<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by Registrant [ x ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ x ] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12
Mobile Gas Service Corporation
(Name of Registrant as Specified In Its Charter)
Mobile Gas Service Corporation [Board of Directors]
(Name of Person(s) Filing Proxy Statement)
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:
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] 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:
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<PAGE> 2
MOBILE GAS SERVICE CORPORATION
2828 DAUPHIN STREET
MOBILE, ALABAMA 36606
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 31, 1997
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, will be held in the Auditorium at
the principal office of the Company, 2828 Dauphin Street, Mobile, Alabama, on
Friday, January 31, 1997, at 10:00 o'clock a.m., Central Standard Time, for the
purpose of:
1. Considering and acting upon a proposal to amend the Company's Restated
Articles of Incorporation, as previously amended, to increase the
authorized stock of the Company to eight million (8,000,000) shares of
common stock, and to reduce the par value of the authorized shares of the
common stock of the Company from $2.50 per share to $.01 per share.
2. Electing three Directors to serve for three-year terms expiring at the
time of the 2000 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.
Further information regarding voting rights and the business to be transacted
at the meeting is given in the annexed Proxy Statement.
The Board of Directors has fixed the close of business on December 18, 1996, as
the record date for the determination of holders of the Common Stock of the
Company entitled to notice of and to vote at the Annual Meeting. Accordingly,
only holders of record of the Common Stock at the close of business on December
18, 1996 will be entitled to vote at the meeting.
By Order of the Board of Directors,
G. EDGAR DOWNING, JR.
Secretary
Mobile, Alabama
December 18, 1996
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.
<PAGE> 3
MOBILE GAS SERVICE CORPORATION
PROXY STATEMENT
This Proxy Statement is furnished to the Stockholders of Mobile Gas Service
Corporation (the "Company") in connection with the solicitation of the enclosed
proxy for use at the Annual Meeting of Stockholders of the Company to be held
on January 31, 1997, or any adjournment or adjournments thereof. This Proxy
Statement, the accompanying form of Proxy and Notice of Annual Meeting of
Stockholders, and the Company's Annual Report to Stockholders for the fiscal
year ended September 30, 1996 are first being mailed to stockholders on or
about December 18, 1996.
PROXY AND SOLICITATION
The accompanying proxy is solicited on behalf of Mobile Gas Service Corporation
for use at the Annual Meeting of the Stockholders of the Company to be held in
the Auditorium at the principal office of the Company, 2828 Dauphin Street,
Mobile, Alabama, on January 31, 1997, at 10:00 o'clock a.m., Central Standard
Time, and at any and all adjournments thereof, for the purposes set forth in
the notice of the meeting annexed hereto and incorporated herein by this
reference.
All costs and expenses of soliciting proxies will be borne by the Company. The
Company's costs of solicitation will include reimbursement of brokers and other
persons for their expenses in sending proxy materials to their principals and
obtaining their proxies.
Stockholders who execute proxies retain the right to revoke them at any time
before they are voted by delivery of a written revocation to the Secretary of
the Company. A proxy when executed and not so revoked will be voted in
accordance therewith.
VOTING SECURITIES
As of December 18, 1996, the record date for determination of stockholders
entitled to vote at the Annual Meeting, there were 3,225,499 shares of common
stock, $2.50 par value per share, of the Company outstanding, with each share
entitled to one vote. A majority in number of votes, present in person or by
proxy, constitutes a quorum for the transaction of business.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of December 2, 1996, information concerning
(i) beneficial ownership of the Company's $2.50 par value common stock, the only
class of voting securities of the Company, 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.
<TABLE>
<CAPTION>
Name and Address Amount Beneficially Owned Percent of Class
- ---------------- ------------------------- ----------------
<S> <C> <C>
William J. Hearin 299,999 (1) 9.3%
304 Government Street
Mobile, Alabama 36630
All directors and executive 428,222 (1)(2) 13.3%
officers as a group (16 persons)
</TABLE>
(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 29,000
shares owned by his wife, Emily Staples Hearin, 44,200 shares owned by his
daughter, Ann Hearin, and 26,799 shares owned by his former spouse, Louise
Hearin.
