<PAGE>
SCHEDULE 14A INFORMATION
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
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14A-11(c) or Rule 14A-12
Roanoke Gas Company
(Name of Registrant as Specified In Its Charter)
Roger L. Baumgardner, Secretary
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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:
Set forth the amount on which the filing fee is calculated and state how it was
determined.
[ ] 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>
ROANOKE GAS COMPANY
519 Kimball Avenue, N.E.
Roanoke, Virginia 24016
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 22, 1996
NOTICE is hereby given that, pursuant to its Bylaws and call of its
directors, the Annual Meeting of the Shareholders of Roanoke Gas Company will be
held at the office of the Company, 519 Kimball Avenue, N.E., Roanoke, Virginia
24016, on Monday, January 22, 1996, at 9 a.m., Eastern Standard Time, for the
election of directors, the approval of the Roanoke Gas Company Key Employee
Stock Option Plan, the appointment of independent auditors for fiscal year 1996
and the transaction of such other business as may properly come before the
meeting. 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
17, 1995, shall be entitled 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 15, 1995
<PAGE>
PROXY STATEMENT
MAILED DECEMBER 15, 1995
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JANUARY 22, 1996
This Proxy Statement is furnished on December 15, 1995, in connection with
the solicitation of proxies to be used at the Annual Meeting of Shareholders of
Roanoke Gas Company (the "Company"), to be held on Monday, January 22, 1996, at
9 a.m., Eastern Standard Time, at the office of the Company, 519 Kimball Avenue,
N.E, Roanoke, Virginia 24016.
Proxies in the form enclosed herewith are solicited by management at the
direction of the Board of Directors of the Company. If the enclosed proxy is
properly signed and returned to the Company, the shares represented thereby will
be voted at the Annual Meeting in accordance with its terms for the election of
the management nominees for the Board of Directors, the adoption of the Roanoke
Gas Company Key Employee Stock Option Plan (the "Proposed Plan") and the
appointment of independent auditors for fiscal year 1996. Any proxy given
pursuant to this solicitation may be revoked at any time prior to the vote of
the shareholders, and an opportunity will be given to shareholders attending the
meeting to withdraw their proxies and to vote their shares in person.
The Company's Annual Report to Shareholders for the year ended September
30, 1995 is being sent to all shareholders concurrently with this Proxy
Statement. Said Annual Report is not to be considered a part of the proxy
solicitation material.
VOTING SECURITIES
The close of business on November 17, 1995, 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. There were 1,434,972 shares
of common stock outstanding as of the foregoing record date, and each such share
is entitled to one vote. To the Company's 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 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 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 Plan will not be included in determining the number of votes cast.
2
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of November 17, 1995, certain
information regarding the beneficial ownership of the common stock of the
Company by each director nominee and named executive officer and by all director
nominees 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 OWNED
BENEFICIAL OWNER AS OF 11/17/95 PERCENT OF CLASS
<S> <C> <C>
Lynn D. Avis...................................................... 9,120(1) *
Abney S. Boxley, III.............................................. 3,486 *
Edward C. Dunbar.................................................. 9,152(2) *
Frank T. Ellett................................................... 4,982 *
Frank A. Farmer, Jr............................................... 22,296(3) 1.55
Wilbur L. Hazlegrove.............................................. 36,224(4) 2.51
W. Bolling Izard.................................................. 4,839 *
J. Allen Layman................................................... 3,861 *
John H. Parrott................................................... 15,025(5) 1.04
Thomas L. Robertson............................................... 3,772 *
S. Frank Smith.................................................... 5,014 *
All Directors and Executive Officers
as a Group (15 persons)......................................... 120,288 8.35
</TABLE>
* Less than 1%
(1) Includes 823 shares owned by son, as to which shares Mr. Avis disclaims
beneficial ownership.
(2) Includes 1,392 shares owned by spouse and includes 6,254 shares owned by Mr.
Dunbar's mother-in-law, for which Mr. Dunbar holds power of attorney.
(3) Includes 7,969 shares owned by spouse.
(4) Includes 11,144 shares owned by spouse and 66 shares owned by daughter. Also
includes 776 shares owned by son, as to which shares Mr. Hazlegrove
disclaims beneficial ownership.
(5) Includes 2,216 shares owned by spouse.
ELECTION OF DIRECTORS
PROPOSAL NO. 1
Increasingly in recent years, 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.
3
<PAGE>
The persons named below have been nominated as management nominees for
election to the Board of Directors of the Company, to serve pursuant to the
provisions of the Bylaws of the Company for a term of one year and until their
successors are elected and qualify. 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. All
management nominees are members of the present Board of Directors. Albert W.
Buckley retired as a director on January 27, 1992, and Edward C. Dunbar will be
retiring from the Board on January 22, 1996. Pending consideration of qualified
candidates, the Board has not nominated any persons to fill the vacancies
created by the retirements of Messrs. Buckley and Dunbar. Proxies cannot be
voted for a greater number of persons than the number of nominees named below.
