Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant (x) Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement
( ) Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material pursuant to Section 240.14a-11(c) or Section
240.14a-12
RGC Resources, Inc.
(Name of Registrant as Specified in its Charter)
Roger L. Baumgardner, Corporate Secretary
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(I)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total Fee Paid:
( ) Fee paid previously with preliminary materials
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
RGC RESOURCES, INC.
519 Kimball Avenue, N.E.
Roanoke, Virginia 24016
----------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 24, 2000
-----------------------------------------------------
NOTICE is hereby given that, pursuant to its Bylaws and call of its
directors, the Annual Meeting of Shareholders of RGC Resources, Inc. will be
held at its principal office, 519 Kimball Avenue, N.E., Roanoke, Virginia 24016,
on Monday, January 24, 2000, at 9:00 a.m., Eastern Standard Time, for the
following purposes:
1. To elect two new Class C directors.
2. To approve an amendment to the RGC Resources, Inc. Key Employee
Stock Option Plan (the "Plan") to increase the aggregate number
of shares of common stock authorized for issuance under the Plan
by 50,000 shares.
3. The transaction of such other business as may properly come
before the meeting or any adjournment or postponement thereof.
Your attention is directed to the Proxy Statement accompanying this
Notice for a more complete statement regarding matters proposed to be acted upon
at the meeting. Only those shareholders of record as of the close of business on
November 19, 1999 shall be entitled to notice of and to vote at the meeting.
You are urged to sign and date the enclosed form of proxy and return it
promptly in the enclosed self-addressed, stamped envelope. Should you decide to
attend the meeting and vote in person, you may withdraw your proxy.
By Order of the Board of Directors.
ROGER L. BAUMGARDNER
Secretary
December 10, 1999
Your vote is important. Even if you plan to be present at the Annual
Meeting, please sign, date and promptly return the enclosed proxy, no matter how
small your holdings, to assure that your shares are represented. 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>
--------------------
PROXY STATEMENT
--------------------
Mailed December 10, 1999
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JANUARY 24, 2000
This Proxy Statement is furnished on December 10, 1999, in connection
with the solicitation of proxies to be used at the Annual Meeting of
Shareholders of RGC Resources, Inc. ("Resources" or the "Company") to be held on
Monday, January 24, 2000, at 9:00 a.m., Eastern Standard Time, at Resources'
office, located at 519 Kimball Avenue, N.E, Roanoke, Virginia 24016, and any
adjournments thereof.
Proxies in the form enclosed herewith are solicited by management at the
direction of Resources' Board of Directors. If the enclosed proxy is properly
signed and returned, the shares represented thereby will be voted at the Annual
Meeting in accordance with its terms. Any proxy given pursuant to this
solicitation may be revoked at any time prior to the vote of the shareholders.
An opportunity will be given to shareholders attending the meeting to withdraw
their proxies and to vote their shares in person.
Resources' Annual Report to Shareholders for the year ended September
30, 1999 is being sent to all shareholders concurrently with this Proxy
Statement. The Annual Report is not to be considered a part of the proxy
solicitation material.
VOTING SECURITIES
The close of business on November 19, 1999 has been fixed as the record
date for the determination of shareholders of the Company entitled to notice of
and to vote at the Annual Meeting of Shareholders. At the close of the record
date, there were 1,836,225 shares of common stock outstanding and each such
share is entitled to one vote. To Resources' knowledge, no person is the
beneficial owner of more than five percent of the issued and outstanding common
stock of the Company.
A majority of votes entitled to be cast on matters to be considered at
the Annual Meeting constitutes a quorum. If a share is represented for any
purpose at the Annual Meeting, it is deemed to be present for purposes of
establishing a quorum. Abstentions and shares held of record by a broker or its
nominee ("Broker Shares") which are voted on any matter are included in
determining the number of votes present or represented at the Annual Meeting.