(2) Includes 47,651 shares owned by spouses of officers and directors,
8,137 shares owned jointly by officers and directors and their respective
spouses and 4,901 shares credited to officers' accounts in the Employee Savings
Plan.
--------------------------------------
PROPOSAL 1
PROPOSED AMENDMENT TO RESTATED
ARTICLES OF INCORPORATION OF THE COMPANY
TO INCREASE CAPITAL STOCK AND REDUCE
PAR VALUE OF STOCK
The Board of Directors of the Company has determined by unanimous vote that an
amendment to the Company's Restated Articles of Incorporation, as previously
amended (the "Articles of Incorporation"), is advisable and has unanimously
recommended that the Company's stockholders approve such amendment. The
proposed amendment would increase the number of authorized shares of the
Company's common stock ("Common Stock") from four million (4,000,000) shares of
Common Stock of a par value of two dollars and fifty cents ($2.50) per share,
to eight million (8,000,000) shares of Common Stock with a reduced par value of
one cent ($.01) per share. If the proposed amendment is approved, Article 4 of
the Company's Articles of Incorporation will read as set forth in Exhibit A
attached hereto.
2
<PAGE> 5
REASONS FOR AND CERTAIN EFFECTS OF THE PROPOSED AMENDMENT
The Board of Directors believes that it is desirable to have sufficient
authorized shares of Common Stock available for future stock splits or
dividends, financing and acquisition transactions, and other general corporate
purposes, including issuance of shares pursuant to the Company's 1992 Stock
Option Plan and pursuant to the Company's Dividend Reinvestment and Stock
Purchase Plan. The additional authorized shares of Common Stock will allow the
Company to maintain the flexibility to issue Common Stock without the potential
expense and delay of a special meeting of stockholders at a future date. The
additional shares of Common Stock would be available for issuance without
further action by Company stockholders unless such action is required by
applicable law or regulation. The holders of Common Stock do not have
preemptive rights to purchase capital stock of the Company, so that any future
issuance of Common Stock other than on a prorated basis may dilute the
percentage ownership position of current stockholders. Except as disclosed
herein, the Company has no present intent, understandings or arrangements for
issuance of the Common Stock which would be authorized by the proposed
amendment to the Articles of Incorporation.
The Board of Directors also believes that it is desirable to reduce the par
value of the Company's Common Stock. The current trend among modern public
corporations is for common stock in public companies to have nominal or no par
value. The diminished importance of par values for stock in modern
corporations is reflected in the new Alabama Business Corporation Act (which
became effective in 1995), which no longer makes use of the par value concept.
However, corporate franchise taxes in Alabama continue to be computed on the
basis of par value, and reduction of the par value of the Company's Common
Stock should result in a substantial reduction in the corporate franchise tax
paid by the Company.
The reduction in par value would not have an adverse effect on holders of
Common Stock. The reduction will be reflected on the Company's books by
transfer, from the Common Stock account to the Capital in Excess of Par Value
account, of an amount equal to the aggregate of the excess of the current par
value of Common Stock over the reduced par value of the Common Stock.
If the proposed amendment is approved, Articles of Amendment reflecting the
amendment will be filed in the appropriate office and will become effective on
the date of such filing (the "Effective Date"). From and after the Effective
Date, each issued and outstanding share of the Company's $2.50 par value Common
Stock will automatically be converted into one share of $.01 par value Common
Stock without action by the Company or the holders of such stock. From and
after the Effective Date, stock certificates representing shares of the Common
Stock of the Company outstanding prior to the Effective Date (which
certificates reflect a par value of $2.50) will automatically represent the
same number of shares with a par value of one cent ($.01), and will continue to
be used to effect transfers or deliveries of the Common Stock of the Company.
