SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ROANOKE GAS COMPANY
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(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 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
ROANOKE GAS COMPANY
519 Kimball Avenue, N.E.
Roanoke, Virginia 24016
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 27, 1997
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 27, 1997, at 9 a.m., Eastern Standard Time, for the
election of directors, the approval of an amendment of the Company's Articles of
Incorporation providing for classification of the Board of Directors into three
classes of directors with staggered terms of office and implementing certain
related matters, the approval of the Roanoke Gas Company Restricted Stock Plan
for Outside Directors, the appointment of independent auditors for fiscal year
1997 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
22, 1996, 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 13, 1996
<PAGE>
PROXY STATEMENT
MAILED DECEMBER 16, 1996
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JANUARY 27, 1997
This Proxy Statement is furnished on December 13, 1996, 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 27, 1997, 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, for the amendment of the
Company's Articles of Incorporation to classify the Board of Directors into
three classes of directors with staggered terms of office and implement certain
related matters (the "Proposed Amendment"), for approval of the Roanoke Gas
Company Restricted Stock Plan for Outside Directors (the "Proposed Plan"), and
for the appointment of independent auditors for fiscal year 1997. 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, 1996 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 22, 1996, 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 1,483,462 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 Amendment and 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
2
<PAGE>
Shares that are not voted in the election of directors and/or in connection with
the Proposed Amendment or the Proposed Plan will not be included in determining
the number of votes cast.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of November 22, 1996, 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 11/22/96 PERCENT OF CLASS
<S> <C> <C>
Lynn D. Avis...................................................... 9,410(1) *
Abney S. Boxley, III.............................................. 3,486 *
Frank T. Ellett................................................... 5,286 *
Frank A. Farmer, Jr............................................... 30,843(2) 2.08
Wilbur L. Hazlegrove.............................................. 36,271(3) 2.45
W. Bolling Izard.................................................. 5,083 *
J. Allen Layman................................................... 3,987 *
John H. Parrott................................................... 14,325(4) *
Thomas L. Robertson............................................... 3,901 *
S. Frank Smith.................................................... 5,320 *
All Directors and Executive Officers
as a Group (14 persons)......................................... 128,141(5) 8.57
</TABLE>
* Less than 1%
(1) Includes 874 shares owned by son, as to which shares Mr. Avis disclaims
beneficial ownership.
(2) Includes 8,457 shares owned by spouse and 818 shares owned by Mr. Farmer's
mother, for which Mr. Farmer holds power of attorney. Also includes 5,000
shares which Mr. Farmer has the right to acquire through the exercise of
stock options.
(3) Includes 11,144 shares owned by spouse and 66 shares owned by daughter. Also
includes 823 shares owned by son, as to which shares Mr. Hazlegrove
disclaims beneficial ownership.
(4) Includes 2,216 shares owned by spouse.
(5) Includes an aggregate of 11,500 shares which executive officers have the
right to acquire through the exercise of stock options.
3
<PAGE>
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.
The persons named below have been nominated as management nominees for
election to the Board of Directors of the Company. 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. Proxies
cannot be voted for a greater number of persons than the number of nominees
named below.
At the Annual Meeting, nine directors will be elected. If Proposal No. 2
(described below) is adopted by the shareholders, a classified Board will be
elected so that three directors will hold office until the 1998 Annual Meeting
of Shareholders, three directors will hold office until the 1999 Annual Meeting
of Shareholders and three directors will hold office until the 2000 Annual
Meeting of Shareholders, and in each case until their respective successors are
elected and qualified.
If Proposal No. 2 is adopted, it is the intention of the persons named as
proxies in the accompanying form of proxy, unless otherwise instructed, to vote
for the election of each nominee set forth below for the term expiring in the
year indicated. If Proposal No. 2 is not adopted, the persons named as proxies
intend to vote, unless otherwise instructed, for the election of each such
nominee to serve for one year.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES FOR
DIRECTOR.
4
<PAGE>
<TABLE>
<CAPTION>
YEAR IN
WHICH
FIRST ELECTED
NAME AND AGE AS DIRECTOR PRINCIPAL OCCUPATION
<S> <C> <C>
CLASS A DIRECTORS FOR ELECTION TO TERMS EXPIRING IN 1998
Abney S. Boxley, III 1994 President, W. W. Boxley Co. (Crushed stone supplier); Director,
Age 38 Valley Financial Corporation
John H. Parrott 1983 President, John H. Parrott and Associates, Inc. (Construction
Age 69 consultants) since 1983; prior thereto, Vice President, Olver,
Incorporated (Consulting engineers and environmental laboratories)
1986-1991
S. Frank Smith 1990 Executive Vice President, Coastal Coal Sales, Inc. (Marketers and
Age 48 sellers of coal)
CLASS B DIRECTORS FOR ELECTION TO TERMS EXPIRING IN 1999
Lynn D. Avis 1986 President, Avis Construction Co., Inc. (Construction Company)