<TABLE>
<CAPTION>
YEAR IN
WHICH
FIRST ELECTED
NAME AND AGE AS DIRECTOR PRINCIPAL OCCUPATION
<S> <C> <C>
Lynn D. Avis 1986 President, Avis Construction Co., Inc. (Construction company)
Age 61
Abney S. Boxley, III 1994 President, W. W. Boxley Co. (Crushed stone supplier); Director,
Age 37 Valley Financial Corporation
Frank T. Ellett 1983 President, Virginia Truck Center, Inc. (Sale, lease and service of
Age 57 heavy trucks)
F. A. Farmer, Jr. 1979 President and Chief Executive Officer of the Company since Jan. 1991;
Age 63 prior thereto, Senior Vice President-Operations and Planning of the
Company, 1983-1990
W. L. Hazlegrove 1979 Member, law firm of Woods, Rogers & Hazlegrove, P.L.C.; Vice
Age 66 President and General Counsel of the Company, 1984-1994
W. Bolling Izard 1966 President, W. Bolling Izard Surety & Consulting Agency, Inc., since
Age 69 June, 1992; prior thereto, Senior Vice President, Johnson & Higgins
of Virginia, Inc. (General Insurance)
J. Allen Layman 1991 President and Chief Executive Officer, Botetourt Communications, Inc.
Age 43 (Telecommunications)
John H. Parrott 1983 President, John H. Parrott and Associates, Inc. (Construction
Age 68 consultants) since 1983; prior thereto, Vice President, Olver,
Incorporated (Consulting engineers and environmental laboratories)
1986-1991
Thomas L. Robertson 1986 President, Carilion Health System and Roanoke Memorial Hospitals;
Age 52 Director, Roanoke Electric Steel Corporation
S. Frank Smith 1990 Executive Vice President, Coastal Coal Sales, Inc. (Marketers
Age 47 and sellers of coal)
</TABLE>
4
<PAGE>
EXECUTIVE COMPENSATION
The following table contains information with respect to the individual
compensation of the Chief Executive Officer for services in all capacities to
the Company and its subsidiaries for fiscal years ended September 30, 1995, 1994
and 1993. None of the Company's executive officers other than the Chief
Executive Officer received total annual compensation in excess of $100,000 for
services rendered to the Company during any of these years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
NAME AND ANNUAL COMPENSATION ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) COMPENSATION($)(2)
<S> <C> <C> <C> <C>
Frank A. Farmer, Jr. 1995 151,976 6,000 4,733
President & Chief Executive Officer 1994 143,650 0 4,303
1993 127,837 0 3,827
</TABLE>
(1) Bonus paid in 1995 for 1994 performance.
(2) Consists entirely of the Company's contribution under the Employees' Thrift
Plan.
RETIREMENT PLAN
The Company has in effect a noncontributory Retirement Plan. The costs of
benefits under the Plan, which are borne by the Company, are computed
actuarially and defrayed by earnings from the Plan's investments and/or annual
contributions of the Company. The Plan generally provides for the monthly
payment, at normal retirement age 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 (i) plus (ii) minus (iii): (i) 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, (ii) .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 (iii) 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.
It is estimated that at age 65, for Plan purposes, Mr. Farmer will have 33
credited years of service.
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 1995, these earnings are limited to $150,000. This limit
is indexed for cost of living after 1994.
5
<PAGE>
ESTIMATED ANNUAL PENSION FOR
REPRESENTATIVE YEARS OF CREDITED SERVICE (1)
<TABLE>
<CAPTION>
HIGHEST SIXTY MONTHS
AVERAGE COMPENSATION 15 20 25 30 35
<S> <C> <C> <C> <C> <C>
$125,000 $32,100 $42,700 $53,400 $64,100 $64,100
150,000 39,000 52,000 65,000 78,000 78,000
175,000 39,000 52,000 65,000 78,000 78,000
200,000 39,000 52,000 65,000 78,000 78,000
</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 Thrift 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 the
Company, 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.
In fiscal 1995, annual salary was the primary component of compensation for
executive officers of the Company. This was 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 below. 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.
At its meeting on January 13, 1995, the Committee approved the payment of
bonuses to the CEO and other executive officers of the Company for outstanding
performance during the calendar year 1994. It further recommended that a Stock
Bonus Plan be approved by the Board of Directors, which Stock Bonus Plan became
effective January 1, 1995. The Stock Bonus Plan is intended to allow the Board
of Directors to reward 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.
6
<PAGE>
The Stock Bonus Plan is administered by the Committee, which considers
recommendations from the Company's President. The Committee's bonus award
proposals are subject to approval by the Board of Directors. Under the Stock
Bonus Plan, executive officers of the Company 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
otherwise approved by the Committee, receive no less than 50% of any performance
bonuses 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.
