SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM U-1
Application
Under the
Public Utility Holding Company Act of 1935
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ROANOKE GAS COMPANY
519 Kimball Avenue, N.E., Roanoke, Virginia 24016
(540) 777-4427
and
RGC RESOURCES, INC.
519 Kimball Avenue, N.E., Roanoke, Virginia 24016
(540) 777-4427
(Names of companies filing this statement and addresses
of principal executive offices)
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John B. Williamson, III
President and Chief Executive Officer
Roanoke Gas Company
and
RGC Resources, Inc.
519 Kimball Avenue, N.E., Roanoke, Virginia 24016
(540) 777-3810
(Name and address of Agent for Service)
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Copy to:
Faith M. Wilson, Esq.
Nicholas C. Conte, Esq.
Woods, Rogers & Hazlegrove, P.L.C.
First Union Tower, Suite 1400
10 South Jefferson Street
Roanoke, Virginia 24011
(540) 983-7600
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Item 1. Description of Proposed Transaction.
A. Proposed Acquisitions of Securities and Corporate Merger and
Reorganization
RGC Resources, Inc. ("Resources") hereby applies for approval by the
Securities and Exchange Commission (the "Commission") under Section 10 of the
Public Utility Holding Company Act of 1935 (the "Act") of its acquisition,
pursuant to the merger and reorganization described below, of all of the
outstanding shares of common stock of Roanoke Gas Company ("Roanoke Gas"), a
Virginia public service corporation, and Bluefield Gas Company ("Bluefield"), a
West Virginia public service corporation. Roanoke Gas hereby applies for
approval by the Commission under Section 10 of the Act of its acquisition,
pursuant to the merger and reorganization described below, of all of the
outstanding shares of common stock of Commonwealth Public Service Corporation
("Commonwealth"), a Virginia public service corporation. Pursuant to 17 C. F. R.
Section 250.2 under the Act, Resources intends, upon consummation of the merger
and reorganization, to file a claim of exemption as a holding company under
Section 3(a)(1) of the Act, on the basis that Resources and every public utility
subsidiary thereof from which Resources derives, directly or indirectly, any
material part of its income are predominately intrastate in character and carry
on their business in Virginia, the state in which Resources and every such
material subsidiary are organized.
Roanoke Gas, a Virginia public service corporation organized in 1912,
provides natural gas service to approximately 53,625 customers in Roanoke,
Virginia and surrounding areas in Virginia. Roanoke Gas owns 100% of the
outstanding common stock of Bluefield, a West Virginia public service
corporation, which provides natural gas service to approximately 4,100 customers
located in and around Bluefield, West Virginia. Bluefield owns all of the issued
and outstanding common stock of Commonwealth, a Virginia public services
corporation, which serves approximately 925 customers in Bluefield, Virginia and
surrounding areas in Virginia. Roanoke Gas also owns 100% of the outstanding
common stock of Diversified Energy Company ("Diversified"), a Virginia
nonutility corporation, which sells propane and propane related products.
Resources is a wholly owned subsidiary of Roanoke Gas and was incorporated
on July 31, 1998, for the purpose of accomplishing the proposed merger and
reorganization. Resources owns all of the outstanding common stock of RGC
Acquisition Corp. ("Acquisition"), a Virginia corporation which was formed on
August 12, 1998, also for the purpose of accomplishing the proposed merger and
reorganization. Neither Resources nor Acquisition owns any utility assets or
engages in any business, or is a "holding company" under the Act.
Resources and Roanoke Gas intend to accomplish the proposed merger and
reorganization by entering into the Agreement and Plan of Merger and
Reorganization filed as Exhibit B-1 to this application, whereby (i) Roanoke Gas
will be merged into Acquisition, with Roanoke Gas as the surviving corporation;
(ii) the common stock of Acquisition owned by
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Resources will be converted into the new common stock of Roanoke Gas; (iii) the
outstanding shares of Roanoke Gas common stock will be converted into the right
to receive, on a one-for-one basis, shares of Resources common stock on the
merger effective date; (iv) Bluefield, by means of a noncash dividend, will
transfer to Roanoke Gas all of the outstanding common stock of Commonwealth; (v)
Roanoke Gas, by means of a noncash dividend, will transfer to Resources all of
the outstanding common stock of Bluefield and Diversified; and (vi) Commonwealth
will be merged into Roanoke Gas. Following the merger and reorganization, all of
the outstanding common stock of Resources will be owned by the former Roanoke
Gas shareholders. For a description of the present corporate structure of
Roanoke Gas and its affiliates and the proposed corporate structure following
the merger and reorganization, see Exhibit B-2 to this Application.
It is proposed that there will be no exchange of the outstanding mortgage
notes, debentures and senior notes of Roanoke Gas in connection with the merger
and reorganization and that, immediately following the merger, Resources will
have no outstanding securities other than common stock. Resources may, however,
be required to guarantee Roanoke Gas' payment and performance of Roanoke Gas'
outstanding mortgage notes. Holders of Roanoke Gas mortgage notes, debentures
and senior notes will continue as security holders of Roanoke Gas.
Exhibit G-1 and Exhibit G-2 to this Application set forth, respectively,
the consolidated balance sheet of Roanoke Gas as of June 30, 1998, on a per book
and pro forma basis, and the consolidated income statement of Roanoke Gas for
the twelve months ended June 30, 1998.
At the regular Annual Meeting of Shareholders to be held on February 8,
1999, Roanoke Gas will seek the requisite approval of its shareholders of the
proposed merger and reorganization and related matters. The Company intends to
file a registration statement with the Commission on Form S-4 (the "Registration
Statement") for the purpose of registering under the Securities Act of 1933 (the
"Securities Act") the shares of common stock of Resources to be issued in
connection with the merger and reorganization and for the purpose of complying
with the requirements of the Securities Exchange Act of 1934 (the "Exchange
Act") in connection with the solicitation of proxies of Roanoke Gas
shareholders. The Registration Statement and the definitive Prospectus/Proxy
Statement will be submitted as Exhibits to this Application by amendment.
The proposed merger and reorganization also is subject to authorization
and approval by the Virginia State Corporation Commission (the "Virginia
Commission") and the consent of the Public Service Commission of West Virginia
(the "West Virginia Commission").
In connection with the merger and reorganization, Resources' common stock
will be listed on the Nasdaq National Market, and Roanoke Gas' common stock will
be delisted from the Nasdaq National Market. Following the effectiveness of the
merger and reorganization, Resources will be required to file reports with the
Commission pursuant to Section 13(a) of the Exchange Act.
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B. Description of Roanoke Gas and Subsidiaries
Roanoke Gas, a Virginia public service company, is engaged in the retail
distribution and sale of natural gas to approximately 53,625 customers in
Roanoke, Virginia and surrounding areas in Virginia. Roanoke Gas' service area
includes the cities of Roanoke and Salem, Virginia and surrounding regions in
Virginia, including Roanoke County and portions of Bedford, Botetourt, Franklin
and Montgomery counties, Virginia. Bluefield, a West Virginia public service
corporation, is a wholly owned subsidiary of Roanoke Gas. Bluefield provides
natural gas service to approximately 4,100 customers located in and around
Bluefield, West Virginia. Bluefield's service area extends from Princeton, West
Virginia to the western most city limits of Bluefield, West Virginia. Bluefield
owns all of the issued and outstanding stock of Commonwealth, a Virginia public
service corporation, which serves approximately 925 customers in Bluefield,
Virginia and surrounding areas in Virginia. Commonwealth's service area includes
principally the Town of Bluefield, Virginia and a portion of Tazewell County,
Virginia. Unless otherwise specified, Roanoke Gas, Bluefield and Commonwealth
will be referred to herein collectively as the "Company." Roanoke Gas also
distributes and sells propane and propane related products to customers in
southwestern Virginia and southern West Virginia through its wholly owned
Virginia subsidiary, Diversified, which is not a regulated public utility.
Natural Gas Distribution Operations. As of September 30, 1998, the
Company's public utility operations served approximately 53,625 natural gas
customers through an operationally integrated natural gas distribution system.
Natural gas is purchased from suppliers and distributed to residential,
commercial and large industrial users through the Company's underground pipeline
system. Of the Company's revenues from regulated gas operations during fiscal
1997 approximately 57% was derived from residential customers and 43% was
derived from commercial and industrial customers. The Company's utility
operations served approximately 47,600 residential customers and approximately
5,200 industrial and commercial customers in fiscal 1997.
As of June 30, 1998, the Company's consolidated net utility plant account
was stated at $45,827,413, its consolidated operating revenues on that date
totaled $45,014,370 and the consolidated net capital applicable to its common
stock was $8,911,499.
Supervision and Regulation. The Company's natural gas distribution
operations are subject to regulation at the federal and state levels. Gas
transmission between Bluefield and Commonwealth is regulated by the Federal
Regulatory Commission (the "FERC"), which regulates the prices, terms and
conditions of interstate pipeline transportation and sales of natural gas.
Roanoke and Bluefield are exempt holding companies under Section 3(a)(2) of the
Act and annually file Forms U-3A-2 with the Commission. At the state level,
Roanoke Gas and Commonwealth are regulated by the Virginia Commission, and
Bluefield is regulated by the West Virginia Commission. The Virginia Commission
and the West Virginia Commission regulate various matters, including rates
charged for services, financings, planning and safety matters. The Virginia
Commission also grants certificates of public convenience and necessity to
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distribute natural gas in the Commonwealth of Virginia. In addition, certain
municipalities and localities grant franchises for the placement of natural gas
distribution pipelines and the operation of a natural gas distribution network
for Roanoke Gas, Commonwealth and Bluefield.
Roanoke Gas and Commonwealth currently hold the only franchises and
certificates of public convenience and necessity to distribute natural gas in
their respective Virginia service areas. The franchises generally extend for
multi-year periods and are renewable by the municipalities. Certificates of
public convenience and necessity, which are issued by the Virginia Commission,
are of perpetual duration, subject to compliance with regulatory standards.
Bluefield holds the only franchise to distribute natural gas in its West
Virginia service area.
Natural Gas Supplies and Storage. In fiscal 1998, the Company delivered
approximately 9.6 BCF of natural gas to its customers. The Company currently
uses long-term (one year or longer), mid-term (one month to one year) and spot
(less than one month) gas purchase contracts to meet its system requirements.
Roanoke Gas has an estimated current peak day firm requirement of 94,000
decatherms ("DTH") of natural gas. Bluefield and Commonwealth currently have an
estimated combined current peak day firm requirement of 13,500 DTH of natural
gas.
Roanoke Gas also maintains a liquefied natural gas ("LNG") storage
facility located in Botetourt County, Virginia. This facility is capable of
storing up to 220,000 DTH of natural gas for use during peak winter periods. In
addition, the Company has contracted for storage reserves providing a combined
total of 2.7 BCF of underground storage capacity for Roanoke Gas and Bluefield.
Columbia Gas Transmission Corporation and Columbia Gulf Transmission
Corporation (together "Columbia") are the Company's primary transporter of
natural gas. Columbia historically has delivered approximately two-thirds of
Roanoke Gas' gas supply and 100% of Bluefield's gas supply. East Tennessee
Natural Gas Company and Tennessee Gas Pipeline Company (together "East
Tennessee") are the Company's other major source of supply. Historically, East
Tennessee has delivered approximately one-third of the Company's natural gas
supply. The rates paid for natural gas transportation and storage services
purchased from Columbia and East Tennessee are established by tariffs approved
by the FERC. These tariffs contain flexible pricing provisions which, in some
instances, authorize these suppliers to reduce rates and charges to meet price
competition.
Nonutility Subsidiary. Roanoke Gas owns 100% of the voting common stock of
Diversified, a Virginia nonpublic utility corporation headquartered in Roanoke,
Virginia. Diversified serves approximately 10,450 active propane accounts in
southwestern Virginia and southern West Virginia. The Company's propane
distribution activities are not subject to any federal or state pricing
regulation. In addition to propane operations, Diversified maintains a natural
gas marketing business which assists large industrial customers in the purchase
of natural gas.
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Additional Information. For additional information concerning Roanoke Gas
and its subsidiaries, see Roanoke Gas' Annual Report on Form 10-K for the year
ended September 30, 1997 and Quarterly Report on Form 10-Q for the quarter ended
June 30, 1998, filed pursuant to the Exchange Act, and Roanoke Gas' and
Bluefield's Forms U-3A-2 dated February 23, 1998, filed pursuant to the Act, all
which are filed as Exhibits H-1, H-2, H-3 and H-4 to this Application and are
incorporated herein by reference.
No company other than those described above is a subsidiary company,
associated company or an affiliate of Resources or Roanoke Gas within the
meaning of the Act.
Forward-Looking Statements. This Form U-1 and the exhibits hereto may
contain forward-looking statements relating to such matters as anticipated
financial performance, business prospects, technological developments, new
products, research and development activities and similar matters. These
forward-looking statements are based upon assumptions with respect to certain
business discussions which are subject to change. Further, the Company notes
that a variety of factors could cause the Company's actual results and
experience to differ materially from the anticipated results or other
expectations expressed in the Company's forward-looking statements. The risks
and uncertainties that may affect the operations, performance, development and
results of the Company's business include the following: (i) obtaining adequate
rate relief from regulatory authorities on a timely basis; (ii) earning on a
consistent basis an adequate return on invested capital; (iii) increasing
expenses and labor costs and availability; (iv) price competition from
alternative fuels; (v) volatility in the price of natural gas and propane; (vi)
some uncertainty in the projected rate of growth of natural gas and propane
requirements in the Company's service area; and (vii) general economic
conditions both locally and nationally. In addition, the Company's business is
seasonal in character and strongly influenced by weather conditions. Extreme
changes in winter heating degree days from the normal or mean can have
significant short-term impacts on revenues and gross margins.
C. Purpose and Benefits of the Proposed Merger and Reorganization
The principal reasons for the proposed restructuring are to create a
structure which can more effectively address the increased competition in the
energy industry, refocus various utility activities, facilitate selective
diversification into nonutility businesses, afford further separation between
the utility and nonutility businesses and provide additional flexibility for
financing.