Age 62
J. Allen Layman 1991 President and Chief Executive Officer, R&B Communications, Inc.
Age 44 (Telecommunications)
Thomas L. Robertson 1986 President, Carilion Health System and Carilion Medical Center;
Age 53 Director, Roanoke Electric Steel Corporation
CLASS C DIRECTORS FOR ELECTION TO TERMS EXPIRING IN 2000
Frank T. Ellett 1983 President, Virginia Truck Center, Inc. (Sale, lease and service of
Age 58 heavy trucks)
F. A. Farmer, Jr. 1979 President and Chief Executive Officer of the Company since Jan. 1991;
Age 64 Chairman of the Board of Directors of the Company since Jan. 1996
W. L. Hazlegrove 1979 Member, law firm of Woods, Rogers & Hazlegrove, P.L.C.; Vice
Age 67 President and General Counsel of the Company, 1984-1994
</TABLE>
5
<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 the fiscal years ended September 30, 1996,
1995 and 1994. None of the Company's executive officers other than the Chief
Executive Officer received total annual compensation in excess of $100,000 for
services rendered to the Company during any of these years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
NAME AND ANNUAL COMPENSATION AWARDS ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)(1) OPTIONS/SARS COMPENSATION ($)(2)
<S> <C> <C> <C> <C> <C>
Frank A. Farmer, Jr. 1996 158,858 11,000 5,000 5,089
President & Chief Executive Officer 1995 151,976 6,000 0 4,733
1994 143,650 0 0 4,303
</TABLE>
(1) Bonus paid in current year for previous year's performance.
(2) Consists entirely of the Company's contribution under the Employees' Thrift
Plan.
OPTIONS GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZED
% OF TOTAL VALUE (1) AT
NUMBER OF OPTIONS MARKET ASSUMED ANNUAL
SECURITIES GRANTED TO EXERCISE PRICE ON RATES OF STOCK
UNDERLYING EMPLOYEES OR BASE DATE OF PRICE APPRECIATION
OPTIONS IN FISCAL PRICE GRANT EXPIRATION FOR OPTION TERM
GRANTED (#) YEAR ($/SHARE) (2) ($/SHARE) DATE 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C> <C>
Frank A. Farmer, Jr. 5,000 38 $ 15.50 $ 15.50 10/30/05 126,239 201,015
</TABLE>
(1) The dollar amounts under these columns are the result of calculations at the
5% and 10% rates set by the Securities and Exchange Commission and therefore
are not intended to forecast possible future appreciation, if any, of the
Company's stock price. Additionally, these values do not take into
consideration the provisions of the options providing for nontransferability
or termination of the options following termination of employment. The
Company did not use an alternative formula for a grant date valuation, as it
is not aware of any formula which will determine with reasonable accuracy a
present value based on future unknown or volatile factors.
(2) The exercise price of the options granted is equal to the closing sales
price of the Company's common stock on the Nasdaq National Market on the
date of grant. Options generally expire ten years from the date of grant.
6
<PAGE>
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 1996, these earnings are limited to $150,000. This limit
is indexed for cost of living after 1994.
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.
7
<PAGE>
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.
ANNUAL SALARY. In fiscal 1996, annual salary continued to be the primary
component of compensation for executive officers of the Company. This is based
in large part on concern that external factors beyond the control of Company
executives, such as weather and regulatory decisions, may have a significant
impact on corporate performance.
The Committee recommends, for approval by the Board of Directors, the
annual salaries of executive officers. Salaries are based on the respective
positions held by the executive officers, including their accomplishments, level
of responsibility and experience and the relationship of such salaries to the
salaries of other Company managers and employees. In this regard, the Committee
reviews the Chief Executive Officer's recommendations on compensation of the
other executive officers and information concerning executive compensation at
other companies in the American Gas Association. Such other companies are
included in (but do not solely comprise) both of the peer indices reflected in
the Performance Graph 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.
Pursuant to its Stock Bonus Plan, the Committee approved the payment of
bonuses to the CEO and other executive officers of the Company for outstanding
performance during the fiscal year 1995. The Stock Bonus Plan is intended to
allow the Board of Directors to award individual or collective superior
performance that has resulted in enhanced shareholder value or returns and to
encourage increased ownership of Company common stock by officers and
management. The Stock Bonus Plan is administered by the Committee, which
considers recommendations from the Company's President. The Company's bonus
award proposals are subject to approval of 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 approved by the Committee, receive no less than 50% of any performance
bonus in the form of Company common stock. Bonus amounts, if any, for a fiscal
year will generally be determined in the January following that fiscal year end.
Bonus award determinations under the Stock Bonus Plan for performance in the
1995 fiscal year were based on the performance of the Company, which reflected
an increase in earnings during a period of reduced revenue resulting from the
warmer than normal weather, combined with an analysis of the individual
contributions of officers receiving the bonuses to the overall performance of
the Company.
The Company adopted a Key Employee Stock Option Plan, which became
effective January 1996. The Plan is intended 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
8
<PAGE>
the opportunity to acquire an equity interest in the Company. Stock options are
used to provide executive officers additional incentive to use their best
efforts and superior performances to promote the best interest of the Company
and the shareholders.
In making its recommendation regarding the 1996 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 1996, Mr. Farmer received a bonus of
$11,000, which he elected to take in Company common stock, for his performance
during the fiscal year 1995. The amount of the bonus was determined based upon
Mr. Farmer's success during 1995 in monitoring operational and capital budgets
for maximum cost efficiency. The control of costs, operational and financing,
resulted in improved earnings for the Company. Mr. Farmer also received during
fiscal 1996 an option under the Key Employee Stock Option Plan to purchase 5,000
shares of Company common stock. The number of shares subject to the option was
determined based on the Compensation Committee's determination that 5,000 option
shares provided a reasonable additional incentive for the Chief Executive
Officer to place added emphasis on enhancing share value through management
practices while being generally moderate in the total grant.