Conversely, Broker Shares that are not voted on any matter will not be included
in determining whether a quorum is present. If a quorum is established,
directors will be elected by a plurality of the votes cast by shares entitled to
vote at the Annual Meeting. Approval of the proposed amendment to the Plan
requires the affirmative vote, at a meeting at which a quorum is present, of a
majority of the votes cast by the shares that are present, in person or proxy,
and entitled to vote. Votes that are withheld and Broker Shares that are not
voted in the election of directors and/or in connection with the proposed
amendment to the Plan will not be included in determining the number of votes
cast.
2
<PAGE>
PROPOSAL 1 ELECTION OF DIRECTORS OF RESOURCES
Occasionally, officers of the Company have been approached by others to
open discussions for acquisition of the Company. The Board of Directors does not
believe that it is obligated to shareholders to sell, hold out for sale or
engage in discussions for sale of the Company and has formally acted to direct
officers and individual directors to advise those who may propose acquisition or
discussions for acquisition that the Company is not now for sale under any
arrangement requiring Board approval.
The Company's Board of Directors is divided into three classes (A, B and
C) with staggered three-year terms. The current term of office of the Class C
directors expires at the 2000 Annual Meeting. The terms of the Class A and Class
B directors will expire in 2001 and 2002, respectively.
There are two management nominees for Class C directors, Frank T. Ellett
and Frank A. Farmer, Jr. Messrs. Ellett and Farmer currently serve on the Board
and are standing for reelection. Mr. Wilbur L. Hazlegrove will be retiring from
the Board effective with the Annual Meeting and his vacancy will not be filled
at this time.
Unless authorization is withheld, the persons named as proxies will vote
for the election of the nominees named below. Each nominee has agreed to serve
if elected. In the event any nominee shall unexpectedly be unable to serve, the
proxies will be voted for such other persons as the Board may designate. The
present principal occupation or employment and employment during the past five
years and the office, if any, held with the Company are set forth opposite the
name of each nominee and director. Proxies cannot be voted for a greater number
of persons than the number of nominees.
Your Board of Directors recommends a vote "FOR" each of the nominees for
Class C Director.
<TABLE>
<CAPTION>
Year In Which
Year In Which First Director Assumed
Name and Age Elected As Director Principal Occupation Principal Occupation
- ------------ ------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
NOMINEES FOR DIRECTOR
CLASS C DIRECTORS (Serving until 2003 Annual Meeting)
Frank T. Ellett 1983 President, Virginia Truck 1981
Age 61 Center, Inc. (Sale, lease and
service of heavy trucks)
Frank A. Farmer, Jr. 1979 Chairman of the Board of 1996
Age 67 Directors of the Company
since January 1996;
President and Chief
Executive Officer, January
1991 to February 1998
3
<PAGE>
Year In Which
Year In Which First Director Assumed
Name and Age Elected As Director Principal Occupation Principal Occupation
- ------------ ------------------- -------------------- --------------------
DIRECTORS CONTINUING IN OFFICE
CLASS A DIRECTORS (Serving until 2001 Annual Meeting)
Abney S. Boxley, III 1994 President & CEO, Boxley 1988
Age 41 Co., Inc. (Crushed stone
supplier); Director, Valley
Financial Corporation
S. Frank Smith 1990 Executive Vice President, 1986
Age 51 Coastal Coal Company, LLC
(Marketers and sellers
of coal)
John B. Williamson, III 1993 President & CEO of the 1998
Age 45 Company since February
1998; Vice President-Rates
& Finance January 1993 to
February 1998; Director of
Rates and Finance April
1992 to January 1993
CLASS B DIRECTORS (Serving until 2002 Annual Meeting)
Lynn D. Avis 1986 President, Avis Construction 1977
Age 65 Co., Inc. (Construction
company)
J. Allen Layman 1991 President and Chief 1990
Age 47 Executive Officer, R&B
Communications, Inc.
(Telecommunications)
Thomas L. Robertson 1986 President and Chief 1986
Age 56 Executive Officer, Carilion
Health System and Carilion
Medical Center; Director,
Roanoke Electric Steel
Corporation
</TABLE>
4
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of November 19, 1999, certain
information regarding the beneficial ownership of the common stock of the
Company by each director, nominee and named executive officer and by all
directors and executive officers as a group. Unless otherwise noted in the
footnotes to the table, the named persons have sole voting and investment power
with respect to all outstanding shares of common stock shown as beneficially
owned by them.
