 19-20)
10. Who Will Manage the Holding Company?
The directors of Mobile Gas at the time of the Reorganization will also be the
directors of EnergySouth. Certain of the existing officers of Mobile Gas will
also serve as officers of EnergySouth. John S. Davis will be president and
chief executive officer and a director of EnergySouth, and will continue as
president and chief executive officer and a director of Mobile Gas. Charles
Huffman will be vice president, treasurer and chief financial officer of
EnergySouth, and will continue to hold those offices with Mobile Gas, and G.
Edgar Downing, Jr. will be vice president, general counsel and secretary of
EnergySouth, and will continue to hold those offices with Mobile Gas.
(SEE PAGE 27)
11. How will My Participation in the Dividend Reinvestment Plan be Affected?
The Dividend Reinvestment and Stock Purchase Plan of Mobile Gas (the "DRIP")
will be amended to become the Dividend Reinvestment and Stock Purchase Plan of
EnergySouth. All shares of Mobile Gas Common Stock held under the DRIP will
be automatically exchanged for shares of EnergySouth Common Stock, at the
ratio of three shares of EnergySouth Common Stock for each two shares of
Mobile Gas Common Stock held. Accounts in the Plan will be credited for
fractional shares. The Dividend Reinvestment and Stock Purchase Plan will be
continued with EnergySouth Common Stock after the Reorganization.
12. What do I Need to do Now?
Just mail your signed proxy card in the enclosed postage-paid return envelope
as soon as possible, so that your shares may be represented at the Annual
Meeting. The meeting will take place on January 30, 1998 in the Mobile Gas
Auditorium at 2828 Dauphin Street, Mobile, Alabama. Do not send in the
certificates representing your shares of Mobile Gas stock until you receive a
letter informing you that the Merger has been completed and instructing you
what to do.
13. What Stockholder Vote is Required for Approval of the Holding Company
Proposal and the Reorganization?
Holders of record of Mobile Gas Common Stock on December 12, 1997 are entitled
to vote at the Annual Meeting. Two-thirds of the outstanding shares of Mobile
Gas Common Stock must be voted "For" Proposal 1 at the Annual Meeting in order
to approve the holding company proposal and the Merger.
14. Who Can I Call if I Have any Questions?
We have set up a special number for you. You are welcome to call either the
Company, at (334) 450-4638, or Morrow & Co., Inc., which is assisting in our
proxy solicitation, toll free at 1-800-662-5200.
<PAGE>
SUMMARY OF OTHER SELECTED INFORMATION
Certain Considerations (See Pages 12-13)
Certain factors for your consideration in determining whether to vote "For"
the Reorganization proposal and to approve and adopt the related Merger
Agreement are discussed under "Proposal 1: Approval of Holding Company
Structure and Adoption of the Merger Agreement--Certain Considerations."
Regulatory Approval (See Page 14)
The Alabama Public Service Commission approved the holding company
reorganization by an order dated November 17, 1997.
Conditions to the Merger (See Page 14)
Completion of the Merger depends on the satisfaction of certain conditions,
including: (a) receipt of required regulatory approvals; (b) stockholder
approval at the Annual Meeting; (c) satisfaction of all conditions for
EnergySouth Common Stock to be approved for listing on the Nasdaq National
Market; and (d) EnergySouth's Restated Articles of Incorporation (see Appendix
B to this Prospectus/Proxy Statement) being effective at or before the time of
the Merger.
Certain Other Consequences of Stockholder Adoption of the Merger Agreement
(See Pages 16-17 and 21-23)
The Merger Agreement provides that after the Merger, shares of EnergySouth
Common Stock and EnergySouth stock options (instead of Mobile Gas Common Stock
and stock options) will be issued, granted or awarded by EnergySouth under the
Mobile Gas stock option plan, which has been previously approved by Mobile Gas
stockholders. In addition, shares of EnergySouth Common Stock (instead of
Mobile Gas Common Stock) will be issued after the Reorganization under the
Dividend Reinvestment and Stock Purchase Plan.
Since the Merger Agreement is conditioned on EnergySouth's restated articles
of incorporation being effective at the time of the Merger, a vote by Mobile
Gas stockholders for adoption of Proposal 1 and the Merger Agreement will
constitute approval of EnergySouth's Restated Articles of Incorporation.
EnergySouth's Board of Directors will adopt EnergySouth's by-laws prior to the
Reorganization. These documents will govern certain rights of EnergySouth's
stockholders after the Reorganization.
Amendment or Termination of the Merger Agreement (See Page 18)
The respective Boards of Directors of Mobile Gas and EnergySouth may amend any
of the terms of the Agreement and Plan of Merger at any time before or after
its adoption by Mobile Gas stockholders. No amendment, however, may materially
and adversely affect the rights of the stockholders of Mobile Gas.
The Merger Agreement may be terminated and the Merger abandoned at any time
before or after stockholders adopt the Merger Agreement, if the Mobile Gas
Board of Directors determines that the completion of the Merger would not be
in the best interests of Mobile Gas or its stockholders.
Comparative Stockholders' Rights (See Pages 23-24)
When the Merger is completed, holders of Mobile Gas Common Stock will
automatically become holders of EnergySouth Common Stock, and their rights
will be governed by EnergySouth's restated articles of incorporation and
by-laws instead of those of Mobile Gas.
EnergySouth's restated articles of incorporation will give EnergySouth broad
corporate powers to engage in any lawful activity for which a corporation may
be formed under Alabama law, and include certain conditions with respect to
transactions with certain stockholders which are not included in the articles
of incorporation of Mobile Gas. In addition, the restated articles of
incorporation of EnergySouth provide that the directors of EnergySouth may
designate the rights and preferences of preferred stock and issue such stock
without further approval by EnergySouth stockholders. Certain other
differences between the rights of holders of EnergySouth Common Stock and
those of holders of Mobile Gas Common Stock are summarized on pages 22-23.
Regulation of EnergySouth and Mobile Gas (See Pages 25-26)
Following the Reorganization, EnergySouth, as the parent company of Mobile
Gas, will not be subject to regulation by the Alabama Public Service
Commission. Mobile Gas will continue to be regulated by the PSC as before.
Mobile Gas currently is not subject to the federal Public Utility Holding
Company Act of 1935. When the Reorganization occurs, EnergySouth will become a
"public utility holding company" and will file an exemption statement with the
Commission to exempt it and each of its subsidiaries from that Act (except for
those provisions requiring approval of certain acquisitions and investments).
Statutory Dissenters' Rights (See Pages 26-27 and Appendix C to this
Proxy Statement/Prospectus)
Shareholders of Mobile Gas who comply with the requirements of Sections
10-2B-13.01 through 10-2B-13.32 of the Alabama Business Corporation Act will,
if the proposed Merger is consummated, be entitled to dissenters' rights of
appraisal with respect to their shares of Mobile Gas common stock. See "Right
of Dissenting Stockholders to Receive Payment for Shares" in the following
Proxy Statement/Prospectus and Appendix C attached hereto for a description of
the procedures required to be followed to perfect such rights.
<PAGE>
INTRODUCTION; PROXIES AND VOTING
This Proxy Statement/Prospectus is furnished in connection with the
solicitation by the Board of Directors of Mobile Gas Service Corporation
("Mobile Gas" or the "Company") of proxies for use at the Annual Meeting of
Stockholders of Mobile Gas to be held on January 30, 1998. Only holders of
record of the Company's common stock, par value $.01 per share ("Mobile Gas
Common Stock") on December 12, 1997 (the "Record Date") are entitled to
receive notice of the Annual Meeting and to vote at the Annual Meeting or any
adjournments or postponements thereof.
The proxy accompanying this Proxy Statement/Prospectus, even if executed and
returned, may be revoked by the person executing it if it has not yet been
exercised. To revoke a proxy, the stockholder must file with the Secretary
of Mobile Gas either a written revocation or a duly executed proxy bearing a
later date.
In addition, any stockholder entitled to vote may attend the Annual Meeting
and vote whether or not such stockholder has submitted a signed proxy. All
shares represented by proxies which have been duly executed and returned will
be voted at the Annual Meeting and, where a choice has been specified in the
proxies, the shares will be voted in accordance with the specification so
made. In the absence of specifications to the contrary, such executed
proxies will be voted FOR Proposal 1, and for each director nominated in
Proposal 2.
As of the close of business on the Record Date, there were 3,239,104 shares
of Mobile Gas Common Stock outstanding. Each share is entitled to one vote.
Only holders of record of Mobile Gas Common Stock on the Record Date are
entitled to vote at the Annual Meeting or any adjournments or postponements
thereof, except for participants in the Mobile Gas Service Corporation
Dividend Reinvestment and Stock Purchase Plan, who are entitled to vote shares
held for their accounts by the agent under such Plan. Shares held in the name
of the trustee under the Mobile Gas Employee Savings Plan may be voted by such
trustee upon the instructions of participants in such Plan.
Mobile Gas will bear the cost of solicitation of proxies. In addition to the
use of the mails, proxies may be solicited personally or by telephone by
directors, officers and employees of Mobile Gas. Such directors, officers
and employees of Mobile Gas receive no compensation therefor other than their
regular remuneration. Also, Mobile Gas will reimburse brokers, bank nominees
and other institutional holders for their reasonable out-of-pocket expenses in
forwarding proxy soliciting material to the beneficial owners of Mobile Gas
Common Stock. In addition, Mobile Gas has retained Morrow & Co., Inc. to aid
in the solicitation of proxies at a fee not to exceed $7,500 plus
reimbursement for out-of-pocket expenses incurred by that firm on behalf of
Mobile Gas.
The proposal for adoption of the holding company structure and the Merger
Agreement is considered "non-discretionary," and brokers who have received no
instructions from their clients do not have the authority to vote thereon.
All abstentions and broker non-votes will be counted towards the establishment
of a quorum. For purposes of determining whether the holding company
proposal and the Merger Agreement have been adopted, an abstention or broker
non-vote WILL NOT be counted as a vote in favor of adoption of the holding
company proposal and the Merger Agreement and, as a result, will have the
effect of a vote AGAINST Proposal 1.
The affirmative vote of two-thirds of the outstanding shares of Mobile Gas
Common Stock will be required to approve Proposal 1. Votes withheld in
connection with the election of one or more of the nominees for director will
not be counted as votes cast for or against such individuals. The vote of a
plurality of the shares of Mobile Gas Common Stock cast is required for the
election of directors.
THE BOARD OF DIRECTORS OF MOBILE GAS HAS UNANIMOUSLY APPROVED THE HOLDING
COMPANY STRUCTURE AND APPROVED AND ADOPTED THE MERGER AGREEMENT, BELIEVES
THE HOLDING COMPANY STRUCTURE AND THE RELATED REORGANIZATION TO BE IN THE
BEST INTERESTS OF MOBILE GAS AND ITS STOCKHOLDERS, AND RECOMMENDS THAT THE
HOLDERS OF MOBILE GAS COMMON STOCK VOTE IN FAVOR OF ADOPTION OF THE HOLDING
COMPANY PROPOSAL AND THE MERGER AGREEMENT AS DISCUSSED IN PROPOSAL 1.
IN ADDITION, THE BOARD OF DIRECTORS OF MOBILE GAS RECOMMENDS A VOTE "FOR" ALL
DIRECTOR NOMINEES NAMED IN PROPOSAL 2.
<PAGE>
PROPOSAL 1
APPROVAL OF HOLDING COMPANY STRUCTURE AND ADOPTION
OF THE MERGER AGREEMENT
The Board of Directors of Mobile Gas unanimously believes that it is in the
best interests of Mobile Gas and its stockholders to reorganize Mobile Gas and
its subsidiaries (the "Reorganization") so that Mobile Gas will become a
separate subsidiary of a new parent holding company, with the present holders
of Mobile Gas common stock, $.01 par value per share ("Mobile Gas Common
Stock"), becoming the holders of the common stock of the new parent holding
company, and the present subsidiaries of Mobile Gas becoming subsidiaries of
the new holding company.
To carry out the Reorganization, Mobile Gas has caused to be incorporated two
Alabama corporations, EnergySouth, Inc. ("EnergySouth") and MBLE Merger Co.,
Inc. ("Mergerco"), each of which now has a nominal amount of stock outstanding
and no present business or properties of its own. All of the currently
outstanding shares of EnergySouth's common stock, par value $.01 per share
("EnergySouth Common Stock"), are owned by Mobile Gas, and all of the
currently outstanding shares of Mergerco are owned by EnergySouth.
The respective Board of Directors of each of Mobile Gas, EnergySouth and
Mergerco have approved and adopted the Merger Agreement, which provides for
the merger of Mobile Gas and Mergerco (the "Merger"), subject to adoption of
an Agreement and Plan of Merger (" Merger Agreement") by Mobile Gas
stockholders and the satisfaction of other conditions. The Merger Agreement
is attached to this Proxy Statement/Prospectus as Appendix A and is
incorporated herein by reference. As a result of the Merger, Mobile Gas
would become a subsidiary of EnergySouth through the conversion of the
outstanding shares of Mobile Gas Common Stock into shares of EnergySouth
Common Stock on the basis of three shares of EnergySouth Common Stock for each
two shares of Mobile Gas Common Stock (with cash being paid for fractional
shares resulting from the conversion).
After the Merger, the existing subsidiaries of Mobile Gas will be transferred
to EnergySouth and become subsidiaries of EnergySouth. See "THE
REORGANIZATION--Transfer of Mobile Gas Subsidiaries to EnergySouth."
Mobile Gas is subject to regulation by the Alabama Public Service Commission
(the "PSC"). On November 17, 1997, the PSC issued its order (the "PSC
Order") approving the proposed holding company reorganization.
<PAGE>
REASONS FOR THE HOLDING COMPANY STRUCTURE AND REORGANIZATION
General
The proposed holding company structure is intended to provide Mobile Gas and
its subsidiaries with the financial and regulatory flexibility to compete more
effectively in an increasingly competitive energy industry. Relaxing
constraints and eliminating time-lags associated with regulatory decisions
should allow the Company to move more rapidly to meet competition in an
industry where unregulated competitors do not have the same constraints as
regulated entities. The Board of Directors of Mobile Gas believes that a
holding company structure will provide greater opportunity for growth and
enhanced values, and greater flexibility in developing and operating new
businesses and greater flexibility regarding the timing, method and amount of
financings and acquisitions, through the separation of the new holding
company's utility and non-utility businesses and relaxed constraints on
unregulated activities. The Board believes that such a separation between
utility and non-utility businesses will serve to protect the financial
integrity of the utility business from risks involved in non-utility
businesses and ventures, and provide greater flexibility regarding the timing,
method and amount of financings and acquisitions.
Flexibility of Utility and Non-Utility Businesses
As a regulated utility, Mobile Gas operates under the regulatory constraints
of the PSC which can limit investments in unregulated operations. This is a
significant constraint on the Company's ability to move rapidly in an
increasingly competitive environment.
As part of the Reorganization, the current subsidiaries of Mobile Gas will be
transferred to and become separate subsidiaries of EnergySouth. Mobile Gas
needs the financial and regulatory flexibility provided by this holding
company structure to operate in the changing environment and successfully
address the new levels of competition.
As many in the energy industry believe, the new competitive environment may
lead to additional consolidation, vertical expansion, and other strategic
alliances, as energy companies may be required to offer a full range of energy
services to compete effectively in order to retain and attract customers.
For example, consolidations between Mobile Gas and other operating utilities
(e.g., through merger and/or acquisition) could result in economies of scale
and synergies by enabling the consolidated company to take advantage of common
needs and complementary strengths. The Company cannot presently pursue
utility business outside the state of Alabama. The holding company would make
it possible for the Company to acquire utility operations in adjacent states,
subject to any required approval by the Securities and Exchange Commission.
See "REGULATION OF ENERGYSOUTH AND MOBILE GAS AND CERTAIN SUBSIDIARIES --
Regulation of EnergySouth" below.
EnergySouth will continue to seek to invest in the Company's current lines of
business, such as pipeline transportation, gas storage and energy marketing
and other energy-related activities. Although EnergySouth has not identified
other specific business opportunities, it believes that such activities would
likely be related or complementary to the energy industry. Under a holding
company structure, EnergySouth should be able to take advantage of
opportunities in a timely fashion and compete more effectively against other
energy companies. As a non-utility, EnergySouth should not be required to
obtain PSC approval for investments in non-utility businesses, would not be
subject to the limitations imposed under certain provisions of Alabama law
applicable to Mobile Gas as a regulated utility, and thus should be able to
compete more effectively against other entities not subject to such regulatory
constraints.
Financing Flexibility
After the Reorganization, financing of unregulated activities of EnergySouth
and its non-utility subsidiaries will not require PSC approval. In addition,
the capital structure of each non-utility subsidiary may be appropriately
tailored to suit its individual business. Also, under the holding company
structure, EnergySouth would not need PSC approval to issue debt or equity
securities to finance the acquisition of the stock or assets of other
companies. The ability to raise capital for acquisitions without prior PSC
approval should allow competition on a level basis with other potential
acquirors, some of which are already holding companies. Under a holding
company structure, the issuance of debt or equity securities by EnergySouth to
finance the acquisition of the stock or assets of another company should not
adversely affect the capital of Mobile Gas devoted to and available for its
regulated utility operations.
<PAGE>
CERTAIN CONSIDERATIONS
Future Performance of EnergySouth Common Stock Cannot Be Assured
The purpose of the Reorganization is to establish a holding company structure
that will enhance the Company's ability to take advantage of business
opportunities, including those outside of the Company's present markets. The
Board of Directors believes the Reorganization and holding company structure
to be in the best interests of Mobile Gas and its stockholders.
Nevertheless, the success of EnergySouth in realizing its goals and the future
performance of EnergySouth Common Stock cannot be assured.
Initial EnergySouth Common Stock Dividends Will Depend Primarily on Dividends
Paid by Mobile Gas
EnergySouth does not now, nor will it immediately after the Reorganization,
conduct directly any business operations from which it will derive any
revenues. EnergySouth plans to obtain funds for its own operations from
dividends paid to EnergySouth by its subsidiaries, and possibly from sales of
securities or debt incurred by EnergySouth. Initially dividends on
EnergySouth Common Stock will depend primarily upon the earnings, financial
condition and capital requirements of Mobile Gas, and the dividends that
Mobile Gas pays to EnergySouth. In the future, dividends from EnergySouth's
subsidiaries other than Mobile Gas may be a more significant source of funds
for dividend payments by EnergySouth. In addition, although it has no
present intention to do so, EnergySouth may issue preferred stock in the
future to meet its capital requirements. See "COMPARATIVE STOCKHOLDERS'
RIGHTS -- Preferred Stock" below. Such preferred stock could have
preferential dividend rights over EnergySouth's Common Stock.
EnergySouth presently expects to pay quarterly dividends on EnergySouth Common
Stock at least equivalent to the rate (taking into account the three-for-two
ratio for conversion of Mobile Gas Common Stock into EnergySouth Common Stock
in the Merger), and on approximately the same schedule, as the dividend most
recently declared by the Company on Mobile Gas Common Stock. While future
dividends will depend on the earnings, financial condition and capital
requirements of Mobile Gas and its other subsidiaries, EnergySouth presently
expects to continue a policy of paying an appropriate percentage of its
earnings to stockholders.
Subsidiary Businesses May Involve Greater Risk
The Company's principal subsidiaries participate and own investments in gas
pipeline transportation, natural gas storage, marketing and other
energy-related services. Mobile Gas will transfer these subsidiaries and
investments to EnergySouth as soon as practicable following the
Reorganization.
It is the current intention of EnergySouth that its subsidiaries will include
non-utility companies which will engage primarily in energy-related businesses
which will not be regulated by state or federal agencies which regulate public
utilities. Such businesses may encounter competitive and other factors not
previously experienced by Mobile Gas, and may have different, and perhaps
greater, investment risks than those involved in the regulated natural gas
utility business of Mobile Gas. There can be no assurance, however, that
such businesses will be successful or, if unsuccessful, that they will not
have a direct or indirect adverse effect on EnergySouth. As is the case now,
any losses incurred by such businesses will not be recoverable in utility
rates of Mobile Gas.
Earnings from Mobile Gas subsidiaries were $1.1 million, or 34 cents per share
in fiscal 1997, $.6 million, or 19 cents per share in 1996, and $.3 million,
or 10 cents per share in 1995, which amounts represented 13.8%, 6.9%
and 7.7% of consolidated net income of the Company and its
subsidiaries in 1997, 1996 and 1995, respectively. Mobile Gas's total equity
investment in these businesses, computed as a percentage of total consolidated
equity, was 23.6%, 21.5% and 20.0% as of September 30, 1997, 1996 and
1995, respectively.
EnergySouth will obtain funds to invest in non-utility subsidiaries and other
businesses from dividends it receives from Mobile Gas, borrowings and other
financings, and dividends EnergySouth may in the future receive from its other
subsidiaries. There can be no assurance that the subsidiaries will have
earnings or pay any dividends to EnergySouth in the foreseeable future.
Reorganization May Have Certain Anti-Takeover Effects.
Certain provisions of the EnergySouth Articles and Bylaws are not included in
the Mobile Gas Articles and/or By-Laws and may be deemed to have anti-takeover
effects. These provisions include those permitting the issuance of stock in
a manner which could be deemed to have anti-takeover effects and may delay,
defer or prevent a tender offer or takeover attempt that a stockholder might
believe to be in its best interest, including takeover attempts that might
result in a premium over the market price for EnergySouth Common Stock. Such
provisions might also adversely affect the market price of EnergySouth Common
Stock.
<PAGE>
THE REORGANIZATION
Merger Agreement
The Merger Agreement has been unanimously adopted by the Boards of Directors
of Mobile Gas and EnergySouth and is subject to approval and adoption by the
holders of at least two-thirds of the outstanding shares of Mobile Gas Common
Stock. See "Vote Required" below. In the Merger,
(i) each two shares of Mobile Gas Common Stock outstanding immediately
prior to the effective time of the Merger will be converted into three new
shares of EnergySouth Common Stock, with cash being paid for fractional
shares,
(ii) EnergySouth will become the owner of all outstanding Mobile Gas
Common Stock, and
(iii) the shares of EnergySouth Common Stock held by Mobile Gas
immediately prior to the Merger will be cancelled.
As a result, upon completion of the Merger, EnergySouth will become a holding
company, Mobile Gas will become a wholly-owned subsidiary of EnergySouth, and
all of the EnergySouth Common Stock outstanding immediately after the Merger
will be owned by the former holders of Mobile Gas Common Stock outstanding
immediately prior to the Merger. In connection with the Reorganization, the
existing subsidiaries Mobile Gas will be transferred to EnergySouth and become
subsidiaries of EnergySouth.
Debt of Mobile Gas will remain unchanged and will continue as outstanding
obligations of Mobile Gas after the Reorganization.
Vote Required
Under Alabama law, the affirmative vote of the holders of record on the record
date of two-thirds of the outstanding shares of Mobile Gas Common Stock is
required to approve the Reorganization proposal and adopt the Merger
Agreement. Because the requirement for this proposal is the affirmative vote
of two-thirds of the outstanding shares, broker non-votes and abstentions will
have the effect of a "no" vote.
Regulatory Approvals
Alabama Law
Under Alabama laws governing public utilities, any transaction involving
transfer of utility stock such as will occur in the Reorganization must be
approved in advance by the PSC. On November 17, 1997, the PSC issued its
order approving the holding company restructuring.
Public Utility Holding Company Act of 1935 (the "Holding Company Act")
Mobile Gas currently is not subject to the Holding Company Act because it is
not a "public utility holding company." As a result of the Reorganization,
EnergySouth will become a public utility holding company under the Holding
Company Act. Pursuant to the Reorganization Agreement, simultaneously with
the effectiveness of the Reorganization, EnergySouth will file with the
Commission an exemption statement to exempt itself and its subsidiaries from
all provisions of the Holding Company Act (except with respect to certain
acquisitions and investments) pursuant to the "intrastate" exemption provided
by Section 3(a)(1) of that Act. The basis for exemption is that EnergySouth
and Mobile Gas are each organized and carry on their business substantially in
the State of Alabama, and at the time of the Reorganization neither
EnergySouth nor Mobile Gas will derive any material part of its income from a
public utility company organized outside of the State of Alabama.