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
9
<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 Jones Natural Gas Distribution Index for the five-year period
commencing on September 30, 1991 and ending on September 30, 1996. These
comparisons assume the investment of $100 in the Company's common stock in each
of the indices on September 30, 1991 and the reinvestment of dividends.
(PERFORMANCE GRAPH APPEARS HERE. THE PLOTS POINTS ARE LISTED BELOW)
1991 1992 1993 1994 1995 1996
Roanoke Gas Company $100 106 113 130 120 145
S&P 500 Stock Index $100 111 125 130 169 203
Edward Jones
Natural Gas Distribution Index $100 109 139 121 138 168
10
<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 1996, and it is anticipated that similar legal services will
be provided by that firm to the Company in 1997.
REMUNERATION OF DIRECTORS
Directors are compensated $6,000 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 $6,000 per year for service as a Board
member. The schedule of fees paid to directors for each such meeting attended is
as follows:
<TABLE>
<CAPTION>
<S> <C>
Board of Directors.............................................. $400
Executive Committee............................................. $400
Audit Committee................................................. $400
Compensation Committee.......................................... $400
</TABLE>
However, the fee for any Committee meetings held the same day as a Board
meeting is $250.
BOARD OF DIRECTORS AND COMMITTEES
AUDIT COMMITTEE
The Audit Committee of the Board of Directors, composed of Messrs. Boxley,
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 three times during
the 1996 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 1996, 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
11
<PAGE>
Board of Directors concerning the salaries of certain executive officers and
management employees of the Company. This Committee met seven times during the
1996 fiscal year.
MEETINGS OF THE BOARD AND COMMITTEES
The Board of Directors met twelve times during the 1996 fiscal year. With
the exception of Messrs. Boxley and Robertson, the incumbent members of the
Board attended in fiscal year 1996, at least 75 percent of the aggregate of the
total number of meetings of the Board and the total number of meetings held by
all Committees of the Board on which they served.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and any persons who own more than 10% of the
Company's common stock, to file reports of ownership and changes in ownership of
Company common stock with the Securities and Exchange Commission. Based on its
review of the copies of such forms furnished to it and written representations
from certain reporting persons that no other reports are required, the Company
believes that in fiscal 1996 one report relating to one transaction was filed
late by Frank A. Farmer, Jr. and four reports relating to one transaction each
were filed late by John H. Parrott.
12
<PAGE>
APPROVAL OF AMENDMENT TO AUTHORIZE A CLASSIFIED BOARD OF DIRECTORS AND TO
IMPLEMENT CERTAIN RELATED MATTERS
PROPOSAL NO. 2
GENERAL
The Company's Board of Directors has unanimously approved an amendment to
the Company's Articles of Incorporation (the "Articles") and has voted to
recommend that the Company's shareholders approve such Proposed Amendment. If
adopted, the Proposed Amendment would (i) classify the Board of Directors into
three classes, as nearly equal in number as possible, each of which, after an
interim arrangement, would serve for three years, with one class being elected
each year; (ii) provide that the number of directors may not be less than seven
nor more than eleven, the precise number to be set in the Company's Bylaws or,
if there is no Bylaw, to be nine; (iii) provide that directors shall be removed
only for cause; and (iv) provide that any vacancy on the Board shall be filled
by a majority of the remaining directors then in office, even if less than a
quorum. The Proposed Amendment is designed to assure continuity and stability in
the Board's leadership and policies, particularly in the event of an unsolicited
tender offer. The Proposed Amendment also establishes a legal structure that
encourages any potential acquiror to negotiate with the Board rather than
unilaterally attempt to gain control of the Company. The Board believes that
this approach is the one most likely to result in long-term enhancement of
shareholder value. Although there has been no problem in the past with the
continuity or stability of the Board, the Board believes that the Proposed
Amendment will help to assure the continuity and stability of the Company's
affairs and policies in the future. If approved, the Proposed Amendment will be
effective upon the filing of Articles of Amendment with the State Corporation
Commission of Virginia, which filing will be made promptly after the Annual
Meeting.
Before voting on the Proposed Amendment, shareholders are urged to read
carefully the following sections of this Proxy Statement, which describe the
amendment and its purposes and effects, and Exhibit I hereto, which sets forth
the full text of the Proposed Amendment. The description of the Proposed
Amendment is qualified in its entirety by reference to Exhibit II.
Adoption of the Proposed Amendment requires the affirmative vote of more
than two-thirds of the outstanding shares of the Company's common stock. A
failure to vote, either by not returning the enclosed proxy or checking the
"Abstain" box, will have the same effect as a vote against Proposal No. 2.
CLASSIFICATION OF THE BOARD OF DIRECTORS
The present Articles are silent on the matter of election of directors and,
accordingly, under applicable law, all directors are to be elected to the Board
annually for a term of one year. Directors of the Company are elected by a
plurality of the votes cast in an election of directors at any annual or special
meeting of the shareholders. The Company's Articles do not permit cumulative
voting for directors.