There will be no need for stockholders to exchange their stock certificates.
After the Effective Date, the transfer agent of the Company will use stock
certificates reflecting the new par value of the Common Stock for all transfers
and issuances of Common Stock.
3
<PAGE> 6
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
ADOPTION OF THE PROPOSED AMENDMENT TO THE ARTICLES OF INCORPORATION TO INCREASE
THE AUTHORIZED STOCK OF THE COMPANY AND TO REDUCE THE PAR VALUE OF SUCH STOCK.
VOTE REQUIRED FOR ADOPTION OF PROPOSED AMENDMENT
Under Alabama law, the approval of the proposed amendment to the Articles of
Incorporation of the Company requires the affirmative vote of the holders of a
majority of the outstanding Common Stock. Therefore, abstentions and broker
non-votes will have the same effect as votes against the proposal. The
Company is informed that members of the Board of Directors and officers of the
Company, who hold or beneficially own in the aggregate approximately 428,222
shares of Common Stock, or approximately 13.3% of the Common Stock, intend to
vote such shares of Common Stock in favor of the proposed amendment to the
Articles of Incorporation of the Company.
-----------------
PROPOSAL 2
ELECTION OF DIRECTORS
The Restated Articles of Incorporation of the Company provide that the number
of Directors shall not be less than nine nor more than twelve, as determined 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 the
Company 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 the Company will be voted for the election as Directors of the
three nominees for Directors listed below. The Directors are to be elected to
serve until the Annual Meeting of Stockholders in 2000 and until their
successors have been duly elected and qualified. Proxies cannot be voted for
more than three persons. Should any nominee be unable or unwilling to accept
election, which the Company has no reason to believe will be the case, the
proxy will be voted for a substitute nominee or nominees designated by the
Company.
The following information is a brief account of the business experience of each
nominee and director during the past five years, and of Common Stock
beneficially owned by each nominee and director as of December 2, 1996, based
on information received from the respective nominees and directors.
4
<PAGE> 7
<TABLE>
<CAPTION>
Name, Age, Principal Occupation During Past Five Years, and First Became No. of Shares Percent
Other Directorships a Director(1) Beneficially of Class
Owned (2)
- ---------------------------------------------------------------- ------------- ------------- --------
<S> <C> <C> <C>
NOMINEES TO SERVE UNTIL ANNUAL
MEETING OF STOCKHOLDERS IN 2000:
JOHN C. HOPE, III, 47, was appointed Chairman and Chief 1993 2,000 *
Executive Officer 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 Director of Infirmary Health Systems, Inc. (3) (5)
S. FELTON MITCHELL, JR. , 52, is President of S. Felton 1993 2,100 *
Mitchell, Jr., 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 Director of QMS, Inc., Mobile,
Alabama. (3) (4) (7)
THOMAS B. VAN ANTWERP, 46, is Sales and Marketing 1993 3,280(8) *
Director of Georgia Press Association, Atlanta,
Georgia, since May 1996. Previously, he served as Zoned
Group Advertising Manager, Syracuse Newspapers,
Syracuse, New York, since 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)
DIRECTORS TO SERVE UNTIL ANNUAL
MEETING OF STOCKHOLDERS IN 1998:
JOHN S. DAVIS, 54, was appointed President and Chief 1995 15,036(9) *
Executive Officer of the Company in January, 1995,
having been appointed Executive Vice President and
Chief Operating Officer of the Company 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. (3) (4) (7)
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
Name, Age, Principal Occupation During Past Five Years, and Other First Became No. of Shares Percent
Directorships a Director(1) Beneficially of Class
Owned (2)
- ------------------------------------------------------------------ ------------- ------------- --------
<S> <C> <C> <C>