Accordingly, no bonus award determinations under the Stock Bonus Plan have yet
been made for performance in the 1995 fiscal year.
In making its recommendation regarding the 1995 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, the Company's improved earnings and shareholder and customer
growth in the preceding fiscal year. During 1995, Mr. Farmer received a bonus of
$6,000, which he elected to take in Company common stock, for his performance
during the calendar year 1994. The amount of the bonus was determined based upon
Mr. Farmer's success during 1994 in monitoring operational and capital budgets
for maximum cost efficiency. The control of costs, operational and financing,
resulted in improved earnings for the Company. Under Mr. Farmer's guidance the
Dividend Reinvestment and Stock Purchase Plan was amended to make customers
eligible, thereby, greatly increasing the number of shareholders. In addition,
listing of the Company's stock on the Nasdaq National Market resulted in greater
liquidity for small block trading for individual stockholders.
At its meeting on October 30, 1995, the Board of Directors, upon the
recommendation of the Committee, adopted, subject to shareholder and Virginia
State Corporation Commission approval, the Roanoke Gas Company Key Employee
Stock Option Plan described in Proposal No. 2. The Committee has recommended
adoption of the Proposed Plan in order to provide the Company's executive
officers with long-term (ten-year) incentives and rewards tied to the price of
the Company's common stock. The Committee believes that stock options will
assist the Company 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 the Company. It is expected that stock options will provide
executive officers additional incentive to use their best efforts and superior
performances to promote the best interests of the Company and the shareholders.
The Proposed Plan will become effective when approved by the shareholders and
the Virginia State Corporation Commission. No stock options were granted
pursuant to the Proposed Plan during the 1995 fiscal year. For more information
concerning the Proposed Plan, see Proposal No. 2 below.
Submitted by the Compensation Committee of the
Board of Directors of the Company:
Lynn D. Avis, Abney S. Boxley, III, Frank T. Ellett, J. Allen Layman,
S. Frank Smith
7
<PAGE>
PERFORMANCE GRAPH
The following graph compares the yearly percentage change and the
cumulative total of shareholder return on the Company's common stock with the
cumulative return on the Standard & Poor's 500 Composite Index (the "S&P 500")
and the Edward D. Jones & Co. Natural Gas Distribution Index for the five-year
period commencing on September 30, 1990 and ending on September 30, 1995. These
comparisons assume the investment of $100 in the Company's common stock and each
of the indices on September 30, 1990 and the reinvestment of dividends.
(The Performance Graph appears here. The plot points are listed in the table
below).
1990 1991 1992 1993 1994 1995
Roanoke Gas Company 100 97 103 110 126 117
S&P 500 Composite Index 100 131 145 164 170 221
Edward D. Jones & Co.
Natural Gas Distribution Index 100 119 147 184 130 146
8
<PAGE>
TRANSACTIONS WITH MANAGEMENT
The law firm of Woods, Rogers & Hazlegrove, P.L.C., of which W. L.
Hazlegrove, a director of the Company, is a member, rendered legal services to
the Company during 1995, and it is anticipated that similar legal services will
be provided by that firm to the Company in 1996.
REMUNERATION OF DIRECTORS
Directors are compensated $3,600 per year in addition to receiving fees for
meetings of the Company's Board of Directors and of Committees of the Board
which they attend. Mr. Farmer is not compensated for attendance at Board and
Committee meetings and does not receive $3,600 per year for service as a Board
member. The schedule of fees paid to directors for each such meeting attended is
as follows:
<TABLE>
<CAPTION>
<S> <C>
Board of Directors.............................................. $300
Executive Committee............................................. $100
Audit Committee................................................. $100
Compensation Committee.......................................... $100
Marketing Committee............................................. $100
</TABLE>
BOARD OF DIRECTORS AND COMMITTEES
AUDIT COMMITTEE
The Audit Committee of the Board of Directors, composed of Messrs. Ellett,
Izard, Layman, Robertson, and Smith, meets at least annually with the Company's
chief financial officer, the independent auditors of the Company, and certain
appropriate officers of the Company. The basic functions of this Committee
include reviewing significant financial information, reviewing accounting
procedures and internal controls and recommending the selection of the Company's
independent auditors. The Audit Committee met five times during the 1995 fiscal
year.
EXECUTIVE COMMITTEE
The Executive Committee of the Board of Directors, which is composed of
Messrs. Hazlegrove, Ellett, Izard, and Parrott, 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 the Company's annual
meeting. This Committee, which did not meet during fiscal year 1995, will not
consider proposed nominees recommended by shareholders of the Company. 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
9
<PAGE>
Board of Directors concerning the salaries of certain executive officers and
management employees of the Company. This Committee met twice during the 1995
fiscal year.