The Proposed Amendment would divide the Board into three classes, each
class to be as nearly equal in number as possible. Three directors will be
elected for a term expiring at the 1998 Annual Meeting of Shareholders, three
directors will be elected for a term expiring at the 1999 Annual Meeting of
Shareholders, and three directors will be elected for a term expiring at the
2000 Annual Meeting of Shareholders (in each case until their respective
successors are elected and qualify). Starting with the 1998 Annual Meeting
13
<PAGE>
of Shareholders, one class of directors -- approximately one-third of the
Board -- will be elected each year for a three-year term. The Proposed Amendment
with respect to classifying the Board, if adopted, will apply to every election
of directors.
A classified Board will extend the time required to change the composition
of a majority of directors. Presently, a change in composition of the Board of
Directors can be made by shareholders of a majority of the Company's stock
voting at a single meeting. With a classified Board, two annual meetings
normally would be required for holders of a majority of the Company's stock to
change the composition of a majority of the Board of Directors, since only
one-third of the number of directors will be elected at each meeting. Because of
the additional time required to change the composition of the Board,
classification of the Board also may make the removal of incumbent management
more difficult.
Since the classified Board will increase the time required for a third
party to obtain control of the Company without the cooperation of the Board of
Directors, it may tend to discourage certain tender offers, including perhaps
some tender offers that some shareholders may feel would be in their best
interest. However, the Board of Directors believes that classification of the
Board will provide the Board with more time to evaluate any takeover proposal
and thus enable it to better protect the interests of the Company and the
remaining shareholders. The Board is not aware of any current specific effort to
attempt to gain control of the Company. Although the Proposed Amendment would
not impede an acquisition of the Company approved by the Board, adoption of the
Proposed Amendment may affect the ability of the shareholders of the Company to
change the composition of the incumbent Board, to affect its policies generally
and to benefit from transactions which are opposed by the incumbent Board.
NUMBER OF DIRECTORS
Article II, Section 2 of the Company's current Bylaws provides that the
number of directors constituting the Board of Directors of the Company shall be
nine. Under Virginia law, the number of directors may be fixed or changed from
time to time by amendment of the Bylaws by the shareholders or by the Board of
Directors. The Proposed Amendment fixes in the Articles a variable range and
provides that the precise number of directors, within that variable range, will
be as from time to time designated in the Bylaws by the Board of Directors.
This provision, together with the provisions hereafter discussed regarding
the filling of vacancies on the Board and restrictions on removal of incumbent
directors, may make it more difficult for a majority shareholder to obtain
representation quickly by enlarging the Board and filling the directorships with
its own nominees.
REMOVAL OF DIRECTORS; FILLING NEWLY-CREATED DIRECTORSHIPS AND VACANCIES
Currently, any director may be removed, with or without cause, by a
majority vote of the shares entitled to elect directors, and newly-created
directorships and vacancies may be filled by a plurality vote of the
shareholders or a majority vote of the Board of Directors. The Proposed
Amendment provides that a director may be removed only for cause and that any
vacancy on the Board occurring during the course of the year, including
vacancies created by an increase in the number of directors, shall be filled by
a majority vote of the remaining directors, whether or not a quorum. Directors
elected in this manner would, under
14
<PAGE>
Virginia law, hold office until the next shareholders' meeting at which
directors are elected, when they would be subject to reelection by the
shareholders.
These provisions are intended to prevent a majority shareholder from
destablizing the classified Board by removing directors without cause and
replacing them with its own nominees. Removal of directors only for cause may
encourage bidders to negotiate with the Board of Directors prior to launching a
takeover bid. This provision, together with the provision for classification of
the Board of Directors and the other provisions of the Proposed Amendment, would
make it more difficult and more time consuming for shareholders to replace a
majority of the directors even when the only reason for a change may be the
performance of the present directors.
OTHER ARTICLE AND BYLAW PROVISIONS
The Company's Articles and Bylaws do not currently contain any other
conventional anti-takeover provisions, and the Company has no current plans to
submit further proposals to shareholders with a possible "anti-takeover" effect.
The Virginia Stock Corporation Act (the "Corporation Act") contains
provisions governing "affiliated transactions" designed to deter uninvited
takeovers of Virginia corporations. These provisions, with several exceptions
discussed below, require approval of material acquisition transactions between a
Virginia corporation and any holder of more than 10% of any class of its voting
shares (a "10% holder") by holders of at least two-thirds of the remaining
voting shares. Under the statute, for the three years following the time the 10%
holder crosses the 10% threshold, a Virginia corporation cannot engage in an
affiliated transaction (primarily a merger, sale of assets or other business
combination) with the 10% holder without approval of a majority of the
"disinterested directors" and two-thirds of the voting shares of the Company
other than shares owned by the 10% holder. This special voting requirement does
not apply if a majority of "disinterested directors" approved the acquisition of
the more than 10% interest in advance. After the three-year period has expired,
a 10% holder may engage in an affiliated transaction only if the transaction has
been approved by a majority of "disinterested directors" or by two-thirds of the
disinterested stockholders, or if the transaction satisfies the statute's
"fair-price" requirements.
The Corporation Act also provides that shares acquired in a transaction
that would cause the acquiring person's voting strength to cross any of three
thresholds (20%, 33 1/2%, 50%) have no voting rights unless granted by a
majority vote of shares not owned by the acquiring person or any officer or
employee-director of the Company. An acquiring person may require the Company to
hold a special meeting of shareholders to consider the granting of voting rights
within fifty days of its request.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL NO. 2.