WALTER L. HOVELL, 68, served as President and Chief Executive
Officer of the Company from March, 1984 to January, 1995. He 1975 32,572(10) *
serves as Director of The Bank of Mobile, Mobile, Alabama. (3)
(4) (7)
G. MONTGOMERY MITCHELL, 68, retired in 1993 as Senior Vice 1993 4,000(11) *
President and Director of Stone & Webster Management Consultants,
Inc., Houston, Texas. He serves as Director of Energy West,
Inc., Great Falls, Montana. (4) (6)
F. B. MUHLFELD, 76, retired in 1986 as Vice Chairman of the 1986 1,750 *
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, 87, Chairman of the Board of the Mobile 1960 299,999(12) 9.3%
Press Register, Mobile, Alabama and The Mississippi Press,
Pascagoula, Mississippi. He serves as Chairman of the Board of
the Company. He serves as Director of The Bank of Mobile,
Mobile, Alabama. (3) (5) (7)
JOSEPH G. HOLLIS, JR., 73, retired in 1992 as Chairman of the 1959 20,000 *
Board of Johnson Hardware Company, Inc., Newnan,
Georgia.(4)(5)
GAYLORD C. LYON, 74, is President of Gaylord C. Lyon & Company, 1973 15,000(13) *
Inc., a real estate appraisal and property management company,
Mobile, Alabama. (3) (4) (6)
E.B. PEEBLES, JR., 77, retired in December, 1984 as Chairman of 1978 19,700(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)
</TABLE>
6
<PAGE> 9
* 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 288 shares held in the Company's 401(k) plan.
(10) Includes 12,501 shares owned by Mr. Hovell's spouse, as to which he
disclaims beneficial ownership, and 7,681 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 29,000
shares owned by his wife, Emily Staples Hearin, 44,200 shares owned by
his daughter, Ann Hearin, and 26,799 shares owned by his former spouse,
Louise Hearin.
(13) Includes 3,500 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. Peeble's spouse as to which he
disclaims beneficial ownership.
INFORMATION REGARDING THE BOARD OF DIRECTORS
Director Compensation, Committees and Attendance. The Board of
Directors of the Company 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 the Company 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 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 1996.
7
<PAGE> 10
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 met one time during the last fiscal
year, exercises all the powers of the Board of Directors in the management
of the business and affairs of the Company between meetings of the Board
of Directors, except as restricted by the By-laws of the Company. 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 three times
during the last fiscal year, reviews and makes recommendations to the
Board establishing salaries and other compensation for the officers of the
Company. This committee also reviews the Employees' Retirement Plan of
the Company 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 the Company to assure that they are appropriate to the
short and long term objectives of the Company. The Committee also advises
the Board of Directors of the effectiveness of these policies and
programs.
The Retirement Board Committee, which met twice during the last
fiscal year, is responsible for the general administration of the Employee
Savings Plans and the Voluntary Employees' Beneficiary Association Plans,
as well as the Retirement Plan, all being Plans of the Company.
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
$2,388 for all directors not serving as officers. The Company is not
designated as the beneficiary under the policy.
REPORTS UNDER SECTION 16 OF THE SECURITIES AND EXCHANGE ACT
The following persons filed late reports required by Section 16(a)
of the Securities and Exchange Act of 1934: Mr. Davis filed one late
report on Form 4 with respect to shares of Common Stock acquired by his
daughter, and Mr. Hearin filed one late report on Form 4 with respect to
shares of Common Stock acquired by his wife. In making this disclosure,
the Company has relied on written representations by or on behalf of its
directors and executive officers and copies of reports filed.