MARKETING COMMITTEE
The Marketing Committee of the Board of Directors is composed of Messrs.
Parrott, Avis, Boxley, Ellett, Izard, Layman, and Smith. The principal purposes
of this Committee include reviewing the marketing plans and providing
suggestions for future marketing emphasis. The Committee did not meet during the
1995 fiscal year.
MEETINGS OF THE BOARD AND COMMITTEES
The Board of Directors met twelve times during the 1995 fiscal year. With
the exception of Mr. Layman, the incumbent members of the Board attended in
fiscal year 1995, 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.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
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 1995 one report relating to one transaction was filed
late by John B. Williamson, III.
10
<PAGE>
APPROVAL OF
ROANOKE GAS COMPANY KEY EMPLOYEE STOCK OPTION PLAN
PROPOSAL NO. 2
At its meeting on October 30, 1995, the Board of Directors of the Company
adopted, subject to shareholder and Virginia State Corporation Commission
approval, the Roanoke Gas Company Key Employee Stock Option Plan. The Proposed
Plan is applicable to not more than 50,000 shares of Company common stock.
The text of the Proposed Plan is attached to this Proxy Statement as
Appendix A. The description of the Proposed Plan set forth below is qualified in
its entirety by reference to Appendix A.
Under the Proposed Plan, the Compensation Committee of the Board may grant
stock options ("Options") to officers and other full time salaried employees of
the Company or its affiliates who are selected by the Committee. As of November
17, 1995, approximately 16 employees were eligible for selection to receive
Options under the Proposed 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.
The Company 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 shall be established by the Committee,
but in no event will be less than the fair market value of Company common stock
at the time the Option is granted. The fair market value per share of Company
common stock will be determined by the Committee under the Proposed Plan by
reference to the closing sales price of the Company's common stock on the Nasdaq
National Market System ("Nasdaq-NMS"). As of November 17, 1995, the closing
sales price of the Company's common stock on the Nasdaq-NMS was $15.50. 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 the Company, the Committee under the
Proposed 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 Proposed Plan. A change in
control under the Proposed Plan includes (i) any person obtaining direct or
indirect voting power of 20% of the Company's 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 the Company; 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 the Company. No change of control is deemed
to have occurred for purposes of the Proposed Plan by virtue of any transaction
(i) which results in the optionee, or a group of persons which includes the
11
<PAGE>
optionee, acquiring, directly or indirectly, 20% or more of the combined voting
power of the Company's voting securities; or (ii) which results in the Company
or any affiliate of the Company or any profit sharing plan, employee stock
ownership plan or employee benefit plan of the Company or any of its affiliates
acquiring, directly or indirectly, 20% or more of the combined voting power of
the Company's securities.
The Committee may grant Options under the Proposed Plan to eligible
individuals on the basis of criteria that it feels are in the best interests of
the Company and its affiliates. Further, the Committee may impose such
restrictions, conditions, terms and timing upon the granting of Options as it
deems advisable for the Company. On October 30, 1995, the Committee granted
Options to the following employees, subject to approval of the Proposed Plan by
the shareholders and the Virginia State Corporation Commission:
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND POSITION DOLLAR VALUE ($)(1) UNDERLYING GRANT
<S> <C> <C>
Frank A. Farmer, Jr.
President and Chief Executive Officer.................................. 77,500 5,000
Executive Officers, as a group......................................... 178,250 11,500
Non-Executive Officer Employees, as a group............................ 23,250 1,500
</TABLE>
(1) Based on the closing sale price ($15.50 per share) of the Company's common
stock on the Nasdaq-NMS on October 30, 1995.
The Board of Directors of the Company may amend or terminate the Proposed
Plan but cannot, without the approval of the shareholders: (i) increase the
maximum number of shares for which Options may be granted under the Proposed
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.
The Proposed Plan will become effective upon approval by the shareholders
and the Virginia State Corporation Commission. The Proposed Plan is designed to
assist in attracting, retaining 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
the Company and thereby benefit from appreciation in the value of Company common
stock. Participants in the Proposed Plan will have an incentive to use their
best efforts and superior performances to promote the best interests of the
Company, for their own benefit and for the benefit of all shareholders.
If a quorum is established, approval of the Proposed Plan requires the
affirmative vote of the majority of the votes cast by the shares that are
entitled to vote at the Annual Meeting. See "Voting Securities" above.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL NO. 2.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
PROPOSAL NO. 3
Upon recommendation of the Audit Committee, the Board of Directors has
appointed KPMG Peat Marwick LLP as independent public accountants to audit the
consolidated financial statements of the Company and its subsidiaries for the
year ending September 30, 1996. This appointment is subject to approval
12
<PAGE>
by the shareholders. A representative of KPMG Peat Marwick LLP is expected to
attend the meeting with the opportunity to make a statement and/or respond to
appropriate questions from shareholders. KPMG Peat Marwick LLP has served as
independent auditors of the Company since fiscal year 1990.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE APPOINTMENT OF
KPMG PEAT MARWICK LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR FISCAL YEAR 1996.