APPROVAL OF ROANOKE GAS COMPANY
RESTRICTED STOCK PLAN FOR OUTSIDE DIRECTORS
PROPOSAL NO. 3
At its meeting on September 23, 1996, the Board of Directors of the Company
adopted, subject to shareholder and Virginia State Corporation Commission
approval, the Roanoke Gas Company Restricted
15
<PAGE>
Stock Plan for Outside Directors. 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
Exhibit II. The description of the Proposed Plan set forth below is qualified in
its entirety by reference to Exhibit II. Under the Proposed Plan, 40% of the
monthly retainer fee paid to each nonemployee director of the Company shall be
paid in shares of common stock that is subject to vesting and nontransferability
restrictions (the "Restricted Stock"). The number of shares of Restricted Stock
will be calculated each month based on the closing sales price of the Company's
common stock on the Nasdaq-NMS on the first day of the month, if the first day
of the month is a trading day, or if not, the first trading day prior to the
first day of the month. A participant can, subject to approval of the Board,
elect to receive up to 100% of his retainer fee for the fiscal year in
Restricted Stock. Such election cannot be revoked or amended during the fiscal
year.
The following table indicates the minimum and maximum number of shares of
Restricted Stock which could have been purchased under the Proposed Plan if it
had been in effect for the 1996 fiscal year by all current nonemployee directors
as a group. Directors who are executive officers or employees of the Company are
not eligible to participate in the Proposed Plan.
<TABLE>
<CAPTION>
MINIMUM NUMBER MAXIMUM NUMBER
OF SHARES OF OF SHARES OF
RESTRICTED STOCK 1, 2 RESTRICTED STOCK 1, 2
<S> <C> <C>
Nonemployee directors
as a group (9 persons)..................................... 1,234 3,086
</TABLE>
(1) Directors' retainer fee during 1996 was $500 per month.
(2) Assumes purchase price of $17.50 per share, the closing sales price of the
Company's common stock on November 1, 1996. The number of shares of
Restricted Stock purchased each month will vary depending on the closing
sales prices of the Company's common stock on the Nasdaq-NMS.
The shares of Restricted Stock of the Company issued under the Proposed
Plan will vest only in the case of a participant's death, disability, retirement
(including not standing for reelection to the Board), or in the event of a
change in control of the Company. There is no option to take cash in lieu of
stock upon vesting of shares under the Proposed Plan. The Restricted Stock may
not be sold, transferred, assigned or pledged by the participant until it has
vested in accordance with the terms of the Proposed Plan. At the time the
Restricted Stock vests, a certificate for vested shares will be delivered to the
participant or the participant's beneficiary.
The shares of Restricted Stock will be forfeited to the Company by a
participant's voluntary resignation during his term on the Board or removal for
cause as a director.
Subject to the terms of the Proposed Plan, a participant, as the owner of
the Restricted Stock, has all rights of a shareholder, including, but not
limited to, voting rights, the right to receive cash or stock dividends, and the
right to participate in any capital adjustment of the Company. The Company may
require that all dividends or other distributions paid on shares of Restricted
Stock be automatically sequestered and reinvested on an immediate or deferred
basis in additional Restricted Stock.
16
<PAGE>
The Board may at any time suspend or terminate the Proposed Plan or amend
it from time to time in such respects as the Board may deem advisable in the
best interests of the Company. In the event of a reorganization,
recapitalization, stock split, stock dividend, combination of shares, rights
offer, liquidation, merger or other change in or affecting the corporate
structure or capitalization of the Company, appropriate adjustments in the
number, price and kind of Restricted Stock authorized to be issued under the
Proposed Plan and in any outstanding Restricted Stock will be made.
An award of Restricted Stock will not be taxable income to the participant,
nor will the award be a deductible expense to the Company, at the date of the
award, unless the participant makes a Section 83(b) election to have the grant
taxed as compensation income at fair market value on the date of the award. When
the Restricted Stock becomes transferrable and nonforfeitable, if no election
has been made under Section 83(b), the Restricted Stock will be subject to tax
based on fair market value on the date that is the later of (i) the date the
restrictions imposed lapsed and the shares became transferable; and (ii) six
months after the date the Restricted Stock was awarded. The Company will be
entitled to a tax deduction (i) in an amount equal to the amount of ordinary
income recognized by the participant director; and (ii) in the taxable year the
participant director recognizes the income.
The foregoing discussion of federal income tax aspects is only a summary
and based upon interpretations of the existing laws, regulations and rulings
which could be materially altered at any time.
The Proposed Plan will become effective upon approval by the shareholders
and the Virginia State Corporation Commission. The Proposed Plan is designed to
advance the interests of the Company, its shareholders and affiliates by
encouraging enabling outside directors, upon whose judgment, initiative and
effort the Company relies for the successful conduct of its business, to acquire
and retain a proprietary interest in the Company by ownership of its stock.
Approval of the Proposed Plan requires the affirmative vote of a majority of the
votes cast by the shares that are entitled to vote at the Annual Meeting of
Shareholders. See "Voting Securities" above.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL NO. 3.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
PROPOSAL NO. 4
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, 1997. This appointment is subject to approval 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 accountants 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 1997.
17
<PAGE>
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.
SHAREHOLDERS PROPOSALS
Proposals of shareholders intended to be presented at the Company's 1998
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 15, 1997, 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 13, 1996
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED SEPTEMBER 30, 1996
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.