8
<PAGE> 11
EXECUTIVE COMPENSATION
The following table contains information with respect to compensation
paid or set aside by the Company for services in all capacities during fiscal
years 1994, 1995 and 1996 to the Company's Chief Executive Officer and to the
four most highly compensated executive officers of the Company and its
subsidiaries, other than Chief Executive Officer, whose aggregate salary and
bonus exceeded $100,000 for fiscal year 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------------------------- ---------------
OTHER ALL
ANNUAL SECURITIES OTHER
SALARY BONUS COMPEN- UNDERLYING COMPEN-
NAME AND PRINCIPAL POSITION YEAR ($) $ SATION ($) OPTIONS (#) SATION ($)
- --------------------------- ---- --------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John S. Davis
President and Chief Executive 1996 197,125 25,000 7,941 (3) 129 (8)
Officer 1995 (1) 181,667 4,337 (3) 30,000 129 (8)
W. G. Coffeen, III 1996 110,958 5,000 3,438 (4) 2,629 (8)
Vice President - Marketing 1995 108,333 3,218 (4) 15,000 129 (8)
1994 98,833 2,965 (4) 129 (8)
Gerald S. Keen 1996 115,958 3,384 (5) 2,629 (8)
Vice President - Operations 1995 108,333 3,361 (5) 15,000 129 (8)
1994 98,833 3,100 (5) 129 (8)
A. H. Tenhundfeld, Jr. 1996 106,667 7,500 1,890 (6) 129 (8)
Vice President - Administration 1995 (2) 58,333 15,000 129 (8)
and Planning
Charles P. Huffman 1996 97,708 10,000 3,040 (7) 2,629 (8)
Vice President, Chief Financial 1995 95,333 2,965 (7) 15,000 129 (8)
Officer, Treasurer and Assistant 1994 85,333 2,560 (7) 129 (8)
Secretary
</TABLE>
(1) Mr. Davis was appointed President and Chief Executive Officer of the Company
effective January 27, 1995.
(2) Mr. Tenhundfeld was appointed Vice President-Administration and Planning of
the Company effective March 1, 1995.
9
<PAGE> 12
(3) Includes $4,671 and $1,187 contributed to Mr. Davis' account in the
Employees Savings Plan for the 1996 and 1995 fiscal years, respectively,
and $3,270 and $3,150 paid to Mr. Davis in 1996 and 1995, respectively,
pursuant to incentive units granted under the Company's Incentive
Compensation Plan.
(4) Includes $3,329, $3,113, and $2,965 contributed to Mr. Coffeen's account
in the Employees Savings Plan for the 1996, 1995, and 1994 fiscal years,
respectively, and $109 and $105 paid to Mr. Coffeen in 1996 and 1995,
respectively, pursuant to incentive units granted under the Company's
Incentive Compensation Plan.
(5) Includes $3,295, $3,256, and $3,100 contributed to Mr. Keen's account in
the Employees Savings Plan for the 1996, 1995 and 1994 fiscal years,
respectively, and $109 and $105 paid to Mr. Keen in 1996 and 1995,
respectively, pursuant to incentive units granted under the Company's
Incentive Compensation Plan.
(6) Represents contributions to Mr. Tenhundfeld's account in the Employee
Savings Plan for the 1996 fiscal year.
(7) Includes $2,931, $2,860 and $2,560 contributed to Mr. Huffman's account in
the Employee Savings 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 the Company's
Incentive Compensation Plan.
(8) Consists of insurance premiums of $129 for each officer; also includes
$2,500 paid by the Company to each of Messrs. Coffeen, Keen, and Huffman in
fiscal 1996 upon surrender of incentive units (see COMPENSATION AND PLANNING
COMMITTEE REPORT below).
No options were granted during fiscal year ended 1996 to any of the
executive officers listed in the Summary Compensation Table. The following
table and notes provide information on the value of unexercised options at
September 30, 1996 held by the executive officers listed in the Summary
Compensation Table.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR(1)
AND 1996 FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised In-the-
Options at 9/30/96 (#) Money Options at 9/30/96 ($)(2)
------------------------- -------------------------------
Name and Position Exercisable Unexercisable Exercisable Unexercisable
- ----------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
John S. Davis 7,500 22,500 $21,563 $64,688
W.G. Coffeen, III 3,750 11,250 $10,781 $32,344
Gerald S. Keen 3,750 11,250 $10,781 $32,344
A. H. Tenhundfeld, Jr. 3,750 11,250 $10,781 $32,344
Charles P. Huffman 3,750 11,250 $10,781 $32,344
</TABLE>
10
<PAGE> 13
(1) No options were exercised during the 1996 fiscal year.