Conditions to Effectiveness of the Merger
The Merger is subject to the satisfaction of the following conditions (in
addition to approval and adoption of the Merger Agreement by the holders of
Mobile Gas Common Stock): (i) all necessary orders, authorizations, approvals
or waivers from the PSC and all other jurisdictive regulatory bodies, boards
or agencies shall have been received, remain in full force and effect, and
shall not include, in the sole judgment of the Board of Directors of Mobile
Gas, unacceptable conditions; (ii) all conditions to the listing of the shares
of EnergySouth Common Stock to be issued in connection with the Merger on the
NASDAQ National Market shall have been satisfied; and (iii) amended and
restated articles of incorporation of EnergySouth, substantially in the form
attached as Appendix B to this Proxy Statement/Prospectus (the "EnergySouth
Restated Articles"), shall have become effective at or prior to the effective
time of the Merger.
Following satisfaction of these conditions, the Merger will become effective
immediately following the close of business on the date of filing with the
Secretary of State of Alabama of articles of merger pursuant to the Alabama
Business Corporation Act (the "Effective Time"). Mobile Gas cannot predict
when all conditions will be satisfied, but expects that the Merger will become
effective in the first quarter of calendar 1998.
Exchange of Stock Certificates; Cash in Lieu of Fractional Shares
If the Merger is effected, holders of Mobile Gas Common Stock will
automatically be sent documents and instructions for the physical exchange of
their existing stock certificates for certificates of EnergySouth Common Stock
and/or cash in lieu of fractional shares, and the certificates which represent
shares of Mobile Gas Common Stock outstanding immediately prior to the
effective time of the Merger will no longer represent Mobile Gas Common Stock,
all as is further described below.
Following the Effective Time, certificates representing shares of Mobile Gas
Stock outstanding at the Effective Time (herein sometimes referred to as
"Mobile Gas Certificates") shall evidence only the right of the registered
holder thereof to receive, and may be exchanged for, the shares of EnergySouth
Common Stock into which such shares of Mobile Gas Common Stock were converted.
At the Effective Time, EnergySouth will issue and deliver, or cause to be
issued and delivered, to the transfer agent for EnergySouth Common Stock (the
"Transfer Agent"), certificates representing the whole shares of EnergySouth
Common Stock into which outstanding shares of Mobile Gas Common Stock have
been converted as a result of the Merger. As promptly as practicable
following the Effective Time, EnergySouth will send or cause to be sent to
each former stockholder of record of Mobile Gas immediately prior to the
Effective Time written instructions and transmittal materials (a "Transmittal
Letter") for use in surrendering Mobile Gas Certificates to the Transfer
Agent. Mobile Gas stockholders should not send in their stock certificates to
the Transfer Agent until they receive a transmittal letter after the Effective
Time.
EnergySouth will also send or cause to be sent to brokers, banks and other
nominee record holders of Mobile Gas Common Stock appropriate instructions and
transmittal materials for use in surrendering Mobile Gas Certificates to the
Transfer Agent, so that shares held by such record holders on behalf of
beneficial of Mobile Gas Common Stock can be exchanged for the shares of
EnergySouth Common Stock and cash, if any, into which such shares of Mobile
Gas Common Stock were converted.
Upon the proper surrender and delivery to the Transfer Agent (in accordance
with EnergySouth's instructions, and accompanied by a properly completed
Transmittal Letter) by a former stockholder of Mobile Gas of such
stockholder's Mobile Gas Certificate(s), and in exchange therefor, the
Transfer Agent shall as soon as practicable issue, register and deliver to
such stockholder a certificate evidencing the number of shares of EnergySouth
Common Stock to which such stockholder is entitled, and/or issue and deliver
to such stockholder a check in the amount of cash to which the stockholder is
entitled in lieu of a fractional share of EnergySouth Common Stock.
Following the Effective Time, there will be no further transfers of Mobile Gas
Stock on the stock transfer books of Mobile Gas or the registration of any
transfer of a Mobile Gas Certificate by any holder thereof. The surrender of
each Mobile Gas Certificate as described herein must be made by or on behalf
of the person who was the holder of record of the shares represented by such
certificate at the Effective Time.
No scrip or certificates representing fractional shares of EnergySouth Common
Stock will be issued to any former stockholder of Mobile Gas, and no such
stockholder will have any right to vote or receive any dividend or other
distribution on, or any other right with respect to, any fraction of a share
of EnergySouth Common Stock resulting from the above exchange. In the event
the conversion of Mobile Gas Common Stock into EnergySouth Common Stock
results in the creation of fractional shares, in lieu of the issuance of
fractional shares of EnergySouth Common Stock, EnergySouth will deliver cash
to the Transfer Agent in an amount equal to the aggregate of all fractional
shares multiplied by the "Average Closing Price", and the Transfer Agent will
divide such cash among and remit it (without interest) to the former
stockholders of Mobile Gas in accordance with their respective interests. The
"Average Closing Price" will be two-thirds the average of the closing prices
of Mobile Gas Common Stock on the NASDAQ National Market over the period of
five (5) consecutive trading days ending on the last trading day prior to the
Effective Date.
Except as described with respect to lost or otherwise missing certificates
below, no EnergySouth Common Stock certificate or cash in lieu of a fractional
share thereof will be delivered to any former stockholder of Mobile Gas unless
and until such stockholder shall have properly surrendered to the Transfer
Agent the Mobile Gas Certificate(s) formerly representing his or her shares of
Mobile Gas Common Stock, together with a properly completed Transmittal Letter
in such form as shall be provided to the stockholder by EnergySouth for that
purpose. Further, until such Mobile Gas Certificate(s) are so surrendered,
no dividend or other distribution payable to holders of record of EnergySouth
Common Stock as of any date subsequent to the Effective Time will be delivered
to the holder of such unsurrendered Mobile Gas Certificate(s). However,
subject to prior escheatment under applicable law, upon the proper surrender
of such Mobile Gas Certificate(s), the Transfer Agent shall pay to the
registered holder of the shares of EnergySouth Common Stock represented by
such Mobile Gas Certificate(s) the amount of any such cash, dividends or
distributions which have accrued but remain unpaid with respect to such
shares. Neither EnergySouth, Mobile Gas nor the Transfer Agent shall have any
obligation to pay any interest on any such cash, dividends or distributions
for any period prior to such payment.
Any stockholder of Mobile Gas whose certificate evidencing shares of Mobile
Gas Common Stock has been lost, destroyed, stolen or otherwise is missing
shall be entitled to receive a certificate representing the shares of
EnergySouth Common Stock to which he or she is entitled in accordance with and
upon compliance with conditions imposed by the Transfer Agent or EnergySouth
(including without limitation a requirement that the stockholder provide a
lost instruments indemnity or surety bond in form, substance and amount
satisfactory to the Transfer Agent and EnergySouth).
Transfer of Mobile Gas Subsidiaries to EnergySouth
Mobile Gas subsidiaries engage in gas pipeline transportation, gas storage,
marketing and other energy-related services. As part of the
Reorganization, Mobile Gas will transfer these subsidiaries to EnergySouth as
soon as practicable after the Merger. It is expected that Mobile Gas will
effect such transfer by making a dividend of the outstanding stock of each of
its wholly-owned subsidiaries, MGS Energy Services, Inc. ("MGS Energy"), MGS
Storage Services, Inc. ("MGS Storage"), and MGS Marketing Services, Inc., to
EnergySouth. As a result, EnergySouth will also indirectly own the
controlling interests, directly owned by MGS Energy and MGS Storage, in
certain partnerships engaged in utility businesses. Such partnerships include
Bay Gas Storage Company, Ltd. ("Bay Gas"), of which MGS Storage owns a
majority interest . See "BUSINESS" below.
Mobile Gas has provided a guaranty of certain indebtedness of Bay Gas, and
such guaranty requires that the consent of the holders of such Bay Gas
indebtedness be obtained with respect to the transfer of Bay Gas as part of
the Reorganization. Mobile Gas has requested and expects to obtain such
consents.
Dividend Reinvestment and Stock Purchase Plan
The Merger Agreement provides that shares of Mobile Gas Common Stock held in
the Mobile Gas Service Corporation Dividend Reinvestment and Stock Purchase
Plan (the "DRIP"), including uncertificated whole and fractional shares, will
automatically become a number of shares of EnergySouth Common Stock equal to
1.5 times the number of shares of Mobile Gas Common Stock held in the DRIP at
the Effective Time of the Merger. At the Effective Time, EnergySouth will
succeed to the DRIP as in effect immediately prior to the Effective Time, and
shares of EnergySouth Common Stock will be issued under the DRIP on and after
the Effective Time. EnergySouth will file a post-effective amendment to the
Mobile Gas registration statement for the DRIP shortly after the
Effective Time.
Mobile Gas Employee Stock Plans
The Merger Agreement also provides that the Mobile Gas Service Corporation
1992 Stock Option Plan (the "Stock Option Plan"), the Mobile Gas Service
Corporation 1992 Incentive Compensation Plan (the "1992 Incentive Plan") and
the Employee Savings Plan (the "Employees' 401(k) Plan") (together, the
"Mobile Gas Stock Plans") will be amended to provide for such plans to utilize
EnergySouth Common Stock instead of Mobile Gas Common Stock upon consummation
of the Merger. The Stock Option Plan and 1992 Incentive Plan were previously
approved by Mobile Gas stockholders.
Upon consummation of the Merger, all outstanding stock options under the Stock
Option Plan will be converted into options to acquire, on the same terms and
conditions as were applicable under such stock options immediately prior to
the Merger, such number of shares of EnergySouth Common Stock as the holders
of such options would have been entitled to receive pursuant to the Merger had
such holders exercised such stock options in full immediately prior to the
Merger, at a price per share of EnergySouth Common Stock equal to two-thirds
of the per share option price originally specified in the option with respect
to Mobile Gas Common Stock. Future grants under the Stock Option Plan will
be made with respect to EnergySouth Common Stock. EnergySouth will file
post-effective amendments to Mobile Gas's registration statements for the
amended Mobile Gas Stock Plans shortly after the Effective Time of the
Merger.
The committee of the Board of Directors of Mobile Gas which administers the
1992 Incentive Plan does not intend to make any future awards under such plan.
Accordingly, the amendment of the 1992 Incentive Plan will affect only the
holders of existing awards under that plan.
If the Merger is consummated, shares of Mobile Gas Common Stock then held
under the Employees' 401(k) Plan will automatically become shares of
EnergySouth Common Stock on the basis of three shares of EnergySouth Common
Stock for each two shares of Mobile Gas Common Stock so held. Also, the
Employees' 401(k) Plan as then amended will provide for the purchase in the
future of shares of EnergySouth Common Stock, instead of Mobile Gas Common
Stock, under such plan.
Amendment or Termination of the Merger Agreement
The Boards of Directors of Mobile Gas and EnergySouth may amend any of the
terms of the Merger Agreement at any time before or after its adoption by the
holders of Mobile Gas Common Stock and prior to the Effective Time, but no
such amendment may, in the sole judgment of the Board of Directors of Mobile
Gas, materially and adversely affect the rights of Mobile Gas stockholders.
The Merger Agreement may be terminated and the Merger abandoned at any time
before or after the stockholders of Mobile Gas approve and adopt the Merger
Agreement and prior to the Effective Time, if the Board of Directors of Mobile
Gas determines, in its sole judgment, that consummation of the Merger would,
for any reason, be inadvisable or not be in the best interests of Mobile Gas
or its stockholders.
Listing of EnergySouth Common Stock
EnergySouth is applying to have its common stock listed on the Nasdaq National
Market. It is expected that such listing will become effective at the
effective time of the Merger. The ticker symbol of EnergySouth Common Stock
will be "ENSI", and quotations will be carried in newspapers as they have been
for Mobile Gas Common Stock. Following the Merger, Mobile Gas Common Stock
will no longer be quoted or trade and will be delisted from the Nasdaq
National Market.
<PAGE>
MOBILE GAS COMMON STOCK MARKET PRICES AND DIVIDENDS
Mobile Gas Common Stock is traded on the NASDAQ National Market under the
symbol "MBLE". As of December 9, 1997 there were 1,577 holders of record
of Mobile Gas Common Stock. Information regarding dividends and the bid price
range for Mobile Gas Common Stock during the periods indicated is as follows:
Per Share Dividends Declared
Quarter Ended Quarter Ended
December 31, 1996 $.28 December 31, 1995 $.27
March 31, 1997 .28 March 31, 1996 .27
June 30, 1997 .30 June 30, 1996 .28
September 30, 1997 .30 September 30, 1996 .28
On December 5, 1997, the Company's Board of Directors declared a dividend of
$.30 per share on Mobile Gas Common Stock, payable on January 1, 1998 to
holders of record on December 12, 1997.
Bid Price Range
Quarter Ended High Low High Low
December 31, 1996 $ 29 $ 23 1/2 December 31, 1995 $22 3/4 $ 20 3/4
March 31, 1997 29 1/4 26 1/2 March 31, 1996 23 21 3/4
June 30, 1997 28 1/4 26 June 30, 1996 25 1/4 22 1/2
September 30, 1997 37 1/4 27 1/4 September 30, 1996 25 1/4 21
Over-the-counter quotations reflect inter-dealer prices without retail
mark-up, mark-down or commissions and may not necessarily represent actual
transactions.
The closing price of Mobile Gas Common Stock on September 5, 1997, the day
before the public announcement of the Reorganization, was $32.
While the Board of Directors intends to continue the practice of paying
dividends quarterly, amounts and dates of such dividends as may be declared
will be dependent upon the Company's future earnings, financial requirements,
and other factors.
The Company's long-term debt instruments contain certain debt to equity ratio
requirements and restrictions on the payment of cash dividends and the
purchase of shares of its capital stock. Such restrictions will remain in
effect after the Reorganization. At September 30, 1997, under the most
limiting of such provisions, retained earnings in the amount of $18,470,000
were unrestricted.
DIVIDEND POLICY
EnergySouth does not now, nor will it immediately after the Reorganization,
conduct directly any business operations from which it will derive any
revenues. EnergySouth plans to initially obtain funds for its own operations
primarily from dividends paid to EnergySouth on the stock of its subsidiaries.
Initially, dividends on EnergySouth Common Stock will depend primarily upon
the earnings, financial condition and capital requirements of Mobile Gas, and
the dividends paid by Mobile Gas to EnergySouth. EnergySouth presently
expects to continue the Company's policy of paying an appropriate percentage
of earnings to stockholders. In the future, dividends from EnergySouth's
subsidiaries other than Mobile Gas may be a more significant source of funds
for dividend payments by EnergySouth. Payment of dividends on EnergySouth
Common Stock could be subject to the prior rights of holders of EnergySouth
preferred stock, if such stock were issued.
EnergySouth presently expects to pay quarterly dividends on EnergySouth Common
Stock at least equal to the rate, and on approximately the same schedule as,
the dividend most recently declared by Mobile Gas on its common stock. The
quarterly dividend most recently declared by Mobile Gas's Board of Directors
on Mobile Gas Common Stock was $.30 per share payable January 1, 1998 to
holders of record on December 12, 1997. Based on the three-for-two ratio for
conversion of Mobile Gas Common Stock into EnergySouth Common Stock in the
Merger, the comparable dividend which would be payable with respect to
EnergySouth Common Stock after the Reorganization would be $.20 per share.
The amount of dividends paid by Mobile Gas to EnergySouth following the
Reorganization is expected to be greater than the amount of dividends
EnergySouth pays on its common stock, as EnergySouth will need funds for its
holding company activities.
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Mobile Gas and EnergySouth have received an opinion from Armbrecht, Jackson,
DeMouy, Crowe, Holmes & Reeves, L.L.C., their counsel, regarding material
Federal income tax consequences of the Reorganization, to the effect that,
based on certain assumptions and factual representations:
(1) no gain or loss will be recognized by a holder of Mobile Gas Common
Stock upon the conversion of such holder's Mobile Gas Common Stock solely
into EnergySouth Common Stock (excluding cash received in lieu of fractional
shares);
(2) the basis of shares of EnergySouth Common Stock received by a former
holder of shares of Mobile Gas common stock in the conversion described in
(1) above in the aggregate will equal the basis of such former holder's shares
of Mobile Gas Common Stock exchanged therefor (except for any reduction in
basis allocable to a fractional share), and the holding period for such shares
of EnergySouth common stock will include the holding period for shares of
Mobile Gas Common Stock exchanged therefor to the extent that such shares of
Mobile Gas Common Stock were held as a capital asset at the effective time of
the Merger;
(3) no gain or loss will be recognized by EnergySouth or Mobile Gas on
account of the Merger or the issuance of shares of EnergySouth Common Stock to
the former holders of shares of Mobile Gas common stock pursuant to the Merger
Agreement; and
(4) a holder of Mobile Gas Common Stock who receives cash pursuant to
the exercise of dissenters' right under Sections 10-2B-13.01 through
10-2B-13.32 of the Alabama Business Corporation Act will recognize gain or
loss equal to the difference, if any, between such stockholder's basis in the
stockholder's Mobile Gas Common Stock and the amount of cash received. Such
gain or loss will be eligible for capital gain or loss treatment if the Mobile
Gas Common Stock is held by such stockholder as a capital asset at the
Effective Time.
The foregoing discussion is a general summary which does not address tax
consequences which may depend on individual circumstances and it does not
cover the tax consequences of the Reorganization under state, local or foreign
income or other tax laws. Each stockholder of Mobile Gas is urged to consult
with such stockholder's own tax advisors with respect to the tax effects of
the Reorganization on such stockholder.
<PAGE>
DESCRIPTION OF ENERGYSOUTH CAPITAL STOCK
Since the Merger Agreement is conditioned on the EnergySouth Restated Articles
being effective at the Effective Time of the Merger, a vote by Mobile Gas
stockholders for adoption of the Merger Agreement will constitute approval of
the EnergySouth Restated Articles. EnergySouth's Board of Directors have
adopted the EnergySouth by-laws which will be in effect at the time of the
Merger. These documents will govern certain rights of EnergySouth's
stockholders after the Reorganization as discussed under this caption and
under "Comparative Stockholders' Rights" below.
The following statements with respect to EnergySouth Common Stock are based on
certain provisions of EnergySouth's Restated Articles and by-laws, as they are
to be in effect as of the effective time of the Merger. A copy of
EnergySouth's Restated Articles, substantially in the form to be in effect at
the effective time of the Merger, is attached as Appendix B hereto and is
incorporated herein by reference. EnergySouth's By-Laws are substantially
similar to the By-Laws of Mobile Gas. The EnergySouth By-Laws have been
filed as an exhibit to the Registration Statement of which this Proxy
Statement/Prospectus is a part, and are incorporated herein by reference.
EnergySouth is authorized to issue 10,000,000 shares of common stock, one cent
($.01) par value per share, and 10,000,000 shares of preferred stock, no par
value per share. EnergySouth preferred stock may be issued from time to time
in series as EnergySouth's Board of Directors may determine, and the
respective dividend rates, redemption terms (if any), amounts payable on
liquidation, voting rights (if any), number of votes per share, conversion
rights (if any), and other terms will be fixed by EnergySouth's Board of
Directors with respect to any such series prior to issuance.
When issued in the Reorganization, shares of EnergySouth Common Stock will be
fully paid and nonassessable.
Holders of EnergySouth Common Stock and preferred stock, if any, are not
entitled to preemptive rights.
Dividends; Repurchase of Shares
Subject to prior rights of EnergySouth preferred stock (if any should be
issued and become outstanding), EnergySouth Common Stock is entitled to such
dividends as may be declared by EnergySouth's Board of Directors, and
EnergySouth may purchase or otherwise acquire outstanding shares of common
stock, out of funds legally available therefor See "DIVIDEND POLICY" above.
Liquidation Rights
Upon liquidation of EnergySouth, any net assets remaining after payment to the
holders (if any) of EnergySouth preferred stock of the full amounts to which
they are entitled to receive are distributable pro rata to the holders of
EnergySouth Common Stock.
Voting Rights
Holders of EnergySouth Common Stock are entitled to one vote per share. There
are no cumulative voting rights. As provided in the EnergySouth Restated
Articles, EnergySouth's Board of Directors will be divided into three
classes, with directors elected generally to serve for terms of three years.
Transfer Agent and Registrar
The transfer agent and registrar for EnergySouth Common Stock will be AmSouth
Bank, Corporate Trust Department, P.O. Box 11426, Birmingham, Alabama 35202.
<PAGE>
INDEMNIFICATION AND LIMITATION OF LIABILITY
As do the Mobile Gas By-Laws, the EnergySouth by-laws provide that EnergySouth
shall indemnify to the full extent permitted by law any person made, or
threatened to be made, a party to any action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that
such person is or was a director, officer, employee, agent or trustee of
EnergySouth, or serves or served at the request of EnergySouth with any other
enterprise in such capacity; expenses incurred by any such person in defending
any such action, suit or proceeding will be paid or reimbursed by EnergySouth
promptly upon receipt by it of an undertaking of such person to repay such
expenses if it shall ultimately be determined that such person is not entitled
to be indemnified by EnergySouth. As allowed by the Alabama Business
Corporation Act, EnergySouth's Restated Articles will provide that no director
shall have personal liability to EnergySouth or its stockholders for damages
for any action taken or not taken as a director, except for liability for:
the amount of financial benefit received by a director to which he or she was
not entitled; an intentional infliction of harm on EnergySouth or its
stockholders; a violation of Section 10-2B-8.33 of the Alabama Business
Corporation Act; an intentional violation of criminal law; or a breach of
director's duty of loyalty to EnergySouth or its stockholders. Any amendment
or repeal of such liability limitation provision may not apply to or have any
effect on the liability or alleged liability of any director for or with
respect to any acts or omissions of such director occurring prior to such
amendment or repeal.
<PAGE>
POSSIBLE EFFECTS OF CERTAIN PROVISIONS OF ENERGYSOUTH
ARTICLES OF INCORPORATION AND BY-LAWS
It is not the intent of the Company's Board of Directors to discourage
legitimate offers to enhance stockholder value. However, certain provisions
of the EnergySouth's Restated Articles and by-laws may have the effect of
discouraging unilateral tender offers or other attempts to take over and
acquire the business of EnergySouth. These provisions, some of which are
presently contained in Mobile Gas's articles of incorporation or by-laws or
otherwise apply to Mobile Gas, might discourage a potentially interested
purchaser from attempting a unilateral takeover bid for EnergySouth on terms
which some stockholders might favor. If they discourage potential takeover
bids, these provisions might limit the opportunity for EnergySouth's
stockholders to sell their shares at a premium over then prevailing market
prices.
Non-Cumulative Voting. Neither Mobile Gas nor EnergySouth provides for
cumulative voting in the election of directors. The procedure known as
cumulative voting permits stockholders to multiply the number of votes to
which they may be entitled by the total number of directors to be elected in
the same election by the holders of the class or classes of shares of which
their shares are a part and to cast their whole number of votes for one
candidate or to distribute them among any two or more candidates.
"Blank-Check" Preferred Stock. EnergySouth's restated articles of
incorporation will authorize the issuance of 10,000,000 shares of EnergySouth
preferred stock. In addition, after giving effect to the Merger,
approximately 4,580,000 shares of EnergySouth Common Stock will be
authorized but unissued and not reserved for issuance. An effect of the
existence of unissued EnergySouth Common Stock and preferred stock may be to
enable the EnergySouth Board of Directors to render more difficult or
discourage a transaction to obtain control of EnergySouth. Such shares might
be issued by the Board of Directors without stockholder approval in
transactions that might prevent or render more difficult or costly the
completion of a takeover transaction, as by diluting voting or other rights of
the proposed acquiror. In this regard, EnergySouth's restated articles of
incorporation will grant the Board of Directors broad power to establish the
rights and preferences of the authorized and unissued preferred stock, one or
more classes or series of which could be issued entitling holders to vote
separately as a class on any proposed merger or consolidation, to convert such
stock into shares of EnergySouth Common Stock or possibly other securities, to
demand redemption at a specified price under prescribed circumstances related
to a change of control, or to exercise other rights designed to impede a
takeover.