<TABLE>
<CAPTION>
Shares of Common
Name of Stock Beneficially
Beneficial Owner Owned As of 11/19/99 1 Percent of Class
- ------------------------------------ ---------------------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Lynn D. Avis 9,445 *
Abney S. Boxley, III 4,512 *
Frank T. Ellett 7,089 *
Frank A. Farmer, Jr. 42,635 2 2.29%
Wilbur L. Hazlegrove 36,138 3 1.94%
J. Allen Layman 6,477 *
Arthur L. Pendleton 11,201 4 *
Thomas L. Robertson 6,596 *
S. Frank Smith 6,767 *
John B. Williamson, III 12,978 5 *
All Directors and Executive
Officers as a Group (13 person) 152,005 6 8.17%
</TABLE>
* Less than 1%
1 Includes restricted shares purchased by directors pursuant to Restricted Stock
Plan For Outside Directors.
2 Includes 9,405 shares owned by spouse.
3 Includes 11,144 shares owned by spouse.
4 Includes 8,000 shares which Mr. Pendleton has the right to acquire through the
exercise of stock options.
5 Includes 10,000 shares which Mr. Williamson has the right to acquire through
the exercise of stock options.
6 Includes an aggregate of 24,000 shares which executive officers have the right
to acquire through the exercise of stock options.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table contains information with respect to the individual
compensation of the following officers for services in all capacities to
Resources and its subsidiaries for fiscal years ended September 30, 1999, 1998
and 1997.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
---------------------- -----------------
Name and Awards All Other
Principal Position Year Salary ($) Bonus($)1 Options/SARs (#) Compensation($)2
- ----------------------- ------ ---------- ---------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
John B. Williamson, III 1999 149,185 20,000 0 7,000
President & CEO of 1998 111,164 7,500 3,500 4,974
RGC Resources, Inc. 1997 82,773 10,000 4,000 3,888
Arthur L. Pendleton 1999 118,573 10,000 0 5,388
President & COO 1998 100,332 7,500 1,500 4,519
Roanoke Gas Company 1997 82,248 10,000 4,000 3,863
- -----------------
</TABLE>
1 Bonus paid in current year for previous year's performance.
2 Consists entirely of the Company's contribution under the Employees' 401(k)
Plan.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Shares Unexercised in-the-money
Acquired on Value Options at fiscal options at fiscal
Name Exercise (#) Realized ($) year-end (#) year-end ($)
- ----------------------- ------------ ------------ ------------------ ------------------
Exercisable/ Exercisable/
Unexercisable Unexercisable
------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
John B. Williamson, III 0 0 10,000/0 $24,562.50/0
Arthur L. Pendleton 0 0 8,000/0 $24,562.50/0
</TABLE>
Retirement Plan
Resources has in effect a noncontributory Retirement Plan. The costs of
benefits under the Plan, which are borne by Resources, are computed actuarially
and defrayed by earnings from the Plan's investments and/or Resources' annual
contributions. The Plan generally provides for the monthly payment, at normal
retirement age
6
<PAGE>
65, of the greater of (a) the participant's accrued benefit as of December
31, 1988 under the formula then in effect or (b) one-twelfth of (1) plus (2)
minus (3) as follows:
(1) 1.2% of the participant's average compensation for his highest
consecutive sixty months of service multiplied by years of
credited service up to thirty years,
(2) .65% of the participant's average compensation for his highest
consecutive sixty months of service in excess of covered
compensation (generally defined as the average of Social Security
wage bases over a participant's assumed working lifetime)
multiplied by years of credited service up to thirty years, and
(3) the participant's balance, if any, from the Company's former
profit sharing plan.
Early retirement with reduced monthly benefits is available at age 55
after ten years' service. Provisions also are made for vesting of benefits after
five years of service and for disability and death benefits. All employees who
have completed one year of service to the Company and are credited with at least
1,000 hours of service in a Plan year are eligible to participate in the Plan.
At age 65, for Plan purposes, Mr. Williamson and Mr. Pendleton will have
28 and 37 credited years of service, respectively.