18
<PAGE>
EXHIBIT I
Article Fourth of the Articles of Incorporation is amended by deleting
existing Article Fourth and substituting in lieu thereof:
"Fourth: (a) The number of directors of the Corporation, not less than
seven nor more than eleven, shall be fixed by the Bylaws and, in the
absence of a Bylaw fixing the number, shall be nine. Upon the adoption of
this Article Fourth, the directors shall be divided into three classes (A,
B and C) as nearly equal in number as possible. The initial term of office
for members of Class A shall expire at the annual meeting of shareholders
in 1998; the initial term of office for members of Class B shall expire at
the annual meeting of shareholders in 1999; and the initial term of office
for members of Class C shall expire at the annual meeting of shareholders
in 2000. At each annual meeting of shareholders following such initial
classification and election, directors elected to succeed those directors
whose terms expire shall be elected for a term of office to expire at the
third succeeding annual meeting of shareholders after their election and
shall continue to hold office until their respective successors are elected
and qualify. In the event of any increase or decrease in the number of
directors fixed by the Bylaws, any newly-created directorships or any
decrease in directorships shall be so apportioned among the classes by the
Board of Directors so as to make all classes as nearly equal in number as
possible.
(b) Newly-created directorships resulting from an increase in the
number of directors or any vacancies in the Board of Directors resulting
from death, resignation, retirement, disqualification, removal from office,
or other cause shall be filled by the affirmative vote of a majority of the
directors then in office, whether or not a quorum. No decrease in the
number of directors constituting the Board of Directors shall shorten the
term of any incumbent director. A director may be removed from office only
for cause."
I-1
<PAGE>
(This Page Left Blank Intentionally)
<PAGE>
EXHIBIT II
ROANOKE GAS COMPANY
RESTRICTED STOCK PLAN FOR OUTSIDE DIRECTORS
1. PURPOSE
The Roanoke Gas Company Restricted Stock Plan for Outside Directors (the
"Plan") is intended to advance the interests of Roanoke Gas Company, its
shareholders, and its affiliates by encouraging and enabling outside directors
upon whose judgment, initiative and effort the Company relies for the successful
conduct of its business, to acquire and retain a proprietary interest in the
Company by ownership of its stock.
2. DEFINITIONS
The following definitions apply to this Plan and to the Election Forms:
(a) Beneficiary or Beneficiaries means a person or persons or other entity
designated on a Beneficiary Designation Form by a Participant to
receive Company Stock under this Plan if the Participant dies. If there
is no valid designation by the Participant, or if the designated
Beneficiary or Beneficiaries fail to survive the Participant, the
Participant's Beneficiary is the first of the following who survives
the Participant: the Participant's spouse (the person legally married
to the Participant when the Participant dies); the Participant's
children in equal shares; the Participant's other surviving issue, PER
STIRPES; the Participant's parents; and the Participant's estate.
(b) Beneficiary Designation Form means a form acceptable to the Chairman of
the Committee or his designee used by a Participant according to this
Plan to name the Beneficiary or Beneficiaries who will receive all the
Company Stock under this Plan if the Participant dies.
(c) Board means the Board of Directors of the Company.
(d) Change in Control means 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 Company'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 Company'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 Company 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 Company are
II-1
<PAGE>
sold, transferred or conveyed by any means, including, but not limited
to, direct purchase or merger, if the transferee is not controlled by
the Company, control meaning the ownership of more than 50% of the
combined voting power of such entity's voting securities; or (iv) the
Company 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 Company. Notwithstanding anything in the foregoing to the contrary,
no Change in Control shall be deemed to have occurred for purposes of
the Plan by virtue of any transaction (i) which results in a
Participant or a group of Persons which includes the Participant,
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, 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 (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 Company's
voting securities.
(e) Committee means the Compensation Committee of the Board.
(f) Company means Roanoke Gas Company.
(g) Company Stock means the common stock, $5 par value of the Company.
(h) Compensation means a Member's Retainer Fee for the Deferral Year.
(i) Election Form means a document governed by the provisions of Section 4
of this Plan, including the portion that is the related Beneficiary
Designation Form, that applies to all of that Participant's shares of
Restricted Stock under the Plan.
(j) Directors means those duly named members of the Board.
(k) Election Date means the date established by this Plan as the date
before which a Member must submit a valid Election Form to the
Committee. For each Plan Year, the Election Date is July 31. However,
for an individual who becomes a Member during a Plan Year, the Election
Date is the thirtieth day following the date that he becomes a Member.
Despite the two preceding sentences, the Committee may set an earlier
date as the Election Date for any Plan Year.
(l) Employee means an individual with whom either the Company or its
affiliates has an employer-employee relationship as determined for
Federal Insurance Contribution Act purposes and Federal Unemployment
Tax Act purposes, including subsection 3401(c) of the Internal Revenue
Code and regulations promulgated under that subsection.
(m) Members means Directors who are not simultaneously Employees.
(n) Participant means a Member during the Plan Year.
(o) Plan means the Company's Restricted Stock Plan for Outside Directors.
(p) Plan Year means a fiscal year ending September 30 during which the Plan
is in effect and during which a Member receives a portion or all of his
Compensation in Restricted Stock hereunder.
II-2
<PAGE>
(q) Person means person within the meaning of Sections 3(a)(9) and 13(d)(3)
of the Securities Exchange Act of 1934.
(r) Restricted Stock means Company Stock issued to Participants under the
Plan and subject to the vesting and nontransferability provision of the
Plan.