Business Combinations with Related Persons. The EnergySouth Restated
Articles provide that the affirmative vote of the holders of at least 75% of
the outstanding shares of EnergySouth Common Stock shall be necessary to
approve mergers and certain other business combination transactions with any
person who beneficially owns 20% or more of the outstanding shares of
EnergySouth Common Stock (a "Related Person"), unless (i) the consideration to
be paid in such transaction meets certain enumerated "fair price" tests or
(ii) such merger or business combination shall have been approved by
two-thirds of the Continuing Directors and at the time of such approval such
Continuing Directors comprised at least a majority of the Board of Directors
of EnergySouth. "Continuing Director" is generally defined in the
EnergySouth Restated Articles as a member of the Board of Directors who is not
a Related Person or an affiliate or an associate of a Related Person and was a
director prior to the time a Related Person became such and any successor to
the Continuing Director who was recommended by a majority of Continuing
Directors. For further information regarding these provisions, see Article 8
of the form of the EnergySouth Restated Articles attached hereto as Appendix
B.
Other Provisions. Some other provisions of EnergySouth's restated articles of
incorporation and by-laws may also tend to discourage potential offers to take
over and acquire the business of EnergySouth. Like the Board of Directors of
Mobile Gas, EnergySouth's Board of Directors will be divided into three
classes, with directors in each class generally being elected to serve a
three-year term. EnergySouth's Restated Articles also provide that directors
may be removed without cause by the stockholders, only upon the affirmative
vote of 75% of the shares entitled to vote at a stockholder meeting. In
addition, certain provisions (relating to, for example, the classified Board
of Directors and transactions with related persons) may only be amended by the
affirmative vote of not less than 75% of the shares entitled to vote at a
stockholder meeting. Mobile Gas's articles of incorporation and by-laws
presently contain a number of these provisions.
<PAGE>
COMPARATIVE STOCKHOLDERS' RIGHTS
Mobile Gas and EnergySouth are both Alabama corporations. When the
Reorganization becomes effective, holders of Mobile Gas Common Stock will
become holders of EnergySouth Common Stock, and their rights will be governed
by EnergySouth's restated articles of incorporation and by-laws instead of
those of Mobile Gas.
Certain differences between the rights of holders of EnergySouth Common Stock
and those of holders of Mobile Gas Common Stock are summarized below. Such
summary is qualified in its entirety by reference to the information included
in the exhibits hereto, in exhibits to the Registration Statement of which
this Proxy Statement/Prospectus is a part, and in materials incorporated
herein by reference.
Authorized Shares
The number of authorized shares of Mobile Gas Common Stock and EnergySouth
Common Stock is 8,000,000 and 10,000,000 shares, respectively. As of the
record date for the Annual Meeting, there were 3,239,104 shares of Mobile Gas
Common Stock issued and outstanding. Up to approximately 4,900,000 shares
of EnergySouth Common Stock may be issued in the Reorganization. The
additional authorized but unissued shares of EnergySouth Common Stock will be
available for issuance under the Dividend Reinvestment and Stock Purchase Plan
and the Mobile Gas Stock Option Plan, as well as possibly for stock splits,
stock dividends, equity financings, and for other general corporate purposes
(including, possibly, acquisitions), none of which is under current
consideration.
Mobile Gas presently has no authorized preferred stock. There are
10,000,000 authorized shares of EnergySouth preferred stock, all of which are
unissued.
Preferred Stock
The Board of Directors of EnergySouth is authorized to issue preferred stock
in series.
EnergySouth's restated articles of incorporation do not establish voting
rights, preferences or other rights with respect to EnergySouth preferred
stock. Energy South's Board of Directors is given full authority to provide
for the establishment and/or issuance of any series of preferred stock, the
designation of such series and the preferences, limitations, and relative
rights of the shares of such series, including the following: (i) distinctive
designation and number of shares comprising such series; (ii) voting rights,
if any, which shares of that series shall have; (iii) the rate of dividends,
if any, on the shares of that series; (iv) whether the shares of that series
shall be redeemable, and, if so, the terms and conditions of such redemption;
(v) whether that series shall have a sinking fund for the redemption or
purchase of shares of that series; (vi) the rights to which the holders of the
shares of that series shall be entitled in the event of voluntary or
involuntary dissolution or liquidation; (vii) whether the shares of that
series shall be convertible into or exchangeable for cash, shares of stock of
any other class or any other series, indebtedness, or other property or
rights; (viii) whether the issuance of any additional shares of such series,
or of any shares of any other series, shall be subject to restrictions as to
issuance, or as to the powers, preferences or rights of any such other series;
and (ix) any other preferences, privileges and powers in relative,
participating, optional, or other special rights and qualifications,
limitations or restrictions of such series.
Management believes that the ability to issue EnergySouth preferred stock will
provide important flexibility to EnergySouth, although there are no present
plans for such issuance.
Classified Board
As is the case with Mobile Gas, EnergySouth's restated articles of
incorporation and by-laws will provide (i) for the Board to determine the
number of directors; and (ii) for the division of the Board into three classes
with directors in each class generally being elected for a three-year term.
See " MANAGEMENT OF ENERGYSOUTH" below.
<PAGE>
BUSINESS
Mobile Gas was incorporated under the laws of the State of Alabama in 1933.
The Company is engaged in the purchase, distribution, sale and transportation
of natural gas to over 100,000 residential, commercial and industrial
customers in southwest Alabama, including the City of Mobile and adjacent
areas. The Company's service territory covers approximately 300 square
miles. Mobile Gas is also involved in merchandise sales, specifically sales
of natural gas appliances.
Mobile Gas's principal subsidiaries participate and own investments in gas
pipeline transportation and storage, marketing and other energy-related
services. These subsidiaries will become separate subsidiaries of
EnergySouth after the Reorganization.
MGS Energy Services, Inc.("MGS Energy"), a wholly-owned subsidiary of Mobile
Gas, provides contract and consulting work for utilities and industrial
customers. MGS Energy owns a 51% interest in Southern Gas Transmission
Company ("SGT"), an Alabama general partnership which is a transportation
company subject to the jurisdiction of and regulation by the PSC. SGT
constructed and operates a 50-mile pipeline from the facilities of Koch
Gateway Pipeline Company ("Koch"), formerly United Gas Pipe Line Company, near
Flomaton, Alabama to the facilities of Alabama River Pulp Company, Inc. in
Claiborne, Alabama.
MGS Storage Services, Inc. ("MGS Storage") , also a wholly-owned subsidiary
of Mobile Gas, holds a general partnership interest of 87 1/2% in Bay Gas
Storage Company, Ltd. ("Bay Gas"), an Alabama limited partnership of which a
12 1/2% limited partnership interest is held by Olin Corporation. Bay Gas
has constructed an underground gas storage cavern which is used to provide
storage and delivery of natural gas for Mobile Gas and other customers.
MGS Marketing Services, Inc. ("MGS Marketing"), also a wholly-owned
subsidiary of Mobile Gas, was incorporated to assist existing and potential
customers in the purchase of natural gas.
When the Reorganization occurs, EnergySouth will have no material assets other
than its ownership of stock of its subsidiaries, which initially will consist
of all of Mobile Gas's outstanding common stock and all of the common stock of
Mobile Gas's existing subsidiaries, which in turn own the partnership
interests described above. See "Transfer of Mobile Gas Subsidiaries to
EnergySouth" above. It is expected that, in the future, EnergySouth will
expand into some other businesses and ventures.
Financial and additional information regarding Mobile Gas and its subsidiaries
is also included in the 1997 Annual Report to Stockholders delivered with this
Proxy Statement/Prospectus and in the Mobile Gas Annual Report on Form 10-K
for the fiscal year ended September 30, 1997, which is incorporated by
reference herein.
<PAGE>
REGULATION OF ENERGYSOUTH AND MOBILE GAS AND CERTAIN SUBSIDIARIES
Regulation of EnergySouth
As a result of the Reorganization, EnergySouth will become a "public utility
holding company" under the Holding Company Act. Simultaneously with the
effectiveness of the Merger, EnergySouth will file with the Commission an
exemption statement to exempt itself and its subsidiaries from all provisions
of the Holding Company Act (except with respect to certain acquisitions and
investments) pursuant to the "intrastate" exemption in Section 3(a)(1) of that
Act. To maintain this exemption, EnergySouth will be required to file a
statement annually with the Commission. The exemption may be revoked by the
Commission if a substantial question of law or fact exists as to whether
EnergySouth is within the parameters of the exemption, or if it appears that
the exemption may be detrimental to the public interest or the interest of
investors or consumers.
EnergySouth believes that it will be exempt from all provisions of the Holding
Company Act except Section 9(a)(2). Section 9(a)(2) requires Commission
approval of the direct or indirect acquisition by EnergySouth of five percent
(5%) or more of the voting securities of any other public utility company.
There are also presently limits on the extent to which EnergySouth and its
non-utility subsidiaries can enter into businesses which are not "functionally
related" to the public utility business without raising potential issues about
EnergySouth's exempt status. Commission policies regarding the scope of
permissible non-utility activities of a public utility holding company are
subject to change, but under current law EnergySouth would be required to
remain engaged primarily and predominantly in the public utility business
which could limit other activities in which EnergySouth might wish to engage.
In 1994 the Commission issued a release soliciting the views of interested
parties on a study being conducted by its staff to develop recommendations
regarding certain Congressional concerns and the needs of those affected by
regulation under the Holding Company Act. In June 1995 the staff completed
its study and issued a report which concluded that significant changes were
needed in the current regulatory scheme. The Commission staff report viewed
the Holding Company Act as unnecessarily restrictive in many regards which
could prevent companies from responding effectively to changes now occurring
in the utility industry. Among the staff report's recommendations were three
legislative options for the Commission to offer to Congress: repeal of the
Holding Company Act with legislation to continue federal protection of
consumers; unconditional repeal of the Holding Company Act; or a broadening of
the Commission's authority to exempt holding companies where state regulation
was adequate. Pending legislative action, the staff report recommended that
the Commission act administratively to modernize and simplify holding company
regulation, reduce delays in current administration, and minimize regulatory
overlap, including rulemaking proposals and significant changes in the
Commission's past interpretations under the Act. One of these proposals was a
rule to exempt most energy-related diversification within investment
limitations. On March 24, 1997, Rule 58 under the Holding Company Act was
amended to exempt from the requirements of prior approval by the Commission
under Section 9(a) of the Holding Company Act the acquisition of securities of
certain varieties of "energy related companies" subject to aggregate
investment limits by registered companies.
Legislation to repeal the Holding Company Act has been introduced in both
houses of Congress and is pending. Mobile Gas cannot predict whether Congress
will take any action to significantly modify or repeal the Holding Company
Act, or whether the Commission will take action to further revise or modify
significantly its Holding Company Act rules, decisions and interpretations.
Regulation of Mobile Gas and Certain Subsidiaries
Mobile Gas will continue to be subject to regulation by the PSC after the
Reorganization. Mobile Gas's utility retail sales, which include sales of
gas, transportation and balancing services, will continue to be made primarily
under rate schedules and tariffs filed with and subject to the jurisdiction of
the PSC. In addition, Mobile Gas will continue to be subject to regulation
by the PSC, as it has been in the past, regarding issuances of securities,
capital ratio maintenance, and the maintenance of its books and records.
Certain Mobile Gas subsidiaries own controlling interests in partnerships
which are subject to regulation by the PSC, and such regulation will continue
after the Reorganization.
<PAGE>
RIGHT OF DISSENTING STOCKHOLDERS TO RECEIVE PAYMENT FOR SHARES
Any holder of record of Mobile Gas Common Stock who follows the procedures
specified in Sections 10-2B-13.01 through 10-2B-13.32 of the Alabama Business
Corporation Act (the "Appraisal Law") is entitled to receive payment of the
"fair value" of such shares. Reference is made to the Appraisal Law, a copy
of which is included herewith as Appendix C, for a complete statement of the
rights of dissenting stockholders. In accordance with the Appraisal Law, a
stockholder who is entitled to dissent and obtain payment for Mobile Gas
Common Stock may not challenge the Merger unless it is unlawful or fraudulent
with respect to such stockholder or Mobile Gas. See Section 10-2B-13.02(b)
of the Appraisal Law.
The following is a summary of appraisal rights available to stockholders of
Mobile Gas, which summary is not intended to be a complete statement of the
Appraisal Law and is qualified in its entirety by reference to the Appraisal
Law. Any stockholder of Mobile Gas wishing to dissent from the proposed
Merger and obtain a cash payment of the fair value of such stockholder's
shares must file with Mobile Gas, prior to the vote on the proposed Merger, a
written notice of such stockholder's intention to demand to be paid the fair
value for such shares if the Proposed Merger is effectuated and must not vote
such shares in favor of the Merger. A failure to vote will satisfy the
condition that such shares not be voted in favor; however, voting in favor of
or delivering a proxy in favor of the Merger or an unmarked proxy (which will
be voted in favor of the Merger) will constitute a waiver of such
stockholder's rights to appraisal and will nullify any written demand for
appraisal. Moreover, voting against the Merger will not, in and of itself,
satisfy the condition that the written notice be filed with Mobile Gas. If
the Merger is consummated, Mobile Gas will mail a notice to all stockholders
who gave due notice of intention to demand payment and who refrained from
voting their shares in favor of the Merger, providing instructions as to how
to obtain payment for their shares. A stockholder who fails to demand
payment, by the date specified in the notice (which must be not less than 30
days nor more than 60 days after the delivery of the notice) will have no
right to receive payment for such stockholder's shares but will retain all
other rights of a stockholder of Mobile Gas. Within 20 days of making a
demand for payment for such shares, the dissenting stockholder must submit the
certificate(s) representing such shares to Mobile Gas for (1) notation thereon
of the demand for payment and (2) return to the stockholder. Under the
Appraisal Law, record holders of common shares of Mobile Gas are entitled to
appraisal rights as described herein and the procedures to perfect such rights
must be carried out by and in the name of such holders of record. Persons
who are beneficial owners but not record holders of Mobile Gas Common Stock
and who wish to exercise appraisal rights with respect to the Merger must (i)
submit to Mobile Gas, at the time of or before the assertion of the rights, a
written consent of the record holder or holders of the common shares to such
dissent and (ii) do so with respect to all of the beneficial owner's shares or
the shares over which the beneficial owner has voting power. Immediately
upon effectuation of the proposed Merger, or upon receipt of demand for
payment if the proposed Merger has already been effectuated, Mobile Gas will
remit (the "Remittance") to a dissenter who has made demand, the amount which
Mobile Gas estimates to be the fair value of the shares, with accrued
interest, if any. The Remittance will be accompanied by certain financial
information of Mobile Gas and a statement regarding Mobile Gas's estimate of
the fair value of the shares, together with a notice of the dissenter's right
to demand supplemental payment and a copy of the Appraisal Law. If Mobile
Gas fails to remit payment for the dissenter's shares as required by the
preceding paragraph or if the dissenter believes that the amount remitted is
less than the fair value of the dissenter's shares or that the interest is not
correctly determined, the dissenter may, within 30 days after the date of
mailing of the Remittance, mail to Mobile Gas such dissenter's own estimate of
the value of the shares or of the interest and demand payment of the
deficiency. A dissenter who fails to do so shall be entitled to no more than
the Remittance. Within 60 days after receiving such demand, Mobile Gas must
either (i) pay the dissenting stockholder the amount demanded (or such other
amount agreed to by such stockholder) or (ii) file a petition requesting that
the Circuit Court of Mobile County, Alabama determine the fair value of the
Mobile Gas Common Stock. The Circuit Court may appoint one or more persons as
appraisers to receive evidence and recommend a decision of the question of
fair value. Fair value means the value of the Mobile Gas Common Stock
immediately before the effectuation of the Merger. Dissenters will be
entitled to judgment for the amount, if any, by which the fair value of their
shares, plus interest, is found to exceed the Remittance. Fair value may be
found by the Circuit Court to be more than, less than or the same as the
amount offered by Mobile Gas.
<PAGE>
MANAGEMENT OF ENERGYSOUTH
Directors of EnergySouth
The EnergySouth Restated Articles, as of the effective time of the Merger,
will divide EnergySouth's Board of Directors into three classes in the same
manner as the directors of Mobile Gas, with directors in each class generally
being elected for a three-year term. EnergySouth's by-laws will permit its
Board of Directors to fix from time to time the number of directors in a range
of nine to twelve, and the Merger Agreement provides that as of the effective
time of the Merger, the eleven directors of Mobile Gas will also become
directors of EnergySouth.
Officers of EnergySouth
As of the Effective Time of the Merger, the Board of Directors of EnergySouth
will appoint the following persons then serving as officers of Mobile Gas to
the following offices as the officers of EnergySouth:
John S. Davis President and Chief Executive Officer
Charles P. Huffman Vice President, Treasurer and Chief Financial Officer
G. Edgar Downing, Jr. Vice President, General Counsel and Secretary
For further information concerning persons to become directors or officers of
EnergySouth, see "PROPOSAL 2: ELECTION OF DIRECTORS OF MOBILE GAS" and
"SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" in this Proxy
Statement/Prospectus and "Executive Officers of the Registrant" following Part
IV of the Company's Annual Report on Form 10-K for the year ended September
30, 1997, which is incorporated by reference herein.
<PAGE>
OTHER INFORMATION
Validity of EnergySouth Common Stock
The validity of the shares of EnergySouth Common Stock to be issued in the
Merger will be passed upon by Armbrecht, Jackson DeMouy, Crowe, Holmes &
Reeves, L.L.C., counsel to Mobile Gas and EnergySouth, 1300 Riverview Plaza,
Mobile, Alabama 36602.
Experts
The consolidated financial statements and the related financial statement
schedule incorporated in this Proxy Statement/Prospectus by reference from the
Company's Annual Report on Form 10-K for the year ended September 30, 1997
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
THE BOARD OF DIRECTORS OF MOBILE GAS HAS UNANIMOUSLY APPROVED THE HOLDING
COMPANY STRUCTURE AND ADOPTED THE MERGER AGREEMENT, BELIEVES THE HOLDING
COMPANY STRUCTURE AND THE REORGANIZATION TO BE IN THE BEST INTERESTS OF MOBILE
GAS AND ITS STOCKHOLDERS, AND RECOMMENDS THAT THE HOLDERS OF MOBILE GAS COMMON
STOCK VOTE "FOR" THE HOLDING COMPANY PROPOSAL AND ADOPTION OF THE MERGER
AGREEMENT AT THE ANNUAL MEETING.
<PAGE>
PROPOSAL 2
ELECTION OF DIRECTORS
The Restated Articles of Incorporation of Mobile Gas provide that the number
of Directors shall not be less than nine nor more than twelve, as determined
from time to time by the Board of Directors. The Board has fixed the number
of Directors at eleven. The Restated Articles of Incorporation also provide
that the Board of Directors shall be divided into three classes, with each
class serving three-year terms which end in successive years. Approximately
one-third of the Board of Directors is elected each year. The Restated
Articles of Incorporation of Mobile Gas do not provide for cumulative voting
in the election of Directors.
Unless authority is withheld on a proxy, shares represented by the proxies
received by Mobile Gas will be voted for the election as Directors of the four
nominees for Directors listed below. The Directors are to be elected to
serve until the Annual Meeting of Stockholders in 2001 and until their
successors have been duly elected and qualified. Proxies cannot be voted for
more than four persons. Should any nominee be unable or unwilling to accept
election, which Mobile Gas has no reason to believe will be the case, the
proxy will be voted for a substitute nominee or nominees designated by Mobile
Gas.
The following information is a brief account of the business experience of
each nominee and director during the past five years, and of Mobile Gas Common
Stock beneficially owned by each nominee and director as of December 5, 1997
based on information received from the respective nominees and directors.
Name, Age, Principal
Occupation During Past No. of Shares
Five Years, and First Became Beneficially Percent
Other Directorships a Director(1) Owned(2) of Class
Nominees to Serve
until Annual Meeting
of Stockholders in 2001:
JOHN S. DAVIS, 55, was 1995
appointed President and Chief 1995 31,213(9) *
Executive Officer of Mobile Gas
in January, 1995, having been
appointed Executive Vice President
and Chief Operating Officer of
Mobile Gas in July, 1994.
Previously, he served as independent
consultant and Chairman of Davis-Shows
Motors, Inc. from 1991 to 1994, and
served as President of United Gas Pipe
Line Company from 1989 to 1991. He
serves as a Director of Infirmary Health
Systems, Inc., Mobile, Alabama. He is
also a member of the South Area
Board of Directors of AmSouth Bank,
Mobile, Alabama. (3) (6) (7)
WALTER L. HOVELL, 69, served as 1975 32,727(10) *
President and Chief Executive
Officer of Mobile Gas from March,
1984 to January, 1995. He serves
as a Director of The Bank of Mobile,
Mobile, Alabama, and as interim
President of the University of
Mobile, Mobile, Alabama. (3)(4)(7)
G. MONTGOMERY MITCHELL, 69, retired 1993 4,000(11) *
in 1993 as Senior Vice President
and Director of Stone & Webster
Management Consultants, Inc., Houston,
Texas. He serves as a Director of
Energy West, Inc., Great Falls,
Montana. (4)(6)
F. B. MUHLFELD, 77, retired in 1986 1986 1,750 *
as Vice Chairman of the Board of Stone
& Webster, Incorporated, New York,
New York. He had been with the Stone
& Webster organization for more
than 40 years and had served as
Vice Chairman for more than
5 years. (4)(6)
Directors to Serve until Annual
Meeting of Stockholders in 1999:
WILLIAM J. HEARIN, 88, Chairman of
the Board of the Mobile Press 1960 309,299(12) 9.4%
Register, Mobile, Alabama and The
Mississippi Press, Pascagoula,
Mississippi. He serves as Chairman
of the Board of Mobile Gas. He
serves as a Director Emeritus of
The Bank of Mobile,
Mobile, Alabama. (3) (5) (7)
JOSEPH G. HOLLIS, JR., 74, retired in
1992 as Chairman of the Board of 1959 20,000 *
Johnson Hardware Company, Inc.,
Newnan, Georgia.(4)(5)
GAYLORD C. LYON, 75, is President of
Gaylord C. Lyon & Company, Inc., 1973 16,700(13) *
a real estate appraisal and property
management company, Mobile,
Alabama. (3)(4)(6)
E. B. PEEBLES, JR., 78, retired in
December, 1984 as Chairman of 1978 19,668(15) *
Ryan-Walsh Stevedoring Company, Inc.,
Mobile, Alabama, and Senior Vice
President of Dravo Corporation,
Pittsburgh, Pennsylvania. He serves
as Chairman and Chief Executive Officer
of Senior Bowl Association, Mobile,
Alabama. (3)(5)
Directors to Serve until Annual
Meeting of Stockholders in 2000:
JOHN C. HOPE, III, 48, was appointed
Chairman and Chief Executive Officer 1993 3,000 *
of Whitney Bank of Alabama and Executive
Vice President of Whitney Holding
Corporation in November, 1994.