The compensation covered by the Plan includes the total of all amounts
paid to a participant by the Company for personal services reported on the
participant's federal income tax withholding statement (Form W-2), up to certain
statutory limits. For 1999, these earnings are limited to $160,000. This limit
is indexed for cost of living after 1994.
<TABLE>
<CAPTION>
Estimated Annual Pension For
Representative Years of Credited Service 1
----------------------------------------------------------------
Highest Sixty Months
Average Compensation 15 20 25 30 35
- ------------------------- ---------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 125,000 $ 31,800 $ 42,400 $ 52,900 $ 63,500 $ 63,500
150,000 38,700 51,600 64,500 77,400 77,400
175,000 39,300 52,300 65,400 78,500 78,500
200,000 39,300 52,300 65,400 78,500 78,500
- -----------------
</TABLE>
1 The benefit amounts assume the employee is retiring at normal retirement age
(age 65). The benefit amounts listed in the table are computed as a straight
life annuity. No offset to pension benefits due to the Profit-Sharing Plan
(which has been converted into the 401(k) Plan) is reflected. Benefits are not
reduced by Social Security.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee (the "Committee"), which is made up of five
members of the Board of Directors who are not officers or employees of
Resources, is responsible for setting and administering the policies that govern
the annual compensation paid to the executive officers of the Company, including
the Chief Executive Officer.
7
<PAGE>
In fiscal 1999, annual salary continued to be the primary component of
compensation for executive officers of the Company. This is based in large part
on concern that external factors beyond the control of Company executives, such
as weather and regulatory decisions, may have a significant impact on corporate
performance.
The Committee recommends, for approval by the Board of Directors, the
annual salaries of executive officers. Salaries are based on the respective
positions held by the executive officers, including their accomplishments, level
of responsibility and experience and the relationship of such salaries to the
salaries of other Company managers and employees. In this regard, the Committee
reviews the Chief Executive Officer's recommendations on compensation of the
other executive officers and information concerning executive compensation at
other companies in the American Gas Association. Such other companies are
included in (but do not solely comprise) both of the peer indices reflected in
the Performance Graph on page 9. The Committee also considers overall corporate
performance, customer service and satisfaction, relationships with regulatory
agencies and the ability to manage and maintain a competent work force in
preparing its compensation recommendations.
Pursuant to Resources' Stock Bonus Plan, the Committee approved the
payment in fiscal 1999 of bonuses to the CEO and other executive officers of the
Company for outstanding performance during the fiscal year 1998. The Stock Bonus
Plan is intended to allow the Board of Directors to award individual or
collective superior performance that has resulted in enhanced shareholder value
or returns and to encourage increased ownership of Company common stock by
officers and management. The Stock Bonus Plan is administered by the Committee,
which considers recommendations from the Company's President. Resources' bonus
award proposals are subject to approval of the Board of Directors. Under the
Stock Bonus Plan, executive officers are encouraged to own a position in the
Company's common stock of at least 50% of the value of their annual salary. To
promote this policy, the Plan provides that all officers with stock ownership
positions below 50% of the value of their annual salaries must, unless approved
by the Committee, receive no less than 50% of any performance bonus in the form
of Company common stock. Bonus amounts, if any, for a fiscal year will generally
be determined in the January following that fiscal year end. Bonus award
determinations under the Stock Bonus Plan for performance in the 1998 fiscal
year were based on the performance of the Company, combined with an analysis of
the individual contributions of officers receiving the bonuses to the overall
performance of the Company.
Resources adopted a Key Employee Stock Option Plan, which became
effective January 1996. The Plan is intended to provide Resources' executive
officers with long-term (ten-year) incentives and rewards tied to the price of
Resources' common stock. The Committee believes that stock options will assist
Resources in attracting, maintaining and motivating officers and other key
employees of the Company, upon whose judgment, initiative and efforts the
Company depends, by providing such persons with the opportunity to acquire an
equity interest in Resources. Stock options are used to provide executive
officers additional incentive to use their best efforts and superior
performances to promote the best interest of Resources and the shareholders.