The two primary reasons for restructuring are to better position Roanoke
Gas to deal effectively with the competitive environment developing within the
energy industry and to best deploy shareholders' capital both inside and outside
of the utility industry. The Board of Directors of Roanoke Gas believes these
objectives can most effectively be accomplished through the proposed
restructuring, as it provides the necessary flexibility required to meet
competitive challenges and to diversify while further insulating the utility
business from the risks of the nonutility business.
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The Company's natural gas business competes with other energy sources such
as fuel oil, electricity and coal. Competition is intense among the competing
energy sources and is based primarily on price and availability. This is
particularly true for industrial applications, where sales are at risk to price
competition in markets which may switch to residual and other fuel oils.
Deregulation in the supply of natural gas has created competition also among
suppliers or brokers of natural gas. Marketers are expected to attempt to
provide increasing volumes of natural gas to large users within the Company's
service territories. As deregulation of the energy industry continues, the
Company expects that competition from other fuel sources, as well as from
natural gas brokers and marketers, will intensify.
The Company anticipates that, based upon its projections of natural gas
demand and absent any major changes in technology, a portion of the Company's
earnings from natural gas operations may not be required to be reinvested in the
utility business over the next ten years. See Exhibit I-1. The Board is of the
view that a holding company structure will facilitate the deployment of a
portion of the Company's earnings which are not needed for the utility business.
In the Board's view, the restructuring will increase opportunities to
broaden Roanoke Gas' financial base and thereby broaden investment appeal by
increasing exposure to other businesses. Financing alternatives may also be
enhanced as a result of engaging in a greater number of businesses.
Diversification that succeeds in promoting employment and commerce in the region
served by the Company also will benefit the Company and its customers and
shareholders.
The holding company structure is designed to further insulate the
Company's public utility customers and the public holders of Roanoke Gas'
securities from the risks of the nonutility businesses by segregating the
nonutility businesses into separate corporations that will be direct
subsidiaries of the holding company and not of Roanoke Gas. Because nonutility
businesses of the holding company will be conducted through separate
subsidiaries, any liabilities incurred by those subsidiaries will not constitute
liabilities of the utility subsidiaries. The corporate separation also insures
that all costs of a particular nonutility subsidiary will be charged to that
subsidiary and not allocated to any utility subsidiary. This type of cost
allocation is in keeping with the requirements of the "affiliated interest"
statutes of Virginia and West Virginia. See Va. Code Sections 56-76 et seq. and
W. Va. Code Section 24-2-12. Thus, the corporate structure and the regulatory
requirements provide for the insulation of customers of Roanoke Gas from risks
of the nonutility businesses. Likewise, debt security holders of Roanoke Gas
after the restructuring will be insulated from the risks of the nonutility
businesses. Any benefits or detriments which result from the restructuring and
consequent segregation of the utility and nonutility businesses will flow to the
security holders of Resources and not to the holders of Roanoke Gas debt
securities. After the restructuring, the separate financial statements prepared
for Roanoke Gas will not reflect the nonutility business owned by Diversified.
The consolidated financial statements of Resources will not reflect the
financial condition of any group of subsidiaries taken separately, but will
reflect the overall operation of all subsidiaries, including Roanoke Gas,
Bluefield and Diversified.
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The holding company structure is intended to afford additional flexibility
for maintaining the capital ratios of Roanoke Gas at levels determined to be
appropriate by regulatory authorities. This ability to adjust the components of
the capital structure of Roanoke Gas will help Roanoke Gas maintain stable
utility rates. One component of utility rates is cost of capital. Equity capital
is the most expensive type of capital, and if the equity component of a
utility's capital structure is too high, it may result in increased pressure to
raise rates. If the equity component is too low, it may result in increases in
the cost of debt because of increased leverage and risk, which will also tend to
increase rates. Under the holding company structure, capital ratios of the
utility would be subject to adjustment from time to time through dividends to or
equity investments from Resources, the holding company. Further, the holding
company structure will facilitate the planning of financings best suited to the
particular needs and circumstances of the separate businesses and thus should
improve financing alternatives. It is contemplated that in the normal course
Resources, in addition to receiving dividends from its subsidiaries, will obtain
funds through debt or equity financings, that Roanoke Gas will obtain funds
through its own financings (which may include the issuance of mortgage notes and
other debt instruments to third parties, as well as the issuance of additional
shares of common stock to the holding company), and that the nonutility
businesses owned by Diversified will obtain funds from Resources, from other
nonutility affiliates, or from their own outside financings. Any financings will
depend on the financial and other conditions of the entities involved and on the
market conditions.
At the present time, Roanoke Gas has no specific diversification plans
beyond expanding the propane operation. The Board of Directors of Roanoke Gas
intends that the natural gas operations of Roanoke Gas will continue to
constitute the predominant activity of Resources for the foreseeable future.
There will be no capital impairment of the Company's public utilities and no
adverse affect on the public utilities' levels of service as a result of the
restructuring. This intention accords with the limitations and other provisions
of the Virginia and West Virginia regulatory schemes.
Item 2. Fees, Commissions and Expenses
The estimated fees, commissions and expenses to be paid or incurred
directly or indirectly in connection with the proposed merger and reorganization
are set forth in Exhibit J-1 hereto. Legal fees in connection with the proposed
merger and reorganization will be paid to Woods, Rogers & Hazlegrove, P.L.C.,
Roanoke, Virginia. Wilbur L. Hazlegrove, a director of Roanoke Gas, is Of
Counsel to Woods, Rogers & Hazlegrove. The principals of the firm of Woods,
Rogers & Hazlegrove beneficially owned, as of September 30, 1998, in the
aggregate, approximately 61,650 shares of Roanoke Gas common stock.
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Item 3. Applicable Statutory Provisions
A. Applicable Provisions
Section 9(a)(2) and Section 10 of the Act are applicable to the
acquisition by Resources of the common stock of Roanoke Gas and Bluefield
pursuant to the proposed merger and reorganization and to the acquisition by
Roanoke Gas of the common stock of Commonwealth and the merger of Commonwealth
into Roanoke Gas. Section 3(a)(1) of the Act is applicable, upon consummation of
the merger and reorganization, to exempt Resources and its subsidiaries from all
provisions of the Act other than Section 9(a)(2), and Resources intends, on the
closing date of the merger transaction, to file, pursuant to 17 C.F.R. Section
250.2, an appropriate Form U-3A-2 exemption statement. A supplemental memorandum
describing the good faith bases upon which Resources will claim this exemption
is attached to this Application as Exhibit M-1.
B. Affiliated Public Utility Companies
Upon consummation of the merger and reorganization, Resources will be the
parent company of two wholly owned public utility companies: Roanoke Gas, a
Virginia public service corporation, and Bluefield, a West Virginia public
service corporation. Commonwealth, currently a Virginia public service
subsidiary of Bluefield, will merge its public utility operation with and into
Roanoke Gas as part of the merger and reorganization. See Exhibit B-2 with
respect to the current and proposed relationships between the companies.
C. Compliance with Applicable Statutory Standards.
Section 9(a)(2) and Section 10 of the Act. Section 9(a)(2) of the Act
requires Resources and Roanoke Gas to obtain the approval of the Commission of
the proposed merger and reorganization. The applicable standards for determining
if the proposed merger and reorganization should be approved are set forth in
Sections 10(b), 10(c) and 10(f) and by reference to Section 11 of the Act.
Resources and Roanoke Gas believe that the proposed merger and reorganization
complies with the applicable standards of Sections 10 and 11 of the Act as
follows:
1. Sections 10(b)(1) and 10(b)(3) - The proposed merger and
reorganization will not result in concentration of control, complexity of
capital structure and other adverse system changes
The proposed merger and reorganization does not involve or tend toward the
creation of any additional relationships among public utility companies or
result in an undue concentration of economic power detrimental to the public
interest. Nor will it result in any complexity of capital structure. The
proposed merger and reorganization involves only the formation of the holding
company over Roanoke Gas and its existing affiliates. Roanoke Gas, Bluefield and
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Commonwealth will continue their public utility operations in essentially the
same manner as before the proposed merger and reorganization, except that (i)
Roanoke Gas and Bluefield will be direct subsidiaries of Resources and (ii)
Commonwealth's public utility operations will be merged into the public utility
operations of Roanoke Gas. The proposed merger and reorganization will not
involve the acquisition of any utility assets not already owned or controlled,
directly or indirectly, by Roanoke Gas. Roanoke Gas and Bluefield will be
controlled by Resources as the sole shareholder; however, the ultimate control
will remain in the hands of the same public shareholders who currently own
Roanoke Gas common stock (with the exception of shareholders who choose to
exercise statutory appraisal rights or to dispose of their shares).
The acquisition by Roanoke Gas of the common stock of its indirect
subsidiary, Commonwealth, will simplify the Company's current public utility
structure. At present, the Company operates under three billing and regulatory
schemes -- Roanoke Gas (Virginia), Bluefield (West Virginia) and Commonwealth
(Virginia). The merger and reorganization would, among other things, combine the
two Virginia public utilities and permit the Company to better take advantage of
economies of scale and synergies in management and billing. This would enable
the Company to conduct its Virginia operations under one set of rates and
reviews and is a structural change strongly encouraged by the staff of the
Virginia Commission.
The merger and reorganization will not unduly complicate the capital
structure of the holding company or be detrimental to investors. The structure
of the holding company system resulting from the proposed merger and
reorganization will not be materially different from or more complicated than
that which exists prior to the proposed merger and reorganization, except for
the interposition of Resources as an ownership entity between Roanoke Gas and
the owners of common stock. The first mortgage notes and other long-term debt of
Roanoke Gas will not be affected by the proposed merger and reorganization. The
common stock ownership interests of Roanoke Gas will be transferred to Resources
but, as described above, ultimate public control will remain in the hands of
Resources' common shareholders. Resources' Articles of Incorporation create a
class of preferred stock; however, Resources has no current plan to issue such
preferred shares. Nor does Resources have any current plan to issue long-term
debt securities. As described above and in the note to Exhibit G-1, Resources
may, upon completion of the merger and reorganization, be required to guarantee
Roanoke Gas' payment and performance of Roanoke Gas' outstanding mortgage notes.
Holders of Roanoke Gas mortgage notes, debentures and senior notes will continue
as security holders of Roanoke Gas.
2. Section 10(b)(2) - The consideration to be paid in connection
with the proposed merger and acquisition is reasonable and fair
The consideration (excluding fees, commission and other remuneration) to
be given in the proposed merger and reorganization is shares of Resources common
stock, in that the proposed merger and reorganization provides for a one-for-one
exchange of shares of Roanoke Gas common stock for shares of Resources common
stock. The proportionate equity ownership
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interest of each common shareholder will remain the same in Resources as it was
in Roanoke Gas. It is expected that the market price of Resources common stock
after the proposed merger and reorganization will be substantially equal to the
market price of Roanoke Gas' common stock prior to the proposed merger and
reorganization. The sum invested in Roanoke Gas, Bluefield and Commonwealth and
the earning capacity of the utility assets of Roanoke Gas, Bluefield and
Commonwealth immediately following the proposed merger and reorganization will
not change in any material respect. All expenses, fees, commissions and other
remuneration to be paid in connection with the proposed merger and
reorganization, if consummated, will be paid by Resources. An estimate of such
amounts is included in Exhibit J-1 hereto. Such amounts relate to required fees
to be paid to governmental bodies, state franchise taxes and filing fees,
expenses to be incurred to obtain shareholder approval of the proposed merger
and reorganization, fees for professional services rendered in connection with
the proposed merger and reorganization and other expenses necessary to carry out
the proposed merger and reorganization. The Company believes that such fees and
expenses are reasonable and customary for a transaction such as the proposed
merger and reorganization and are not material when measured against the
Company's book value or the earning capacity of the utility assets. Therefore,
the consideration, including all fees, commissions and other remuneration to be
given, directly or indirectly, in connection with the proposed merger and
reorganization, is reasonable and bears a fair relation to the sum invested in
and the earning capacity of the utility assets underlying the securities to be
acquired by Resources in connection with the proposed merger and reorganization.
3. Section 10(c)(1) - The proposed merger and reorganization is not
detrimental to carrying out of the purposes of Section 11 of the Act
(a) Section 11(b)(1). The merger and reorganization will not
facilitate diversification deemed harmful by Section 11(b)(1) of the Act.
Resources will be an exempt holding company and, therefore, will not be subject
to the per se prohibitions of Section 11(b)(1) against retention of unrelated
non-utility businesses to the same extent as a registered holding company. Any
diversification by Resources will be conducted through separate corporate
subsidiaries and will be subject to state regulation and other safeguards,
consistent with the guidelines set forth in Pacific Lighting Corporation,
Release No. 35-17855 (Jan. 11, 1973).
Formation of holding companies through the transfer of stock and/or assets
of public utilities subject to the jurisdiction of the Virginia Commission
and/or the West Virginia Commission is closely regulated. The Virginia and West
Virginia state laws and regulations governing the operation of public service
corporations contain provisions which are designed to assure that non-utility
operations of public service holding companies are not operated to the detriment
of the public utility and its customers. As an additional safeguard, the
Commission has the ability under the Act to monitor developments and revise or
revoke its orders as necessary.
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Following completion of the proposed merger and reorganization, the
activities of Roanoke Gas will continue to be subject to affirmative regulation
by the Virginia Commission, and the activities of Bluefield Gas will continue to
be subject to affirmative regulation by the West Virginia Commission. In
particular, transactions between Roanoke Gas and any other entity, including
Resources, which is an "affiliated interest" of Roanoke Gas within the meaning
of the applicable Virginia statutes is subject to prior approval by the Virginia
Commission. Va. Code Sections 56-76 et seq. Similarly, any contract between
Bluefield and an affiliate requires the prior consent of the West Virginia
Commission. W.Va. Code Section 24-2-12. These statutes enable the state
regulators effectively to delineate and control the allocation of holding
company assets to assure that such assets are not used in a fashion deemed
inappropriate or detrimental to the public utility system and its customers. The
Virginia Commission and the West Virginia Commission each has full authority to
investigate public utilities for purposes of determining efficiency and economy
of operation, to conduct continuing reviews and audits and to issue appropriate
directives. The Virginia Commission and the West Virginia Commission each
reviews cost allocations and, in every rate case, requires the public utility to
submit substantial data to support both rate-based components and cost
components between or among divisions, utility or non-utility. See Va. Code
Sections 56-232 et seq.; W.Va. Code Sections 24-2-2 and 24-2-3.