Previously, he served as Executive Vice
President and Regional Executive of
AmSouth Bank, Mobile, Alabama. He
serves as a Director of Infirmary
Health Systems, Inc., Mobile,
Alabama. (3)(5)
S. FELTON MITCHELL, JR. , 53, is
President of S. Felton Mitchell, Jr., 1993 2,100 *
P.C., a law practice, and sole
proprietor of S. Felton Mitchell, Jr.,
CPA, an accounting practice. He is
President of The Vibroplex(R) Co.,
Inc., a manufacturer of amateur radio
equipment. He serves as a Director of
QMS, Inc., Mobile, Alabama. (3)(4)(7)
THOMAS B. VAN ANTWERP, 47, became
President of Legal Professional 1993 3,280(8) *
Staffing, Atlanta, Georgia in July of
1997. He previously served as Sales
and Marketing Director of Georgia
Press Association, Atlanta, Georgia,
from May 1996; as Zoned Group A
dvertising Manager, Syracuse Newspapers,
Syracuse, New York, from February 1, 1993;
and prior to such date as
Executive-in-Training at The Mississippi
Press, Pascagoula, Mississippi. He
serves as Director of Merchants & Marine
Bank, Pascagoula, Mississippi. (5)(6)(14)
- ---------------------
* Less than one percent.
(1) Each director has served continuously since the dates indicated.
(2) Except as noted, the indicated owners have sole voting and dispositive
power with respect to shares beneficially owned.
(3) Member of Executive Committee.
(4) Member of Audit Committee.
(5) Member of Compensation and Planning Committee.
(6) Member of Risk Management Committee.
(7) Member of Retirement Board Committee.
(8) Includes 1,817 shares owned jointly with Mr. Van Antwerp's spouse with
whom he shares voting and dispositive power, and 1,040 shares held in each of
two accounts by Mr. Van Antwerp as custodian for two children under the New
York Uniform Transfers to Minors Act, as to which he has voting and
dispositive power.
(9) Includes 463 shares held in Employees' 401(k) Plan and 15,000 shares
subject to options exercisable within 60 days.
(10)Includes 12,501 shares owned by Mr. Hovell's spouse, as to which he
disclaims beneficial ownership, and 7,836 shares held in his Individual
Retirement Account, over which shares he has sole voting power.
(11)All shares are owned jointly with Mr. Mitchell's spouse with whom he
shares voting and dispositive power.
(12)Includes 45,000 shares owned by the Chandler Charitable Trust, of which
Mr. Hearin is the trustee.
Mr. Hearin shares voting power as to 31,300 shares owned by his wife, Emily
Staples Hearin, 45,200 shares owned by his daughter, Ann Hearin, and 27,799
shares owned by his former spouse, Louise Hearin.
(13)Includes 3,775 shares owned by Mr. Lyon's spouse.
(14)Mr. Van Antwerp is the stepson of Mr. Hearin.
(15)Includes 2,000 shares owned by Mr. Peebles' spouse as to which he
disclaims beneficial ownership.
The directors of Mobile Gas also serve as the directors of EnergySouth. The
EnergySouth directors are divided into three classes in the same manner as
Mobile Gas and have terms of office identical to their terms as directors of
Mobile Gas. The directors of EnergySouth will continue to serve as such
after the Reorganization until their successors are elected and qualified.
<PAGE>
INFORMATION REGARDING THE BOARD OF DIRECTORS
Director Compensation, Committees and Attendance. The Board of Directors of
Mobile Gas had six meetings during the last fiscal year. Quarterly fees paid
to non-employee members of the Board of Directors, other than members of the
Executive Committee, are $3,250 per quarter; quarterly fees paid to Executive
Committee members are $3,750 per quarter. Directors also receive $500 per
Board meeting attended. The maximum aggregate of fees payable to any
director for service on the Board of Directors and its committees is $16,000
per fiscal year, except that the maximum annual fee payable to Executive
Committee members is $18,000. Directors who are also employees of Mobile Gas
do not receive fees for service on the Board of Directors or its committees.
Pursuant to the Non-Employee Directors Deferred Fee Plan, directors may make
an advance election to defer director's fees, and to have such deferred fees
treated as though invested in Mobile Gas Common Stock, or as cash earning
interest at the prime rate. Messrs. Hope, Hovell, S. Felton Mitchell, G.
Montgomery Mitchell and Van Antwerp elected to defer a portion of director's
fees payable to them during fiscal year 1997. There are five standing
committees of the Board, which are the Executive Committee, Audit Committee,
Compensation and Planning Committee, Risk Management Committee and Retirement
Board Committee. The Company does not have a nominating committee.
The Executive Committee, which did not meet during the last fiscal year,
exercises all the powers of the Board of Directors in the management of the
business and affairs of Mobile Gas between meetings of the Board of Directors,
except as restricted by the By-laws of Mobile Gas. Action by the Executive
Committee is reported at the meeting of the Board next succeeding such action.
The Audit Committee, which met five times during the last fiscal year,
recommends to the Board the independent auditors and reviews recommendations
made by the auditors. The committee meets with the auditors to review the
scope of the audit to be conducted and afterwards to receive the report of
such audit with recommendations, and advises the Board with respect thereto.
The Company's independent public accountants have free access to the Audit
Committee and meet with the committee with and without management present.
Members of the Audit Committee are all non-employee Directors.
The Compensation and Planning Committee, which met twice during the last
fiscal year, reviews and makes recommendations to the Board establishing
salaries and other compensation for the officers of Mobile Gas. This
committee also reviews the Employees' Retirement Plan of Mobile Gas and makes
recommendations to the Board concerning changes in the Plan. Members of the
Compensation and Planning Committee are all non-employee Directors.
The Risk Management Committee, which met one time during the last fiscal year,
is responsible for reviewing risk management policies and programs throughout
Mobile Gas to assure that they are appropriate to the short and long term
objectives of Mobile Gas. The Committee also advises the Board of Directors
of the effectiveness of these policies and programs.
The Retirement Board Committee, which met five times during the last fiscal
year, is responsible for the general administration of the Employee Savings
Plan and the Voluntary Employees' Beneficiary Association Plans, as well as
the Retirement Plan, all being Plans of Mobile Gas.
Insurance. The Company provides accidental death and dismemberment insurance
of $200,000 for each Director and $100,000 for the spouse of each Director.
Premium cost for the fiscal year for such coverage was $2,504 for all
Directors not serving as officers. The Company is not designated as the
beneficiary under the policy.
<PAGE>
REPORTS UNDER SECTION 16 OF THE SECURITIES AND EXCHANGE ACT
Mr. Lyon filed one late report on Form 4, required by Section 16(a) of the
Securities and Exchange Act of 1934, with respect to his acquisition of 500
shares of Mobile Gas Common Stock. In making this disclosure, Mobile Gas has
relied on written representations by or on behalf of its directors and
executive officers and copies of reports filed.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of December 5, 1997, information concerning
(i) beneficial ownership of the Mobile Gas Common Stock, the only class of
voting securities of Mobile Gas, by persons who are known by the Company to
own beneficially more than 5% of such common stock, and (ii) beneficial
ownership of such common stock by all directors and executive officers of the
Company as a group. Except as noted below, the indicated owners have sole
voting and investment power with respect to shares beneficially owned.
Name and Address Amount Beneficially Owned Percent of Class
William J. Hearin 309,299 (1) 9.4%
304 Government Street
Mobile, Alabama 36630
All directors and executive 493,585 (1)(2) 15.0%
officers as a group (16 persons)
(1) Includes 45,000 shares owned by the Chandler Charitable Trust, of which
Mr. Hearin is the trustee. Mr. Hearin shares voting power as to 31,300 shares
owned by his wife, Emily Staples Hearin, 45,200 shares owned by his daughter,
Ann Hearin, and 27,799 shares owned by his former spouse, Louise Hearin.
(2) Includes 48,526 shares owned by spouses of officers and directors, 8,168
shares owned jointly by officers and directors and their respective spouses,
5,810 shares credited to officers' accounts in the Employees' 401(k) Plan, and
52,500 shares subject to options exercisable within 60 days.
<PAGE>
EXECUTIVE COMPENSATION
The following table contains information with respect to compensation paid or
set aside by Mobile Gas for services in all capacities during fiscal years
1995, 1996 and 1997 to the Company's Chief Executive Officer and to the four
most highly compensated executive officers of Mobile Gas and its subsidiaries,
other than Chief Executive Officer, whose aggregate salary and bonus exceeded
$100,000 for fiscal year 1997.
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation Awards
--------------------------- ---------------------
All
Other Other
Annual Securities Annual
Name and Principal Year Salary Bonus Compen- Underlying Compen-
Position ($) ($) sation($) Options (#) sation($)
John S. Davis
President and 1997 218,167 85,000 8,480 (3) 129 (8)
Chief Executive 1996 205,833 78,000 7,941 (3) 129 (8)
Officer 1995(1) 181,667 25,000 4,337 (3) 30,000 129 (8)
W. G. Coffeen,III 1997 122,000 28,300 3,631 (4) 129 (8)
Vice President 1996 115,833 30,000 3,438 (4) 2,629 (8)
- - Marketing 1995 108,333 5,000 3,218 (4) 15,000 129 (8)
Gerald S. Keen 1997 124,167 32,000 3,633 (5) 129 (8)
Vice President 1996 119,167 25,000 3,384 (5) 2,629 (8)
- - Operations 1995 113,333 3,361 (5 ) 15,000 129 (8)
A.H. Tenhundfeld, 1997 112,583 27,300 3,378 (6) 129 (8)
Jr. 1996 106,667 23,000 1,890 (6) 129 (8)
Vice President - 1995(2) 58,333 7,500 15,000 129 (8)
Administration
and Planning
Charles P. 1997 107,583 25,000 3,214 (7) 129 (8)
Huffman 1996 102,000 23,000 3,040 (7) 2,629 (8)
Vice President, 1995 95,333 10,000 2,965 (7) 15,000 129 (8)
Chief Financial
Officer, Treasurer
and Assistant
Secretary
- ------------------------
(1) Mr. Davis was appointed President and Chief Executive Officer of Mobile
Gas effective January 27, 1995.
(2) Mr. Tenhundfeld was appointed Vice President-Administration and Planning
of Mobile Gas effective March 1, 1995.
(3) Includes $5,060, $4,671 and $1,187 contributed to Mr. Davis' account in
the Employees' 401(k) Plan for the 1997, 1996 and 1995 fiscal years,
respectively, and $3,420, $3,270 and $3,150 paid to Mr. Davis in 1997, 1996
and 1995, respectively, pursuant to incentive units granted under Mobile Gas's
Incentive Compensation Plan.
(4) Includes $3,631, $3,329, and $3,113 contributed to Mr. Coffeen's account
in the Employees' 401(k) Plan for the 1997, 1996, and 1995 fiscal years,
respectively, and $109 and $105 paid to Mr. Coffeen in 1996 and 1995,
respectively, pursuant to incentive units granted under Mobile Gas's Incentive
Compensation Plan.
(5) Includes $3,633, $3,275, and $3,256 contributed to Mr. Keen's account in
the Employees 401(k) Plan for the 1997, 1996 and 1995 fiscal years,
respectively, and $109 and $105 paid to Mr. Keen in 1996 and 1995,
respectively, pursuant to incentive units granted under Mobile Gas's Incentive
Compensation Plan.
(6) Represents contributions to Mr. Tenhundfeld's account in the Employee
401(k) Plan for the 1997 and 1996 fiscal years.
(7) Includes $3,214, $2,931 and $2,860 contributed to Mr. Huffman's account in
the Employees' 401(k) Plan in the 1996, 1995 and 1994 fiscal years,
respectively, and $109 and $105 paid to Mr. Huffman in 1996 and 1995,
respectively, pursuant to incentive units granted under Mobile Gas's Incentive
Compensation Plan.
(8) Consists of insurance premiums of $129 for each officer; also includes
$2,500 paid by Mobile Gas to each of Messrs. Coffeen, Keen and Huffman in
fiscal 1996 upon surrender of incentive units (see COMPENSATION AND PLANNING
COMMITTEE REPORT below).
No options were granted during the fiscal year ended September 30, 1997 to any
of the executive officers listed in the Summary Compensation Table. The
following table and notes provide information on the value of unexercised
options at September 30, 1997 held by the executive officers listed in the
Summary Compensation Table.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR(1)
AND 1997 FISCAL YEAR-END OPTION VALUES
Number of Securities
Underlying Unexercised Value of Uexercised In-the-
Options at 9/30/97 (#) Money Options at 9/30/97 ($)(2)
Name and Position Exercisable Unexercisable Exercisable Unexercisable
John S. Davis 15,000 15,000 $217,500 $217,500
W.G. Coffeen, III 7,500 7,500 $108,750 $108,750
Gerald S. Keen 7,500 7,500 $108,750 $108,750
A. H. Tenhundfeld, 7,500 7,500 $108,750 $108,750
Jr.
Charles P. Huffman 7,500 7,500 $108,750 $108,750
- -----------------------
(1) No options were exercised during the 1997 fiscal year.
(2) The ultimate realization of value on the exercise of such options is
dependent upon the market price of Mobile Gas Common Stock at the time of
exercise. Calculations are based on the $35.625 closing price of Mobile Gas
Common Stock on the last trading day of the fiscal year.
Employees' Retirement Plan. The Employees' Retirement Plan is a defined
benefit plan which covers all full-time employees upon attainment of age 21
and completion of one year of service. Benefits are generally based on
various percentages of regular basic compensation for each year of the
individual's service, but if the resulting benefit is greater, is based upon
average compensation during the last five years of employment proportionately
reduced for years of service less than twenty and reduced by 70% of Social
Security benefits. Participants are vested after five years of continuous
service and are eligible for early retirement at or after age 55 with ten
years of credited service.
The full cost of the Plan is paid by Mobile Gas. Amounts accrued pursuant to
the Plan for the accounts of the individuals named in the Summary Compensation
Table above cannot be readily calculated. The estimated annual retirement
benefit, based on current remuneration and assuming retirement at age 65, of
Mr. Davis, Mr. Coffeen, Mr. Keen, Mr. Tenhundfeld and Mr. Huffman are $45,930,
$56,024, $32,439, $41,847 and $63,062, respectively. Years of service now
credited under the Plan for Mr. Davis, Mr. Coffeen, Mr. Keen, Mr. Tenhundfeld
and Mr. Huffman are 2 (subject to the provisions of the Deferred Compensation
Agreement with Mr. Davis described below), 10, 7, 2 and 17 years,
respectively. The estimated annual benefits are net of any reductions for
Social Security benefits or other offset amounts.
Employee Savings Plan. The Employee Savings Plan is a qualified voluntary
contributory retirement plan under Section 401(k) of the Internal Revenue Code
established by Mobile Gas on September 1, 1988. Eligibility requirements are
one year of employment and 21 years of age. Eligible employees can invest up
to 15% of their base salary in the plan. Employee contributions vest
immediately and can be allocated among a money market fund, bond funds, or
equity funds, as directed by the employee. The Company makes a contribution,
equal to 50% of an employee's contribution, but not more than 3% of the
employee's base salary. Company contributions are invested in Mobile Gas
Common Stock and are vested at 20% for each year of an employee's service. A
participant's account will be distributed following termination of employment.
Participants may withdraw their contributions or borrow from their accounts
subject to certain conditions. Company contributions for the 1997, 1996 and
1995 fiscal years for each of the executive officers are included in the
Summary Compensation Table above.
Agreements with Mr. Davis. In connection with Mr. Davis' employment by
Mobile Gas in 1994, Mobile Gas entered into a letter agreement with Mr. Davis
which provided, among other things, for Mobile Gas to enter into an unfunded
and unsecured deferred compensation agreement with Mr. Davis substantially in
accordance with a proposal provided by consultants retained by Mobile Gas.
Such an agreement was entered into between Mobile Gas and Mr. Davis as of
January 26, 1996 (the "Deferred Compensation Agreement"). The Deferred
Compensation Agreement provides for benefits to be paid to Mr. Davis upon
retirement, in such amount as would, taken together with amounts payable under
the Employees' Retirement Plan, equal that which would have been payable
to Mr. Davis upon retirement with the greater of 20 years or his actual years
of service with Mobile Gas. The Deferred Compensation Agreement also provides
for a benefit payable if Mr. Davis terminates employment with Mobile Gas for
any reason prior to age 65, but after having completed at least 5 years of
service with Mobile Gas. The severance benefit would be equal to two-thirds
of the monthly benefit which would have been paid to Mr. Davis under the
Employees' Retirement Plan if he had retired on his 65th birthday, but based
on Mr. Davis' actual employment history with Mobile Gas as of the date his
employment ceases. In connection with his employment, Mr. Davis was granted
3,000 incentive units under the Company's 1992 Incentive Plan.
Insurance. The Company provides accidental death and dismemberment insurance
of $200,000 for each officer and $100,000 for the spouse of each officer. The
Company is not designated as the beneficiary under the policy. Premium cost
for such insurance for each of each of the executive officers named therein is
included in the Summary Compensation Table above.
Other Compensation. The Company provides certain facilities and services to
various officers to assist them in performing their corporate responsibilities
and duties in connection with business of Mobile Gas, such as automobiles and
club memberships. The Summary Compensation Table does not include the value
of such facilities and services which might be deemed attributable to personal
use by the recipient, because the cost to Mobile Gas of such personal benefits
with respect to any executive officer named in the Summary Compensation Table
did not exceed the lesser of $50,000 or 10 percent of the compensation
reported with respect to such executive officer.
<PAGE>
COMPENSATION AND PLANNING COMMITTEE REPORT
The Compensation and Planning Committee (the "Committee") is currently
comprised of five outside directors: Mr. Hearin, Mr. Hollis, Mr. Hope, Mr.
Peebles and Mr. Van Antwerp. Based upon recommendation of the Chief Executive
Officer with respect to executive officers other than himself, it reviews and
makes recommendations to the Board with respect to salaries and other
compensation for officers of Mobile Gas. Decisions by the Committee with
respect to Compensation of Mobile Gas's executive officers, including the
Chief Executive Officer, are reviewed and approved by the Board.
The Committee is continuing to implement its compensation philosophy as
outlined in last year's proxy statement, which is intended to change Mobile
Gas's historical emphasis on base salary as the primary basis of executive
compensation. The Committee's compensation philosophy includes the following
five principles:
1. Objectives: The Company's two primary compensation objectives are to
provide a competitive compensation package that will enable Mobile Gas to
attract and retain a highly-qualified executive team, and to provide a
significant amount of variable compensation that is contingent upon
objectively-measured performance, so as to align executive interests with
those of customers and stockholders.
2. Competitiveness: Compensation comparisons will be made against
similar-size public utilities on a national basis, to allow Mobile Gas to
compete nationally for top executive talent. Competitive levels of four
compensation components will be measured:
Base salary, to be targeted above the median for the peer group, with
the primary consideration being external market levels and secondary
consideration being internal equity concerns.
Annual incentives, to be targeted at the median, to motivate and
reward accomplishment of key corporate priorities and objectives.
Long-term incentives, to be targeted below the median, so that total
target compensation (base salary plus annual incentives plus long-term
incentives) would equal median total compensation for peer group executives.
Benefits and perquisites, to be targeted at the low end of the
competitive range, so as to provide reasonable levels of security and
protection but to not emphasize this component of the total compensation
package.
3. Leverage: Annual and long-term incentives are to have significant upside
and downside variability so as to create a strong relationship of the level of
total executive compensation and the level of performance achieved.
4. Basis for measurements: Annual and incentive plans are to emphasize
teamwork, and are to be based primarily on corporate performance, but will
provide latitude to reward individual performance and contributions. Annual
incentives are to reflect a balance between stockholder and customer
interests, and between financial and operational goals, with financial
objectives weighted more heavily with respect to senior executives, and
operational goals being more heavily weighted at lower executive levels.
Long-term incentives are to focus on stockholder interests and are to be tied,
in part, to performance of Mobile Gas Common Stock.
5. Stock ownership: The executive compensation program is intended to
facilitate senior executives acquiring an equity stake in Mobile Gas, to
increase the alignment between executive interests and stockholders.
Determination of annual base salary and incentive compensation for each of the
Company's executive officers, including Mr. Davis, are made in accordance with
the foregoing criteria, with salary amounts and cash incentive targets and
awards being recommended by the Chief Executive Officer with respect to other
executive officers, and the salary and cash incentive targets and awards for
the Chief Executive Officer being determined by the Committee.
Consistent with the foregoing compensation philosophy, long-term incentives in
the form of stock options with respect to 105,000 shares of Mobile Gas Common
Stock were granted under the Mobile Gas Service Corporation 1992 Stock Option
Plan (the "Stock Option Plan") in fiscal year 1995. The Committee had also
made awards previously under the Mobile Gas Service Corporation Incentive
Compensation Plan (the "1992 Incentive Plan"), which was approved by the
stockholders of Mobile Gas in 1993 at the time of approval of the Stock Option
Plan. During fiscal year 1996, most participants who had been awarded
incentive units under the 1992 Incentive Plan surrendered those incentive
units in consideration of cash payments by Mobile Gas. The aggregate of
payments made upon surrender of such incentive units was $72,500; the amounts
paid to the named executive officers are included in the Summary Compensation
Table above. Incentive units which had been awarded to Mr. Davis were not
surrendered.
It is the Committee's current intention that no further awards will be made
under the 1992 Incentive Plan. The Company's retirement of most of the
incentive units granted under the 1992 Incentive Plan, as described above,
reflected the Committee's view that in most cases stock options are the
preferable means of providing long-term incentives to Company executives.
Consistent with the Committee's compensation philosophy, in October 1996 the
Committee recommended and the Board of Directors of Mobile Gas adopted a new
Officers Incentive Compensation Plan to be effective as of the fiscal year
beginning October 1, 1996 (the "1996 Incentive Plan"). Under the 1996
Incentive Plan, cash incentive awards to Company Officers, computed as a
percentage of base salary, were made by the Committee based on three
performance measures (the first two being referred to as "Company Objectives"
and the third being referred to as "Personal Objectives"):
The Company's Return on Common Equity ("ROE"), compared to the ROE of a
group of peer companies;
The Company's earnings per share ("EPS") compared to a target EPS goal
established by the Committee; and
Specific individual personal performance objectives to be established
annually for each participant in the 1996 Incentive Plan.
The 1996 Incentive Plan provides for a target award level for the President
and Chief Executive Officer of the Company at a specified percentage of base
salary, and for other officers of the Company at a lesser percentage. The
1996 Incentive Plan also provides for relative weighting of the three
performance objectives at specified percentages for the President and Chief
Executive Officer, with different specified percentages for all other
officers. The relative weighting of performance objectives for the President
and Chief Executive Officer places more emphasis on the Company Objectives,
while the relative weighting for other officers places more emphasis on
attainment of Personal Objectives. Depending on the degree to which Company
Objectives and Personal Objectives are attained or exceeded awards may range
from 50% to 150% of the target award level. Although the Committee may in its
discretion set target awards levels and weighting of performance criteria at
percentages different from those in the 1996 Incentive Plan, the Committee did
not do so for fiscal year 1997. Personal Objectives for the President and
Chief Executive Officer for the 1997 fiscal year were generally parallel to
the Company Objectives.
Incentive awards made for the 1997 fiscal year to the named executive officers
are reported as bonus in the Summary Compensation Table above. The awards
made reflect that the Company Objectives were exceeded, and that accordingly
the Personal Objectives of the President and Chief Executive Officer were also
exceeded.
William J. Hearin Joseph G. Hollis E. B. Peebles, Jr.
John C. Hope, III Thomas B. Van Antwerp
Compensation Committee Interlocks and Insider Participation
Mr. Hearin, who is a member of the Compensation and Planning Committee, serves
as Chairman of the Board of Mobile Gas, but receives no compensation for such
service.
<PAGE>
MOBILE GAS SERVICE CORPORATION STOCK PERFORMANCE GRAPH
The following graph compares the value of $100 invested on October 1, 1992 in
Mobile Gas Common Stock, the NASDAQ Market Index and the Media General Gas
Utilities Industry Group Index (the "Media General Gas Index"), assuming
reinvestment of dividends. The Media General Gas Index, published as Industry
Group Index No. 602 by Media General Financial Services of Richmond,
Virginia, consists of 64 gas utilities including Mobile Gas.