In making its recommendation regarding the 1999 compensation of the
Chief Executive Officer, the Committee considered all of the criteria above.
Specific consideration also was given to the Chief Executive Officer's efforts
toward cost containment, Resources' improved earnings, and shareholder and
customer growth in the preceding fiscal year. During fiscal 1999, Mr. Williamson
received a bonus of $20,000 which he elected to take in Company common stock,
for his performance during the fiscal year 1998. The amount of the bonus was
determined based upon Mr. Williamson's success during fiscal 1998 in monitoring
operational and capital
8
<PAGE>
budgets for maximum cost efficiency and monitoring his management team's
performance in regard to corporate objectives. The control of costs, operational
and financing, resulted in improved earnings for Resources.
Submitted by the Compensation Committee of the
Board of Directors of Resources:
Lynn D. Avis, Abney S. Boxley, III, Frank T. Ellett,
J. Allen Layman, S. Frank Smith
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
John B. Williamson, III, President and Chief Executive Officer of
Resources, serves as a director of R&B Communications, Inc. J. Allen Layman, who
is a director of Resources and serves on the Compensation Committee of the Board
of Directors of Resources, is President and Chief Executive Officer of R&B
Communications, Inc.
PERFORMANCE GRAPH
The following graph compares the yearly percentage change and the
cumulative total of shareholder return on the RGC Resources, Inc. common stock
with the cumulative return on the Standard and Poor's Utilities Index (the "S&P
Utilities Index") and the Edward Jones Natural Gas Distribution Index for the
five-year period commencing on September 30, 1994 and ending on September 30,
1999. These comparisons assume the investment of $100 in the Company's common
stock and each of the indices on September 30, 1994 and the reinvestment of
dividends.
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
RGC Resources, Inc. $100 92 112 123 140 152
S&P Utilities $100 128 137 157 204 181
Edward Jones Natural Gas
Distribution Index $100 113 137 162 182 195
</TABLE>
9
<PAGE>
TRANSACTIONS WITH MANAGEMENT
The law firm of Woods, Rogers & Hazlegrove, P.L.C., of which W. L.
Hazlegrove, a director of Resources, is Of Counsel, rendered legal services to
the Company during fiscal 1999, and it is anticipated that similar legal
services will be provided by that firm to the Company in fiscal 2000.
Roanoke Gas Company purchased natural gas from Engage Energy, a
subsidiary of Coastal Corporation in fiscal 1999. Roanoke Gas Company purchased
coal in the amount of $1,084,730 from Coastal Coal Sales, Inc., a subsidiary of
Coastal Corporation. Mr. S. Frank Smith, a director of the Company, is also
executive vice president of Coastal Coal Sales, Inc. It is anticipated that a
portion of Roanoke Gas Company's natural gas supply will be provided by Engage
Energy in fiscal 2000.
Effective February 1, 1998, Frank A. Farmer, Jr., retired President and
Chief Executive Officer of Roanoke Gas, entered into an agreement to provide
consulting services to Roanoke Gas. Under the agreement, Mr. Farmer served as
Chairman of the Board of Directors of Roanoke Gas and performed such duties and
responsibilities as assigned to him by the Board. During the term of the
agreement, Mr. Farmer could not accept engagements for compensation by any party
that was in competition or could reasonably have expected to be in competition
with Roanoke Gas. The consulting agreement, by its terms, terminated on January
31, 1999.
REMUNERATION OF DIRECTORS
Directors are compensated $6,000 per year in addition to receiving fees
for meetings of Resources' Board of Directors and of Committees of the Board
which they attend. Mr. Williamson is not compensated for attendance at Board and
Committee meetings and does not receive $6,000 per year for service as a Board
member. The schedule of fees paid to directors for each such meeting attended is
as follows:
Board of Directors $ 400
Executive & Nominating Committee $ 400
Audit Committee $ 400
Compensation Committee $ 400
However, the fee for any Committee meetings held the same day as a Board
meeting is $250.
Restricted Stock Plan for Outside Directors
The Board of Directors of the Company implemented the Restricted Stock
Plan for Outside Directors effective January 27, 1997. The Plan is applicable to
not more than 50,000 shares of Resources' common stock.