(b) Section 11(b)(2). Section 11(b)(2) of the Act empowers the
Commission to ensure that the corporate structure or continued existence of any
company in the holding company system does not unduly or unnecessarily
complicate the structure of a registered holding company. Under this provision,
the Commission has indicated that it will not approve an acquisition as a result
of which a new holding company will be superimposed over an existing public
utility or holding company system unless it is shown that "significant benefits"
will be obtained therefrom. WPL Holdings, Inc., S.E.C. Release No. 35-25377
(1991).
The proposed merger and reorganization will achieve significant benefits.
The holding company structure is necessary for Roanoke Gas to respond to
increased competition in the energy industry, to refocus various utility
activities, to facilitate selective diversification into non-utility businesses,
to afford further separation between the utility and non-utility businesses, and
to provide additional flexibility for financing.
One of the most significant benefits of the proposed restructuring will be
the ability of Roanoke Gas to achieve a more balanced capital structure and
maintain an efficient use of the Company's retained earnings, which will provide
customers with a greater level of rate stability. The state regulators require
the equity portion of a utility's capital structure not grow too large as a
result of retained earnings, and this increases the cost of equity capital
charged to rate payers. Using the holding company structure, Resources will be
able, if necessary, to reduce the common equity ratios of Roanoke Gas and
Bluefield without affecting the dividend rate on Resources' publicly held
shares, by declaring a dividend to the holding company. The retention of
earnings in the holding company structure would permit later utilization of
holding company resources as a flexible and economic means of obtaining funds
for capital investment in the utilities and increasing the level of common
equity if that becomes desirable as a result of plant construction
11
<PAGE>
or otherwise. Once the restructuring has been accomplished, the dividend policy
of each utility can be calibrated to maintain the desired debt/equity ratio, and
excess cash can be retained by the holding company and invested in diversified
activities without affecting the financial integrity of the utilities. At times
when the construction cycle demands greater investments in utility plant,
Resources will be able to reduce its investments in the diversified activities
and apply the proceeds to plant construction. Accordingly, the holding company
structure will enable the Company to more efficiently manage and allocate its
earnings from its utility operations so as to maintain the proper capital
structure and provide funds for construction needs.
In addition, the holding company structure will permit more flexibility in
diversified investments by the corporate group. Presently, any investment by
Roanoke Gas in a non-utility subsidiary may affect investors' perceptions of the
creditworthiness of the utility's debt, thereby potentially affecting the
utility's cost of capital. By making non-utility investments through direct
non-utility subsidiaries of the holding company, the utility is more insulated
from risk. The holding company structure also should provide additional
financing alternatives for the corporate group, since Roanoke Gas and Bluefield
would be able to finance their utility businesses through the sale of their own
debt to investors and by the sale of their common stock to Resources, and
Resources could raise capital by selling additional capital stock.
4. Section 10(c)(2) - The proposed merger and reorganization will
serve the public interest by tending toward the economical and efficient
development of an integrated public-utility system
Roanoke Gas, Bluefield and Commonwealth currently form an integrated
public-utility system within the meaning of Section 2(a)(29)(B) of the Act and
will continue to operate as an integrated public-utility system after the
proposed merger and reorganization. The companies are (i) physically
interconnected or capable of physical interconnection, (ii) operate economically
as a single interconnected and coordinated system, (iii) operate within a single
area or region, and (iv) are under common management and control.
The Company provides public utility service to approximately 53,625
customers in the southwestern Virginia and southern West Virginia region.
Roanoke Gas distributes natural gas to customers in Roanoke, Virginia and
surrounding areas in Virginia, including the cities of Roanoke and Salem,
Roanoke County and portions of Bedford, Botetourt, Franklin and Montgomery
counties, Virginia. Bluefield distributes natural gas to customers located in
and around Bluefield, West Virginia. Commonwealth's service area includes the
town of Bluefield, Virginia and portions of Tazewell County, Virginia. See
Exhibit E-1 to this Application for a map showing the approximate service area
of the Company's public utility system, the principal distribution lines and the
distribution lines that interconnect each part of the system. The proposed
restructuring and merger would not extend the Company's public utility
operations beyond its current southwestern Virginia/southern West Virginia
service area.
12
<PAGE>
The primary properties owned by the Company consist of retail natural gas
distribution facilities. The natural gas distributed by Roanoke Gas and its
subsidiaries is purchased from various producers and marketers and transported
on Columbia's gas distribution system to the city gate of each community. The
natural gas is then transported on the Company's gas distribution lines, where
it is sold at retail to the Company's natural gas customers. The Company's Gas
Control Center is located in Roanoke, Virginia. From this Center, the Company
monitors and provides supervisory controls for system pressures for Roanoke Gas,
Bluefield and Commonwealth. A new pipeline giving the Company the capacity to
electronically control from Roanoke the system pressures and flows for Bluefield
and Commonwealth currently is under construction (expected completion in
November 1998).
The Company does not itself own the full length of the transmission lines
connecting the different parts of the system. Rather, gas is transported
throughout portions of the system, pursuant to contractual arrangements
negotiated by Company management in Roanoke, over gas distribution lines owned
by Columbia. These contractual arrangements assure that the different parts of
the Company's natural gas distribution system have the privilege of using and
controlling the interconnecting sections of pipeline owned by Columbia. See
Cities Service Power & Light Co., 14 SEC 28, 53, note 44 (1943); Electric
Energy, Inc. et al., SEC Release No.
35-13871 (1958).
Roanoke Gas, Bluefield and Commonwealth have substantially the same
management. The three companies have the same President, the same Vice
Presidents and the same Secretary- Treasurer, as well as various interlocking
directors. See Exhibit K-1 to this Application regarding officers and directors
of the Company. The Company's central office is headquartered in Roanoke,
Virginia. The Company also maintains a customer service office in Bluefield,
West Virginia, approximately 110 miles away. The Bluefield office is staffed
with three employees, who handle new customer accounts, walk-in customer
payments, questions, complaints and requests for service.
All critical functions of the Company are centralized in Roanoke,
including engineering, gas control, purchasing, billing and collecting,
accounting, human resource management, budgeting and peak hour customer service.
Such centralization permits the efficient coordination of the Company's public
utility companies and enables them to share services and take advantage of
economies of scale with respect to their physical day-to-day operations. For
example, Roanoke Gas provides managerial, administrative and engineering
services to Bluefield, and Bluefield, in turn provides managerial and direct
labor, goods and services to Commonwealth, all under agreements approved by the
Virginia and West Virginia Commissions. Bluefield sells and delivers at cost to
Commonwealth, for resale, a portion of Bluefield's interstate pipeline supply of
gas under service agreements and rate schedules on file with the FERC.
Roanoke Gas and Bluefield enter into separate contracts for gas supply;
however, all supply planning and acquisition for the system is centralized in
Roanoke. Similarly, all contracts with suppliers are administered in Roanoke.
The Company's public utility system is so
13
<PAGE>
coordinated that if one of its public utility companies experiences a peak
demand, the other public utility can help it meet that demand through direct
transmission of natural gas via Columbia or by displacement using the Company's
LNG facility or through reallocation of storage gas delivery via the Columbia
pipeline.
The proposed merger and reorganization will result in an integrated
public-utility system, and economies and financial and organizational
efficiencies will be produced as a result of the transaction. See Wisconsin's
Environmental Decade, Inc. v. S.E.C., 882 F.2d 523 (D.C. Cir. 1989). The
Company's public utility operations will continue to be physically
interconnected and operated as a single coordinated system within the same
market region under localized management. The merger of the Company's two
Virginia public utilities, Roanoke Gas and Commonwealth, will increase
centralization by enabling the Company to conduct its Virginia operations under
one set of rates and revenues and to thereby take advantage of economies of
scale and synergies in management and billing. Under the holding company
structure, the pipeline and supply contracts likewise can be greatly simplified.
As discussed above, Roanoke Gas and Bluefield are separate parties to pipeline
and supply contracts which are negotiated and administered out of Roanoke. After
the reorganization, such contracts may be combined into one contract as part of
the renegotiation of service provisions when the current contracts expire in
2004.
As noted above, the holding company structure also will offer flexible
means to adjust capital ratios of Roanoke Gas and Bluefield from time to time
through dividends to, or equity investments from, Resources. This mechanism
allows capital ratios to be maintained at levels determined to be appropriate by
state regulatory authorities. A balanced capital structure can contribute to
stable utility rates by minimizing the cost of capital. Since the cost of
capital is part of the utility revenue requirement, the rate payers would
benefit by paying the most reasonable returns on capital. A balanced capital
structure also helps provide financing flexibility, and the potential savings
accruing from such financing flexibility should further the economical operation
of the system.
Additionally, the restructuring should help to broaden the system's
financial base and its investment appeal. Although any financings will depend on
the financial or other conditions of the entities involved and on market
conditions, economies and efficiencies in financing should occur as a result of
the new holding company structure. The merger and reorganization should insulate
the consumers and the owners of the public utilities' debt securities from the
risks of non-utility businesses. Currently, Roanoke Gas conducts its non-utility
operations through Diversified, its wholly owned subsidiary, and the public
utility thereby bears the risks of diversification. Because, as a result of the
merger and reorganization, Diversified and any other non-utility businesses
would be operated as subsidiaries of Resources, any liabilities incurred by
those non-utility subsidiaries will be less likely to affect the public
utilities. Any detriment that may result from the activities of the non-utility
subsidiaries should flow to the security holders of Resources, rather than the
senior security holders of the public utilities. The separation of the utility
and non-utility businesses under the new holding company structure also should
protect
14
<PAGE>
utility customers by helping to assure that all costs of a particular
non-utility subsidiary will be charged to that subsidiary and not allocated to
an associated utility company.
5. Section 10(f) - Applicable state law
The Company will comply with all applicable laws of the states of Virginia
and West Virginia in connection with the proposed merger and reorganization.
Item 4. Regulatory approval.
The proposed merger and reorganization will require the approval of the
Virginia Commission pursuant Chapter 3 (Issuance of Stocks, Bonds, etc.),
Chapter 4 (Regulation of Relations with Affiliated Interests) and Chapter 5
(Utility Transfers Act) of Title 56 of the Virginia Code, and the consent of the
West Virginia Commission pursuant to Chapter 24 of the West Virginia Code.
Appropriate applications are being prepared and will be filed with each
Commission. Copies of these applications, and all orders issued pursuant
thereto, will be submitted as exhibits to this Application by amendment.
Item 5. Procedure.
The Commission is requested to issue an order as promptly as possible
after the filing of this Application and all required amendments: (i) approving
the acquisition by Resources, pursuant to the proposed merger and
reorganization, of all of the shares of the outstanding common stock of Roanoke
Gas and Bluefield; and (ii) approving the acquisition by Roanoke Gas of all of
the outstanding shares of common stock of Commonwealth and the merger of
Commonwealth into Roanoke Gas. Upon consummation of the proposed merger and
reorganization, Resources will claim exemption under Section 3(a)(1) of the Act
from all provisions of the Act except Section 9(a)(2).
No recommended decision by a hearing officer or other responsible officer
of the Commission is necessary or required in connection with this Application.
The Division of Corporate Regulation of the Commission may assist in preparation
of the Commission's decision in this matter. Unless the Commission is notified
otherwise by Resources or Roanoke Gas subsequent to the date hereof, there
should be no thirty-day waiting period between the issuance and the effective
date of any order issued by the Commission in this matter; and it is
respectfully requested that any such order be made effective immediately upon
entry thereof.
Item 6. Exhibits and Financial Statements.
No financial statements are filed for Resources because Resources has only
nominal assets and has not engaged in any business operations. Consolidated
financial statements of Roanoke Gas Company are attached to this Application as
Exhibits G-1 and G-2.
15
<PAGE>
EXHIBIT NO. DESCRIPTION
A-1 Articles of Incorporation, Bylaws and a specimen stock certificate
of Roanoke Gas Company
A-2 Articles of Incorporation, Bylaws and a specimen stock
certificate of RGC Resources, Inc.
A-3 Articles of Incorporation, Bylaws and a specimen stock certificate
of Bluefield Gas Company
A-4 Articles of Incorporation, Bylaws and a specimen stock certificate
of Commonwealth Public Service Corporation
A-5 Articles of Incorporation, Bylaws and a specimen stock
certificate of RGC Acquisition Corp.
B-1 Agreement and Plan of Merger and Reorganization
B-2 Diagram of present and proposed corporate structure
*C-1 Draft Registration Statement on Form S-4 registering shares of RGC
Resources, Inc. common stock to be issued in the merger and
reorganization
*C-2 Prospectus/Proxy Statement of Resources and Roanoke Gas Company
*C-3 1998 Annual Report to Shareholders of Roanoke Gas Company
*D-1 Copies of all applications to the Virginia and West
Virginia Commissions with respect to the proposed
transactions, and certified copies of any findings,
orders or certificates evidencing express authorization
of the transactions by such authorities
E-1 Map showing the interconnection and relationship of the
properties of Roanoke Gas, Bluefield and Commonwealth
(submitted in paper under cover of Form SE dated October 15,
1998 pursuant to Rule 311(f) of Regulation S-T)
F-1 Preliminary Opinion of Counsel
*F-2 "Past Tense" Opinion of Counsel
16
<PAGE>
G-1 Consolidated Balance Sheet of Roanoke Gas Company as of June
30, 1998 and proforma consolidated balance sheet of the
Company as of June 30, 1998, assuming consummation of the
merger and reorganization
G-2 Consolidated Statement of Income of Roanoke Gas Company for the
twelve-months ended June 30, 1998
G-3 Financial Data Schedules
H-1 Roanoke Gas Company Annual Report on Form 10-K for the year ended
September 30, 1997
H-2 Roanoke Gas Company Quarterly Report on Form 10-Q for the nine-
months ended June 30, 1998
H-3 Roanoke Gas Company Form U-3A-2 dated February 23, 1998
H-4 Bluefield Gas Company Form U-3A-2 dated February 23, 1998
*H-5 Roanoke Gas Company Annual Report on Form 10-K for the year ended
September 30, 1998
I-1 Projections of natural gas demand and income availability for
diversification
J-1 Estimated fees and expenses
K-1 Officers and directors of Roanoke Gas Company and subsidiaries
L-1 Proposed Notice of Proceeding required by Rule 22(f)
M-1 Supplemental Memorandum supporting claim of PUHCA Section 3(a)(1)
exemption
- ------------------------
*To be filed by amendment to this Application
17
<PAGE>
Item 7. Information as to Environmental Effects.