Fiscal Year Ending 1992 1993 1994 1995 1996 1997
Mobile Gas Service Corp 100 141.68 128.62 127.83 153.10 236.33
Industry Index 100 126.57 114.22 120.92 154.40 202.43
Broad Market 100 130.05 137.62 167.10 195.08 265.16
<PAGE>
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Deloitte & Touche LLP has served as independent public accountants
to audit Mobile Gas's financial statements for the past twelve years and they
have been selected by the Board of Directors to continue in such capacity for
the current fiscal year. Representatives of Deloitte & Touche LLP are
expected to be present at the Annual Meeting and will have the opportunity to
make a statement, if they so desire, and will be available to respond to
appropriate questions.
<PAGE>
STOCKHOLDER PROPOSALS
Stockholders are entitled to submit proposals on matters appropriate for
stockholder action consistent with regulations of the Securities and Exchange
Commission. In order to be included in EnergySouth's proxy statement and form
of proxy relating to its 1999 Annual Meeting (if Mobile Gas stockholders adopt
the Reorganization Agreement and the Reorganization occurs) or in Mobile Gas's
1999 Annual Meeting proxy statement and form of proxy (if the Reorganization
Agreement is not adopted by Mobile Gas stockholders), proposals from
stockholders to be presented at the 1999 Annual Meeting must be received by
the Secretary of EnergySouth or Mobile Gas, as the case may be, no later than
August 24, 1998.
If Mobile Gas stockholders adopt the Merger Agreement and the Reorganization
occurs, Mobile Gas will no longer be publicly held and EnergySouth will be the
sole owner of Mobile Gas Common Stock after the Reorganization. In such event,
there will be no regularly scheduled meetings of stockholders of Mobile Gas in
1999 or thereafter.
<PAGE>
POSSIBLE ADJOURNMENT OF MEETING
In case the requisite vote to approve Proposal 1 or to elect the nominees for
Directors proposed by Mobile Gas cannot be obtained at the date set for the
meeting, it is the intention of Mobile Gas, if it seems advisable to do so at
the time, to adjourn the meeting to permit the solicitation of additional
proxies. Accordingly, the enclosed form of proxy authorizes a vote in favor
of adjournment. The Annual Meeting may be adjourned from time to time without
other notice than by verbal announcement at the meeting of any adjournment,
and any business for which notice of the Annual Meeting is hereby given may be
transacted at any such adjournment.
<PAGE>
OTHER PROPOSALS
As of this date, Mobile Gas does not know of any other business to be
presented at the meeting. However, the enclosed proxy gives discretionary
authority to the proxy holders named therein should any other matters be
presented to the meeting and it is the intention of such proxy holders to take
such action in connection therewith as shall be in accordance with their best
judgment.
_______________________
Please sign, date, and return the enclosed proxy promptly in the enclosed
envelope on which no postage stamp is necessary if mailed in the United
States.
MOBILE GAS SERVICE CORPORATION
By G. EDGAR DOWNING, JR.
Secretary
Mobile, Alabama
Dated December 12, 1997
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is made as of December
10, 1997, by and among MOBILE GAS SERVICE CORPORATION, an Alabama
corporation ("Mobile Gas"), MBLE MERGER CO., INC. , an Alabama corporation
("Mergerco"), and ENERGYSOUTH, INC., an Alabama corporation ("EnergySouth").
WHEREAS, Mobile Gas has authorized capital stock consisting of 8,000,000
shares of common stock, one cent ($.01) par value per share ("Mobile Gas
Common Stock"), of which 3,239,104 shares are issued and outstanding; and
WHEREAS, Mergerco has authorized capital stock consisting of 1,000
shares of common stock ("Mergerco Common Stock"), of which 100 shares are
issued and outstanding and owned beneficially and of record by EnergySouth;
and
WHEREAS, EnergySouth has authorized capital stock consisting of
10,000,000 shares of common stock, one cent ($.01) par value per share
("EnergySouth Common Stock"), of which 100 shares are issued and outstanding
and owned beneficially and of record by Mobile Gas, and 10,000,000 shares of
Preferred Stock, no par value per share, none of which have been issued; and
WHEREAS, the Boards of Directors of the respective parties hereto deem
it advisable to merge Mergerco with and into Mobile Gas in accordance with the
Alabama Business Corporation Act ("Alabama Corporation Act") and this
Agreement for the purpose of establishing EnergySouth as the parent
corporation of Mobile Gas.
NOW, THEREFORE, in consideration of the premises and agreements
contained herein, the parties agree that (i) Mergerco shall be merged with and
into Mobile Gas (the "Merger"), (ii) Mobile Gas shall be the corporation
surviving the Merger, and (iii) the terms and conditions of the Merger, the
mode of carrying it into effect, the manner of converting and exchanging
shares of capital stock of the parties hereto and other matters relating
thereto shall be as follows:
ARTICLE 1
THE MERGER
1.1 Articles of Merger. Subject to and in accordance with the
provisions of this Agreement, in the event this Agreement and Plan of Merger
is approved by the stockholders of Mobile Gas in accordance with the Alabama
Corporation Act, Articles of Merger of Mobile Gas shall be delivered to the
office of the Secretary of State of Alabama for filing, all as provided in
Section 10-2B-11.05 of the Alabama Corporation Act.
1.2 Effective Time. The Merger shall become effective at the time of
filing on the date on which the Articles of Merger are filed with the
Secretary of State of Alabama as contemplated by Section 1.1 above, unless
otherwise specified in such Articles of Merger (the "Effective Time"). At the
Effective Time, the separate existence of Mergerco shall cease and Mergerco
shall be merged with and into Mobile Gas, which shall continue its corporate
existence as the surviving corporation (Mobile Gas and Mergerco being
sometimes referred to herein as the "Constituent Corporations" and Mobile Gas,
as the surviving corporation, being sometimes referred to herein as the
"Surviving Corporation"). Mobile Gas shall succeed, without other transfer,
to all the rights and property of Mergerco and shall be subject to all the
debts and liabilities of Mergerco in the same manner as if Mobile Gas had
itself incurred them. All rights of creditors and all liens upon the property
of each of Mobile Gas and Mergerco shall be preserved unimpaired.
1.3 Appropriate Actions. Prior to and after the Effective Time,
EnergySouth, Mobile Gas and Mergerco, respectively, shall take all such
actions as may be necessary or appropriate in order to effectuate the Merger.
In this connection, EnergySouth shall issue and pay the shares of EnergySouth
Common Stock and cash in lieu of fractional shares into which outstanding
shares of Mobile Gas Common Stock will be converted on the basis and to the
extent provided in Article 2 of this Agreement, and shall take such other
actions as are necessary to fulfil EnergySouth's obligations hereunder
including without limitation those specified in Article 6 of this Agreement.
In case at any time after the Effective Time any further action is necessary
or desirable to carry out the purposes of this Agreement and to vest the
Surviving Corporation with full title to all properties, assets, privileges,
rights, immunities and franchises of either of the Constituent Corporations,
the officers and directors of each of the Constituent Corporations as of the
Effective Time shall take all such further action.
ARTICLE 2
TERMS OF CONVERSION AND EXCHANGE OF SHARES
2.1 Mobile Gas Common Stock. (a) At the Effective Time, subject to
subsection (b) below, shares of Mobile Gas Common Stock issued and outstanding
immediately prior to the Merger shall be automatically changed and converted
into shares of EnergySouth Common Stock, at the ratio of three shares of
EnergySouth Common Stock for each two shares of Mobile Gas Common Stock, and
such EnergySouth Common Stock shall thereupon be issued and fully-paid and
non-assessable; provided, however, that such conversion shall not affect
shares of holders, if any, who perfect their rights as dissenting stockholders
under Article 13 of the Alabama Corporation Act with respect to such shares.
(b) No scrip or certificates representing fractional shares of
EnergySouth Common Stock shall be issued to any former stockholder of Mobile
Gas, and, except as provided below, no such stockholder shall have any right
to vote or receive any dividend or other distribution on, or any other right
with respect to, any fraction of a share of EnergySouth Common Stock resulting
from the conversion described in Section 2.1. In the event such conversion of
shares results in the creation of fractional shares, in lieu of the issuance
of fractional shares of EnergySouth Common Stock, EnergySouth shall deliver
cash to the transfer agent for EnergySouth Stock (the "Transfer Agent") in an
amount equal to the aggregate of all fractional shares multiplied by the
Average Closing Price, and, in such event, the Transfer Agent shall divide
such cash among and remit it (without interest) to the former stockholders of
Mobile Gas in accordance with their respective interests. The "Average
Closing Price" shall be two-thirds the average of the closing prices of Mobile
Gas Common Stock on the Nasdaq National Market over the period of five (5)
consecutive trading days ending on the last trading day prior to the Effective
Date.
2.2 Mergerco Shares. The shares of Mergerco Common Stock issued and
outstanding immediately prior to the Merger shall be automatically changed and
converted into all of the issued and outstanding shares of Common Stock of the
Surviving Corporation, which shall thereupon be issued and fully-paid and
non-assessable, with the effect that the number of issued and outstanding
shares of Common Stock of the Surviving Corporation shall be the same as the
number of issued and outstanding shares of Mergerco Common Stock immediately
prior to the Effective Time.
2.3 EnergySouth Shares. Each share of EnergySouth Common Stock issued
and outstanding immediately prior to the Merger shall be canceled.
ARTICLE 3
ARTICLES OF INCORPORATION AND BYLAWS
3.1 Mobile Gas Restated Articles. From and after the Effective Time,
and until thereafter amended as provided by law, the Restated Articles of
Incorporation of Mobile Gas as in effect immediately prior to the Merger shall
be and continue to be the Restated Articles of Incorporation of the Surviving
Corporation.
3.2 Mobile Gas By-Laws. From and after the Effective Time, and until
thereafter amended as provided by law, the By-Laws of Mobile Gas as in effect
immediately prior to the Merger shall be and continue to be the By-Laws of the
Surviving Corporation.
3.3 EnergySouth Articles and Bylaws. From and after the Effective
Time, and until thereafter amended as provided by law, the Articles of
Incorporation and Bylaws of EnergySouth as in effect immediately prior to the
Merger shall be and continue unchanged to be the Articles of Incorporation and
By-Laws of the Surviving Corporation.
ARTICLE 4
DIRECTORS AND OFFICERS
4.1 Mobile Gas Directors and Officers. The persons who are directors
and officers of Mobile Gas immediately prior to the Merger shall continue as
directors and officers, respectively, of the Surviving Corporation and shall
continue to hold office as provided in the Bylaws of the Surviving
Corporation. If, at or following the Effective Time, a vacancy shall exist in
the Board of Directors or in the position of any officer of the Surviving
Corporation, such vacancy may be filled in the manner provided in the Bylaws
of the Surviving Corporation.
4.2 EnergySouth Directors and Officers. The persons who are directors
and officers of EnergySouth immediately prior to the Merger shall continue as
directors and officers, respectively, of EnergySouth and shall continue to
hold office as provided in the Bylaws of EnergySouth. If, at or following the
Effective Time, a vacancy shall exist in the Board of Directors or in the
position of any officer of EnergySouth, such vacancy shall be filled in the
manner provided in the Bylaws of EnergySouth.
ARTICLE 5
STOCK CERTIFICATES
5.1 Rights of Holders of Certificates. Following the Effective Time,
certificates representing shares of Mobile Gas Common Stock outstanding at the
Effective Time (herein sometimes referred to as "Mobile Gas Certificates")
shall evidence only the right of the registered holder thereof to receive, and
may be exchanged for, the shares of EnergySouth Common Stock into which such
shares of Mobile Gas Common Stock were converted in accordance with Section
2.1. At the Effective Time, EnergySouth shall issue and deliver, or cause to
be issued and delivered, to the Transfer Agent certificates representing whole
shares of EnergySouth Stock into which outstanding shares of Mobile Gas Stock
have been converted as provided above. As promptly as practicable following
the Effective Time, EnergySouth shall send or cause to be sent to each former
stockholder of record of Mobile Gas immediately prior to the Effective Time
written instructions and transmittal materials (a "Transmittal Letter") for
use in surrendering Mobile Gas Certificates to the Transfer Agent. Upon the
proper surrender and delivery to the Transfer Agent (in accordance with
EnergySouth's instructions, and accompanied by a properly completed
Transmittal Letter) by a former stockholder of Mobile Gas of such
stockholder's Mobile Gas Certificate(s), and in exchange therefor, the
Transfer Agent shall as soon as practicable, (i) in the case of a stockholder
whose Mobile Gas Common Stock, or a portion thereof, has been converted into
EnergySouth Stock, issue, register and deliver to such stockholder a
certificate evidencing the number of shares of EnergySouth Stock to which such
stockholder is entitled pursuant to Section 2.1 above, and/or (ii) in the case
of a stockholder whose Mobile Gas Common Stock, or a portion thereof, has been
converted into the right to receive cash in lieu of a fractional share, issue
and deliver to such stockholder a check in the amount of cash to which the
stockholder is entitled pursuant to Section 2.2 above.
5.2 Outstanding Certificates. Each outstanding certificate which,
prior to the Effective Time, represented Mobile Gas Common Stock shall be
deemed for all corporate purposes to represent only the right to receive the
number of shares of EnergySouth Common Stock and/or cash in lieu of fractional
shares into which such Mobile Gas Common Stock was converted.
5.3 Stock Transfer Books. The stock transfer books for Mobile Gas
Common Stock shall be deemed to be closed at the Effective Time and no
transfer of shares of Mobile Gas Common Stock outstanding prior to the
Effective Time shall thereafter be made on such books. As of the Effective
Time, EnergySouth shall establish a stock register reflecting ownership of
EnergySouth Common Stock by former holders of record of Mobile Gas Common
Stock.
5.4 Post-Merger Rights of Holders. Following the Effective Time, the
holders of certificates representing Mobile Gas Common Stock outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to stock of the Surviving Corporation and their sole rights shall be
with respect to the EnergySouth Common Stock and/or cash in lieu of fractional
shares into which their shares of Mobile Gas Common Stock shall have been
converted by the Merger, subject to the rights of any dissenting stockholders
who perfect dissenters' rights under Article 13 of the Alabama Corporation
Act.
5.5 Unsurrendered Certificates. Subject to Section 5.6 below, no
EnergySouth Common Stock certificate or cash in lieu of a fractional share
thereof shall be delivered to any former stockholder of Mobile Gas unless and
until such stockholder shall have properly surrendered to the Transfer Agent
the Mobile Gas Certificate(s) formerly representing his or her shares of
Mobile Gas Stock, together with a properly completed Transmittal Letter in
such form as shall be provided to the stockholder by EnergySouth for that
purpose. Further, until such Mobile Gas Certificate(s) are so surrendered, no
dividend or other distribution payable to holders of record of EnergySouth
Stock as of any date subsequent to the Effective Time shall be delivered to
the holder of such Mobile Gas Certificate(s). However, subject to prior
escheatment under applicable law, upon the proper surrender of such Mobile Gas
Certificate(s), the Transfer Agent shall pay to the registered holder of the
shares of EnergySouth Stock represented by such Mobile Gas Certificate(s) the
amount of any such cash, dividends or distributions which have accrued but
remain unpaid with respect to such shares. Neither EnergySouth, Mobile Gas nor
the Transfer Agent shall have any obligation to pay any interest on any such
cash, dividends or distributions for any period prior to such payment.
5.6 Lost, etc., Certificates. Any stockholder of Mobile Gas whose
certificate evidencing shares of Mobile Gas Common Stock has been lost,
destroyed, stolen or otherwise is missing shall be entitled to receive a
certificate representing the shares of EnergySouth Common Stock to which he or
she is entitled in accordance with and upon compliance with conditions imposed
by the Transfer Agent or EnergySouth (including without limitation a
requirement that the stockholder provide a lost instruments indemnity or
surety bond in form, substance and amount satisfactory to the Transfer Agent
and EnergySouth).
ARTICLE 6
MOBILE GAS STOCK PLANS
Mobile Gas and EnergySouth shall take all actions required to provide
that, from and after the Effective Time, the following Mobile Gas plans shall
utilize EnergySouth Common Stock instead of Mobile Gas Common Stock: (i) the
Employee Savings Plans; (ii) the Mobile Gas Service Corporation 1992 Stock
Option Plan; (iii) the Mobile Gas Service Corporation Incentive Compensation
Plan; and (iv) the Mobile Gas Service Corporation Dividend Reinvestment and
Stock Purchase Plan.
ARTICLE 7
CONDITIONS OF THE MERGER
Completion of the Merger is subject to the satisfaction of the following
conditions:
6.1 Stockholder Approval. The principal terms of this Agreement shall
have been approved by such holders of capital stock of each of the Constituent
Corporations as is required by the Alabama Corporation Act.
6.2 EnergySouth Common Stock Listed. All conditions for the listing on
the NASDAQ National Market as of the Effective Time of the EnergySouth Common
Stock to be issued and to be reserved for issuance pursuant to the Merger
shall have been satisfied.
6.3 Restated Articles of EnergySouth. Restated Articles of
Incorporation of EnergySouth, substantially in the form appended hereto as
Exhibit A, shall have been adopted by EnergySouth and remain in effect.
6.4 Regulatory Approvals. All necessary orders, authorization,
approvals or waivers from the PSC and all other jurisdiction regulatory
bodies, boards or agencies shall have been received, remain in full force and
effect, and shall not include, in the sole judgment of the Board of Directors
of Mobile Gas, unacceptable conditions.
ARTICLE 8
AMENDMENT AND TERMINATION
7.1 Amendment. The parties to this Agreement, by mutual consent of
their respective boards of directors, may amend, modify or supplement this
Agreement in such manner as may be agreed upon by them in writing at any time
before or after approval of this Agreement by the pre-Merger stockholders of
Mobile Gas (as provided in Section 6.1 above); provided, however, that no such
amendment, modification or supplement shall, if agreed to after such approval
by the pre-Merger stockholders of Mobile Gas, change any of the principal
terms of this Agreement in a manner which would materially and adversely
affect the rights of the stockholders of Mobile Gas .
7.2 Termination. This Agreement may be terminated and the Merger and
other transactions provided for by this Agreement may be abandoned at any
time, whether before or after approval of this Agreement by the pre-Merger
stockholders of Mobile Gas, by action of the board of directors of Mobile Gas
if such board of directors determines for any reason that the completion of
the transactions provided for herein would for any reason be inadvisable or
not in the best interests of Mobile Gas or its stockholders.
ARTICLE 9
MISCELLANEOUS
8.1 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original hereof.
8.2 Alabama Law. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of Alabama.
IN WITNESS WHEREOF, Mobile Gas, EnergySouth and Mergerco, pursuant to
approval and authorization duly given by resolutions adopted by their
respective boards of directors, have each caused this Agreement to be executed
by its President or one of its Vice Presidents and attested by its Secretary
or one of its Assistant Secretaries.
Mobile Gas:
MOBILE GAS SERVICE CORPORATION,
an Alabama corporation
By: /s/ John S. Davis
Its: President and Chief Executive Officer
Attest:
By: /s/ G. Edgar Downing, Jr.
Its: Secretary
EnergySouth:
ENERGYSOUTH, INC.,
an Alabama corporation
By: /s/ John S. Davis
Its: President and Chief Executive Officer
Attest:
By: /s/ G. Edgar Downing, Jr.
Its: Secretary
Mergerco:
MBLE MERGER CO., INC.,
an Alabama corporation
By: /s/ John S. Davis
Its: President and Chief Executive Officer
Attest:
By: /s/ G. Edgar Downing, Jr.
Its: Secretary
<PAGE>
APPENDIX B
(ATTACHMENT 1 TO THE MERGER AGREEMENT)
ARTICLES OF RESTATEMENT
OF THE
ARTICLES OF INCORPORATION
OF
ENERGYSOUTH, INC.
Pursuant to the provisions of Section 10-2B-10.07 of the Code of
Alabama, EnergySouth, Inc., pursuant to a resolution duly adopted by its Board
of Directors, hereby restates its Articles of Incorporation, as follows:
ARTICLE 1
NAME
The name of the corporation is "EnergySouth, Inc." (hereinafter, the
"Corporation").
ARTICLE 2
AUTHORIZED CAPITAL STOCK
The Corporation is authorized to issue two classes of stock in the following
numbers of shares:
(i) TEN MILLION (10,000,000) shares of one cent ($0.01) par value common stock
(the "Common Stock") and (ii) TEN MILLION (10,000,000) shares of no par value
preferred stock (the "Preferred Stock").
The preferences, limitations and relative rights of the above two classes of
stock shall be as follows:
A. Common Stock.
(1) Except as may be otherwise required by law or by these Articles of
Incorporation, each holder of Common Stock shall have one vote in respect of
each share of such stock held by such holder on all matters voted upon by the
shareholders of the Corporation.
(2) After distribution in full of the preferential amount, if any, fixed
pursuant to paragraph B(2)(f) of this Article 2 to be distributed to the
holders of any series of Preferred Stock, in the event of the voluntary or
involuntary dissolution or liquidation of the Corporation, the holders of
Common Stock (and the holders of Preferred Stock, if and to the extent
provided pursuant to paragraph B(2)(f) of this Article 2) shall be entitled to
receive the net assets of the Corporation of whatever kind available for
distribution.
B. Preferred Stock.
(1) Shares of Preferred Stock may be issued in one or more series at such
time or times and for such consideration as the Board of Directors may
determine. Each such series shall be given a distinguishing designation. All
shares of any one series shall have preferences, limitations and relative
rights identical with those of other shares of the same series and, except to
the extent otherwise provided in the description of such series, with those of
other shares of Preferred Stock.
(2) Authority is hereby expressly granted to the Board of Directors to fix
from time to time, by resolution or resolutions providing for the
establishment and/or issuance of any series of Preferred Stock, the
designation of such series and the preferences, limitations and relative
rights of the shares of such series, including the following:
(a) The distinctive designation and number of shares comprising such
series, which number may (except where otherwise provided by the Board
of Directors in creating such series) be increased or decreased (but not
below the number of shares then outstanding) from time to time by action
of the Board of Directors;
(b) The voting rights, if any, which shares of that series shall have,
which may be special, conditional, limited or otherwise;
(c) The rate of dividends, if any, on the shares of that series, whether
dividends shall be non-cumulative, cumulative to the extent earned,
partially cumulative or cumulative (and, if cumulative, from which date or
dates), whether dividends shall be payable in cash, property or rights, or
in shares of the Corporation's capital stock, and the relative rights of
priority, if any, of payment of dividends on shares of that series over shares
of any other series or of any other class of Corporation stock;
(d) Whether the shares of that series shall be redeemable and, if so,
the terms and conditions of such redemption, including the date or dates
upon or after which they shall be redeemable, the event or events upon
or after which they shall be redeemable, whether they shall be
redeemable at the option of the Corporation, the shareholder or another
person, the amount per share payable in case of redemption (which amount
may vary under different conditions and at different redemption dates),
whether such amount shall be a designated amount or an amount determined
in accordance with a designated formula or by reference to extrinsic
data or events and whether such amount shall be paid in cash,
indebtedness, securities or other property or rights, including
securities of any other corporation;
(e) Whether that series shall have a sinking fund for the redemption or
purchase of shares of that series and, if so, the terms of and amounts
payable into such sinking fund;
(f) The rights to which the holders of the shares of that series shall
be entitled in the event of voluntary or involuntary dissolution or
liquidation of the Corporation, and the relative rights of priority, if
any, of payment of shares of that series over shares of any other series
or of any other class of Corporation stock in any such event;
(g) Whether the shares of that series shall be convertible into or
exchangeable for cash, shares of stock of any other class or any other series,
indebtedness, or other property or rights, including
securities of another corporation, and, if so, the terms and conditions
of such conversion or exchange, including the rate or rates of conversion or
exchange, and whether such rate shall be a designated amount or an amount
determined in accordance with a designated formula or by reference to
extrinsic data or events, the date or dates upon or after which they shall be
convertible or exchangeable, the duration for which they shall be convertible
or exchangeable, the event or events upon or after which they shall be
convertible or exchangeable, and whether they shall be convertible or
exchangeable at the option of the Corporation, the shareholder or another
person, and the method (if any) of adjusting the rate of conversion or
exchange in the event of a stock split, stock dividend, combination of shares
or similar event;
(h) Whether the issuance of any additional shares of such series, or of
any shares of any other series, shall be subject to restrictions as to
issuance, or as to the powers, preferences or rights of any such other
series; and
(i) Any other preferences, privileges and powers and relative,
participating, optional or other special rights and qualifications,
limitations or restrictions of such series, as the Board of Directors may
deem advisable and as shall not be inconsistent with the provisions of this
Article 2 and to the full extent now or hereafter permitted by the laws of the
State of Alabama.