Under the Plan, a minimum of 40% of the monthly retainer fee paid to
each non-employee director of Resources is paid in shares of common stock. The
number of shares of Restricted Stock is calculated each month based on the
closing sales price of Resources' common stock on the Nasdaq-NMS on the first
day of the month, if the first day of the month is a trading day, or if not, the
first trading day prior to the first day of the month. Beginning in fiscal 1998,
a participant can, subject to approval of the Board, elect to receive up to 100%
of his retainer fee for the fiscal year in Restricted Stock. Such election
cannot be revoked or amended during the fiscal year.
10
<PAGE>
The shares of Restricted Stock of Resources issued under the Plan will
vest only in the case of a participant's death, disability, retirement
(including not standing for reelection to the Board), or in the event of a
change in control of Resources. There is no option to take cash in lieu of stock
upon vesting of shares under the Plan. The Restricted Stock may not be sold,
transferred, assigned or pledged by the participant until the shares have vested
under the terms of the Plan. At the time the Restricted Stock vests, a
certificate for vested shares will be delivered to the participant or the
participant's beneficiary.
The shares of Restricted Stock will be forfeited to Resources by a
participant's voluntary resignation during his term on the Board or removal for
cause as a director.
Subject to the terms of the Plan, a participant, as owner of the
Restricted Stock, has all rights of a shareholder, including but not limited to,
voting rights, the right to receive cash or stock dividends, and the right to
participate in any capital adjustment of Resources. Resources requires that all
dividends or other distributions paid on shares of Restricted Stock be
automatically sequestered and reinvested on an immediate or deferred basis in
additional Restricted Stock.
All directors, except Mr. Williamson (who does not qualify as an outside
director), participated in the Plan in fiscal 1999. The directors received a
total of 1,917.906 shares of Restricted Stock in fiscal 1999, valued at
$38,597.86. (This value was calculated using the closing price of $20.125 per
share of Company's common stock on September 30, 1999).
BOARD OF DIRECTORS AND COMMITTEES
Audit Committee
The Audit Committee of the Board of Directors, composed of Messrs.
Boxley, Ellett, Layman, Robertson, and Smith, meets at least annually with
Resources' chief financial officer, the independent auditors, and certain
appropriate officers of Resources. The basic functions of this Committee include
reviewing significant financial information, reviewing accounting procedures and
internal controls and recommending the selection of independent auditors. The
Audit Committee met twice during the 1999 fiscal year.
Executive & Nominating Committee
The Executive & Nominating Committee of the Board of Directors, which is
composed of Messrs. Avis, Hazlegrove, Ellett, and Layman, is empowered to
exercise all authority of the Board of Directors, except with respect to matters
reserved for the Board by Virginia law. Thus, in the absence of nominations by
the Board of Directors, this Committee may nominate persons as management's
nominees for election to the Board of Directors by the shareholders at
Resources' annual meeting. This Committee met once in fiscal year 1999. The
Board of Directors does not have a standing nominating committee as such.
Compensation Committee
The Compensation Committee of the Board of Directors is composed of
Messrs. Avis, Boxley, Ellett, Layman, and Smith. This Committee meets as
necessary to consider and make recommendations to the Board of Directors
concerning the salaries of certain executive officers and management employees
of Resources. This Committee met twice during the 1999 fiscal year.
11
<PAGE>
Meetings of the Board and Committees
The Board of Directors met twelve times during the 1999 fiscal year.
With the exception of Mr. Hazlegrove, the incumbent members of the Board
attended in fiscal year 1999, at least 75 percent of the aggregate of the total
number of meetings of the Board and the total number of meetings held by all
Committees of the Board on which they served.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and any persons who own more than
10% of the Company's common stock, to file reports of ownership and changes in
ownership of Company common stock with the Securities and Exchange Commission.
Based on its review of the copies of such forms furnished to it and written
representations from certain reporting persons that no other reports are
required, the Company believes that in fiscal 1999, four reports relating to
four transactions for J. Allen Layman were filed late.