The proposed transaction, a corporate merger and reorganization, neither
involves a "major federal action" nor "significantly affects the quality of the
human environment" as those terms are used in Section 102(2)(C) of the National
Environmental Policy Act. The only federal actions related to the proposed
transactions pertain to the Commission's declaration of the effectiveness of the
Registration Statement, and this Application before the Commission. Consummation
of the proposed transaction will not result in changes in the operation of
Roanoke Gas or any of its affiliates that would have any impact on the
environment. No federal agency is preparing an environmental impact statement
with respect to this matter.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Public Utility Holding Company Act of
1935, each of the undersigned companies has duly caused this statement to be
signed on its behalf by the undersigned thereunto duly authorized.
ROANOKE GAS COMPANY
Date: 10/15/98 By: s/John B. Williamson, III
John B. Williamson, III
President and Chief Executive
Officer
RGC RESOURCES, INC.
Date: 10/15/98 By: s/John B. Williamson, III
John B. Williamson, III
President and Chief Executive
Officer
19
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
A-1 Articles of Incorporation, Bylaws and a specimen stock certificate
of Roanoke Gas Company
A-2 Articles of Incorporation, Bylaws and a specimen stock
certificate of RGC Resources, Inc.
A-3 Articles of Incorporation, Bylaws and a specimen stock certificate
of Bluefield Gas Company
A-4 Articles of Incorporation, Bylaws and a specimen stock certificate
of Commonwealth Public Service Corporation
A-5 Articles of Incorporation, Bylaws and a specimen stock
certificate of RGC Acquisition Corp.
B-1 Agreement and Plan of Merger and Reorganization
B-2 Diagram of present and proposed corporate structure
*C-1 Draft Registration Statement on Form S-4 registering shares of RGC
Resources, Inc. common stock to be issued in the merger and
reorganization
*C-2 Prospectus/Proxy Statement of Resources and Roanoke Gas Company
*C-3 1998 Annual Report to Shareholders of Roanoke Gas Company
*D-1 Copies of all applications to the Virginia and West
Virginia Commissions with respect to the proposed
transactions, and certified copies of any findings,
orders or certificates evidencing express authorization
of the transactions by such authorities
E-1 Map showing the interconnection and relationship of the
properties of Roanoke Gas, Bluefield and Commonwealth
(submitted in paper under cover of Form SE dated October 15,
1998 pursuant to Rule 311(f) of Regulation S-T)
<PAGE>
F-1 Preliminary Opinion of Counsel
*F-2 "Past Tense" Opinion of Counsel
G-1 Consolidated Balance Sheet of Roanoke Gas Company as of June
30, 1998 and proforma consolidated balance sheet of the
Company as of June 30, 1998, assuming consummation of the
merger and reorganization
G-2 Consolidated Statement of Income of Roanoke Gas Company for the
twelve-months ended June 30, 1998
G-3 Financial Data Schedules
H-1 Roanoke Gas Company Annual Report on Form 10-K for the year ended
September 30, 1997
H-2 Roanoke Gas Company Quarterly Report on Form 10-Q for the nine-
months ended June 30, 1998
H-3 Roanoke Gas Company Form U-3A-2 dated February 23, 1998
H-4 Bluefield Gas Company Form U-3A-2 dated February 23, 1998
*H-5 Roanoke Gas Company Annual Report on Form 10-K for the year ended
September 30, 1998
I-1 Projections of natural gas demand and income availability for
diversification
J-1 Estimated fees and expenses
K-1 Officers and directors of Roanoke Gas Company and subsidiaries
L-1 Proposed Notice of Proceeding required by Rule 22(f)
M-1 Supplemental Memorandum supporting claim of PUHCA Secton 3(a)(1)
exemption
- ------------------------
*To be filed by amendment to this Application
<PAGE>
Exhibit A-1
ARTICLES OF AMENDMENT
----------------------
OF THE ARTICLES OF INCORPORATION
--------------------------------
OF ROANOKE GAS COMPANY
----------------------
Pursuant to Section 13.1-710 of the Code of Virginia, the Articles of
Amendment of the Articles of Incorporation of Roanoke Gas Company are hereby
set forth as follows:
A. The name of the Corporation is Roanoke Gas Company.
B. The Amendment of the Articles of Incorporation is as follows:
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."
<PAGE>
C. The Amendment was adopted at the Annual Meeting of Shareholders
held on January 27, 1997.
D. The Amendment was proposed by the Board of Directors of the
Corporation and submitted to the shareholders in accordance with the
requirements of the Virginia Stock Corporation Act.
E. The only voting group entitled to vote on the Amendment is the
holders of the Corporation's common stock. As of November 22, 1996, the
record date for the Annual Meeting, there were 1,483,462 shares of common
stock of the Corporation issued and outstanding and entitled to vote.
1,035,254 votes were cast "for" the Amendment, and 16,931 votes were withheld
or cast "against" such Amendment. The number of votes cast "for" the
Amendment was sufficient for approval of the Amendment by the shareholders.
EXECUTED this 29th day of January, 1997, on behalf of Roanoke Gas
Company, by its President.
ROANOKE GAS COMPANY
By: s/Frank A. Farmer
---------------------------------
Frank A. Farmer, Jr., President
<PAGE>
COMMONWEALTH OF VIRGINIA
STATE CORPORATION COMMISSION
February 5, 1997
The State Corporation Commission has found the accompanying articles submitted
on behalf of
ROANOKE GAS COMPANY
to comply with the requirements of law, and confirms payment of all related
fees.
Therefore, it is ORDERED that this
CERTIFICATE OF AMENDMENT
be issued and admitted to record with the articles of amendment in the Office
of the Clerk of the Commission, effective February 5, 1997 at 12:30 PM.
The corporation is granted the authority conferred on it by law in accordance
with the articles, subject to the conditions and restrictions imposed by law.
STATE CORPORATION COMMISSION
By T. V. Morrison, Jr.
-------------------------
Commissioner
AMENACPT
CIS20318
97-02-03-0198
<PAGE>
ARTICLES OF AMENDMENT
OF THE ARTICLES OF INCORPORATION
OF ROANOKE GAS COMPANY
Pursuant to Section 13.1-710 of the Code of Virginia, the Articles of
Amendment of the Articles of Incorporation of Roanoke Gas Company are hereby
set forth as follows:
(a) The name of the Corporation is ROANOKE GAS COMPANY.
(b) Paragraph "Third" of the Articles of Incorporation, as amended,
shall be amended to read in its entirety as follows:
"Third: The aggregate number of shares which the
corporation shall have the authority to issue and the par value
per share are as follows:
Par Value
Class Number of Shares Per Share
----- ---------------- ---------
Common 3,000,000 $5.00"
(c) New paragraph "Fifth" shall be added to the Articles of
Incorporation, as amended, to read as follows:
"Fifth: No shareholder shall have any
preemptive or preferential right to subscribe for or
acquire unissued shares of the corporation's capital
stock, or any security convertible into or carrying a
right to subscribe for or acquire shares of the
corporation's capital stock, when issued."
(d) Both of the amendments were adopted at a Special Meeting of the
Corporation's shareholders held on March 23, 1992.
(e) Each amendment was proposed by the Board of Directors of the
Corporation and submitted to the shareholders in accordance with the
requirements of the Virginia Stock Corporation Act.
(f) The only voting group entitled to vote on the amendments is the
holders of the Corporation's common stock. As of February 7, 1992, the record
date for the Special Meeting, there were 631,551 shares of common stock of the
Corporation issued and outstanding. 499,092 votes were cast "For" the
amendment to paragraph "Third" increasing the Corporation's authorized common
stock, and 34,818 votes were withheld or cast "Against" that amendment.
473,597 votes were cast "For" the amendment adding paragraph "Fifth" to delete
preemptive rights of shareholders, and 37,975 votes were withheld or cast
"Against" that amendment. The number of votes cast "For" each amendment was
sufficient for approval of the amendment by the shareholders.
EXECUTED this 23rd day of March, 1992, on behalf of Roanoke Gas Company,
by its President.
ROANOKE GAS COMPANY
By: s/Frank A. Farmer, Jr.
-------------------------
Frank A. Farmer, Jr.
President
<PAGE>
COMMONWEALTH OF VIRGINIA
STATE CORPORATION COMMISSION
March 24, 1992
The State Corporation Commission has found the accompanying articles submitted
on behalf of
ROANOKE GAS COMPANY
to comply with the requirements of law, and confirms payment of all related
fees.
Therefore, it is ORDERED that this
CERTIFICATE OF AMENDMENT
be issued and admitted to record with the articles of amendment in the Office
of the Clerk of the Commission, effective March 24, 1992.
The corporation is granted the authority conferred on it by law in accordance
with the articles, subject to the conditions and restrictions imposed by law.
STATE CORPORATION COMMISSION
By s/[illegible signature]
-------------------------
Commissioner
AMENACPT
CIS20436
92-03-24-0506
<PAGE>
ARTICLES OF AMENDMENT
OF
THE ARTICLES OF INCORPORATION
OF
ROANOKE GAS COMPANY
a. The name of the corporation is Roanoke Gas Company.
b. Paragraph "THIRD" of the Articles of Incorporation of the
corporation, as amended, reads in its entirety as follows:
"THIRD: The aggregate number of shares which the
Corporation shall have the authority to issue and the
par value per share are as follows:
Par Value
Class Number of Shares Per Share
----- ---------------- ---------
Common 1,000,000 $5.00"
c. The Board of Directors of Roanoke Gas Company at a meeting
held on August 22, 1977, found the foregoing amendment of its Articles of
Incorporation to be in the best interests of the corporation and directed that
it be submitted to a vote of the stockholders of the corporation at a Special
Meeting called on October 19, 1977. Notice of the Special Meeting of
Stockholders was given to each stockholder of record entitled to vote on
September 16, 1977, in the manner and within the time provided by the Virginia
Stock Corporation Act, which notice included a copy of the amendment, and the
amendment was adopted by requisite vote of the stockholders at the Special
Meeting of Stockholders of the corporation held on October 19, 1977.
d. The number of shares of the one class of common stock of the
corporation outstanding and entitled to vote on the amendment was 188,057.
e. The number of shares voted for adoption of the amendment was
161,882 and against such amendment was 1,199.
f. The foregoing amendment increases the aggregate number of
shares authorized for issue from 200,000 to 1,000,000, but does not effect a
change in the amount of the stated capital of the corporation.
g. The foregoing amendment does not effect a restatement of the
Articles of Incorporation.
ROANOKE GAS COMPANY
By s/A. N. Buckley
-----------------------
Its President
and
By s/E. C. Dunbar
-----------------------
Its Vice President - Finance
and Secretary
<PAGE>
COMMONWEALTH OF VIRGINIA
STATE CORPORATION COMMISSION
AT RICHMOND,
December 6, 1977
The accompanying articles having been delivered to the State Corporation
Commission on behalf of
Roanoke Gas Company
and the Commission having found that the articles comply with the requirements
of law and that all required fees have been paid, it is
ORDERED that this CERTIFICATE OF AMENDMENT
be issued, and that this order together with the articles, be admitted to
record in the office of the Commission; and that the corporation have the
authority conferred on it by law in accordance with the articles, subject to
the conditions and restrictions imposed by law.
Upon the completion of such recordation, this order and the articles
shall be forwarded for recordation in the office of the clerk of the
Circuit Court City of Roanoke
STATE CORPORATION COMMISSION
By s/[illegible signature]
-----------------------
Commissioner
VIRGINIA:
In the Clerk's Office of the Circuit Court City of Roanoke
The foregoing certificate (including the accompanying articles) has been
duly recorded in my office this 19th day of December, 1977 and is now returned
---- --------------
to the State Corporation Commission by certified mail.
s/WALKER R. CARTER, JR., Clerk
------------------------------------
By: s/Brenda Scott Clerk
<PAGE>
ARTICLES OF AMENDMENT
OF
ROANOKE GAS COMPANY
A. The name of the corporation is ROANOKE GAS COMPANY.
B. The amendments so adopted are as follows:
RESOLVED that it is in the best interests of Roanoke Gas
Company that its Articles of Incorporation (Association) be
amended and restated so that they shall read in their entirety as
follows:
First: The name of the corporation is ROANOKE GAS COMPANY.
Second: The purpose or purposes for which the corporation is
organized and is authorized to pursue shall be to acquire, own, manage,
control and conduct in the State of Virginia properties, systems and
plants for the manufacture, storage, transmission, sale and delivery to
the public, as a public service company, of gas, whether natural,
manufactured or mixed, for power, heat, light and all other uses under
such Certificates of Convenience and Necessity as have been or may in
the future from time to time be granted to it by the State Corporation
Commission of Virginia. In addition, the corporation may conduct in the
State of Virginia any other business so far as the same may be related
or incidental to its herein-stated business and purposes, and may
further conduct in any other state such business as may be authorized or
permitted by the laws thereof.
Third: The aggregate number of shares which the corporation
shall have authority to issue and the par value per share are as
follows:
Number Par Value
Class Of Shares Per Share
----- --------- ---------
Common 200,000 $5.00
Fourth: The number of directors, not less than three, shall be
fixed by the bylaws, and, in the absence of such a bylaw fixing the
same, the number shall be eight.