(3) Before issuing any shares of a series of Preferred Stock the
Corporation shall deliver to the Secretary of State for filing articles of
amendment, which (except as may be otherwise required by Alabama law) shall be
effective without shareholder action, that set forth (a) the name of the
Corporation, (b) the text of the amendment determining the terms of the
series, (c) the date it was adopted and (d) a statement that the amendment was
duly adopted by the Board of Directors.
ARTICLE 3
NO PREEMPTIVE RIGHTS
The shareholders of the Corporation shall not have preemptive rights.
ARTICLE 4
INITIAL REGISTERED OFFICE AND AGENT
The street address of the Corporation's initial registered office is 2828
Dauphin Street, Mobile, Alabama, and the name of its initial registered agent
at that office is G. Edgar Downing, Jr.
ARTICLE 5
INCORPORATOR
The name and address of the incorporator are G. Edgar Downing, Jr., 2828
Dauphin Street, Mobile, Alabama 36606.
ARTICLE 6
DIRECTORS
(a) All corporate powers shall be exercised by or under the authority of,
and the business and affairs of the Corporation managed under the direction
of, a board of directors, which shall consist of not less than nine nor more
than twelve persons. The exact number of directors within the minimum and
maximum limitation specified in the preceding sentence shall be fixed from
time to time by the board of directors pursuant to a resolution adopted by a
majority of the entire board of directors. Until otherwise changed in
accordance with this Article 6, the number of directors shall be eleven. At
the annual meeting of shareholders of the Corporation held in 1998, the
directors shall be divided and classified into three classes, as nearly equal
in number as possible, with the term of office of the first class of directors
to expire at the annual meeting of shareholders of the Corporation to be held
in 1999, the term of office of the second class of directors to expire at the
annual meeting of shareholders of the Corporation to be held in 2000, and the
term of office of the third class of directors to expire at the annual meeting
of shareholders of the Corporation to be held in 2001. At each annual
meeting of shareholders of the Corporation following such initial
classification and election, except as provided below in this Article 6 in the
case of electing a successor to a director elected by the board of directors
to fill a vacancy occurring in the membership of the board of directors,
directors elected to succeed those directors whose terms expire at such annual
meeting shall be elected for a term of office to expire at the third
succeeding annual meeting of shareholders of the Corporation after their
election.
(b) Any vacancy occurring in the board of directors, including by reason of
an increase in the number of directors, may be filled by the affirmative vote
of a majority of the remaining directors though less than a quorum of the
board of directors. A director so elected to fill a vacancy shall be
elected to serve until the next annual meeting of shareholders, at which time
a director shall be elected to fill the unexpired portion of the term of
office of the director whose successor was elected by the remaining directors.
No decrease in the number of directors constituting the board of directors
shall shorten the term of any incumbent director.
(c) Notwithstanding the foregoing provisions of this Article 6, any
director whose term of office has expired shall continue to hold office until
his successor shall be elected and qualify.
(d) Directors may be removed from office at any time, without cause, but
only by the affirmative vote of at least seventy-five percent (75%) of the
total number of votes entitled to be cast by the holders of all of the shares
of capital stock of the Corporation then entitled to vote generally in
the election of directors. The holder of each share of capital stock entitled
to vote thereon shall be entitled to cast the same number of votes as the
holder of such shares is entitled to cast generally in the election of each
director. Directors may be removed from office at any time, with cause, in
the manner provided by law.
(e) Notwithstanding any other provisions of these Articles of Incorporation
or the Bylaws of the Corporation, the affirmative vote of at least
seventy-five percent (75%) of the total number of votes entitled to be cast by
the holders of all of the shares of capital stock of the Corporation then
entitled to vote generally in the election of directors shall be required to
amend, alter, change or repeal, or to adopt any provision as part of these
Articles of Incorporation inconsistent with, this Article 6.
ARTICLE 7
PURPOSES
The purpose for which the Corporation is formed is the transaction of all
lawful business for which corporations may be incorporated under the laws of
the State of Alabama, including, without limitation, that of being a holding
company for companies engaged in energy related businesses.
ARTICLE 8
BUSINESS COMBINATIONS WITH RELATED PERSONS
Section 8.01 Definitions.
The following definitions shall apply for purposes of this Article 8:
(1) Affiliate. An "Affiliate" of, or Person "affiliated with," a
specified Person, is a Person that directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
specified Person. The term "control" (including the terms "controlling,"
"controlled by" and "under common control with") means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract, or otherwise, and a Person who is the Beneficial
Owner of shares representing ten percent (10%) or more of the votes entitled
to be cast by the Corporation's voting shares shall be irrebuttably presumed
to be in control of the Corporation.
(2) Associate. The term "Associate," when used to indicate a relationship
with any Person, means (a) any Person (other than the Corporation or a
Subsidiary) of which such Person is an officer, director or partner or is the
Beneficial Owner of ten percent (10%) or more of any class of equity
securities, (b) any trust or other estate in which such Person has a
beneficial interest of ten percent (10%) or more or as to which such Person
serves as a trustee or in a similar fiduciary capacity, and (c) any relative
or spouse of such Person, or any relative of such spouse who has the same home
as such Person.
(3) Beneficial Owner. A Person shall be considered to be the "Beneficial
Owner" of any equity securities (which equity securities are referred to
herein as "Beneficially Owned"):
(a) which such Person or any of such Person's Affiliates or
Associates owns, directly or indirectly; or
(b) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has (i) the right to acquire, whether
such right is exercisable immediately or only after the passage of time,
pursuant to any agreement, arrangement, or understanding or upon the
exercise of conversion rights, exchange rights, warrants or options or
otherwise; or (ii) the right to vote pursuant to any agreement,
arrangement, or understanding; or
(c) which are owned, directly or indirectly, by any other
Person with which such Person or any of its Affiliates or Associates has
any agreement, arrangement, or understanding for the purpose of acquiring,
holding, voting, or disposing of such equity securities.
(4) Business Combination. The term "Business Combination" shall mean:
(a) a merger or consolidation of the Corporation or any Subsidiary
with or into any other Person, or of such other Person with or into the
Corporation or any Subsidiary; or
(b) any sale, exchange, lease, mortgage, pledge, transfer or other
disposition to any other Person, in one transaction or a series of
transactions, of assets of the Corporation or any Subsidiary having an
aggregate book value as of the end of the Corporation's most recently
ended fiscal quarter of ten percent (10%) or more of the net assets of the
Corporation;
(c) any sale, exchange, lease, mortgage, pledge, transfer or other
disposition for value by any other Person of any assets to the Corporation
or any Subsidiary in exchange for Outstanding Shares or equity securities
of any Subsidiary, where the result of such transaction is that such other
Person is the Beneficial Owner of a majority of the Outstanding Shares; or
(d) the liquidation or dissolution of the Corporation or any
Subsidiary if such liquidation or dissolution is proposed by or on behalf
of a Related Person; or
(e) any share exchange in which shares of common stock of the
Corporation or of any Subsidiary having an aggregate book value as of the
end of the Corporation's most recently ended fiscal quarter of ten percent
(10%) or more of the net assets of the Corporation are exchanged for
shares of stock, other securities, cash or other property; or
(f) any amendment of these Articles of Incorporation which would
effect a reclassification of any securities of the Corporation (including
a reverse stock split or the equivalent thereof) or any merger of the
Corporation with any Subsidiary, which has the effect, directly or
indirectly, of increasing the proportionate share of any class of the
Outstanding Shares or any equity securities of any Subsidiary,
Beneficially Owned by a Related Person.
(5) Continuing Director. (a) The term "Continuing Director" shall mean
any member of the Board of Directors who is not (i) a Related Person or an
Affiliate or Associate of a Related Person or of any such Affiliate or
Associate or (ii) a representative of a Related Person or of any such
Affiliate or Associate, and who was a Director of the Corporation prior to the
time a Related Person became such.
(b) Any successor to a Continuing Director described in (a) above shall also
be deemed a Continuing Director if such successor is not an Affiliate or
Associate of a Related Person and was recommended by a majority of the
Continuing Directors then on the Board of Directors, provided that at the
time of such recommendation, Continuing Directors comprised a majority of the
Board.
(c) If there is no Related Person, all members of the Board of Directors
shall be deemed to be Continuing Directors.
(6) Date of Determination. The term "Date of Determination" shall mean
(a) the date on which a binding agreement (except for the fulfillment of
conditions precedent, including, without limitation, votes of shareholders to
approve such transaction) is entered into by the Corporation, as authorized by
the Board of Directors, and another Person providing for any Business
Combination, or (b) if such an agreement as referred to in item (a) above is
amended so as to make it less favorable to the Corporation or its
shareholders, the date on which such amendment is entered into by the
Corporation, as authorized by the Board of Directors, or (c) in cases where
neither items (a) nor (b) shall be applicable, the record date for the
determination of shareholders of the Corporation entitled to notice of and to
vote upon the transaction in question. The Board of Directors shall have the
power and duty to determine pursuant to the foregoing the Date of
Determination as to any transaction for purposes of this Article 8. Any such
determination made by the Board of Directors in good faith shall be conclusive
and binding for all purposes of this Article 8.
(7) Fair Market Value. The term "Fair Market Value" shall mean, as of any
date: (a) in the case of stock, either (i) the median of the averages of the
daily high and low sale prices during the 30-day period immediately preceding
such date of a share of such stock on the Composite Tape for New York Stock
Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape,
on the New York Stock Exchange, or, if such stock is not listed on such
Exchange, on the principal United States securities exchange registered under
the Securities Exchange Act of 1934 on which such stock is listed; or (ii) if
such stock is not listed on any such exchange, the median of the averages of
the daily closing bid and closing asked quotations on the National Association
of Securities Dealers Automated Quotations System ("NASDAQ") (or any successor
system then in use), or the median of the averages of the daily high and low
sales prices on the NASDAQ National Market System, if applicable, for such
stock during the 30-day period preceding such date, or if no such quotations
are then available, the fair market value as determined in good faith by a
majority of the Continuing Directors; and (b) in the case of property other
than cash or stock, the fair market value of such property on such date as
determined in good faith by a majority of the Continuing Directors.
(8) Outstanding Shares. The term "Outstanding Shares" shall mean any
issued shares of capital stock of the Corporation with the right generally to
vote for the election of Directors, but shall not include any shares (prior to
issue) which may be issuable pursuant to any agreement or upon exercise of
conversion rights, warrants, options or otherwise.
(9) Person. The term "Person" shall mean any individual, partnership,
corporation, group or other entity (other than the Corporation, any Subsidiary
or a trustee holding stock for the benefit of employees of the Corporation or
any Subsidiary, or any one of them, pursuant to one or more employee benefit
plans or arrangements). When two or more Persons act as a partnership,
limited partnership, syndicate, association or other group for the purposes of
acquiring, holding, voting or disposing of Outstanding Shares, such
partnership, syndicate, association, or group shall be deemed a "Person."
(10) Related Person. The term "Related Person" shall mean any Person
which, together with the Affiliates and Associates of such Person, is the
Beneficial Owner as of the Date of Determination or immediately prior to the
consummation of a Business Combination, or both, of at least that number of
shares of stock of the Corporation equal to ten percent (10%) of all of the
Outstanding Shares, but does not include any one or a group of more than one
Continuing Director. The term "Related Person" shall include the Affiliates
and Associates of such Related Person.
(11) Subsidiary. The term "Subsidiary" shall mean any corporation of
which a majority of any class of equity security is owned, directly or
indirectly, by the Corporation.
Section 8.02 Determination of Application of Article 8.
The Board of Directors shall have the power and the duty to determine for
the purposes of Article 8, on the basis of the information known to the Board
of Directors, any fact determinable under this Article 8 and the applicability
of all definitions to transactions contemplated by this Article 8, including
but not limited to the following:
(1) the number of shares of stock of the Corporation owned
by a Person, and
(2) whether a Person is an Affiliate or Associate of
another, and
(3) the fair market value, to be determined pursuant to the
definition of "Fair Market Value" contained in Section 8.01(7), of
consideration other than cash received or to be received for Outstanding
Shares.
Any such determination shall be conclusive and binding for all purposes of
this Article 8, provided that such determination is approved by a majority of
the Continuing Directors then in office.
Section 8.03 Voting Requirements for Business Combinations with Related
Persons.
Except as set forth in Sections 8.04 and 8.05 of this Article 8, if as of
the Date of Determination with respect to any Business Combination, any Person
that is a party to such Business Combination is a Related Person, the
affirmative vote or consent of the holders of at least seventy-five percent
(75%) of all Outstanding Shares shall be required to approve such Business
Combination. Such affirmative vote shall be required notwithstanding the fact
that no vote may be required, or that a lesser percentage may be specified, by
law or in any agreement with any national securities exchange or otherwise,
and shall be in addition to any shareholder vote which would be required
without reference to this Article 8.
Section 8.04 Nonapplicability of Special Voting Requirements.
The provisions of Section 8.03 shall not apply if all of the following
conditions shall have been met, provided, however, that nothing contained in
this Article 8 shall be construed to relieve any Related Person from any
fiduciary obligation imposed by law:
(1) The consideration to be received by the Corporation or per
share by holders of Outstanding Shares shall be in cash or in the same
form as the consideration given by the Related Person in acquiring
Outstanding Shares at any time during the period commencing on the date of
the first acquisition by such Related Person of any Outstanding Shares and
ending on and including the date upon which the Related Person became a
Related Person. If the Related Person paid for Outstanding Shares with
varying forms of consideration, the form of consideration to be received
by the Corporation or per share by holders of Outstanding Shares shall be
either cash or the form of consideration used to acquire the largest
number of Outstanding Shares acquired by the Related Person during such
period.
(2) The Fair Market Value of the consideration received in such
Business Combination by the Corporation (analyzed on a per share basis) or
per share by holders of Outstanding Shares is not less than the highest
per share price (including brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by such Related Person in acquiring any of
its holdings of Outstanding Shares.
(3) The ratio of:
(a) the Fair Market Value of the consideration to be
received in such Business Combination by the Corporation (analyzed
on a per share basis) or per share by holders of Outstanding Shares
to
(b) the per share market price of Outstanding Shares
immediately prior to the announcement of the Business Combination,
is at least as great as the ratio of
(c) the highest per share price (including brokerage
commissions, transfer taxes and soliciting dealers' fees) which such
Related Person has paid for any of the Outstanding Shares acquired
by it prior to the Date of Determination to
(d) the per share market price of Outstanding Shares
immediately prior to the initial acquisition by such Related Person
of any Outstanding Shares.
(4) The Fair Market Value of consideration to be received in such
Business Combination by the Company (analyzed on a per share basis) or per
share by holders of Outstanding Shares shall not be less than the sum of:
(a) the higher of (i) the highest gross per share price
paid or agreed to be paid by the Related Person to acquire any of
the Outstanding Shares of the Company beneficially owned by such
Related Person or (ii) the highest per share market price for such
Outstanding Shares since the Related Person became a Related Person,
plus
(b) an amount equal to the highest price/earnings multiple
of the Company, as customarily computed and reported in the
financial community, attained by the Company during the five fiscal
years immediately preceding the Date of Determination multiplied by
the aggregate amount, if any, by which seven percent (7%) of such
higher per share price determined under (a) above exceeds the
smallest quarterly common stock dividend per share (annualized) paid
in cash since the date on which such Related Person became a Related
Person.
(5) If the Related Person is a corporation, the Fair Market Value
of the consideration to be received in such Business Combination by the
Corporation (analyzed on a per share basis) or per share by holders of
Outstanding Shares shall be not less than the primary earnings per share of
Outstanding Shares during the four full consecutive fiscal quarters
immediately preceding the Date of Determination for solicitation of votes on
such Business Combination multiplied by the then price/earnings multiple (if
any) of the voting common stock of such Related Person as customarily computed
and reported in the financial community.
(6) The Fair Market Value of the consideration to be received in
such Business Combination by the Corporation (analyzed on a per share basis)
or per share by holders of Outstanding Shares shall not be less than the per
share book value of Outstanding Shares at the end of the most recent fiscal
year preceding the Date of Determination, calculated in accordance with
generally accepted accounting principles.
(7) After such Related Person has become a Related Person and prior
to the consummation of such Business Combination there shall have been (i) no
reduction in the annual dividend from that most recently paid on Outstanding
Shares (except as necessary to reflect any subdivision of the Outstanding
Shares through stock dividend, stock split, or otherwise), except as approved
by two-thirds of the Continuing Directors if such Continuing Directors
comprise at least a majority of the Board of Directors at the time of such
approval, and (ii) an increase in such annual dividend as necessary to reflect
any reclassification (including a reverse stock split), recapitalization,
reorganization or any similar transaction which has the effect of reducing the
number of Outstanding Shares, unless the failure so to increase such annual
dividend is approved by two-thirds of the Continuing Directors and such
Continuing Directors comprise at least a majority of the Board of Directors at
the time of such approval.
(8) After such Related Person has become a Related Person, such
Related Person shall not have received the benefit, directly or indirectly
(except proportionately as a shareholder of the Corporation) of any loans,
advances, guarantees, pledges or other financial assistance or benefit or any
tax credits or other tax advantages provided by the Corporation, whether in
anticipation of or in connection with such Business Combination or otherwise.
Section 8.05 Approval by Continuing Directors.
The provisions of Sections 8.03 shall not be applicable to any particular
Business Combination or other event covered thereby, and such Business
Combination or other event covered thereby shall require only such affirmative
vote as is required by law or in any agreement with any national securities
exchange or otherwise and by any other provision of these Articles of
Incorporation, if both of the following conditions with respect to such
Business Combination or other event shall have been satisfied: (1) the
Business Combination or other event shall have been approved by two-thirds of
the Continuing Directors; and (2) at the time of such approval, Continuing
Directors comprised at least a majority of the Board of Directors.
Section 8.06 Amendment.
The affirmative vote of shareholders required to alter, amend or repeal all
or any part of this Article 8, or to alter, amend, or repeal any other
provision of the Articles of Incorporation of the Corporation in any respect
which would or might have the effect, directly or indirectly, of modifying,
permitting any action inconsistent with, or permitting circumvention of, this
Article 8 (including, but not limited to, any amendment of the Articles of
Incorporation which would effect a reclassification of any securities of the
Corporation which has the effect, directly or indirectly, of increasing the
proportionate share of Outstanding Shares, or outstanding shares of any
Subsidiary, Beneficially Owned by a Related Person), shall be at least
seventy-five percent (75%) of all of the Outstanding Shares; provided,
however, that if such proposed alteration, amendment or repeal is approved by
two-thirds of the Continuing Directors and at the time of such approval
Continuing Directors comprise at least a majority of the Board of Directors,
then such proposed alteration, amendment or repeal shall require for approval
only such affirmative vote as is required by law or in any agreement with any
national securities exchange or otherwise and by any other provision of these
Articles of Incorporation. The 75% affirmative vote provided for above shall
be in addition to any shareholder vote which would be required without
reference to this Article 8.
ARTICLE 9
LIMITATIONS ON DIRECTOR LIABILITY
A director of the Corporation shall not be liable to the Corporation or its
shareholders for money damages for any action taken, or any failure to take
any action, as a director, except for (i) the amount of a financial benefit
received by such director to which such director is not entitled: (ii) an
intentional infliction of harm by such director on the Corporation or its
shareholders; (iii) a violation of Section 10-2B-8.33 of the Code of Alabama
of 1975 or any successor provision to such section; (iv) an intentional
violation by such director of criminal law; or (v) a breach of such director's
duty of loyalty to the Corporation or its shareholders. If the Alabama
Business Corporation Act, or any successor statute thereto, is hereafter
amended to authorize the further elimination or limitation of the liability of
a director of a Corporation, then the liability of a director of the
Corporation, in addition to the limitations on liability provided herein,
shall be limited to the fullest extent permitted by the Alabama Business
Corporation Act, as amended, or any successor statute thereto. The limitation
on liability of directors of the Corporation contained herein shall apply to
liabilities arising out of acts or omissions occurring subsequent to the
adoption of this Article 9 and, except to the extent prohibited by law, to
liabilities arising out of acts or omissions occurring prior to the adoption
of this Article 9. Any repeal or modification of this Article 9 by the
shareholders of the Corporation shall be prospective only and shall not
adversely affect any limitation of the liability of a director of the
Corporation existing at the time of such repeal or modification.
<PAGE>
APPENDIX C
SECTIONS 10-2B-13.01 through 10-2B-32 OF THE ALABAMA BUSINESS CORPORATION ACT
Sec. 10-2B-13.01. Definitions
(1) "Corporate action" means the filing of articles of merger or Exchange
by the probate judge or Secretary of State, or other action giving legal
effect to a transaction that is the subject of dissenters' rights.
(2) "Corporation" means the issuer of shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
Exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Section 10-2B-13.02 and who exercises that right when
and in the manner required by Sections 10-2B-13.20 through 10-2B-13.28.
(4) "Fair value," with respect to a dissenter's shares, means the value
of the shares immediately before the effectuation of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(5) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans, or, if none, at a rate that is fair
and equitable under all circumstances.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares
to the extent of the rights granted by a nominee certificate on file with a
corporation.
(7) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
Sec. 10-2B-13.02. Right to dissent
(a) A shareholder is entitled to dissent from, and obtain payment of the
fair value of his or her shares in the event of, any of the following
corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party (i) if shareholder approval is required for the merger by Section
10-2B-11.03 or the articles of incorporation and the shareholder is entitled
to vote on the merger or (ii) if the corporation is a subsidiary that is
merged with its parent under Section 10-2B-11.04;
(2) Consummation of a plan of Exchange to which the corporation is a
party as the corporation whose shares will be acquired, if the shareholder is
entitled to vote on the plan;
(3) Consummation of a sale or exchange by all, or substantially all,
of the property of the corporation other than in the usual and regular course
of business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to court
order or a sale for cash pursuant to a plan by which all or substantially all
of the net proceeds of the sale will be distributed to the shareholders within
one year after the date of sale;
(4) To the extent that the articles of incorporation of the
corporation so provide, an amendment of the articles of incorporation that
materially and adversely affects rights in respect to a dissenter's shares
because it:
(i) Alters or abolishes a preferential right of the shares;
(ii) Creates, alters, or abolishes a right in respect of
redemption, including a provision respecting a sinking fund for the redemption
or repurchase of the shares;
(iii) Alters or abolishes a preemptive right of the holder of
the shares to acquire shares or other securities;
(iv) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution through
issuance of shares or other securities with similar voting rights; or
(v) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired for
cash under Section 10-2B-6.04; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board of
directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for shares under
this chapter may not challenge the corporate action creating his or her
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
Sec. 10-2B-13.03. Dissent by nominees and beneficial owners
(a) A record shareholder may assert dissenters' rights as to fewer than
all of the shares registered in his or her name only if he or she dissents
with respect to all shares beneficially owned by any one person and notifies
the corporation in writing of the name and address of each person on whose
behalf he or she asserts dissenters' rights. The rights of a partial
dissenter under this subsection are determined as if the shares to which he or
she dissents and his or her other shares were registered in the names of
different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his or her behalf only if:
(1) He or she submits to the corporation the record shareholder's
written consent to the dissent not later than the time the beneficial
shareholder asserts dissenters' rights; and
(2) He or she does so with respect to all shares of which he or she
is the beneficial shareholder or over which he or she has power to direct the
vote.