(s) Retainer Fee means that portion of a Director's Compensation that is
fixed and paid without regard to his attendance at meetings.
3. RESTRICTED STOCK PAYMENTS
On the first day of each month during each Plan Year, forty percent (40%)
of a Participant's Compensation for the month shall be paid in shares of
Restricted Stock of the Company. In determining the number of shares to be
issued pursuant to the preceding sentence, the Fair Market Value of the
Restricted Stock under the Plan shall, for each calendar month, be calculated
based on the closing sales price of the Company's common stock on the Nasdaq-NMS
on the first day of the month, if the first day of the month is a trading day,
or if not, the first trading day prior to the first day of the month.
4. ADDITIONAL RESTRICTED STOCK ELECTION
(a) Before each Plan Year's Election Date, each Member will be provided
with an Election Form and a Beneficiary Designation Form. Subject to
approval of the Board or the Committee, a Member may elect to receive
up to 100% of his Compensation for the Plan Year in Restricted Stock.
(b) An additional Restricted Stock election is valid when an Election Form
is completed, signed by the electing Member, received by the Committee
Chairman and approved by the Board or the Committee on or before the
Election Date.
(c) A Member may not revoke or amend an Election Form after the Election
Date for the Plan Year. Any revocation before an Election Date is the
same as a failure to submit an Election Form. Any writing signed by a
Member expressing an intention to revoke his Election Form and
delivered to a member of the Committee before the close of business on
the relevant Election Date is a revocation.
5. VESTING
The shares of Restricted Stock of the Company issued under Section 3 and
Section 4 of this Plan shall vest only in the case of a Participant's death,
disability, retirement (including not standing for reelection to the Board), or
in the event of a Change in Control of the Company. There shall be no option to
take cash in lieu of stock upon vesting of shares under this Plan.
6. NONTRANSFERABILITY
No share of Restricted Stock issued hereunder may be sold, transferred,
assigned, or pledged by the Participant until such share has vested in
accordance of the terms of this Plan. At the time the Restricted Stock vests,
and, if the Participant has been issued legended certificates of Restricted
Stock, upon the return of such certificates to the Company, a certificate for
such vested shares shall be delivered to the Participant
II-3
<PAGE>
(or the Beneficiary designated by the Participant in the event of death), free
of restrictive legend (other than any required by applicable securities laws).
Notwithstanding the foregoing, no vested shares may be sold, transferred,
assigned or pledged by the Participant (or the Beneficiary) unless six months
have elapsed between the date of grant of the shares of Restricted Stock which
have vested and the date of the sale, transfer, assignment or pledge of such
vested shares.
7. FORFEITURE
The shares of Restricted Stock issued under Section 3 and Section 4 of this
Plan shall be forfeited to the Company upon a Member's voluntary resignation
during his term on the Board, or removal for cause as a Director.
8. STOCK CERTIFICATES
Stock certificates representing the Restricted Stock, together with stock
powers or other instruments of assignment, each endorsed in blank, which will
permit transfer to the Company of all or any portion of the Restricted Stock
evidenced by such certificate in the event it is forfeited, shall be deposited
by the recipient with the Company.
9. RIGHTS AS SHAREHOLDER
Subject to the terms of this Plan, the Participant, as the owner of the
Restricted Stock, shall have all rights of a shareholder including, but not
limited to, voting rights, the right to receive cash or stock dividends thereon,
and the right to participate in any capital adjustment of the Company. Any
distribution with the respect to shares of Restricted Stock other than in the
form of cash shall be held by the Company, and shall be subject to the same
restrictions as the shares with respect to which such distributions were made.
The Committee may require that any or all dividends or other distributions paid
on shares of Restricted Stock shall be automatically sequestered and may be
reinvested on an immediate or deferred basis in additional shares of Company
stock, which may be subject to the same restrictions as the Restricted Stock or
such other restrictions as the Committee may determine.
10. CLAIMS AGAINST PARTICIPANT'S RESTRICTED STOCK
The shares of Restricted Stock issued pursuant to this Plan are not subject
in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, or charge, and any attempt to do so is void. Moreover, the shares
are not subject to attachment or legal process for a Participant's debts or
other obligations. Nothing contained in this Plan gives any Participant any
interest, lien, or claim against any specific asset of the Company.
11. AMENDMENT OR TERMINATION
The Board may at any time suspend or terminate the Plan or may amend it
from time to time in such respects as the Board may deem advisable in order that
the Restricted Stock issued hereunder may conform to any changes in the law or
any other respect with which the Board may deem to be in the best interests of
the Company. No such suspension, termination or amendment of the Plan shall
require approval of the shareholders unless shareholder approval is required by
applicable law or stock exchange requirements.
II-4
<PAGE>
12. NOTICES
Notices and elections under this Plan must be in writing. A notice or
election is deemed delivered if it is delivered personally or if it is mailed by
registered or certified mail to the person at his last known business address.
13. WAIVER
The waiver of a breach of any provision in this Plan does not operate as
and may not be construed as a waiver of any later breach.
14. CONSTRUCTION
This Plan is created, adopted, and maintained according to the laws of the
Commonwealth of Virginia (except its choice-of-law rules). It is governed by
those laws in all respects. Headings and captions are only for convenience; they
do not have substantive meaning. If a provision of this Plan is not valid or not
enforceable, that fact in no way affects the validity or enforceability of any
other provision. Use of the one gender includes all, and the singular and plural
include each other.