C. The Board of Directors of the corporation at its meeting held
February 25, 1965, found the foregoing amendments in the best interests of the
corporation and directed them to be submitted to a vote at the annual meeting
of the stockholders of the corporation to be held April 6, 1965; written
notice of the stockholders' meeting was given to each stockholder of record
entitled to vote at said meeting on March 8, 1965 (more than 25 days prior to
the April 6, 1965 meeting date); the foregoing notice was given in the manner
provided by the Virginia Stock Corporation Act and was accompanied by a copy
of the proposed amendments; and said amendments were adopted by the
stockholders of the corporation on April 6, 1965.
D. The number of shares of the corporation outstanding and the number
of shares entitled to vote thereon is 155,697 shares of common stock. No
other class of shares of the corporation is outstanding.
<PAGE>
E. 125,593 shares of common stock of the corporation voted for the
amendments; and no shares of the common stock voted against the amendments.
F. The amendments do not effect a change in the amount of stated
capital of the corporation.
G. The amendments do effect a restatement in their entirety of the
Articles of Incorporation of the corporation, and the amount of stated capital
of the corporation on the effective date of such amendments is and will be
$778,485.00
WITNESS the signature of Roanoke Gas Company by its President and its
corporate seal affixed hereto and attested by its Secretary, this 6th day of
April, 1965.
ROANOKE GAS COMPANY
By s/John C. Parrott
-----------------------
President
ATTEST:
s/E. C. Dunbar
- --------------------
Secretary
[Company seal appears here]
<PAGE>
STATE OF VIRGINIA)
)to wit:
CITY OF ROANOKE )
I, Ruth T. Murphy, a Notary Public in and for the City of Roanoke,
Virginia, do hereby certify that John C. Parrott, President of Roanoke Gas
Company, whose name is signed to the foregoing Articles of Amendment bearing
date the 6th day of April, 1965, has personally appeared before me and
acknowledged the same in my City and State aforesaid.
GIVEN under my hand this 6th day of April.
s/Ruth T. Murphy
-------------------------------------------
Notary Public
My commission expires:
My Commission Expires August 3, 1967
- ------------------------------------
<PAGE>
COMMONWEALTH OF VIRGINIA
STATE CORPORATION COMMISSION
AT RICHMOND, April 9, 1965
The accompanying articles having been delivered to the State Corporation
Commission on behalf of
Roanoke Gas Company
and the Commission having found that the articles comply with the requirements
of law and that all required fees have been paid, it is
ORDERED that this CERTIFICATE OF AMENDMENT AND RESTATEMENT
be issued, and that this order, together with the articles, be admitted to
record in the office of the Commission; and that the corporation have the
authority conferred on it by law in accordance with the articles, subject to
the conditions and restrictions imposed by law.
Upon the completion of such recordation, this order and the articles
shall be forwarded for recordation in the office of the clerk of the Hustings
Court of the City of Roanoke.
STATE CORPORATION COMMISSION
By: s/Jessee Dillon
-------------------------
Chairman
VIRGINIA:
In the Clerk's Office of the Hustings Court of the City of Roanoke
The foregoing certificate (including the accompanying articles) has been duly
recorded in my office this 20th day of April, 1965 and is now returned to the
State Corporation Commission by certified mail.
WALKER R. CARTER JR., CLERK
---------------------------------
By: s/Ruth Keith Deputy Clerk
<PAGE>
ARTICLES OF ASSOCIATION
of
ROANOKE GAS LIGHT COMPANY
--0--
KNOW ALL MEN BY THESE PRESENTS, That we do hereby make and sign these
Articles of Association for the purpose of forming a corporation under and by
virtue of the provisions of an Act of the General Assembly of Virginia,
entitled "An Act Concerning Corporations", which became a law on the
twenty-first day of May, 1903, and the several supplements thereto and acts
amendatory thereof, for the purpose of purchasing, leasing or constructing,
maintaining and operating works for the manufacture and sale of gas for light,
heat or power, or for any and all other purposes, and to that end we do set
forth, as follows:
I.
The name of this Corporation shall be Roanoke Gas Company.
II.
The nature and character of the works to be purchased, leased,
constructed and otherwise acquired maintained, sold or otherwise disposed of
is a plant or plants with machinery, equipment and appliances for the
manufacture, production, receipt, storage and transmission of gas, including
natural gas and mixed gases of all kinds, gas products, coke, coal tar, coal
tar products and by-products, to be sold and supplied in Roanoke, Virginia,
Roanoke County, Virginia, Botetourt County, Virginia, Montgomery County,
Virginia, and Bedford County, Virginia, and all towns, cities, municipalities
and settlements located in said counties, and to the public generally, for
power, heat, light and all other uses, including, but not being limited to,
domestic, commercial, industrial and governmental uses; the purposes being to
manufacture, transmit, receive, store, sell, distribute and supply gas,
natural gas and mixed gases of all kinds in Roanoke, Virginia, Roanoke County,
Virginia, Botetourt County, Virginia, Montgomery County, Virginia, and Bedford
County, Virginia, and towns, cities, municipalities and settlements located in
said counties, and to operate a gas plant or plants at Roanoke, Virginia, or
its vicinity; also to construct, maintain and operate works for receiving,
holding, transmitting and distributing gas, natural gas and mixed gases of all
kinds, and the incidental products of gas production; also to manufacture,
buy, transmit, receive, sell and generally deal in gas, natural gas, mixed
gases of all kinds, coke, coal tar, coal tar products and by-products, gas
meters, pipes, stoves, burners and other appliances, machinery and fixtures
pertaining to the production of and the use of gas, natural gas and mixed
gases of all kinds, coke, coal tar, coal tar products and by-products; also to
purchase and obtain, by any and all means, supplies of natural gas and mixed
gases of all kinds, and to that end to acquire construct, maintain, operate,
lease, sell and otherwise dispose of gas lines, including gas transmission
lines and other fixtures, appliances and works necessary and convenient for
procuring, carrying and distributing natural gas and mixed gases of all kinds;
also to acquire, hold, use and dispose of all necessary lands, interests in
lands, pipe lines, transmission lines, and all necessary and convenient
facilities for the conduct of the purposes and objects above mentioned, with
full power to mortgage, lease, sell or encumber any part or all of the
property, works and franchises for the said objects and purposes; likewise to
purchase, lease, sell or otherwise acquire the property, works and franchises
or other corporations or companies of like or similar purposes, and generally
to do all things relating to the control, operation, management and conduct of
said purposes and objects.
<PAGE>
The said works are not local to any one city but are to be confined to
the corporate limits of the City of Roanoke, Virginia, and the limits of
Roanoke County, Virginia, Botetourt County, Virginia, Montgomery County,
Virginia, and Bedford County, Virginia.
III.
The principal terminal places to and from which it is proposed to
construct, purchase or otherwise acquire, maintain and operate said works are:
the corporate limits of the City of Roanoke, Virginia, and limits of Roanoke
County, Virginia, Botetourt County, Virginia, Montgomery County, Virginia, and
Bedford County, Virginia, and all towns, cities, municipalities and
settlements located in said counties, with the main or chief producing plant
or plants and the main or chief receiving station or stations at the City of
Roanoke, Virginia, or its vicinity, with auxiliary or supplemental producing,
receiving or storing plants or stations and other integral parts of its plant
or system at such other places as may become necessary or advantageous in the
conduct of the affairs of the Company.
IV.
The proposed works are estimated and intended to be sufficient to
furnish gas, natural gas and mixed gases of all kinds for heating, lighting,
power and all other uses to the City of Roanoke, Virginia, and its inhabitants
and residents tributary to the pipe lines which the Company owns and may
construct within the said city, as well as to Roanoke County, Virginia,
Botetourt County, Virginia, Montgomery County, Virginia, and Bedford County,
Virginia, the inhabitants and residents therein, and all towns, cities,
municipalities and settlements located in said counties, into which the
Company has and may extend its pipe lines and facilities.
V.
The period for the duration of the corporation is unlimited.
VI.
The maximum amount of the capital stock of the corporation is to be
200,000 shares and the minimum amount of the capital stock is to be 10,000
shares, all of which shall be common stock divided into shares of the par
value of $5.00 each.
VII.
The names and places of residence of the officers and directors, who,
unless others are sooner chosen by the stockholders to act in their places,
shall manage the affairs of the corporation for the first year, are as
follows:
OFFICERS.
---------
Name. Office. Residence.
---- ------ ---------
Clarence H. Geist President Philadelphia, Pa.
W. H. Lewis Vice President Roanoke, Va.
Joseph A. Slattery Secretary & Treasurer Philadelphia, Pa.
<PAGE>
DIRECTORS.
Name. Residence.
---- ---------
Clarence H. Geist Philadelphia, Pa.
W. H. Lewis Roanoke, Va.
Joseph A. Slattery Philadelphia, Pa.
Canton Geist Atlantic City, N.J.
H.S. Schutt Wilmington, Del.
VIII.
The place in this State, in which its principal office will be located,
is City of Roanoke, Virginia.
IX.
The Board of Directors of the said "Roanoke Gas Light Company" shall
have the power to name and appoint any executive committee or other committees
to be chosen from its membership, and may appoint within or without its
membership, managers and agents for the corporation; and may vest in such
agents, managers or committees, such authority as may be deemed advisable and
advantageous to the said corporation; not, however, in conflict with the laws
of this State.
For the conduct or the business of the corporation and in providing for
its financial organization, the said corporation:
(a) May merge or consolidate its franchises, property or works with
those of any corporation created for like purposes, as provided for in Chapter
5 of said "Act Concerning Corporations", or as may be hereafter allowed by law
to similar corporations, and may purchase or lease the franchises, property
and works, or any portion thereof, of such other corporation, or may sell or
lease its franchises, property and works, or any part thereof, to any such
other corporation;
(b) May borrow money and make and issue bonds payable to bearer, or
otherwise, with or without interest coupons attached; may make and issue notes
or drafts for loans or for any other debts or obligations incurred by it for
any of the purposes of the corporation; and may secure such loans by mortgage,
or deed of trust, upon all or any part of its property, works and franchises.
(c) The said Board of Directors may, whenever they deem proper,
increase the issue of the capital stock of the corporation to the maximum
limit hereinabove set out, or the limit of any amendment thereof, and may
dispose of the additional issues at such prices, or for such consideration,
and on such terms and conditions as they may deem best, having, however, fully
complied with the provisions of Section 167 of the Constitution of this State,
so far as applicable thereto.
(d) And the said corporation may have and exercise all the general
powers and be subject to all the restrictions conferred generally by Chapter 5
of said "Act Concerning Corporations" and the laws of this State so far as
they are relative thereto; and shall have and may exercise all the special
powers conferred upon corporations of like character by Chapter 3 of said "Act
Concerning Corporations", and by the laws of this State, so far as not in
conflict with this Act, and by all acts hereinafter passed supplementary
thereto or amendatory thereof.
<PAGE>
GIVEN under our hands this 22nd day of March, 1912.
CLARENCE H. GEIST
W. H. LEWIS
JOSEPH A. SLATTERY
CARLTON GEIST
H.S. SCHUTT
<PAGE>
STATE OF VIRGINIA)
TO-WIT:
CITY OF ROANOKE )
I, J. A. Martin, a notary Public in and for the City of Roanoke, in the
State of Virginia, do certify that Clarence H. Geist, W.H. Lewis, Joseph A.
Slattery, Carlton Geist and H.S. Schutt, whose names are signed to the
foregoing writing, bearing date the 22nd day of March, 1912, have each
acknowledged the same before me in my City aforesaid.
GIVEN under my hand this 22nd day of March, 1912.
J.A. Martin,
Notary Public
My commission expires July 11, 1914.
<PAGE>
BYLAWS
OF
ROANOKE GAS COMPANY
ARTICLE I
STOCKHOLDERS
Section 1. The stockholders of this corporation shall be those who appear
on the books of the corporation as holders of one or more shares of any class of
stock of the corporation.
Section 2. The annual meeting of the stockholders shall be held annually on
the fourth Monday in January of each year, if not a legal holiday, and if a
legal holiday, then on the next succeeding day not a legal holiday, at such
place and at such hour as may be provided by the Board of Directors or in the
stated notice of the meeting.
At such annual meetings there shall be an election of the Board of
Directors for the ensuing year and the transaction of any business which may
properly come before the meeting.
If in any year the annual meeting shall not be held at the time designated
herein, a meeting shall be held as soon as practicable after the time designated
for the holding of the annual meeting and upon the same notice as required for
an annual meeting, at which time the Board of Directors shall be elected and
such other business may be transacted as might have been transacted at the
annual meeting.
Notice of meetings of stockholders shall be given to the extent and in the
manner required by the Virginia Stock Corporation Act adopted in 1956, or as it
may be amended from time to time hereafter (said Act being hereinafter sometimes
called "Act"), and notice of either stockholders' meetings or directors'
meetings may be waived to the extent and in the manner provided in said Act.
Section 3. Special meetings of the stockholders may be called by the
President, the Board of Directors, or by holders of not less than one-tenth of
all the shares entitled to vote at the meeting, or otherwise as may be required
by the Certificate of Incorporation.
<PAGE>
Page 2 of 11
Section 4. Any action required under the law of Virginia to be taken at a
meeting of the stockholders of the corporation, or any action which may be taken
at a meeting of the stockholders, may be taken without a meeting if a consent in
writing setting forth the action so taken shall be signed by all the
stockholders entitled to vote with respect to the subject matter thereof.
Such consent shall have the same force and effect as a unanimous vote of
stockholders and may be stated as such in any article or document filed with the
State Corporation Commission or others.
Section 5. For the purpose of determining stockholders entitled to notice
of or to vote at any meeting of stockholders, or any adjournment thereof, or
entitled to receive payment of any dividend, or in order to make a determination
of stockholders for any other proper purpose, the Board of Directors may provide
that the stock transfer books shall be closed for a stated period, but not to
exceed in any case seventy days. In lieu of closing the stock transfer books,
the Board of Directors may fix in advance a date as the record date for any such
determination of stockholders, such date in any case to be not more than seventy
days prior to the date on which the particular action requiring such
determination of stockholders is to be taken.