Sec. 10-2B-13.20. Notice of dissenters' rights
(a) If proposed corporate action creating dissenters' rights under Section
10-2B-13.02 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert
dissenters' rights under this article and be accompanied by a copy of this
article.
(b) If corporate action creating dissenters' rights under Section
10-2B-13.02 is taken without a vote of shareholders, the corporation shall (1)
notify in writing all shareholders entitled to assert dissenters' rights that
the action was taken; and (2) send them the dissenters' notice described in
Section 10-2B-13.22.
Sec. 10-2B-13.21. Notice of intent to demand payment
(a) If proposed corporate action creating dissenters' rights under Section
10-2B-13.02 is submitted to a vote at a shareholder's meeting, a shareholder
who wishes to assert dissenters' rights
(1) must deliver to the corporation before the vote is taken written
notice of his or her intent to demand payment or his or her shares if the
proposed action is effectuated; and
(2) must not vote his or her shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his or her shares under this article.
Sec. 10-2B-13.22. Dissenters' notice
(a) If proposed corporate action creating dissenters' rights under Section
10-2B-13.02 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Section 10-2B-13.21.
(b) The dissenters' notice must be sent no later than 10 days after the
corporate action was taken, and must:
(1) State where the payment demand must be sent;
(2) Inform holders of shares to what extent transfer of the shares
will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is delivered; and
(5) Be accompanied by a copy of this article.
Sec. 10-2B-13.23. Duty to demand payment
(a) A shareholder sent a dissenters' notice described in Section
10-2B-13.22 must demand payment in accordance with the terms of the
dissenters' notice.
(b) The shareholder who demands payment retains all other rights of a
shareholder until those rights are canceled or modified by the taking of the
proposed corporate action.
(c) A shareholder who does not demand payment by the date set in the
dissenters' notice is not entitled to payment for his or her shares under this
article.
(d) A shareholder who demands payment under subsection (a) may not
thereafter withdraw that demand and accept the terms offered under the
proposed corporate action unless the corporation shall consent thereto.
Sec. 10-2B-13.24. Share restrictions
(a) Within 20 days after making a formal payment demand, each shareholder
demanding payment shall submit the certificate or certificates representing
his or her shares to the corporation for (1) notation thereon by the
corporation that such demand has been made and (2) return to the shareholder
by the corporation.
(b) The failure to submit his or her shares for notation shall, at the
option of the corporation, terminate the shareholders' rights under this
article unless a court of competent jurisdiction, for good and sufficient
cause, shall otherwise direct.
(c) If shares represented by a certificate on which notation has been made
shall be transferred, each new certificate issued therefor shall bear similar
notation, together with the name of the original dissenting holder of such
shares.
(d) A transferee of such shares shall acquire by such transfer no rights
in the corporation other than those which the original dissenting shareholder
had after making demand for payment of the fair value thereof.
Sec. 10-2B-13.25. Offer of payment
(a) As soon as the proposed corporate action is taken, or upon receipt of
a payment demand, the corporation shall offer to pay each dissenter who
complied with Section 10-2B-13.23 the amount the corporation estimates to be
the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of the offer, an income
statement for that year, and the latest available interim financial
statements, if any;
(2) A statement of the corporation's estimate of the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under
Section 10-2B-13.28; and
(5) A copy of this article.
(c) Each dissenter who agrees to accept the corporation's offer of payment
in full satisfaction of his or her demand must surrender to the corporation
the certificate or certificates representing his or her shares in accordance
with terms of the dissenters' notice. Upon receiving the certificate or
certificates, the corporation shall pay each dissenter the fair value of his
or her shares, plus accrued interest, as provided in subsection (a). Upon
receiving payment, a dissenting shareholder ceases to have any interest in the
shares.
Sec. 10-2B-13.26. Failure to take corporate action
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment, the corporation shall release the
transfer restrictions imposed on shares.
(b) If, after releasing transfer restrictions, the corporation takes the
proposed action, it must send a new dissenters' notice under Section
10-2B-13.22 and repeat the payment demand procedure.
Sec. 10-2B-13.27. Reserved
Sec. 10-2B-13.28. Procedure if shareholder dissatisfied with offer of payment
(a) A dissenter may notify the corporation in writing of his or her own
estimate of the fair value of his or her shares and amount of interest due,
and demand payment of his or her estimate, or reject the corporation's offer
under Section 10-2B-13.25 and demand payment of the fair value of his or her
shares and interest due, if:
(1) The dissenter believes that the amount offered under Section
10-2B-13.25 is less than the fair value of his or her shares or that the
interest due is incorrectly calculated;
(2) The corporation fails to make an offer under Section 10-2B-13.25
within 60 days after the date set for demanding payment; or
(3) The corporation, having failed to take the proposed action, does
not release the transfer restrictions imposed on shares within 60 days after
the date set for demanding payment.
(b) A dissenter waives his or her right to demand payment under this
section unless he or she notifies the corporation of his or her demand in
writing under subsection (a) within 30 days after the corporation offered
payment for his or her shares.
Sec. 10-2B-13.30. Court action
(a) If a demand for payment under Section 10-2B-13.28 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the
shares and accrued interest. If the corporation does not commence the
proceeding within the 60 day period, it shall pay each dissenter whose demand
remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding in the circuit court of
the county where the corporation's principal office (or, if none in this
state, its registered office) is located. If the corporation is a foreign
corporation without a registered office in this state, it shall commence the
proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters (whether or not residents of
this state) whose demands remain unsettled parties to the proceeding as in an
action against their shares, and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided under the Alabama Rules of Civil Procedure.
(d) After service is completed, the corporation shall deposit with the
clerk of the court an amount sufficient to pay unsettled claims of all
dissenters party to the action in an amount per share equal to its prior
estimate of fair value, plus accrued interest, under Section 10-2B-13.25.
(e) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) is plenary and exclusive. The court may appoint one or
more persons as appraisers to receive evidence and recommend decision on the
question of fair value. The appraisers have the powers described in the order
appointing them, or in any amendment to it. The dissenters are entitled to
the same discovery rights as parties in other civil proceedings.
(f) Each dissenter made a party to the proceeding is entitled to judgment
for the amount the court finds to be the fair value of his or her shares, plus
accrued interest. If the court's determination as to the fair value of a
dissenter's shares, plus accrued interest, is higher than the amount estimated
by the corporation and deposited with the clerk of the court pursuant to
subsection (d), the corporation shall pay the excess to the dissenting
shareholder. If the court's determination as to fair value, plus accrued
interest, of a dissenter's shares is less than the amount estimated by the
corporation and deposited with the clerk of the court pursuant to subsection
(d), then the clerk shall return the balance of funds deposited, less any
costs under Section 10-2B-13.31, to the corporation.
(g) Upon payment of the judgment, and surrender to the corporation of the
certificate or certificates representing the appraised shares, a dissenting
shareholder ceases to have any interest in the shares.
Sec. 10-2B-13.31. Court costs and counsel fees
(a) The court in an appraisal proceeding commenced under Section
10-2B-13.30 shall determine all costs of the proceeding, including
compensation and expenses of appraisers appointed by the court. The court
shall assess the costs against the corporation, except that the court may
assess costs against all or some of the dissenters, in amounts the court finds
equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Section
10-2B-13.28.
(b) The court may also assess the reasonable fees and expenses of counsel
and experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Sections 10-2B-13.20 through 10-2B-13.28; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this chapter.
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these counsel reasonable fees to be paid out of the amounts
awarded the dissenters who were benefitted.
Sec. 10-2B-13.32. Status of shares after payment
Shares acquired by a corporation pursuant to payment of the agreed value
therefor or to payment of the judgment entered therefor, as in this chapter
provided, may be held and disposed of by such corporation as in the case of
other treasury shares, except that, in the case of a merger or Exchange, they
may be held and disposed of as the plan of merger or Exchange may otherwise
provide.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Bylaws provide for indemnification to the full extent
permitted by the laws of the State of Alabama against and with respect to
threatened, pending or completed actions, suits or proceedings arising from or
alleged to arise from, a party's actions or omissions as a director, officer,
employee or agent of the Registrant or any other corporation, partnership,
joint venture, trust or other enterprise which has served in such capacity at
the request of the Registrant if such acts or omissions occurred or were or
are alleged to have occurred, while said party was a director or officer of
the Registrant. The Registrant has also entered into agreements with its
directors and certain officers which provide for such indemnification and
advancement of expenses in such circumstances. Generally, under Alabama law,
indemnification will only be available where an officer or director can
establish that he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Registrant.
The Registrant maintains a director's and officer's liability insurance
policy which indemnifies directors and officers for certain losses arising
from a claim by reason of a wrongful act, as defined, under certain
circumstances where the Registrant does not provide indemnification.
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
Exhibit
Number Description of Exhibit
- ------- ----------------------
2.1* Agreement and Plan of Merger.
3.1** Articles of Restatement of
Articles of Incorporation
of EnergySouth, Inc.
3.2*** Bylaws of EnergySouth, Inc.
4.1*** Form of Common Stock Certificate.
5.1*** Opinion of Armbrecht, Jackson, DeMouy, Crowe,
Holmes & Reeves, L.L.C. with respect to the
EnergySouth, Inc. Common Stock.
8.1*** Opinion of Armbrecht, Jackson, DeMouy, Crowe,
Holmes & Reeves, L.L.C. with respect to certain
tax matters.
23.1*** Consent of Deloitte & Touche LLP.
23.2*** Consent of Armbrecht, Jackson, DeMouy, Crowe,
Holmes & Reeves, L.L.C. (included in Exhibits 5.1 and 8).
24.1*** Power of Attorney (included on signature page).
99.1*** Form of Director's Consent
99.2*** Form of Proxy
93.3*** Form of Followup Letter
- ---------------
* Attached as Appendix A to the Proxy Statement/Prospectus.
** Attached as Appendix B to the Proxy Statement/Prospectus.
*** Filed herewith.
<PAGE>
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price represent
no more than a 20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the effective
registration statement.
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in the Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered herein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered hereby which remain unsold at
the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for the purpose
of determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Exchange Act that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
(d) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11 or 13 of this Form within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Mobile, State of
Alabama, on December 10, 1997.
EnergySouth, Inc.
By:/s/John S. Davis
-------------------------
John S. Davis
President and Chief
Executive Officer
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John S. Davis, Charles P. Huffman and G. Edgar
Downing, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, and to make any and
all state securities law or blue sky filings, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated.
Signature Title Date
--------- ----- ----
/s/ John S. Davis President, Chief December 10, 1997
- ------------------------- Executive Officer,
John S. Davis Director
/s/ William J. Hearin Chairman, Director December 10, 1997
- -------------------------
William J. Hearin
/s/ Walter L. Hovell Director December 10, 1997
- -------------------------
Walter L. Hovell
/s/ Charles P. Huffman Chief Financial December 10, 1997
- ------------------------- Officer and
Charles P. Huffman Treasurer(Principal
Financial and
Accounting Officer)
/s/ Joseph G. Hollis, Jr. Director December 10, 1997
- -------------------------
Joseph G. Hollis, Jr.
/s/ John C. Hope Director December 10, 1997
- -------------------------
John C. Hope
/s/ Gaylord C. Lyon Director December 10, 1997
- -------------------------
Gaylord C. Lyon
/s/ G. Montgomery Mitchell Director December 10, 1997
- -------------------------
G. Montgomery Mitchell
/s/ S. Felton Mitchell, Jr. Director December 10, 1997
- -------------------------
S. Felton Mitchell, Jr.
/s/ F.B. Muhlfeld Director December 10, 1997
- -------------------------
F.B. Muhlfeld
/s/ E.B. Peebles, Jr. Director December 10, 1997
- -------------------------
E.B. Peebles, Jr.
/s/ Thomas B. Van Antwerp Director December 10, 1997
- -------------------------
Thomas B. Van Antwerp
<PAGE>
EXHIBIT INDEX
Sequential
Exhibit Page
Number Description of Exhibit Number
- ------- ---------------------- ----------
2.1* Agreement and Plan of Merger.
3.1** Restated Articles of Incorporation
of EnergySouth, Inc.
3.2*** Bylaws of EnergySouth, Inc.
4.1*** Form of Common Stock Certificate.
5.1*** Opinion of Armbrecht, Jackson, DeMouy, Crowe,
Holmes & Reeves, L.L.C. with respect to the
EnergySouth, Inc. Common Stock.
8.1*** Opinion of Armbrecht, Jackson, DeMouy, Crowe,
Holmes & Reeves, L.L.C. with respect to certain
tax matters.
23.1*** Consent of Deloitte & Touche LLP.
23.2*** Consent of Armbrecht, Jackson, DeMouy, Crowe,
Holmes & Reeves, L.L.C. (included in Exhibits 5.1 and 8).
24.1*** Power of Attorney (included on signature page).
99.1*** Form of Director's Consent
99.2*** Form of Proxy
93.3*** Form of Followup Letter
- ---------------
* Attached as Appendix A to the Proxy Statement/Prospectus.
** Attached as Appendix B to the Proxy Statement/Prospectus.
*** Filed herewith.
<PAGE>
EXHIBIT 3.2
BYLAWS
EnergySouth, Inc.
ARTICLE I
STOCKHOLDERS
SECTION 1. ANNUAL MEETING. The Corporation shall hold annually a
regular meeting of its Stockholders for the election of Directors and for the
transaction of general business at the principal office of the Corporation in
Mobile, Alabama, except in cases in which the calls therefor designate some
other place either within or without the State of Alabama, at ten o'clock A.M.
on the last Friday in January in each year, if not a legal holiday, and if a
legal holiday, then on the first day following which is not a legal holiday,
or on such other date and time as may be set by the Board of Directors. Such
annual meetings shall be general meetings, that is to say, open for the
transaction of any business within the powers of the Corporation without
special notice of such business, except in cases in which special notice is
required by law, by the Articles of Incorporation or by these Bylaws.
SECTION 2. SPECIAL MEETINGS. At any time in the interval between
annual meetings, meetings of the Stockholders may be called by the Board of
Directors. Special meetings of the Stockholders shall be held at the
principal office of the Corporation in Mobile, Alabama, except in cases in
which the calls therefor designate some other place either within or without
the State of Alabama.
SECTION 3. NOTICE OF MEETINGS. Written or printed notice of every
annual meeting or special meeting of the Stockholders shall be given to each
Stockholder entitled to vote at such meeting, by leaving the same with him, or
by mailing it, postage prepaid, and addressed to him at his address as it
appears upon the books of the Corporation, at least ten days before such
meeting, except as otherwise provided by law. Notice of every special meeting
shall state the place, day and hour of such meeting and the general nature of
the business proposed to be transacted thereat. Failure to give notice of any
annual meeting or any irregularity in such notice shall not affect the
validity of such annual meeting or of any proceedings at such meeting (other
than proceedings of which special notice is required by law, by the Articles
of Incorporation or by these Bylaws). It shall not be requisite to the
validity of any meeting of Stockholders that notice thereof whether prescribed
by law, by the Articles of Incorporation or by these Bylaws, shall have been
given to any Stockholder who attends in person or by proxy, or to any
Stockholder who in writing executed and filed with the records of the meeting
either before or after the holding thereof, waives such notice. Except as
otherwise provided by law, no notice other than by verbal announcement need be
given of any adjourned meetings of Stockholders.
SECTION 4. QUORUM. At all meetings of Stockholders, the
Stockholders entitled to cast a majority in number of votes, present in person
or by proxy, shall constitute a quorum for the transaction of business; but in
the absence of a quorum the Stockholders present in person or by proxy by
majority vote may adjourn the meeting from time to time without notice other
than by verbal announcement at the meeting, until a quorum shall attend. At
any such adjourned meeting at which a quorum shall be present, any business
may be transacted which might have been transacted at the original meeting.
SECTION 5. PROXY AND VOTING. The voting power of the capital stock
of the Corporation shall be as provided in the Articles of Incorporation.
Stockholders of record entitled to vote may vote at any meeting either in
person or by signed proxy, and dated, but need not be sealed, witnessed or
acknowledged, which shall be filed with the Secretary before being voted.
Such proxies shall entitle the holders thereof to vote at any adjournment of
such meeting but shall not be valid after the final adjournment thereof. Each
Stockholder shall be entitled to one vote for each share of stock held by him.
SECTION 6. LIST OF STOCKHOLDERS. A complete list of the
Stockholders entitled to vote at the ensuing meeting arranged in alphabetical
order with the mailing address of each according to the records of the
Corporation and the number of voting shares held by each shall be prepared,
certified and filed with the Secretary within the time required by law.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. ELECTION AND POWERS. Except such as are by law, by the
Articles of Incorporation or by these Bylaws, conferred upon or reserved to
the Stockholder, all corporate powers shall be exercised by or under the
authority of, and the business and affairs of the Corporation managed under
the direction of, a Board of Directors, which shall consist of not less than
nine nor more than twelve persons. The exact number of Directors within the
minimum and maximum limitation specified in the preceding sentence shall be
fixed from time to time by the Board of Directors pursuant to a resolution
adopted by a majority of the entire Board of Directors. Until otherwise
changed in accordance with these Bylaws and Article 6 of the Articles of
Incorporation, the number of Directors shall be eleven. At the first meeting
of shareholders of the Corporation held in 1998, the Directors shall be
divided and classified into three classes, as nearly equal in number as
possible, with the term of office of the first class of Directors to expire at
the annual meeting of shareholders of the Corporation to be held in 1998, the
term of office of the second class of Directors to expire at the annual
meeting of shareholders of the Corporation to be held in 1999, and the term of
office of the third class of directors to expire at the annual meeting of
shareholders of the Corporation to be held in 2000. At each annual meeting of
shareholders of the Corporation following such initial classification and
election, except as provided herein and in Article 6 of the Articles of
Incorporation in the case of electing a successor to a Director elected by the
Board of Directors to fill a vacancy occurring in the membership of the Board
of directors, Directors elected to succeed those Directors whose terms expire
at such annual meeting shall be elected for a term of office to expire at the
third succeeding annual meeting of shareholders of the Corporation after their
election. A nominee for election as a member of the Board of Directors shall
be elected by a majority of the votes cast at a meeting of Stockholders,
except as may be otherwise provided in the Articles of Incorporation. Each
Director shall hold office until the annual meeting specified above and until
his successor shall have been duly chosen and qualified, or until he shall
have resigned or been removed in the manner provided in Section 6 of this
Article II. Other than persons in office as directors on such date, after
January 1, 1998 no person who would be less than twenty-one (21) years of age
or more than seventy-two (72) years of age on the date of taking office shall
be elected as director.
SECTION 2. CHAIRMAN AND VICE CHAIRMAN OF THE BOARD OF DIRECTORS.
The Board of Directors may, in its discretion, elect from its members a
Chairman of the Board of Directors. Such Chairman, when present, shall
preside at all meetings of the Board of Directors, and in the absence of the
President and Chief Executive Officer he shall call to order and preside at
meetings of the Stockholders of the Corporation, and shall have such other
powers and duties as the Board of Directors may from time to time prescribe.
The Board of Directors may also, in its discretion, elect from its members a
Vice Chairman of the Board of Directors. Such Vice Chairman shall, in the
absence of the Chairman of the Board of Directors, have the powers of the
Chairman of the Board of Directors and shall have such other powers and duties
as the Board of Directors may from time to time prescribe.
SECTION 3. MEETINGS OF DIRECTORS. Regular meetings of the Board of
Directors shall be held at such places within or without the State of Alabama
and at such times as the Board by vote may determine from time to time and if
so determined, no notice thereof need be given. Special Meetings of the Board
of Directors may be held at any time or place, either within or without the
State of Alabama, whenever called by the Chairman of the Board of Directors,
the Vice Chairman of the Board of Directors, the President and Chief Executive
Officer, or by a majority of the Directors, notice thereof being given to each
Director by the Secretary or an Assistant Secretary or officer calling the
meeting, or at any time without formal notice provided all the Directors are
present or those not present shall at any time waive or have waived notice
thereof. Notice of special meetings, stating the time and place thereof,
shall be given by mailing the same to each Director at his residence or
business address at least two days before the meeting or by delivering the
same to him personally or by telephoning or by facsimile transmission of the
same to him at his residence or business address not later than the day before
the day on which the meeting is to be held, unless, in case of exigency, the
Chairman of the Board of Directors or the President and Chief Executive
Officer shall prescribe a shorter notice to be given personally or by
telephoning or by facsimile transmission to each Director at his residence or
business address. Such special meetings shall be held at such times and places
as the notice thereof shall specify. No notice of adjourned meetings of the
Board of Directors need be given. All regular and special meetings of the
Board of Directors shall be general meetings, that is to say, open for the
transaction of any business within the powers of the Corporation without
special notice of such business, except in cases in which special notice is
required by law, by the Articles of Incorporation, by these Bylaws or by the
call of such meeting.
SECTION 4. QUORUM. At all meetings of the Board of Directors, a
majority of the total number of the Directors in office (but not less than a
third of the number fixed by or in accordance with these Bylaws) shall
constitute a quorum for the transaction of business. Except in cases in which
it is by law, by the Articles of Incorporation, or by these Bylaws otherwise
provided, a majority of such quorum shall decide any questions that may come
before the meeting. In the absence of a quorum, the Directors present by
majority vote may adjourn the meeting from time to time without notice other
than by verbal announcement at the meeting until a quorum shall attend. At
any such adjourned meeting at which a quorum shall be present, any business
may be transacted which might have been transacted at the meeting as
originally notified, and at any such adjourned meeting at which a quorum shall
not be present, business may be transacted to the extent allowed by law.
SECTION 5. VACANCIES. Any vacancy occurring in the Board of
Directors, including by reason of an increase in the number of Directors, may
be filled by the affirmative vote of a majority of the remaining Directors
though less than a quorum of the Board of Directors. A Director so elected to
fill a vacancy shall be elected to serve until the next annual meeting of
shareholders, at which time a Director shall be elected to fill the unexpired
portion of the term of office of the Director whose successor was elected by
the remaining Directors. No decrease in the number of Directors constituting
the Board of Directors shall shorten the term of any incumbent Director.
SECTION 6. COMPENSATION. Directors who are not employees of the
Corporation or its subsidiaries shall receive such compensation as members of
the Board of Directors or committees thereof as may be fixed from time to time
by resolution of the Board of Directors.
SECTION 7. REMOVAL. Directors may be removed from office at any
time, without cause, but only by the affirmative vote of at least seventy-five
percent (75%) of the total number of votes entitled to be cast by the holders
of all of the shares of capital stock of the Corporation then entitled to vote
generally in the election of Directors. The holder of each share of capital
stock entitled to vote thereon shall be entitled to cast the same number of
votes as the holder of such shares is entitled to cast generally in the
election of each Director. Directors may be removed from office at any time,
with cause, in the manner provided by law.
ARTICLE III
COMMITTEES
SECTION 1. EXECUTIVE COMMITTEE. The Board of Directors, by resolution
adopted by a majority of the whole Board of Directors, may designate an
Executive Committee of three or more Directors, one of whom shall be the
President and Chief Executive Officer of the Corporation, one of whom shall be
the Chairman of the Board of Directors, and one of whom shall be the Vice
Chairman of the Board of Directors. The President and Chief Executive Officer
shall be ex officio Chairman of the Committee. Except as otherwise provided
by law, during the intervals between the meetings of the Board of Directors,
the Executive Committee shall have and may exercise all of the powers of the
Board of Directors in the management of the business and affairs of the
Corporation. All action by the Executive Committee shall be reported to the
Board of Directors at its meeting next succeeding such action. Vacancies in
the Executive Committee shall be filled by the Board of Directors.