(2) The ultimate realization of value on the exercise of such options is
dependent upon the market price of Common Stock at the time of exercise.
Calculations are based on the $24.00 closing price of 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 the Company. 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
$46,193, $53,438, $32,003, $39,303 and $60,678, respectively. Years of service
now credited under the Plan for Mr. Davis, Mr. Coffeen, Mr. Keen, Mr.
Tenhundfeld and Mr. Huffman are 1.25 (subject to the provisions of the Deferred
Compensation Agreement with Mr. Davis described below) 9, 6, 1 and 16 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 the Company on September 1, 1988. Eligibility
requirements are one year of employment and 21 years of age. Eligible employees
can invest up to 10% of their base salary in the plan. Employee contributions
vest immediately and can be allocated among a money market fund, bond fund, or
equity fund, 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 the Company's
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 1996, 1995 and
1994 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
the Company in 1994, the Company entered into a letter agreement with Mr.
Davis which provided, among other things, for the Company to enter into an
unfunded and unsecured deferred compensation agreement with Mr. Davis
substantially in accordance with a proposal provided by consultants retained by
the Company. Such an agreement was entered into between the Company 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
11
<PAGE> 14
payable under the Employees' Retirement Plan, would 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 the Company. The Deferred Compensation Agreement
also provides for a benefit payable if Mr. Davis terminates employment with the
Company for any reason prior to age 65, but after having completed at least 5
years of service with the Company. 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 the Company as of the date his
employment ceases. The 1994 letter agreement also provides that, if the
employment of Mr. Davis is involuntarily terminated for other than good cause
before July 1, 1997, Mr. Davis will receive severance benefits equal to one year
of his then-current salary, payable at the rate of 1/12 thereof per month for
twelve consecutive months, subject to all applicable state and federal
withholding requirements. 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 the Company, 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 the Company
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.
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, it reviews and makes recommendations to the Board with respect to
salaries and other compensation for officers of the Company. Decisions by the
Committee with respect to Compensation of the Company'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 the
Company's historical emphasis on base salary as the primary basis of executive
compensation. The Committee's compensation philosophy includes the following
five principles:
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<PAGE> 15
1. Objectives: The Company's two primary compensation objectives are
to provide a competitive compensation package that will enable the
Company 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 the Company
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 emphasis
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 shareholder 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 the Company's
stock.
5. Stock ownership: The executive compensation program is intended to
facilitate senior executives acquiring an equity stake in the Company, to
increase the alignment between executive interests and stockholders.
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<PAGE> 16
Consistent with the foregoing compensation philosophy, long-term
incentives in the form of stock options with respect to 105,000 shares of the
Company's 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 the Company 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 the Company. 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, compensation paid for
fiscal year 1996 included cash bonuses, and in October 1996 the Committee
recommended and the Board of Directors of the Company 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,
annual cash incentive awards to Company Officers may be made by the Committee in
its discretion, based on three performance measures:
o The Company's Return on Common Equity (ROE"), compared to the ROE of a
group of peer companies;
o The Company's earnings per share ("EPS") compared to a target EPS goal
established by the Committee; and
o Specific individual personal performance objectives to be established
annually for each participant in the 1996 Incentive Plan.
Because the Committee's implementation of its compensation philosophy was
not complete during fiscal year 1996, the bases for determining 1996
compensation for executive officers, including the chief executive officer,
remained largely subjective, and there was no mathematical relationship between
the corporate performance of the Company and executive compensation for fiscal
1996.
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 the Company, but receives no compensation
for such service.