OTHER MATTERS
Management does not know of any matters to be presented at the Annual
Meeting of Shareholders other than those set forth above. 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.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the Company's 1997
Annual Meeting must be received by the Corporate Secretary of Roanoke Gas
Company at its office, 519 Kimball Avenue, N.E., Roanoke, Virginia 24016, no
later than August 17, 1996, in order to be considered for inclusion in the
Company's Proxy Statement relating to that meeting.
EXPENSES OF SOLICITATION
The entire expense of preparing, assembling, printing and mailing the form
of proxy and Proxy Statement will be paid by the Company. The Company will
request banks and brokers to solicit their customers who beneficially own common
stock of the Company 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
the Company by telephone, telegraph, cable and personal interview. The Company
does not expect to pay any compensation for the solicitation of proxies.
By Order of the Board of Directors.
F. A. FARMER, JR.
PRESIDENT
December 15, 1995
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED SEPTEMBER 30, 1995
IS AVAILABLE WITHOUT CHARGE TO ANY SHAREHOLDER REQUESTING THE SAME. WRITTEN
REQUESTS SHOULD BE ADDRESSED TO THE ATTENTION OF MR. ROGER L. BAUMGARDNER,
SECRETARY, ROANOKE GAS COMPANY, P.O. BOX 13007, ROANOKE, VIRGINIA 24030.
13
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APPENDIX A
ROANOKE GAS COMPANY
KEY EMPLOYEE STOCK OPTION PLAN
1. PURPOSE:
The purpose of this Plan is to promote the interests of Roanoke Gas Company
(the "Corporation") and its shareholders by aiding in attracting, retaining and
motivating officers and other key employees of the Corporation and its
affiliates. The Plan is designed to accomplish these objectives by providing
such officers and key employees with an opportunity to acquire a proprietary
interest in the Corporation by means of options and thereby benefit from
appreciation in value of the shares of the Corporation's Common Stock. This
opportunity should provide additional incentives for such officers and key
employees to continue to use their best efforts and superior performances to
promote the best interests of the Corporation, for their own benefit and for the
benefit of the shareholders.
2. DEFINITIONS:
The following words and phrases as used herein shall have the meanings set
forth below:
2.1 "Board" shall mean the Board of Directors of the Corporation.
2.2 "Change in Control" shall mean a change in control of a nature that
would be required to be reported (assuming such event has not been "previously
reported") in response to Item 1(a) of the Current Report on Form 8-K, as in
effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended ("Exchange Act"); provided that,
notwithstanding the foregoing and without limitation, such a change in control
shall be deemed to have occurred at such time as (i) any Person is or becomes
the "beneficial owner" (as defined in Rule 13d-3 or Rule 13d-5 under the
Exchange Act as in effect on the date hereof), directly or indirectly, of 20%
or more of the combined voting power of the Corporation's voting securities;
(ii) the incumbent Board ceases for any reason to constitute at least the
majority of the Board, provided that any person becoming a director subsequent
to the date hereof whose election, or nomination for election by the
Corporation's shareholders, was approved by a vote of at least 75% of the
directors comprising the incumbent Board (either by a specific vote or by
approval of the proxy statement of the Corporation in which such person is
named as a nominee for director, without objection to such nomination) shall be,
for purposes of this clause (ii) considered as though such person were a member
of the incumbent Board; (iii) all or substantially all of the assets of the
Corporation are sold, transferred or conveyed by any means, including but not
limited to, direct purchase or merger, if the transferee is not controlled by
the Corporation, control meaning the ownership of more than 50% of the combined
voting power of such entity's voting securities; or (iv) the Corporation is
merged or consolidated with another corporation or entity and as a result of
such merger or consolidation less than 75% of the outstanding voting securities
of the surviving or resulting corporation or entity shall be owned in the
aggregate by the former shareholders of the Corporation. Notwithstanding
anything in the foregoing to the contrary, no change in control shall be deemed
to have occurred for purposes of this Agreement 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 the Corporation's voting securities; or (ii) which
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results in the Corporation, any affiliate of the Corporation or any
profit-sharing plan, employee stock ownership plan or employee benefit plan of
the Corporation or any of its affiliates (or any trustee of or fiduciary with
respect to any such plan acting in such capacity) acquiring, directly or
indirectly, 20% or more of the combined voting power of the Corporation's voting
securities.
2.3 "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
2.4 "Committee" shall mean the Compensation Committee of the Board of
Directors, or such other committee of the Board as may be designated by the
Board from time to time, for the purpose of administering this Plan as
contemplated by Section 3 of this document. The composition of the Committee
shall meet the disinterested administration requirements of Rule 16b-3
promulgated pursuant to the Exchange Act. Should any member of the Committee
cease to be a disinterested person under Rule 16b-3(c)(2)(i) or any subsequent
rule, he shall immediately be deemed not to be a member of the Committee for all
purposes of this Plan.