PROPOSAL 2 AMENDMENT TO KEY EMPLOYEE STOCK OPTION PLAN
In October 1999, the Board approved an amendment to the RGC Resources,
Inc. Key Employee Stock Option Plan (the "Plan"), subject to shareholder
approval, increasing the number of shares of common stock authorized for
issuance under the Plan by 50,000 shares. At September 30, 1999, options to
purchase a total of 50,000 shares had been granted and were outstanding under
the Plan and no shares remained available for future grants. There were no
options granted to executive officers in the fiscal year ended September 1999.
Shareholders are requested in Proposal 2 to approve the amendment to the
Plan. If the shareholders fail to approve the amendment to the Plan, there will
be no shares available for future grant under the Plan. Approval of the
amendment to the Plan requires this affirmative vote of a majority of the votes
cast that are present in person or represented by proxy and entitled to vote.
See "Voting Securities" above.
The essential features of the Plan are outlined below:
Under the Plan, the Compensation Committee of the Board may grant stock
options ("Options") to officers and other full time salaried employees of
Resources or its affiliates who are selected by the Committee. As of November
19, 1999, approximately 12 employees were eligible for selection to receive
Options under the Plan. The Options do not meet the terms of Section 422A of the
Internal Revenue Code and therefore result in taxable income to the recipient at
the time of exercise to the extent of the difference between the exercise price
and the fair market value of the stock at the time of exercise. Resources will
be entitled to a federal income tax deduction upon the transfer of stock to an
optionee pursuant to an exercise of an Option, if certain federal income tax
withholding requirements are met. The amount of the deduction will equal the
amount of compensation income recognized by the optionee.
The exercise price under each Option is established by the Committee,
but in no event will be less than the fair market value of Resources' common
stock at the time the Option is granted. The fair market value per share of
Resources' common stock is determined by the Committee under the Plan by
reference to the closing sales price of Resources' common stock on the Nasdaq
National Market System ("Nasdaq-NMS"). As of November
12
<PAGE>
18, 1999 (the last trading day preceding the record date), the closing
sales price of Resources' common stock on the Nasdaq-NMS was $20.50. The
exercise period of each Option is determined by the Committee at the time of the
grant, but cannot be more than ten years from the date of the grant.
The right to exercise an Option generally expires three months after
employment is terminated for a reason other than retirement or death. In the
event an optionee retires or dies while employed by the Company, Options may be
exercised within one year following the optionee's death or retirement, as the
case may be, but in no event later than the expiration date of the Option. In
the event of a change in control of Resources, the Committee under the Plan is
authorized to take such action as it, in its discretion, may deem necessary or
advisable and fair to optionees, including amending the terms, conditions or
duration of Options granted under the Plan. A change in control under the Plan
includes (i) any person obtaining direct or indirect voting power of 20% of
Resources' voting securities; (ii) a change in the composition of the Board of
Directors not approved by a vote of at least 75% of the incumbent directors;
(iii) the sale of all or substantially all of the assets of Resources; and (iv)
the merger or consolidation of the Company with another corporation or entity
which results in less than 75% of the outstanding voting securities of the
surviving corporation being owned in the aggregate by former shareholders of
Resources. No change of control is deemed to have occurred for purposes of the
Plan by virtue of any transaction (i) which results in the optionee, or a group
of persons which includes the optionee, acquiring, directly or indirectly, 20%
or more of the combined voting power of Resources' voting securities; or (ii)
which results in Resources or any affiliate of Resources or any profit sharing
plan, employee stock ownership plan or employee benefit plan of Resources or any
of its affiliates acquiring, directly or indirectly, 20% or more of the combined
voting power of Resources' securities.
The Committee may grant Options under the Plan to eligible individuals
on the basis of criteria that it feels are in the best interests of Resources
and its affiliates. Further, the Committee may impose such restrictions,
conditions, terms and timing upon the granting of Options as it deems advisable
for Resources.
The Board of Directors of Resources may amend or terminate the Plan but
cannot, without the approval of the shareholders: (i) increase the maximum
number of shares for which Options may be granted under the Plan; (ii) permit
the granting of Options at less than 100% of fair market value at the time of
grant; or (iii) change the class of employees eligible to receive Options.