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<PAGE> 17
MOBILE GAS SERVICE CORPORATION STOCK PERFORMANCE GRAPH
The following graph compares the value of $100 invested on October 1,
1991 in the Company's 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 the Company.
- ------------------------------FISCAL YEAR ENDING--------------------------------
<TABLE>
<CAPTION>
COMPANY 1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
MOBILE GAS SERVICE CORP 100 127.41 180.51 163.87 162.87 195.06
INDUSTRY INDEX 100 102.06 129.18 116.57 123.41 157.58
BROAD MARKET 100 98.34 127.89 135.34 164.32 191.84
</TABLE>
15
<PAGE> 18
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Deloitte & Touche LLP has served as independent public
accountants to audit the Company's financial statements for the past ten 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.
STOCKHOLDER PROPOSALS
Stockholders are entitled to submit proposals on matters appropriate for
stockholder action consistent with regulations of the Securities and Exchange
Commission. Should a stockholder intend to present a proposal at next year's
Annual Meeting, it must be received by the Secretary of the Company (at 2828
Dauphin Street, Mobile, Alabama 36606) no later than August 25, 1997, in order
to be included in the Company's proxy statement and form of proxy relating to
that meeting.
POSSIBLE ADJOURNMENT OF MEETING
In case the requisite vote to elect the nominees for Directors proposed
by the Company cannot be obtained at the date set for the meeting, it is the
intention of the Company, 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.
OTHER INFORMATION
As of this date, the Company 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.
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<PAGE> 19
ANNUAL REPORT ON FORM 10-K
A copy of the Company's Annual Report on Form 10-K for the period ended
September 30, 1996, including the financial statements and the schedules
thereto, will be provided without charge, upon receipt of a written request
addressed to Charles P. Huffman, Vice President, Chief Financial Officer and
Treasurer, Mobile Gas Service Corporation, P.O. Box 2248, Mobile, Alabama
36652.
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 18, 1996
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<PAGE> 20
EXHIBIT A
The first paragraph of Article 4 of the Restated Articles of
Incorporation is amended to read in its entirety as follows:
The total authorized Capital Stock of the Corporation
shall consist of EIGHT MILLION (8,000,000) shares of Common
Stock of the par value of ONE CENT ($.01) per share.
<PAGE> 21
PROXY MOBILE GAS SERVICE CORPORATION PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS, JANUARY 31, 1997
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 as proxies at the Annual Meeting of Stockholders of Mobile
Gas Service Corporation to be held in the Auditorium of the Company at 2828
Dauphin Street, Mobile, Alabama, on Friday, January 31, 1997, 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 entitled to cast if
personally present.
1. PROPOSAL TO AMEND RESTATED ARTICLES OF INCORPORATION OF MOBILE
GAS SERVICE CORPORATION as described in the Company's Proxy
Statement dated December 18, 1996 (Management favors a vote
"FOR")
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. ELECTION OF DIRECTORS (Management favors a vote "FOR") Nominees
for a term expiring in 2000: John C. Hope, III, S. Felton
Mitchell, Jr., Thomas B. Van Antwerp
[ ] 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 below.)
---------------------------------------------------------------
---------------------------------------------------------------
[ ] VOTE WITHHELD from all nominees.
3. In their discretion, the Proxies are authorized to vote upon
such other and further business as may come before the meeting
or any and all adjournments thereof, and upon matters that the
Company did not know were going to be brought before the
meeting or any adjournment because they had not become known a
reasonable time before the solicitation.
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 WILL BE VOTED "FOR" PROPOSAL 1 AND "FOR" ALL NOMINEES. Said
proxies, or either one of them, are authorized, in their or his discretion, to
vote the shares of the undersigned in favor of an adjournment or adjournments
of said meeting for the purpose of allowing time for additional solicitation of
proxies.
---------------------------- --------
---------------------------- --------
Stockholder Signature(s) Date
Please date, sign, and mail this Proxy in the envelope provided.
Postage not required 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, etc.
should so indicate.)