SECTION 2. MEETINGS OF THE EXECUTIVE COMMITTEE. The Executive Committee
may fix its own rules of procedure and shall meet at the call of the Chairman
or any two (2) members of the Committee or by resolution of the Board of
Directors. A majority of such Committee shall be necessary to constitute a
quorum and such majority shall decide any questions that may come before the
meeting.
SECTION 3. OTHER COMMITTEES. The Board of Directors may by resolution
designate such other standing or special committees as it deems desirable and
discontinue the same at pleasure. Each such committee shall have such powers
and perform such duties, not inconsistent with the law, as may be assigned to
it by the Board of Directors.
ARTICLE IV
OFFICERS
SECTION 1. EXECUTIVE OFFICERS. The Executive officers of the
Corporation shall be a President and Chief Executive Officer, one or more Vice
Presidents, a Secretary, a Treasurer, and such other Executive Officers as may
be elected pursuant to Section 6 of this Article IV. The officers shall be
elected annually by the Board of Directors at its first meeting following the
annual meeting of Stockholders, and each such officer shall hold office until
the corresponding meeting in the next year and until his successor shall have
been duly chosen and qualified, or until he shall have resigned or have been
removed, in any manner provided in Section 10 of this Article IV. Any vacancy
in any of the above offices shall be filled for the unexpired portion of the
term by the Board of Directors, at any regular or special meeting.
SECTION 2. PRESIDENT AND CHIEF EXECUTIVE OFFICER. The President and
Chief Executive Officer shall be the chief executive officer of the
Corporation. He shall, when present, preside at all meetings of the
Stockholders; he shall have general charge and supervision of the business of
the Corporation; he may sign with the Treasurer or an Assistant Treasurer, or
with the Secretary or an Assistant Secretary, certificates of stock of the
Corporation; he may sign and execute in the name of the Corporation all
authorized deeds, mortgages, bonds, contracts or other instruments; and, in
general, the President and Chief Executive Officer shall perform all duties
incident to the office of a president and chief executive officer of a
corporation, and such other duties as, from time to time, may be assigned to
him by the Board of Directors.
SECTION 3. VICE PRESIDENTS. Each Vice President shall have the power to
sign all certificates of stock, bonds, deeds and contracts of the
Corporation. Each Vice President shall perform such other duties and have
such powers as the Board of Directors shall designate from time to time.
SECTION 4. SECRETARY. The Secretary shall record the proceedings of the
meetings of the Stockholders, of the Board of Directors, and if so appointed,
of the Executive Committee, in books provided for that purpose; he shall see
that all notices are duly given in accordance with the provisions of these
Bylaws, or as required by law; he shall be custodian of, and responsible for
authenticating, the records and shall be custodian of the corporate seal or
seals of the Corporation; he shall see that the corporate seal is affixed to
all documents, the execution of which, on behalf of the Corporation, under its
seal, is duly authorized, and when so affixed may attest the same; he may
sign, with the President and Chief Executive Officer or Vice President,
certificates of stock of the Corporation; and in general, he shall perform all
duties incident to the office of a secretary of a corporation, and such other
duties as from time to time may be assigned to him by the Board of Directors.
SECTION 5. TREASURER. The Treasurer shall have charge of and be
responsible for all funds, securities, receipts and disbursements of the
Corporation, and shall deposit or cause to be deposited, in the name of the
Corporation, all monies or other valuable effects in such banks, trust
companies or other depositories as shall, from time to time, be selected by
the Board of Directors; he shall render to the President and Chief Executive
Officer and to the Board of Directors, whenever requested, an account of the
financial condition of the Corporation; he may sign, with the President and
Chief Executive Officer or a Vice President, certificates of stock of the
Corporation; and, in general, he shall perform all the duties incident to the
office of a treasurer of a corporation, and such other duties as may be
assigned to him by the Board of Directors.
SECTION 6. ADDITIONAL EXECUTIVE OFFICERS. The Board of Directors may,
in its discretion, from time to time elect such additional executive officers
as it may deem appropriate, including, but not limited to, one or more
Executive Vice Presidents, and one or more Senior Vice Presidents. Any
additional executive officers elected by the Board of Directors shall have
such powers and duties as may be assigned by the Board of Directors.
SECTION 7. OTHER OFFICERS. The Board of Directors may elect one or more
Assistant officers or other officers. Each Assistant officer or other
officer, if any, shall hold office for such period and shall have such
authority and perform such duties as the Board of Directors may prescribe.
SECTION 8. PRESIDENT AND CHIEF EXECUTIVE OFFICER NOT TO HOLD CERTAIN
OFFICES. The President and Chief Executive Officer shall not hold the office
of Secretary or Treasurer of the Corporation.
SECTION 9. COMPENSATION. The Board of Directors shall have power to fix
the compensation of all officers of the Corporation.
SECTION 10. REMOVAL. Any officer of the Corporation may be removed,
with or without cause, by vote of the Board of Directors or by an Executive
Officer upon whom such power of removal may have been conferred by the Board
of Directors.
ARTICLE V
STOCK
SECTION 1. CERTIFICATES. Each Stockholder shall be entitled to a
certificate or certificates certifying the number and kind of shares owned by
him, signed (either manually or in facsimile) in the name of and for and on
behalf of the Corporation by the President and Chief Executive Officer or a
Vice President and the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary, and sealed with the seal of the Corporation or its
facsimile. In case an officer or officers who shall have signed any such
certificate or certificates shall cease to be such officer or officers whether
because of death, resignation or otherwise, before such certificate or
certificates shall have been delivered by the Corporation, such certificate or
certificates may nevertheless be issued and delivered as though the person or
persons who signed such certificate or certificates had not ceased to be such
officer or officers. Stock certificates shall be in such form, not
inconsistent with law or with the Articles of Incorporation, as shall be
approved by the Board of Directors.
SECTION 2. TRANSFER OF SHARES. The Board of Directors shall have power
and authority to make all such rules and regulations as it may deem expedient
concerning the issue, transfer and registration of certificates of stock.
SECTION 3. TRANSFER AGENTS AND REGISTRARS. The Corporation may have one
or more Transfer Agents and one or more Registrars of its stock, whose
respective duties the Board of Directors may, from time to time, define. No
certificate of stock shall be valid until countersigned by a transfer agent,
if the Corporation has a Transfer Agent, or until registered by a Registrar,
if the Corporation has a Registrar. The duties of Transfer Agent and
Registrar may be combined.
SECTION 4. RECORD DATES. The Board of Directors shall have the
authority to fix in advance a date, not exceeding seventy (70) days preceding
(1) the date of any meeting of stockholders, (2) the date for the payment of
any dividend, (3) the date for the allotment of rights, or (4) the date when
any change or conversion of exchange of capital stock shall go into effect, as
a record date for the determination of the Stockholders entitled, to notice
of, or to vote at, any such meeting or entitled to receive payment of any such
dividend or to any such allotment of rights, or to exercise the rights in
respect of any such change, conversion or exchange of capital stock, and in
such case such Stockholders and only such Stockholders, as shall be
Stockholders of record on the date so fixed, shall be entitled to such notice
of, and to vote at such meeting, or to receive payment of such dividend, or to
receive such allotment of rights, or to exercise such rights, as the case may
be notwithstanding any transfer of any stock on the books of the Corporation
after any such record date fixed as aforesaid.
SECTION 5. LOSS OF CERTIFICATES. In case of the loss, mutilation or
destruction of a certificate of stock, a duplicate certificate may be issued
upon such terms as the Board of Directors shall prescribe.
ARTICLE VI
DIVIDENDS AND FINANCE
SECTION 1. DIVIDENDS. Subject to the provisions of the Articles of
Incorporation, the Board of Directors may, in its discretion, declare what, if
any, dividends shall be paid upon the stock of the Corporation, or upon any
class of such stock. Except as otherwise provided by the Articles of
Incorporation, dividends shall be payable upon such dates as the Board of
Directors may designate. Before payment of any dividend there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the Directors, from time to time, in their absolute discretion, think
proper as a reserve fund to meet contingencies, or for equalizing dividends,
or for repairing or maintaining any property of the Corporation, or for such
other purpose as the directors shall think conducive to the interests of the
Corporation, and the directors may abolish any such reserve in the manner in
which it was created.
SECTION 2. FISCAL YEAR. The fiscal year of the Corporation shall be
October 1 through September 30, unless otherwise provided by the Board of
Directors.
ARTICLE VII
SUNDRY PROVISIONS
SECTION 1. SEAL. The Corporate Seal of the Corporation shall bear the
name of the Corporation and the words "CORPORATE SEAL - ALABAMA". If deemed
advisable by the Board of Directors, a duplicate seal or duplicate seals may
be provided and kept for the necessary purposes of the Corporation.
SECTION 2. BOOKS AND RECORDS. The Board of Directors may determine from
time to time whether and if allowed, when and under what conditions and
regulations, the books and records of the Corporation, or any of them, shall
be open to the inspection of Stockholders, and the rights of Stockholders in
this respect are and shall be limited accordingly, except as otherwise
provided by law.
SECTION 3. BONDS. The Board of Directors may require any officer, agent
or employee of the Corporation to give a bond to the Corporation, conditioned
upon the faithful discharge of his duties, with one or more sureties and in
such amount as may be satisfactory to the Board of Directors.
SECTION 4. VOTING UPON STOCK IN OTHER CORPORATIONS. Any stock in other
corporations, which may from time to time be held by the Corporation, may be
represented and voted at any meeting of Stockholders of such other
corporations by the President and Chief Executive Officer or a Vice President
of the Corporation or by proxy executed in the name of the Corporation by its
President and Chief Executive Officer or a Vice President.
SECTION 5. AMENDMENTS. These Bylaws may be altered, amended or
repealed, or new Bylaws may be adopted, by the Board of Directors, provided
that: (a) the Board of Directors may not alter, amend or repeal any Bylaw
establishing what constitutes a quorum at Stockholders' meetings, and (b) no
Bylaw shall be altered, amended or repealed in a manner inconsistent with the
provisions of Article 6 or Article 8 of the Articles of Incorporation.
SECTION 6. PRONOUNS. The masculine pronoun, as used in the Bylaws,
means the masculine and feminine wherever applicable.
ARTICLE VIII
INDEMNIFICATION AND RELATED MATTERS
Each person who is or was a director or officer of the Corporation and who was
or is a party or was or is threatened to be made a party to any threatened,
pending or completed claim, action, suit or proceeding, whether civil,
criminal, administrative or investigative, including appeals, by reason of the
fact that he is or was a director or officer of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee,
agent or trustee of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, shall be indemnified by the
Corporation as a matter of right against any and all expenses (including
attorneys' fees) actually and reasonably incurred by him and against any and
all claims, judgments , fines, penalties, liabilities and amounts paid in
settlement actually incurred by him in defense of such claim, action, suit or
proceeding, including appeals, to the full extent permitted by applicable law.
The indemnification provided by this Section shall inure to the benefit of the
heirs, executors and administrators of such person. Expenses (including
attorneys' fees) incurred by a director or officer of the Corporation with
respect to the defense of any such claim, action, suit or proceeding may be
advanced by the Corporation prior to the final disposition of such claim,
action suit or proceeding, as authorized by the Board of Directors in the
specific case, upon receipt of an undertaking by or on behalf of such director
or officer to repay such amount if and to the extent it shall be ultimately
determined that he is not entitled to be indemnified by the Corporation as
authorized under this Article or applicable law; provided, however, that the
advancement of such expenses shall not be deemed to be indemnification unless
and until it shall ultimately be determined that such person is entitled to be
indemnified by the Corporation.
The Corporation shall make such reports to its Stockholders regarding
indemnification or advancement of expenses as may be required by law.
The Corporation may purchase and maintain insurance at the expense of the
Corporation on behalf of any person who is or was a director, officer,
employee or agent of the Corporation or any person who is or was serving at
the request of the Corporation as a director (or the equivalent), officer,
employee, agent or trustee of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, against any liability or
expense (including attorneys' fees) asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability or
expense under this Section or otherwise.
The foregoing rights shall not be exclusive of any other rights to which such
director or officer may otherwise be entitled and shall be available whether
or not the director or officer continues to be a director or officer at the
time of incurring any such expenses and liabilities.
If any word, clause or provision of the Bylaws or any indemnification made
under Article VIII hereof shall for any reason be determined to be invalid,
the provisions of the Bylaws shall not otherwise be affected thereby but shall
remain in full force and effect.
</DOCUMENBT.
<PAGE>
EXHIBIT 4.1
FORM OF COMMON STOCK CERTIFICATE
[front of certificate]
ENERGYSOUTH, INC.
NUMBER SHARES
------------- ------------
ORGANIZED UNDER THE LAWS SEE REVERSE FOR
OF THE STATE OF ALABAMA CERTAIN DEFINITIONS
CUSIP
THIS CERTIFIES THAT
is the owner of
Fully Paid and Non-Assessable Shares of the Common Capital Stock of the Par
Value
of $1.00 Each of
EnergySouth, Inc.
transferable only on the books of the Corporation by the holder hereof in
person or by Attorney, upon surrender of this Certificate, properly endorsed.
IN WITNESS WHEREOF the said Corporation has caused this Certificate to be
signed by its duly authorized officers and to be sealed with the Seal of the
Corporation.
Dated:
------------ ----------------
Secretary President
[back of certificate]
ENERGYSOUTH, INC.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT- ____Custodian_____
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right under Uniform Gifts to Minors
of survivorship and not as Act ------------------
tenants in common (State)
Additional abbreviations may also be used though not in the above list.
For value received, hereby sell, assign and
transfer unto
Please insert Social Security or other
identifying number of Assignee
Please print or typewrite name and address of Assignee
Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
Attorney to transfer the said stock on the books of the within-named
Corporation with fully power of substitution in the premises.
Dated,
NOTICE: THIS SIGNATURE TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN
EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
THE SIGNATURE(S) SHOULD BE GUARANTEED
BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN
ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
Upon the written request of any shareholder, the Corporation will furnish such
shareholder without charge the designations, relative rights, preferences and
limitations applicable to each class of shares and the variations in rights,
preferences, and limitations determined for each series within a class (and
the authority of the Board of Directors to determine variations for future
series).
<PAGE>
EXHIBIT 5.1
December 10, 1997
ENERGYSOUTH, INC.
2828 Dauphin Street
Mobile, Alabama 36606
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form S-4, as amended
(Registration No. 333- ) (the "Registration Statement"), filed with the
Securities and Exchange Commission by you, as Registrant, for the purpose of
registering under the Securities Act of 1933, as amended (the "Act"),
4,900,000 shares of common stock, par value $.01 per share (the "Common
Stock") of ENERGYSOUTH, INC., an Alabama corporation (the "Company"). We are
acting as your counsel with respect to corporate proceedings in connection
with the authorization, issuance and exchange of the Common Stock for the
common stock of Mobile Gas Service Corporation ("Mobile Gas") pursuant to the
Merger Agreement described below.
In arriving at the opinion expressed below, we have examined such corporate
records, certificates and other documents as we have considered necessary or
appropriate for purposes of this opinion. We have also examined and relied
upon (1) information obtained from public officials, officers of the Company
and officers of Mobile Gas and other sources we believe to be responsible; and
(2) such other documents, and have made such investigations of law, as we have
deemed appropriate as a basis for the opinions expressed below. In rendering
the opinion expressed below, we have assumed the authenticity of all documents
submitted to us as originals and the conformity to the originals of all
documents submitted to us as copies.
On the basis of such examination, we advise you that upon (i) the respective
Boards of Directors of EnergySouth and Mobile Gas having taken all required
corporate action, (ii) the Registration Statement relating to the Common Stock
having become effective under the Act, (iii) the Agreement and Plan of Merger
(the "Merger Agreement") attached as Exhibit A to the Proxy
Statement/Prospectus contained in the Registration Statement (the
"Prospectus") having been duly adopted by Mobile Gas stockholders at the
Mobile Gas Annual Meeting of Stockholders to be held on January 30, 1997, (iv)
all conditions in the Merger Agreement to the effectiveness of the Merger
provided for therein having been satisfied and Articles of Restatement of the
Articles of Incorporation of EnergySouth substantially in the form attached as
Exhibit B to the Prospectus having been duly filed with the Secretary of State
of the State of Alabama, and (v) the Common Stock having been duly issued in
the transactions contemplated by the Merger Agreement and the Prospectus,
then, in our opinion, the Common Stock will have been validly issued and will
be fully paid and nonassessable.
The foregoing opinion is limited to the Federal laws of the United States and
the laws of the State of Alabama, and we are expressing no opinion as to the
effect of the laws of any other jurisdiction.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement and to the use
of our name in the Prospectus under the caption "Validity of EnergySouth
Common Stock." In giving this consent, we do not thereby admit that we are
within the category of persons whose consent is required under Section 7 of
the Act.
Very truly yours,
Armbrecht, Jackson, DeMouy, Crowe, Holmes & Reeves, L.L.C.
By: /s/ E. B. Peebles III
<PAGE>
Exhibit 8.1
December 10, 1996
MOBILE GAS SERVICE CORPORATION
2828 Dauphin Street
Mobile, Alabama 36606
ENERGYSOUTH, INC.
2828 Dauphin Street
Mobile, Alabama 36606
Ladies and Gentlemen:
We have acted as counsel to Mobile Gas Service Corporation, an Alabama
corporation ("Mobile Gas"), and EnergySouth, Inc., an Alabama corporation (the
"Holding Company"), in connection with a planned corporate restructuring (the
"Reorganization") in which Mobile Gas will become a subsidiary of the Holding
Company, and the current holders of the outstanding shares of Mobile Gas
Common Stock, par value $.01 per share ("Mobile Gas Common Stock"), will
become holders of all the outstanding shares of the Holding Company's common
stock, par value $.01 per share ("Holding Company Common Stock"). The
Reorganization and related transactions are more fully described in the Form
S-4 Registration Statement of the Holding Company filed with the Securities
and Exchange Commission (the "Registration Statement"), to which this opinion
is an exhibit, and in the Proxy Statement/ Prospectus(the "Prospectus")
comprising a part of the Registration Statement. The Exchange will be
effected pursuant to an Agreement and Plan of Merger (the "Merger Agreement"),
attached as Exhibit A to the Prospectus, between Mobile Gas and the Holding
Company. Capitalized terms used herein and not otherwise defined shall have
the meanings specified in the Merger Agreement.
In connection with this opinion, we have assumed, with your consent, that (1)
the Merger will be effected in accordance with the Merger Agreement and the
laws of the State of Alabama and in the manner described in the Registration
Statement, (2) all the provisions of the Merger Agreement will be complied
with, (3) the Merger Agreement and the Prospectus describe the entire
transaction and all related transactions, (4) the facts and representations
made to us in a letter from the Holding Company dated December 10, 1997,
executed by a duly appointed officer of the Holding Company, are true and
correct, and (5) there will be no change in any of the facts or
representations material to this opinion between the date of this opinion and
the Effective Time.
Based upon and subject to the foregoing, we hereby confirm to you our opinion
as set forth under the heading "Certain Federal Income Tax Consequences" in
the Prospectus, subject to the limitations set forth therein. We hereby
consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to us under the heading "Certain Federal Income
Tax Consequences" in the Prospectus. In giving such consent, we do not thereby
admit that we are in the category of persons whose consent is required under
Section 7 of the Act.
Very truly yours,
Armbrecht, Jackson, DeMouy, Crowe, Holmes & Reeves, L.L.C.
By: /s/ J. Donald Hughes
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Mobile Gas Service Corporation (the "Company") on Form S-4 of our report dated
November 7, 1997, appearing in the Annual Report on Form 10-K of the Company
for the year ended September 30, 1997 and to the reference to us under the
heading "Experts" in the Proxy Statement/Prospectus, which is part of this
Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Atlanta, Georgia
December 5, 1997
<PAGE>
EXHIBIT 99.1
CONSENT
The undersigned, a director of Mobile Gas Service Corporation ("Mobile Gas"),
hereby consents (i) to being named as a prospective director of EnergySouth,
Inc. ("EnergySouth") in the Proxy Statement /Prospectus of EnergySouth and
Mobile Gas relating to the Annual Meeting of Stockholders of Mobile Gas to be
held on January 30, 1998, and (ii) to his election as a director of
EnergySouth, for the term indicated in such Proxy Statement /Prospectus, prior
to effectiveness of the Merger provided for in the Agreement and Plan of
Merger attached to such Proxy Statement /Prospectus as Appendix A.
The undersigned understands that (i) he will be elected a director of
EnergySouth if and only if he is, at the time of such election, serving as a
director of Mobile Gas, and (ii) he will be elected to serve as a director of
EnergySouth (subject to removal, resignation, death, or disability) for the
term indicated in such Proxy Statement /Prospectus.
December 5, 1997
______________________
<PAGE>
EXHIBIT 99.2
PROXY MOBILE GAS SERVICE CORPORATION PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS, JANUARY 30, 1998
The undersigned hereby appoints John S. Davis and G. Edgar
Downing, Jr., and each of them as proxies, each with power of
substitution and revocation, to vote at the Annual Meeting of
Stockholders of Mobile Gas Service Corporation (the "Company") to be
held in the Auditorium of the Company at 2828 Dauphin Street, Mobile,
Alabama on Friday, January 30, 1998, at 10:00 a.m., Central Standard
Time, or at any adjournment or adjournments thereof, according to the
number of votes that the undersigned would be able to cast if
personally present at the Annual Meeting.
1. PROPOSAL TO ADOPT AN AGREEMENT AND PLAN OF MERGER TO
EFFECT A REORGANIZATION OF THE COMPANY INTO A HOLDING
COMPANY STRUCTURE, as described in the Company's Proxy
Statement for the 1998 Annual Meeting (the Board of
Directors favors a vote "FOR").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. ELECTION OF DIRECTORS for a term expiring 2001 (the
Board of Directors favors a vote "FOR"):
John S. Davis, Walter L. Hovell, G. Montgomery Mitchell,
F.B. Muhlfeld.
[ ] FOR all nominees listed (except as indicated
below).
(To withhold authority to vote for any individual
nominee, write that nominee's name in the space
provided).
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[ ] VOTE WITHHELD from all nominees.
3. In their discretion, the proxies are authorized to
vote upon such other and further business as may
properly come before the meeting or any and all
adjournments thereof.
The shares represented by this Proxy will be voted in the manner
directed herein by the undersigned stockholder. IF NO SPECIFIC
DIRECTION IS GIVEN, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED
"FOR" PROPOSAL 1 AND "FOR" ALL OF THE DIRECTOR NOMINEES IDENTIFIED IN
PROPOSAL 2. The proxies, or either one of them, are authorized, in
their or his discretion to vote the shares of the undersigned
stockholder represented by this Proxy in favor of an adjournment of
adjournments of said meeting for the purpose of allowing time for
additional solicitation of proxies.
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Stockholder Signature(s) Date
Instructions: Please sign, date and mail this Proxy in the envelope
provided. No postage is necessary if mailed in the United States.
Please sign exactly as the name appears hereon. If stock is held in the name
of joint owners, each should sign. Attorneys, executors, administrators,
guardians, trustees and corporate officers should so indicate.
<PAGE>
EXHIBIT 99.3
January __, 1997
IMPORTANT REMINDER
Dear Stockholder:
We have previously mailed the prospectus/proxy statement and proxy materials
to you for the Annual Meeting of Stockholders of Mobile Gas to be held on
Friday, JANUARY 30, 1998. According to our records, we have not received your
completed proxy card for this important meeting. YOUR VOTE IS IMPORTANT TO
US.
The company's restructuring will help us meet the new competition and will
allow us to adapt to the changing energy-market environment quickly and more
effectively. Your Board of Directors believes the restructuring of Mobile Gas
as a holding company is in the best interests of our stockholders, employees
and customers, and unanimously recommends that everyone support our holding
company proposal.
If you haven't previously mailed your proxy card, please take a moment to
sign, date and mail the enclosed duplicate proxy card promptly in the return
envelope, with a vote "FOR" proposal 1 and"FOR" the director nominees
described in proposal 2. Thank you for your cooperation and continued
support.
Sincerely,