Section 6. Unless otherwise provided in the Articles of Incorporation, a
majority of the shares entitled to vote, represented in person or by proxy,
shall constitute a quorum at a meeting of the stockholders. If a quorum is
present, the affirmative vote of a majority of the shares represented at the
meeting and entitled to vote on the subject matter shall be the act of the
stockholders, unless the vote of a greater number or voting by classes is
required under the applicable law of Virginia or the Articles of Incorporation,
and except that in elections of directors those receiving the greatest numbers
of votes shall be deemed elected, even though not receiving a majority. Less
than a quorum may adjourn.
Section 7. Each outstanding share, regardless of class, shall be entitled
to one vote on each matter submitted to a vote at a meeting of the stockholders,
except to the extent that the voting rights of the shares of any class or
classes are limited or denied by the Articles of Incorporation as permitted by
the Act, and except as the Articles of Incorporation may confer on the holders
of shares of any particular class or series the right to more than one vote per
share, either generally or on particular matters. Where the Articles of
Incorporation confer the right to more or less than one vote per share, any
requirement in the Act for the affirmative vote of a specified proportion of the
shares shall be deemed to refer to a like proportion of the votes eligible to be
cast.
A stockholder may vote either in person or by proxy executed in writing by
the stockholder or by his duly authorized attorney in fact and shall have one
vote for
<PAGE>
Page 3 of 11
each share of stock which he is entitled to vote at such meeting. At each
election for directors, every stockholder entitled to vote at such election
shall have the right to vote in person or by proxy the number of shares owned by
him for as many persons as there are directors to be elected at that time and
for whose election he has a right to vote.
Shares of stock of other corporations owned by this corporation may be
voted in person by the President or a Vice President or by proxy executed by the
President or a Vice President; provided, however, the Board of Directors may by
resolution revoke such authority from time to time and thereby designate some
other agent, attorney-in-fact, or proxy to vote such shares.
Section 8. All meetings of the stockholders shall be presided over by the
Chairman of the Board of Directors, if such office is filled, or, if there is no
such officer or in the absence or inability to act of the Chairman of the Board,
by the President, or, if the Chairman of the Board, if any, and the President
are absent or unable to act, by the most senior Vice President present at the
meeting, but if none of the foregoing are present and able to act, a Chairman
shall be elected by the meeting. Such meetings shall be attended by the
Secretary of the corporation, who shall act as Secretary of all such meetings if
present. If the Secretary is absent at any meeting, the Chairman shall appoint a
Secretary of the meeting. The proceedings of all such meetings shall be verified
by the signature of the Secretary of the meeting and approved by the Chairman.
ARTICLE II
DIRECTORS
Section 1. The business and affairs of the corporation shall be managed by
the Board of Directors, subject to any requirement of stockholder action made by
the Act or the Articles of Incorporation.
Section 2. The Board of Directors shall consist of nine members. The number
of directors may be increased or decreased from time to time within the variable
range established by the Articles. At each Annual Meeting of Stockholders, the
number of directors equal to the number of the class whose term expires at the
time of such meeting shall be elected to hold office until the third succeeding
annual meeting, and until their successors shall have been elected and
qualified. No decrease in the number of directors shall have the effect of
shortening the term of any incumbent director. The normal retirement date for
directors shall be the date of the Annual Meeting of Stockholders succeeding the
director's 70th birthday.
<PAGE>
Page 4 of 11
Section 3. Any vacancy occurring in the Board of Directors, including a
vacancy resulting from an increase in the number of directors, shall be filled
by the affirmative vote of a majority of the remaining directors, whether or not
a quorum.
Section 4. A majority of the number of directors fixed by the Bylaws shall
constitute a quorum for the transaction of business. The act of the majority of
the directors present at a meeting, at which a quorum is present, shall be the
act of the Board of Directors.
Section 5. A meeting of the Board of Directors shall be held immediately
after each annual meeting of the stockholders without other notice than is given
by these Bylaws, at which meeting there shall be elected at least a President, a
Treasurer and a Secretary, who shall hold such offices until the first meeting
of the Board following the next annual meeting of the stockholders and until
their successors are elected and qualify, unless sooner removed by the Board of
Directors.
The Board shall also annually (or from time to time as may be deemed
desirable) elect one or more Vice Presidents and any other officers, agents or
factors or fill any vacancy as it may deem necessary, who shall hold office
until others are elected and qualify in their stead, subject to removal by the
Board at any time with or without cause.
The same person may hold one or more offices, except that the same person
may not serve as both President and Secretary.
Section 6. Meetings of the Board of Directors, regular or special, may be
held at such times and places as it may designate.
A special meeting may be called at any time by the President or by any
three elected directors.
Regular meetings of the Board of Directors may be held with or without
notice. Notice of special meetings of the Board of Directors shall be mailed or
telegraphed to each director at least three days prior to the date of the
meeting, or notice may be waived in writing before, at or subsequent to any such
meeting, and the presence of any director at a meting shall be deemed a waiver
of notice of such meeting. Neither the business to be transacted at nor the
purpose of any regular or special meeting of the Board of Directors need be
specified in the notice or waiver of notice of such meeting.
Members of the Board of Directors and all committees designated by said
Board of Directors may participate in meetings of such Board or committees by
means of a conference telephone or similar communications equipment whereby all
persons participating in the meeting can hear each other, and participation by
such
<PAGE>
Page 5 of 11
means shall constitute presence in person at such meeting. When such a meeting
is conducted by means of a conference telephone or similar communications
equipment, a written record shall be made of the action taken at such meeting.
Section 7. The Board of Directors may, by resolution adopted by a majority
of the number of directors fixed by these Bylaws, designate two or more
directors to constitute an Executive Committee, which shall have and may
exercise all of the authority of the Board of Directors, except to approve an
amendment to the Articles of Incorporation or a plan of merger or consolidation.
Other committees with limited authority may be designated by a resolution
adopted by a majority of the directors present at a meeting at which a quorum is
present.
Section 8. The Board of Directors may appoint a Transfer Agent or a
Transfer Agent and Registrar of Transfer any may require all certificates for
each applicable class of stock to be authenticated by the Transfer Agent or by
the Transfer Agent and Registrar, as the case may be, or as the Board may
otherwise direct.
Section 9. A director may be removed from office only for cause.
Section 10. Unless otherwise provided by the Articles of Incorporation of
this corporation, any action required by the laws of Virginia to be taken at a
meeting of the directors, or any action which may be taken at a meeting of the
directors or of a committee, may be taken without a meeting if a consent in
writing, setting forth the action, shall be signed either before or after such
action by all of the directors, or all of the members of the committee, as the
case may be. Such consent shall have the same force and effect as a unanimous
vote.
ARTICLE III
OFFICERS - DUTIES AND POWERS
Section 1. The President shall be elected by the Board of Directors, shall
preside at all meetings of the Board of Directors, unless there shall be a
Chairman of the Board and such officer shall be present, in which event such
Chairman shall so preside. In the absence of the Chairman of the Board of
Directors, if any, the President and all Vice Presidents, a Chairman of the
meeting shall be elected by the meeting.
The President shall ex officio be a member of all committees, shall sign
all certificates of stock and conveyances of real estate and other instruments
in writing by law requiring the President's signature, and perform such other
duties as may be
<PAGE>
Page 6 of 11
required of him from time to time by the directors, and shall have the
authority, powers and duties that are usually given such officer.
Section 2. In the case of the absence of the President or of his inability
to act, his duties shall be performed by any Vice President (in the event of
more than one Vice President, the senior Vice President present and able to act
shall be entitled to do so), who, in that event, shall execute any of the above
powers of the President.
Section 3. The Secretary or Secretary-Treasurer shall attend all meetings
of the stockholders and directors and Executive Committee of the corporation and
keep a full and accurate account of their proceedings in a book to be kept for
that purpose.
He shall, unless and until the Board of Directors appoints another person
or corporation the Transfer Agent as hereinabove provided, act as the Transfer
Agent of the corporation and maintain the stock books and addresses of the
stockholders of the corporation. He shall be the custodian of the corporate seal
of the corporation and shall fix and attest the seal, as authorized by the Board
of Directors or the Bylaws of this corporation, to all certificates of stock and
such other instruments requiring the seal. He shall also keep such other books,
deeds, contracts and other valuable papers belonging to the corporation and
perform such other duties as may be required of him by the President, the Board
of Directors, or the Executive Committee.
Section 4. The Treasurer or Secretary-Treasurer shall have the custody of
all monies and securities of the corporation and shall deposit the same in the
name and to the credit of the corporation in such depositories as may be
designated by the Board of Directors. He shall keep a full and accurate account
of the receipts and disbursements of the corporation in books belonging to the
corporation, and shall disburse the funds of the corporation by check or other
warrant to be signed as prescribed by resolution of the Board of Directors. All
books and papers in his care shall be always open to the inspection of the
President or any director, as well as of any person whom the President or Board
of Directors may appoint to examine such books and papers. He shall render such
reports to the President or Board of Directors as may be required of him and
shall perform such other duties as may be incident to his office or as may be
required of him by the Board of Directors.
He may be required by the directors at any time to give bond as the
directors may designate.
Section 5. Any person elected by the Board of Directors as an assistant to
an officer, for example, an Assistant Secretary, shall, unless otherwise
restricted by the Board of Directors and in all cases subordinate to the officer
himself, have and exercise all of the rights, duties, functions and powers of
such officer.
<PAGE>
Page 7 of 11
Section 6. In the event of the absence of any officer of the corporation or
his disqualification or inability to act where provision therefore is not
expressly made by these Bylaws, the President may by written order, or the Board
of Directors may by resolution, delegate the powers of such officer to any other
officer or employee of the corporation.
Section 7. Any officer or agent may be removed, with or without cause, at
any time whenever the Board of Directors in its absolute discretion shall
consider that the best interests of the corporation would be served thereby. Any
officer or agent appointed otherwise than by the Board of Directors may be
removed, with or without cause, at any time either by the Board of Directors or
by any officer having authority to appoint whenever the Board of Directors or
such appointing officer in its or his absolute discretion shall consider that
the best interests of the corporation will be served thereby.
ARTICLE IV
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 1. The corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative, arbitrative
or investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgements, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in the manner he reasonably believed to be in or not opposed
to the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgement, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not of itself create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe that his conduct was unlawful.
Section 2. The corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgement in
its favor by reason of the fact that he is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director,
<PAGE>
Page 8 of 11
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection with defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation and except that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the corporation unless and only to
the extent that the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem proper.
Section 3. To the extent that a director, officer, employee or agent of
this corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in Sections 1 and 2, or in defense of
any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
Section 4. Any indemnification under Sections 1 and 2 (unless ordered by a
court) shall be made by the corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in Sections 1 and 2. Such determination shall be made (a)
by the Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (b) if such a
quorum, is not obtainable, or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or (c)
by the shareholders.
Section 5. Expenses (including attorneys' fees) incurred in defending an
action, suit or proceeding, whether civil, criminal, administrative, arbitrative
or investigative, may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding as authorized in the manner
provided in Section 4 upon receipt of an undertaking by or on behalf of the
director, officer, employee or agent to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by the
corporation as authorized in this article.
Section 6. The corporation shall have power to make any other or further
indemnity, including criminal proceedings, to any person referred to in this
section that may be authorized by the Articles of Incorporation or by any Bylaw
made by the stockholders or any resolution adopted, before or after the event,
by the stockholders, except an indemnity against his gross negligence or willful
misconduct. Each such indemnity may continue as to a person who has ceased to
have the capacity referred
<PAGE>
Page 9 of 11
to above and may inure to the benefit of the heirs, executors and
administrators of such a person.
Section 7. The corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify him
against such liability under the provisions of this article.
Section 8. For the purposes of this article, references to "corporation"
include all constituent corporations absorbed in a consolidation or merger, as
well as the resulting or surviving corporation, so that any person who is or was
a director, officer, employee or agent of such a constituent corporation or is
or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise shall stand in the same position under the provisions
of this article with respect to the resulting or surviving corporation as he
would if he had served the resulting or surviving corporation in the same
capacity.
ARTICLE V
SEAL
Section 1. The seal of this corporation shall be as the impression made
below:
<PAGE>
Page 10 of 11
ARTICLE VI
CHECKS, DRAFTS, NOTES, ETC.
Section 1. All checks, drafts, notes and orders for the payment of money
issued by the corporation shall be signed by such person or persons as the Board
of Directors may from time to time designate, and any endorsement of such paper
in the ordinary course of business shall be similarly made.
ARTICLE VII
NOTICE
Section 1. Any notice mailed by the corporation to any director or
stockholder shall be sufficient service of such notice when deposited in the
United States mail, addressed to such stockholder or director at the address
furnished by such stockholder or director to the corporation or its Transfer
Agent, in the event an outside Transfer Agent has been appointed, with postage
thereon prepaid.
ARTICLE VIII
STOCK, NOTES, BONDS AND DEBENTURES
Section 1. The shares of the corporation shall be evidenced by certificates
of each class of stock issued in numerical order, signed by the President or a
Vice President and the Secretary or an Assistant Secretary or the Treasurer or
an Assistant Treasurer, or any other officer authorized by these Bylaws or a
resolution of the Board of Directors, and may (but need not) be sealed with the
seal of the corporation or a facsimile thereof. The signatures of the officers
upon a certificate may be facsimiles if the certificate is countersigned by a
Transfer Agent or registered by a Registrar other than the corporation itself or
an employee of the corporation.
Section 2. On any bond, note or debenture issued by the corporation which
is countersigned or otherwise authenticated by the signature of a trustee, the
signatures of the officers of the corporation and its seal may be facsimiles.
Section 3. In case any officer who has signed or whose facsimile signature
has been placed upon a stock certificate or a bond, note or debenture shall have
ceased to be such officer before such certificate or other such document is
issued, it may be issued by the corporation with the same effect as if he were
such officer at the date of its issue.
<PAGE>
Page 11 of 11
Section 4. Transfers of stock shall be made only upon the books of the
corporation (whether maintained by the corporation or by a Transfer Agent, in
the event one is appointed) and only by the person named in the certificate or
by attorney lawfully constituted in writing and, subject to the provisions of
Section 6 hereof, only upon surrender of the certificate therefore. The Board of
Directors may by resolution make reasonable regulations for the transfer of
stock.