2.5 "Common Stock" shall mean the common stock of the Corporation.
2.6 "Option" shall mean any stock option granted pursuant to this Plan.
2.7 "Optionee" shall mean any person who is the holder of an Option granted
under this Plan.
2.8 "Person" shall mean person within the meaning of Sections 3(a)(9) and
13(d)(3) of the Exchange Act.
2.9 "Plan" shall mean this Roanoke Gas Company Key Employee Stock Option
Plan.
2.10 "Fair Market Value" shall mean the closing sales price of Common Stock
on a nationally recognized stock exchange or, if not traded on such an exchange,
the NASDAQ National Market System, on the date involved if that is a trading
day, or if not, the first trading day prior to such day. If said Common Stock is
not quoted on the NASDAQ National Market System, then Fair Market Value shall
mean the average between the bid and asked price on the date involved if that is
a trading day, or if not, the first trading day prior to such day. If there is
no such average, the Committee shall determine Fair Market Value in good faith.
In determining such Fair Market Value, the Committee shall utilize all
information which it deems pertinent, including, but not limited to, actual sale
or purchase data, and may engage the services of an accounting firm to assist in
the determination. The Committee shall further determine Fair Market Value using
guidelines promulgated pursuant to the pertinent provisions of the Code.
3. ADMINISTRATION:
3.1 The Plan shall be administered by the Committee, which may make such
determinations and take such actions in connection with the Plan as it deems
necessary. Such determinations and actions shall be binding and conclusive for
all purposes and upon all persons.
3.2 The Committee may correct any defects, omissions or ambiguities, or
reconcile any inconsistencies, in the Plan, or in any document issued pursuant
to the Plan, in the manner and to the extent it shall deem reasonably desirable.
The Committee shall have full and sole authority to make all administrative,
interpretative and other determinations with respect to the Plan and all such
determinations shall be final and conclusive.
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3.3 As provided in Section 6.1 hereof, the Committee shall have full and
sole authority to make all grants to be made hereunder.
3.4 Any other provision of the Plan to the contrary notwithstanding, the
Committee is authorized to take such action as it, in its discretion, may deem
necessary or advisable and fair and equitable with regard to Optionees in the
event of: a Change in Control of the Corporation; a tender, exchange or similar
offer for all or any part of the Common Stock made by an entity, person or group
(other than the Corporation, any affiliate of the Corporation or any savings,
pension or other benefit plan for the benefit of employees of the Corporation or
its affiliates); a merger of the Corporation into, a consolidation of the
Corporation with, or an acquisition of the Corporation by another corporation;
or a sale or transfer of all or substantially all of the Corporation's assets.
Such action, in the Committee's discretion, may include (but shall not be deemed
limited to): establishing, amending or waiving the forms, terms, conditions or
duration of Options granted hereunder or subject to grant hereunder, so as to
provide for earlier, later, extended or additional terms for exercise of the
whole, or any installment thereof (provided that, except as permitted by the
provisions of this Section and Section 9.1 hereof, in no event will any Option
be exercisable within the first six months of its respective term); alternate
forms of payment; or other modifications. The Committee may take any such
actions pursuant to this Section 3.4 by adopting rules or regulations of general
applicability to all Optionees, or to certain categories of Optionees; by
amending or waiving terms and conditions in stock option agreements; or by
taking action with respect to individual Optionees. The Committee may take any
such actions before or after the public announcement of any such Change in
Control, tender offer, exchange offer, merger, consolidation, acquisition or
sale or transfer of assets.
4. SHARES AVAILABLE:
4.1 Subject to the provisions of Sections 4.2 and 4.3 hereof, the aggregate
number of shares of Common Stock to be subject to Options under this Plan shall
not exceed 50,000 shares. Such shares shall be made available from the
authorized but unissued shares of Common Stock of the Corporation.
4.2 Shares subject to an Option, to the extent such shares are surrendered
or withheld to pay the exercise price of the Option, are no longer available for
issuance hereunder. Other shares subject to Options granted under this Plan,
which Options have been canceled or have expired or are unexercised and no
longer outstanding, shall thereupon become available for issuance pursuant to
other Options granted under the Plan. This Section 4.2 shall in all cases be
interpreted in a manner consistent with Rule 16b-3, as amended from time to
time.
4.3 The Committee may, at any time, make or provide for such adjustments to
the Plan, to the number and class of shares available thereunder or to any
outstanding Options as it shall deem appropriate to prevent dilution or
enlargement of the rights of Optionees, including adjustments in the event of
changes in the outstanding Common Stock by reason of stock dividends, stock
splits, distributions to shareholders (other than cash dividends),
recapitalizations, mergers, consolidations, combinations or exchanges of shares,
separations, reorganizations, liquidations and the like. Such adjustments may
include, in the discretion of the Committee, adjustments to the aggregate number
and kind of shares which may be issued pursuant to Options under this Plan, and
the number, kind and price of shares subject to each Option then outstanding.