15. ADJUSTMENTS FOR CHANGES IN CAPITALIZATION
In the event of a reorganization, recapitalization, stock split, stock
dividend, combination of shares, rights offer, liquidation, dissolution, merger,
consolidation, spin off, sale of assets, payment of an extraordinary cash
dividend, or any other change in or affecting the corporate structure or
capitalization of the Company, the Committee shall make appropriate adjustments
in the number, price or kind of shares of Restricted Stock authorized to be
issued under this Plan, and in any outstanding shares of Restricted Stock issued
hereunder.
16. WITHHOLDING TAXES
Whenever the Company is required to issue or transfer shares of Restricted
Stock under this Plan, the Company shall have the right to require the recipient
of such Restricted Stock to remit to the Company an amount sufficient to satisfy
any federal, state or local withholding tax liability prior to the delivery of
any certificate for such shares. Whenever under the Plan payments are to be made
in cash, such payments shall be net of an amount sufficient to satisfy any
federal, state or local withholding tax liability.
17. INDEMNIFICATION
The Company shall indemnify and hold harmless each person who is or has
been a member of the Committee, or of the Board of Directors, against and from
any and all loss, expense, liability, or costs (including reasonable attorneys'
fees) that may be imposed upon or reasonably incurred by him in connection with
or resulting from any claim, action, suit or proceedings to which he may be a
party or in which he may be involved by reason of any action taken or failure to
act under the Plan, and against and from any and all amounts paid by him in
settlement thereof with the Company's approval or paid by him in satisfaction of
a final judgment against him in such action, suit, or proceedings, provided he
shall give the Company an opportunity, at its own expense to handle and defend
the same before he undertakes to handle defense on his own behalf. The right of
indemnification herein set forth shall not be exclusive of any other
II-5
<PAGE>
rights of indemnification to which such person may be entitled under the
Company's Articles of Incorporation, or code or regulations, as a matter of law,
or otherwise, or any power that the Company may have to indemnify him or to hold
him harmless. It is the Company's intention that all expenses incurred in
connection with the administration of the Plan shall be borne by the Company
rather than by any member of the Committee or the Board of Directors.
18. EFFECTIVE DATE OF THE PLAN
The Plan is subject to approval by the shareholders of the Company. The
Plan will become effective on the date so approved.
19. SHARES SUBJECT TO THE PLAN
The aggregate number of shares of Company Stock which may be issued in
respect to Restricted Stock shall not exceed 50,000 shares. All shares
distributed pursuant to the Plan shall consist of authorized but unissued shares
of the Company.
20. POWER OF THE COMMITTEE
The Committee shall have authority to interpret conclusively the provisions
of the Plan, to adopt such rules and regulations for carrying out the Plan as it
may deem advisable, to decide conclusively all questions of fact arising in the
application of the Plan, and to make all other determinations necessary or
advisable for the administration of the Plan. All decisions and acts of the
Committee shall be final and binding upon all affected Plan Participants.
21. MISCELLANEOUS
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 Securities
Exchange Act of 1934. 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.
As evidence of its adoption and approval of this Plan and approval of the
terms and conditions of each Participant transaction hereunder, the Board has
caused this document to be executed on its behalf, and on behalf of the Company,
this 23rd day of September, 1996.
By /s/ F. A. FARMER
---------------------------
CHAIRMAN OF THE BOARD
AND PRESIDENT OF ROANOKE GAS COMPANY
II-6
<PAGE>
*******************************************************************************
APPENDIX
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 22, 1996,
at the Annual Meeting of Shareholders of Roanoke Gas Company to be held on
January 27, 1997, and any adjournments thereof, as follows:
1. ELECTION OF DIRECTORS:
FOR all nominees listed below WITHHOLD AUTHORITY to vote
(except as marked to the contrary below) for all nominees listed below
Lynn D. Avis, Abney S. Boxley, III, Frank T. Ellett, F.A. Farmer, Jr., W.L.
Hazlegrove,
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. APPROVAL OF AN AMENDMENT OF THE ARTICLES OF
INCORPORATION CLASSIFYING THE BOARD OF
DIRECTORS AND IMPLEMENTING CERTAIN RELATED
MATTERS, ALL AS MORE FULLY SET FORTH IN THE
PROXY STATEMENT DATED DECEMBER 13, 1996.
___ FOR ___ AGAINST ___ ABSTAIN
3. APPROVAL OF ROANOKE GAS COMPANY RESTRICTED STOCK PLAN FOR OUTSIDE DIRECTORS.
___ FOR ___ AGAINST ___ ABSTAIN
4. PROPOSAL TO APPROVE THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT
AUDITORS FOR THE FISCAL YEAR 1997.
___ FOR ___ AGAINST ___ ABSTAIN
5. 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
PROPOSAL NOS. 1, 2, 3 AND 4 ABOVE.
The undersigned hereby acknowledges
receipt of the Proxy Statement dated
December 13, 1996.
Dated:_______________________________
_____________________________________
_____________________________________
Signature of Shareholder
Please sign your name(s) exactly as shown
imprinted hereon. Executors,
administrators, trustees and other
fiduciaries, and persons signing on
behalf of corporations or partnerships,
should so indicate when signing.
(This proxy is revocable at any time
prior to exercise hereof.)