Section 5. Registered stockholders only shall be entitled to be treated by
the corporation as the holders in fact of the stock standing in their respective
names, and the corporation shall not be bound to recognize any equitable or
other claim to or interest in any shares on the part of any other person whether
or not it shall have express or other notice thereof, except as expressly
provided by the laws of Virginia.
Section 6. In case of loss or destruction of any certificate of stock,
another may be issued in its place upon proof of such loss or destruction, and
upon the giving of a satisfactory bond of indemnity to the corporation in such
sum as the directors may provide, not exceeding double the value of the stock.
ARTICLE IX
BOOKS AND RECORDS
Section 1. The Board of Directors shall determine from time to time
whether, and, if allowed, when and under what conditions and regulations, the
accounts and books of the corporation (except such as may by statute be
specifically open to inspection), or any of them, shall be open to the
inspection of the stockholders, and the stockholders' rights in this respect are
and shall be restricted and limited accordingly.
ARTICLE X
AMENDMENT OF BYLAWS
Section 1. These Bylaws may be altered, amended or repealed and new Bylaws
may be adopted by the Board of Directors; but Bylaws made or adopted by the
Board of Directors may be repealed or changed and new Bylaws made by the
stockholders, and the stockholders may prescribe that any Bylaw made by them
shall not be altered, amended or repealed by the directors.
<PAGE>
Page 12 of 11
Effective: Oct. 1, 1979
Amended: Feb. 28, 19-3 Article II, Section 2
Amended: Oct. 22, 19-4 Article II, Section 2
Amended: Jun. 23, 19-6 Article II, Section 2
Amended: Oct. 31, 19-0 Article I, Section 5
Amended: Nov. 23, 1996 - Article II, Section 2
Amended: May 19, 1997 - Article II, Section 2
Article II, Section 3 Article III, Section 1,
Paragraph 1 Article III, Section 9
<PAGE>
[SPECIMEN STOCK CERTIFICATE OF ROANOKE GAS COMPANY]
NUMBER SHARES
RG-2957 SPECIMEN
INCORPORATED UNDER THE LAWS OF
THE STATE OF VIRGINIA
ROANOKE GAS COMPANY
CUSIP 769858 10 1
SEE REVERSE FOR
CERTAIN
DEFINITIONS
This Certifies that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES WITH THE PAR VALUE OF $5.00
EACH OF
Roanoke Gas Company, transferable only on the books of the Corporation by the
holder hereof in person or by duly authorized attorney upon surrender of this
Certificate properly endorsed.
This Certificate is not valid unless countersigned by the Transfer Agent.
Witness the facsimile signatures of its duly authorized officers.
Dated
s/Roger L. Baumgardner s/Frank A. Farmer, Jr.
Secretary President
Countersigned:
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
Transfer Agent andrlotte, North Carolina)
Registrar
Authorized Signature
<PAGE>
Roanoke Gas Company
- ------------------------------------------------------------------------------
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants
in common
UNIF GIFT MIN ACT - _______________ Custodian __________________
(Cust) (Minor)
Under Uniform Gifts to Minors
Act _____________________________
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received, ___________________________________ hereby sell, assign and
transfer unto [PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF
ASSIGNEE] --------------------------------------------------------------------
- ------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
________________________________________________________________________ Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint ___________________________________________
____________________________________________________________________ Attorney to
transfer the said stock on the books of the within-named Corporation with full
power of substitution in the premises.
Dated ____________________ X ______________________________________
X ______________________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME(S) AS WRITTEN
UPON THE FACE OF THE CERTIFICATE, IN EVERY
PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT, OR ANY CHANGE WHATEVER.
<PAGE>
Exhibit A-2
ARTICLES OF INCORPORATION
OF
RGC RESOURCES, INC.
1. The name of the Corporation is RGC Resources, Inc.
2. The purpose of the Corporation is to engage in any lawful act or
activity not required to be specifically stated in these Articles of
Incorporation ("Articles") for which corporations may be organized under the
laws of the Commonwealth of Virginia.
3. (a) The aggregate number of shares which the Corporation is authorized
to issue and the par value per share are as follows:
Class Number of Shares Par Value
Common 10,000,000 $5.00
Preferred 5,000,000 No Par Value
(b) The Board of Directors of the Corporation (the "Board of
Directors") may, by amending these Articles by filing Articles of Amendment with
the Virginia State Corporation Commission, fix in whole or in part the
preferences, limitations and rights, within the limits set by law, of (i) any
class of shares, before the issuance of any shares of that class, or (ii) one or
more series within a class, before the issuance of any shares within that
series.
(c) The preferred stock (including any shares of preferred stock
restored to the status of authorized but unissued preferred stock undesignated
as to series pursuant to this Article 3(c)) may be divided into one or more
series and issued from time to time with such preferences, privileges,
limitations, and relative rights as shall be fixed and determined by the Board
of Directors. Without limiting the generality of the foregoing, the Board of
Directors is expressly authorized to the fullest extent permitted from time to
time by law to fix:
1
<PAGE>
(i) the distinctive serial designations and the division of
shares of preferred stock into one or more series and the number of shares of a
particular series, which may be increased or decreased (but not below the number
of shares thereof then outstanding);
(ii) the rate or amount (or the method of determining the rate
or amount) and times at which, the form in which, and the preferences and
conditions under which, dividends shall be payable on shares of a particular
series, the status of such dividends as cumulative, partially cumulative, or
noncumulative, the date or dates from which dividends, if cumulative, shall
accumulate, and the status of such series as participating or nonparticipating
with shares of other classes or series;
(iii) the price or prices at which, the consideration for
which, the period or periods within which and the terms and conditions, if any,
upon which the shares of a particular series may be redeemed, in whole or in
part, at the option of the Corporation or otherwise;
(iv) the amount or amounts and rights and preferences, if any,
to which the holders of shares of a particular series are entitled or shall have
upon any involuntary or voluntary liquidation, dissolution or winding up of the
Corporation;
(v) the rights and preferences over or otherwise in relation
to any other class or series (including other series of preferred stock), as to
the right to receive dividends and/or the right to receive payments out of the
net assets of the Corporation upon any involuntary or voluntary liquidation,
dissolution or winding up of the Corporation;
(vi) the right, if any, of the holders of a particular series,
the Corporation or another person to convert or cause conversion of shares of
such series into shares
2
<PAGE>
of other classes or series or into other securities, cash, indebtedness or other
property, or to exchange or cause exchange of such shares for shares of other
classes or series or other securities, cash, indebtedness or other property, and
the terms and conditions, if any, including the price or prices or the rate or
rates of conversion and exchange, and the terms and conditions or adjustments,
if any, at which such conversion or exchange may be made or caused;
(vii) the obligation, if any, of the Corporation to redeem,
purchase or otherwise acquire, in whole or in part, shares of a particular
series for a sinking fund or otherwise, the terms and conditions thereof, if
any, including the price or prices and the nature of the consideration payable
for such shares so redeemed, purchased or otherwise acquired;
(viii)the voting rights, if any, including special,
conditional or limited voting rights, of the shares of a particular series in
addition to those required by law, including the number of votes per share and
any requirement for the approval by the holders of shares of all series of
preferred stock, or of the shares of one or more series thereof, or of both, in
an amount greater than a majority, up to such amount as is in accordance with
applicable law or these Articles, as a condition to specified corporate action
or amendments to the Articles; and
(ix) any other preferences, limitations and relative rights
which may be so determined by resolution or resolutions of the Board of
Directors.
Shares of preferred stock shall rank prior or superior to the common
stock in respect of the right to receive dividends and/or the right to receive
payments out of the net assets of the Corporation upon any involuntary or
voluntary liquidation, dissolution or winding up of the Corporation. All shares
of preferred stock redeemed, purchased or otherwise acquired by the Corporation
(including shares surrendered for conversion or exchange) shall be cancelled and
3
<PAGE>
thereupon restored to the status of authorized but unissued shares of preferred
stock undesignated as to series.
(d) The holders of common stock, to the exclusion of any other class
of stock of the Corporation, have sole and full power to vote for the election
of directors and for all other purposes without limitation except only (i) as
otherwise expressly provided in the serial designation of any series of
preferred stock, (ii) as otherwise expressly provided in these Articles or (iii)
as otherwise expressly provided by the then existing laws of the Commonwealth of
Virginia. The holders of common stock will have one vote for each share of
common stock held by them. The outstanding shares of common stock, upon
dissolution, liquidation or winding up of the Corporation, entitle their holders
to share, pro rata, based on the number of shares owned, in the Corporation's
assets remaining after payment or provisions for payment of all debts and
liabilities of the Corporation, and after provisions for the outstanding shares
of any class of stock or other security having senior liquidation rights to the
common stock.
(e) No holder of shares of stock of any class of the Corporation
will have any preemptive or preferential right of subscription to any shares of
any class of stock of the Corporation, whether now or hereafter authorized, or
to any obligations of the Corporation convertible into stock of the Corporation,
issued or sold, nor any right of subscription to any thereof.
4. Subject to the rights of holders of any series of preferred stock to
elect directors under specified circumstances:
(i) The number of directors of the Corporation, not less than
seven nor more than eleven, shall be set by the Bylaws; provided that, in the
absence of a provision in the
4
<PAGE>
Bylaws fixing the number of directors, the number of directors shall be nine.
The directors shall be divided into three classes as nearly equal in number as
possible, with the term of office of directors of the first class to expire at
the first annual meeting of the shareholders after their election, that of the
second class to expire at the second annual meeting after their election, and
that of the third class to expire at the third annual meeting after their
election. 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 in 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 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.
(ii) Newly-created directorships resulting from an increase in
the authorized 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.
5. To the full extent that the laws of the Commonwealth of Virginia, as
they now or may hereafter exist, permit the limitation or elimination of the
liability of directors or officers, no director or officer of the Corporation
shall be liable to the Corporation or its shareholders for any monetary damages.
5
<PAGE>
6. (a) The Corporation shall indemnify a director or officer of the
Corporation who is or was a party to any proceeding, including a proceeding by
or in the right of the Corporation, by reason of the fact that he is or was such
a director or officer or is or was serving at the request of the Corporation as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other profit or non-profit
enterprise against all liabilities and expenses incurred in the proceeding,
except such liabilities and expenses as are incurred because of his willful
misconduct or knowing violation of the criminal law. Unless a determination has
been made that indemnification is not permissible, the Corporation shall make
advances and reimbursement for expenses incurred by a director or officer in a
proceeding upon receipt of an undertaking from him to repay the same if it is
ultimately determined that he is not entitled to indemnification. Such
undertaking shall be an unlimited unsecured general obligation of the director
or officer and shall be accepted without reference to his ability to make
repayment. The Board of Directors is hereby empowered to contract in advance to
indemnify and advance the expenses of any director or officer. The termination
of any proceeding by judgment, order, settlement, conviction or upon a plea of
nolo contendere or its equivalent shall not, by itself, create a presumption
that the director or officer did not meet the standard of conduct entitling him
to indemnity hereunder.
(b) The Board of Directors is hereby empowered to cause the
Corporation to indemnify and make advances and reimbursement for expenses (or
contract in advance for the same) incurred by any person not specified in
paragraph (a) of this Article who was or is a party to any proceeding, by reason
of the fact that he is or was an employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer, employee
6
<PAGE>
or agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other profit or non-profit enterprise, to the same extent as if
such person were specified as one to whom indemnification is granted in
paragraph (a) of this Article.
(c) The Corporation may purchase and maintain insurance to indemnify
it against the whole or any portion of the liability assumed by it in accordance
with this Article and may also procure insurance, in such amounts as the Board
of Directors may determine, on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against any liability asserted against or incurred by such person in
any such capacity or arising from his status as such, whether or not the
Corporation would have power to indemnify him against such liability under the
provisions of this Article.
(d) Except as hereinafter provided, all determinations as to the
permissibility of indemnification and advances and reimbursement for expenses
(including contracts with respect thereto) shall be made by a majority vote of a
quorum consisting of directors not at the time parties to the proceeding. In the
event such a quorum cannot be obtained to make any determination as to the
permissibility of indemnification and advances and reimbursement for expenses
with respect to any claim for indemnification (including contracts with respect
thereto), or in the event there has been a change in the composition of a
majority of the Board of Directors after the date of the alleged act with
respect to which indemnification is claimed, such determination shall be made by
special legal counsel agreed upon by the Board of Directors and the proposed
indemnitee. If the Board of Directors and the proposed indemnitee are unable to
7
<PAGE>
agree upon such special legal counsel, the Board of Directors and the proposed
indemnitee each shall select a nominee, and the nominees shall select such
special legal counsel.
(e) The provisions of this Article shall be applicable to all
actions, claims, suits or proceedings commenced after the adoption hereof,
whether arising from any action taken or failure to act before or after such
adoption. No amendment, modification or repeal of this Article shall diminish
the rights provided hereby or diminish the right to indemnification with respect
to any claim, issue or matter in any then pending or subsequent proceeding that
is based in any material respect on any alleged action or failure to act prior
to such amendment, modification or repeal.
(f) Except to the extent inconsistent with this Article, terms used
herein shall have the same meanings assigned them in the Indemnification Article
of the Virginia Stock Corporation Act, as now in effect or hereafter amended or
replaced. Without limitation, it is expressly understood that reference herein
to directors, officers, employees or agents shall include former directors,
officers, employees and agents and their respective heirs, executors and
administrators.
7. The Corporation's initial registered office shall be located in the
City of Roanoke at 10 South Jefferson Street, Suite 1400, Roanoke, Virginia
24011. The Corporation's initial registered agent shall be Faith M. Wilson,
whose address is the same as the Corporation's registered office and who is a
resident of Virginia and a member of the Virginia State Bar.
Dated: July 29, 1998 s/Faith M. Wilson
------------------
Incorporator
8
<PAGE>
BYLAWS
OF
RGC RESOURCES, INC.
1
<PAGE>
BYLAWS
OF
RGC RESOURCES, INC.
ARTICLE I
STOCKHOLDERS
Section 1. The stockholders of this corporation shall be those who appear
on the books of the corporation as holders of one or more shares of any class of
stock of the corporation.