Your Board of Directors recommends a vote "FOR" Proposal 2.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board has selected Deloitte & Touche LLP as independent accountants
to audit the financial statements of the Company for the fiscal year ending
September 30, 2000. Deloitte and Touche LLP has served in this capacity since
fiscal 1998. A representative of such firm is expected to attend the annual
meeting to answer appropriate questions from shareholders and to make a
statement if he or she so desires.
OTHER MATTERS
Management does not know of any matters to be presented at the Annual
Meeting of Shareholders other than the election of directors and the proposed
amendment to the Plan. However, if any other matters properly come before the
meeting, proxies received pursuant to this solicitation will be voted thereon in
the discretion of the proxyholder.
13
<PAGE>
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at Resources' 2001
Annual Meeting must be received by Resources' Corporate Secretary at its office,
519 Kimball Avenue, N.E., Roanoke, Virginia 24016, no later than August 11,
2000, in accordance with Rule 14a-8 of the Exchange Act of 1934, in order to be
considered for inclusion in the Company's Proxy Statement relating to that
meeting.
Resources' Bylaws limit the business that may be transacted at a meeting
of shareholders to that specified in the notice of the meeting, those otherwise
properly presented by the Board of Directors and those presented by a
shareholder of record of Resources who provides notice in writing to the
President not less than sixty days nor more ninety days prior to the meeting.
Proposals not meeting the requirements of the Bylaws will not be entertained at
a shareholder's meeting.
EXPENSES OF SOLICITATION
The entire expense of preparing, assembling, printing and mailing the
form of proxy and Proxy Statement will be paid by Resources. Resources will
request banks and brokers to solicit their customers who beneficially own common
stock of Resources listed in the names of nominees and will reimburse said banks
and brokers for the reasonable out-of-pocket expense of such solicitation. In
addition to the use of the mails, solicitation may be made by employees of
Resources by any and all means available. Resources does not expect to pay any
compensation for the solicitation of proxies.
By Order of the Board of Directors.
JOHN B. WILLIAMSON, III
President & CEO
December 10, 1999
Resources' Annual Report on Form 10-K for the year ended September 30,
1999 is available without charge to any shareholder requesting the same. Written
requests should be addressed to the attention of Mr. Roger L. Baumgardner,
Secretary, RGC Resources, Inc., P.O. Box 13007, Roanoke, Virginia 24030.
14
<PAGE>
P R O X Y RGC RESOURCES, INC.
519 Kimball Avenue, N.E.
Roanoke, Virginia 24016
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints John H. Parrott and W. Bolling Izard, or
either of them, with full power of substitution, to vote all common stock of RGC
Resources, Inc. held of record by the undersigned as of November 19, 1999, at
the Annual Meeting of Shareholders of Roanoke Gas Company to be held on January
24, 2000, and at any adjournments thereof, as follows:
1. ELECTION OF CLASS C DIRECTORS (Serving until 2003 Annual Meeting):
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote
(except as marked to the for all nominees listed below
contrary below)
Frank T. Ellett, Frank A. Farmer, Jr.
INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the line below:
- --------------------------------------------------------------------------------
(Over)
<PAGE>
2. AMENDMENT TO THE RGC RESOURCES, INC. KEY EMPLOYEE STOCK OPTION PLAN
INCREASING THE NUMBER OF SHARES OF COMMON STOCK AUTHORIZED FOR ISSUANCE
UNDER THE PLAN BY 50,000 SHARES
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Upon such other business as may properly come before the meeting and any
adjournments thereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED
AS SPECIFIED. IF NO CHOICE IS SPECIFIED, THE PROXY
WILL BE VOTED FOR NO. 1 AND NO. 2 ABOVE.
The undersigned hereby acknowledges receipt of the
Proxy Statement dated December 10, 1999.
Dated:
------------------------------------------
------------------------------------------------
Signature of Shareholder
Please sign your name(s) exactly as shown imprinted
hereon. Executors, administrators, trustees and
other fiduciaries, and persons signing on behalf of
corporations or partnerships, should so indicate
when signing.
(This proxy is revocable at any time prior to
exercise hereof.)