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<PAGE>
5. ELIGIBILITY:
5.1 Officers and other full-time, salaried employees of the Corporation and
its affiliates shall be eligible to receive Options under the Plan. No Option,
however, may be granted to a person who, immediately after an Option is granted,
owns directly or indirectly shares of stock possessing more than 5% of the total
combined voting power or value of all classes of stock of the Corporation at the
time outstanding. For purposes of this paragraph only, an employee shall be
deemed to own directly or indirectly shares of stock which he may purchase under
outstanding Options.
5.2 A director of the Corporation or any of its affiliates who is not also
regular, full-time employee of the Corporation or its affiliates will not be
eligible for Options under the Plan.
5.3 An employee who has been granted an Option otherwise under the Plan may
be granted additional Options, if the Committee shall so determine.
6. GRANTS:
6.1 Subject to the express provisions of this Plan, the Committee shall
have sole authority to determine the individuals to whom Options shall be
granted, the time or times at which Options shall be granted, the number of
shares of Common Stock to be subject to each Option granted, the period of each
Option and the time or times at or during which an Option may be exercised in
whole or in part, and all such other terms and conditions of such Options
granted as the Committee deems appropriate.
6.2 Each Option granted to an Optionee under this Plan shall, if required
by the Committee, be evidenced by a written agreement to be duly executed and
delivered by or on behalf of the Corporation and the Optionee and containing
provisions not inconsistent with the Plan.
7. OPTION PRICE:
The exercise price under each Option shall be established by the Committee,
but in no event shall it be less than 100% of the Fair Market Value of the
Common Stock on the date the Option is granted.
8. TERM OF OPTIONS:
The term of each Option shall be fixed by the Committee, but, subject to
the power of the Committee, among other things, to accelerate or otherwise
adjust the terms for exercise of Options pursuant to Section 3.4 hereof in the
event of the occurrence of any of the events set forth therein, no Option shall
be exercisable later than ten years from the date of grant of the Option or
earlier than six months from the date of grant of the Option, except as
otherwise provided in Section 9.1.
9. EXERCISE OF OPTIONS:
9.1 Each Option granted under this Plan shall be exercisable in such number
of shares and, subject to the provisions of Section 8, at such time or times,
including periodic installments, as may be determined by the Committee at the
time of the grant. The six months from the date of the grant of the Option
restriction pursuant to Section 8 shall not be applicable to an Optionee in the
event that he dies prior to the expiration of such period. The right to acquire
shares pursuant to Options that are exercisable in installments shall be
cumulative so that when the right to acquire any shares has accrued such shares
or any part thereof may be acquired at any time thereafter until the expiration
or termination of the Option.
A-4
<PAGE>
9.2 An Option may be exercised by giving written notice of exercise to the
Corporation specifying the number of shares to be purchased and by paying in
full in cash the exercise price. The proceeds received by the Corporation in
cash will be used for general corporate purposes.
9.3 If authorized by the Committee, the exercise price may also be paid by
(i) the delivery of shares of Common Stock with a Fair Market Value equal to the
exercise price, or (ii) a combination of cash and such Common Stock equal to the
exercise price.
9.4 Upon notification of the amount due and prior to, or concurrently with,
the delivery to the Optionee of a certificate representing any shares purchased
pursuant to the exercise of an Option, the Optionee shall promptly pay to the
Corporation any amount necessary to satisfy applicable federal, state or local
tax requirements.
9.5 An Optionee shall have none of the rights of a shareholder with respect
to the shares subject to any Option until such shares have been issued and
registered on the Corporation's transfer books upon exercise thereof.
10. NON-TRANSFERABILITY:
No Option granted under this Plan shall be transferable other than by will
or the laws of descent and distribution or pursuant to a qualified domestic
relations order as defined in the Code, and an Option may be exercised during
the lifetime of the Optionee only by him or by his guardian or legal
representative.
11. TERMINATION OF EMPLOYMENT, RETIREMENT, DEATH OR CANCELLATION:
11.1 In the event that the employment of an Optionee is terminated, for a
reason other than retirement or death, no Option held by such Optionee shall be
exercisable later than three months after such Optionee shall have ceased to be
an employee of the Corporation or one of its affiliates or, if earlier, later
than the expiration date of the Option. The employment relationship, however,
will be treated as continuing intact while the Optionee is on military or sick
leave if the period of such leave does not exceed ninety days, or, if longer, so
long as the Optionee's right to re-employment is guaranteed either by statute or
by contract.
11.2 In the event that an Optionee shall retire or die while employed by
the Corporation or one of its affiliates, Options held by such Optionee may be
exercised by the Optionee or by the person designated in the will of the
Optionee or by the proper legal representative of the Optionee within one year
following the Optionee's death or one year following retirement, but in no event
later than the expiration date of the Option.
11.3 Notwithstanding the express term of the grant or the foregoing
provisions of this Section 11, Options shall terminate upon the termination of
the employment of the Optionee if the Corporation determines that such
termination is for deliberate, willful or gross misconduct, and the Options
shall terminate (whether or not the employment of the Optionee is terminated) if
the Corporation determines that the Optionee has improperly disclosed
confidential information of the Corporation and the Optionee is so notified.
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12. LISTING AND REGISTRATION OF SHARES:
Each Option shall be subject to the requirement that, if at any time the
Committee shall determine in its discretion that the listing, registration or
qualification of the shares subject to such Option upon any securities exchange
or under any state or federal law, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition of, or in
connection with, the granting of such Option or the issuance or purchase of
shares thereunder, then such Option shall not be granted or exercised in whole
or in part unless such listing, registration, qualification, consent or approval
shall have been effected or obtained free of any conditions not acceptable to
the Committee.
13. EFFECTIVE DATE:
This Plan is subject to approval by the shareholders of the Corporation.
The Plan will become effective on the date so approved. The Committee may, in
its discretion, grant Options conditioned upon the shareholders' subsequent
approval of the Plan.
14. DURATION AND AMENDMENT:
14.1 There is no express limitation upon the duration of the Plan.
14.2 The Board may terminate or may amend the Plan at any time, provided,
however, that the Board may not, without approval of the shareholders of the
Corporation, (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 time of grant, or (iii) change the class of employees
eligible to receive Options under the Plan. The transactions under this Plan are
intended to comply with Rule 16b-3 (or its successor), as amended from time to
time, promulgated pursuant to the Exchange Act, and the Corporation may, but
shall not be required to, submit any proposed Plan amendment to its shareholders
for their approval to assure continued compliance if such proposed amendment
would, with respect to any participant who is an officer, director or 10%
shareholder of the Corporation who is subject to Section 16 of the Exchange Act
("Control Person"), (i) materially increase the benefits accruing to
participants under the Plan, or (ii) materially increase the number of
securities which may be issued under the Plan (this shall not affect the
prohibition against increasing the maximum number of shares for which Options
may be granted under the Plan pursuant to the previous paragraph without
shareholder approval), or (iii) materially modify the requirements as to
eligibility for participation in the Plan.
15. MISCELLANEOUS:
With respect to any participant who is a Control Person, transactions under
this Plan are intended to comply with Rule 16b-3 (or its successor), as amended
from time to time, promulgated pursuant to the Exchange Act. Therefore, to the
extent any provision of the Plan or action by a person administering the Plan
fails to so comply, it shall be deemed null and void ab initio to the extent
permitted by law and deemed advisable by the Committee.
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As evidence of its adoption of this Plan, the Corporation has caused this
document to be executed on its behalf this 30th day of October, 1995.
ROANOKE GAS COMPANY
By: /s/ FRANK A. FARMER, JR.
Its: PRESIDENT
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ROANOKE GAS COMPANY
P R O X Y
519 KIMBALL AVENUE, N.E.
ROANOKE, VIRGINIA 24016
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Albert W. Buckley and Robert W. Woody, or
either of them, with full power of substitution, to vote all common stock of
Roanoke Gas Company held of record by the undersigned as of November 17, 1995,
at the Annual Meeting of Shareholders of Roanoke Gas Company to be held on
January 22, 1996, and at any adjournments thereof, as follows:
1. ELECTION OF DIRECTORS:
<TABLE>
<S> <C>
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote
(except as marked to the contrary below) for all nominees listed below
</TABLE>
Lynn D. Avis, Abney S. Boxley, III, Frank T. Ellet, F.A. Farmer, Jr.,
W.L. Hazlegrove, W. Bolling Izard, J. Allen Layman, John H. Parrott,
Thomas L. Robertson, S. Frank Smith.
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME IN THE LINES BELOW:
(Over)
<PAGE>
2. PROPOSAL TO APPROVE THE ROANOKE GAS COMPANY KEY EMPLOYEE STOCK OPTION PLAN,
ALL AS MORE FULLY SET FORTH IN THE PROXY STATEMENT DATED DECEMBER 15, 1995.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO APPROVE THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT
AUDITORS FOR THE FISCAL YEAR 1996.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. 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 1, 2 AND 3 ABOVE.
The undersigned hereby acknowledges receipt of the Proxy Statement dated
December 15, 1995.
Dated:
Signature of Shareholder
Please sign your name(s) exactly as
shown imprinted hereon.
(This proxy is revocable at any time
prior to exercise hereof.)