Section 2. The annual meeting of the stockholders shall be held annually
on the fourth Monday in January of each year, if not a legal holiday, and if a
legal holiday, then on the next succeeding day not a legal holiday, at such
place and at such hour as may be provided by the Board of Directors or in the
stated notice of the meeting.
At such annual meetings there shall be an election of directors for the
ensuing year and the transaction of any business which may properly come before
the meeting.
If in any year the annual meeting shall not be held at the time designated
herein, a meeting shall be held as soon as practicable after the time designated
for the holding of the annual meeting and upon the same notice as required for
an annual meeting, at which time directors shall be elected and such other
business may be transacted as might have been transacted at the annual meeting.
Notice of meetings of stockholders shall be given to the extent and in the
manner required by the Virginia Stock Corporation Act, as it may be amended from
time to time hereafter (said Act being hereinafter sometimes called the "Act"),
and notice of either stockholders' meetings or directors' meetings may be waived
to the extent and in the manner provided in the Act.
Section 3. Special meetings of the stockholders may be called by the
President, the Board of Directors, or by holders of not less than one-tenth of
all the shares entitled to vote at the meeting, or otherwise as may be required
by the Articles of Incorporation.
Section 4. Any action required under the law of Virginia to be taken at a
meeting of the stockholders of the corporation, or any action which may be taken
at a meeting of the stockholders, may be taken without a meeting if a consent in
writing setting forth the action so taken shall be signed by all the
stockholders entitled to vote with respect to the subject matter thereof.
Such consent shall have the same force and effect as a unanimous vote of
stockholders and may be stated as such in any article or document filed with the
State Corporation Commission or others.
1
<PAGE>
Section 5. For the purpose of determining stockholders entitled to notice
of or to vote at any meeting of stockholders, or any adjournment thereof, or
entitled to receive payment of any dividend, or in order to make a determination
of stockholders for any other proper purpose, the Board of Directors may provide
that the stock transfer books shall be closed for a stated period, but not to
exceed in any case seventy days. In lieu of closing the stock transfer books,
the Board of Directors may fix in advance a date as the record date for any such
determination of stockholders, such date in any case to be not more than seventy
days prior to the date on which the particular action requiring such
determination of stockholders is to be taken.
Section 6. Unless otherwise provided in the Articles of Incorporation, a
majority of the shares entitled to vote, represented in person or by proxy,
shall constitute a quorum at a meeting of the stockholders. If a quorum is
present, the affirmative vote of a majority of the shares represented at the
meeting and entitled to vote on the subject matter shall be the act of the
stockholders, unless the vote of a greater number or voting by classes is
required under the applicable law of Virginia or the Articles of Incorporation,
and except that in elections of directors those receiving the greatest numbers
of votes shall be deemed elected, even though not receiving a majority. Less
than a quorum may adjourn.
Section 7. Each outstanding share, regardless of class, shall be entitled
to one vote on each matter submitted to a vote at a meeting of the stockholders,
except to the extent that the voting rights of the shares of any class or
classes are limited or denied by the Articles of Incorporation as permitted by
the Act, and except as the Articles of Incorporation may confer on the holders
of shares of any particular class or series the right to more than one vote per
share, either generally or on particular matters. Where the Articles of
Incorporation confer the right to more or less than one vote per share, any
requirement in the Act for the affirmative vote of a specified proportion of the
shares shall be deemed to refer to a like proportion of the votes eligible to be
cast.
A stockholder may vote either in person or by proxy executed in writing by
the stockholder or by his duly authorized attorney in fact and shall have one
vote for each share of stock which he is entitled to vote at such meeting. At
each election for directors, every stockholder entitled to vote at such election
shall have the right to vote in person or by proxy the number of shares owned by
him for as many persons as there are directors to be elected at that time and
for whose election he has a right to vote.
Shares of stock of other corporations owned by this corporation may be
voted in person by the President or a Vice President or by proxy executed by the
President or a Vice President; provided, however, the Board of Directors may by
resolution revoke such authority from time to time and thereby designate some
other agent, attorney-in-fact, or proxy to vote such shares.
2
<PAGE>
Section 8. All meetings of the stockholders shall be presided over by the
chairman of the Board of Directors, if such office is filled, or, if there is no
such officer or in the absence or inability to act of the chairman of the Board,
by the President, or, if the chairman of the Board, if any, and the President
are absent or unable to act, by the most senior Vice President present at the
meeting, but if none of the foregoing is present and able to act, a chairman
shall be elected by the meeting. Such meetings shall be attended by the
Secretary of the corporation, who shall act as secretary of all such meetings if
present. If the Secretary is absent at any meeting, the chairman shall appoint a
secretary of the meeting. The proceedings of all such meetings shall be verified
by the signature of the secretary of the meeting and approved by the chairman.
Section 9. No business shall be transacted at any meeting of stockholders,
except such business as shall be (a) specified in the notice of meeting given as
provided in this Article; (b) otherwise brought before the meeting by or at the
direction of the Board; or (c) otherwise brought before the meeting by a
stockholder of record of the corporation entitled to vote at the meeting in
compliance with the procedure set forth in this Section. For business to be
brought before a meeting by a stockholder pursuant to (c) above, the stockholder
must have given timely notice in writing to the President of the corporation. To
be timely, a stockholder's notice shall be delivered to, or mailed and received
at, the principal executive offices of the corporation not less than sixty days
nor more than ninety days prior to the meeting; provided, however, in the event
that less than seventy days' notice or prior public disclosure of the date of
the meeting is given or made to stockholders, notice by the stockholder to be
timely must be so received not later than the close of business on the tenth day
following the day on which such notice of the date of the meeting or such public
disclosure was made. Notice shall be deemed to have been given more than seventy
days in advance of an annual meeting of stockholders if the annual meeting is
called on the date indicated by Section 2 of this Article without regard to when
public disclosure thereof is made. Notice of actions to be brought before a
meeting pursuant to (c) above shall set forth, as to each matter the stockholder
proposes to bring before the meeting: (a) a brief description of the business
desired to be brought before the meeting and the reasons for bringing such
business before the meeting; and (b) as to the stockholder giving the notice,
(i) the name and address, as they appear on the corporation's books, of such
stockholder, (ii) the classes and number of shares of the corporation which are
owned of record and beneficially by such stockholder, and (iii) any material
interest of such stockholder in such business other than his interest as a
stockholder of the corporation. Notwithstanding anything in these Bylaws to the
contrary, no business shall be conducted on a stockholder proposal or nomination
except in accordance with the provisions set forth in this Section. The
requirements of this Section are in addition to any other requirements
established by law or these Bylaws relating to business permitted to be
transacted at special stockholders' meetings. The chairman of the meeting shall,
if the facts warrant, determine and declare to the meeting that any business was
not properly brought before the meeting in accordance with the provisions
prescribed by these Bylaws and, if he should so determine, he shall so declare
to the meeting and any such business not so properly brought before the meeting
shall not be transacted.
3
<PAGE>
ARTICLE II
DIRECTORS
Section 1. The business and affairs of the corporation shall be managed by
the Board of Directors, subject to any requirement of stockholder action made by
the Act or the Articles of Incorporation.
Section 2. The Board of Directors shall consist of nine members. The
number of directors may be increased or decreased from time to time within the
variable range established by the Articles. At each Annual Meeting of
Stockholders, the number of directors equal to the number of the class whose
term expires at the time of such meeting shall be elected to hold office until
the third succeeding annual meeting, and until their successors shall have been
elected and qualified. No decrease in the number of directors shall have the
effect of shortening the term of any incumbent director. The normal retirement
date for directors shall be the date of the Annual Meeting of Stockholders
succeeding the director's 70th birthday.
Section 3. Any vacancy occurring in the Board of Directors, including a
vacancy resulting from an increase in the number of directors, shall be filled
by the affirmative vote of a majority of the remaining directors, whether or not
a quorum.
Section 4. A majority of the number of directors fixed by the Bylaws shall
constitute a quorum for the transaction of business. The act of the majority of
the directors present at a meeting, at which a quorum is present, shall be the
act of the Board of Directors.
Section 5. A meeting of the Board of Directors shall be held immediately
after each annual meeting of the stockholders without other notice than is given
by these Bylaws, at which meeting there shall be elected at least a President, a
Treasurer and a Secretary, who shall hold such offices until the first meeting
of the Board following the next annual meeting of the stockholders and until
their successors are elected and qualify, unless sooner removed by the Board of
Directors.
The Board shall also annually (or from time to time as may be deemed
desirable) elect one or more Vice Presidents and any other officers and agents
or fill any vacancy as it may deem necessary, who shall hold office until others
are elected and qualify in their stead, subject to removal by the Board at any
time with or without cause.
Section 6. Meetings of the Board of Directors, regular or special, may be
held at such times and places as it may designate.
A special meeting may be called at any time by the President or by any
three elected directors.
4
<PAGE>
Regular meetings of the Board of Directors may be held with or without
notice. Notice of special meetings of the Board of Directors shall be mailed or
telegraphed to each director at least three days prior to the date of the
meeting, or notice may be waived in writing before, at or subsequent to any such
meeting, and the presence of any director at a meeting shall be deemed a waiver
of notice of such meeting. Neither the business to be transacted at nor the
purpose of any regular or special meeting of the Board of Directors need be
specified in the notice or waiver of notice of such meeting.
Members of the Board of Directors and all committees designated by said
Board of Directors may participate in meetings of such Board or committees by
means of a conference telephone or similar communications equipment whereby all
persons participating in the meeting can hear each other, and participation by
such means shall constitute presence in person at such meeting. When such a
meeting is conducted by means of a conference telephone or similar
communications equipment, a written record shall be made of the action taken at
such meeting.
Section 7. The Board of Directors may, by resolution adopted by a majority
of the number of directors fixed by these Bylaws, designate two or more
directors to constitute an Executive Committee, which shall have and may
exercise all of the authority of the Board of Directors, except to approve an
amendment to the Articles of Incorporation or a plan of merger or consolidation
or as otherwise restricted by the Act.
Other committees with limited authority may be designated by a resolution
adopted by a majority of the directors present at a meeting at which a quorum is
present.
Section 8. The Board of Directors may appoint a Transfer Agent or a
Transfer Agent and Registrar of Transfer and may require all certificates for
each applicable class of stock to be authenticated by the Transfer Agent or by
the Transfer Agent and Registrar, as the case may be, or as the Board may
otherwise direct.
Section 9. A director may be removed from office only for cause.
Section 10. Unless otherwise provided by the Articles of Incorporation of
this corporation, any action required by the laws of Virginia to be taken at a
meeting of the directors, or any action which may be taken at a meeting of the
directors or of a committee, may be taken without a meeting if a consent in
writing, setting forth the action, shall be signed either before or after such
action by all of the directors, or all of the members of the committee, as the
case may be. Such consent shall have the same force and effect as a unanimous
vote.
5
<PAGE>
ARTICLE III
OFFICERS - DUTIES AND POWERS
Section 1. The President shall be elected by the Board of Directors and
shall preside at all meetings of the Board of Directors, unless there shall be a
Chairman of the Board and such officer shall be present, in which event such
Chairman shall so preside. In the absence of the Chairman of the Board of
Directors, if any, the President and all Vice Presidents, a chairman of the
meeting shall be elected by the meeting.
The President shall ex-officio be a member of all committees, shall sign
all certificates of stock and conveyances of real estate and other instruments
in writing by law requiring the President's signature, and perform such other
duties as may be required of him from time to time by the directors, and shall
have the authority, powers and duties that are usually given such officer.
Section 2. In the case of the absence of the President or of his inability
to act, his duties shall be performed by any Vice President (in the event of
more than one Vice President, the senior Vice President present and able to act
shall be entitled to do so), who, in that event, shall execute any of the above
powers of the President.
Section 3. The Secretary shall attend all meetings of the stockholders and
directors and Executive Committee of the corporation and keep a full and
accurate account of their proceedings in a book to be kept for that purpose.
He shall, unless and until the Board of Directors appoints another person
or corporation as the Transfer Agent as hereinabove provided, act as the
Transfer Agent of the corporation and maintain the stock books and addresses of
the stockholders of the corporation. He shall be the custodian of the corporate
seal of the corporation and shall fix and attest the seal, as authorized by the
Board of Directors or the Bylaws of this corporation, to all certificates of
stock and such other instruments requiring the seal. He shall also keep such
other books, deeds, contracts and other valuable papers belonging to the
corporation and perform such other duties as may be required of him by the
President, the Board of Directors, or the Executive Committee.
Section 4. The Treasurer shall have the custody of all monies and
securities of the corporation and shall deposit the same in the name and to the
credit of the corporation in such depositories as may be designated by the Board
of Directors. He shall keep a full and accurate account of the receipts and
disbursements of the corporation in books belonging to the corporation, and
shall disburse the funds of the corporation by check or other warrant to be
signed as prescribed by resolution of the Board of Directors. All books and
papers in his care shall be open to the inspection of the President or any
director, as well as of any person whom the President or Board of Directors may
appoint to examine such books and papers. He shall render such reports to the
President or Board of Directors as may be required of him and shall
6
<PAGE>
perform such other duties as may be incident to his office or as may be
required of him by the Board of Directors.
He may be required by the directors at any time to give bond as the
directors may designate.
Section 5. Any person elected by the Board of Directors as an assistant to
an officer, for example, an Assistant Secretary, shall, unless otherwise
restricted by the Board of Directors and in all cases subordinate to the officer
himself, have and exercise all of the rights, duties, functions and powers of
such officer.
Section 6. In the event of the absence of any officer of the corporation
or his disqualification or inability to act where provision therefor is not
expressly made by these Bylaws, the President may by written order, or the Board
of Directors may by resolution, delegate the powers of such officer to any other
officer or employee of the corporation.
Section 7. Any officer or agent may be removed, with or without cause, at
any time whenever the Board of Directors in its absolute discretion shall
consider that the best interests of the corporation would be served thereby. Any
officer or agent appointed otherwise than by the Board of Directors may be
removed, with or without cause, at any time either by the Board of Directors or
by any officer having authority to appoint whenever the Board of Directors of
such appointing officer in its or his absolute discretion shall consider that
the best interests of the corporation will be served thereby.
ARTICLE IV
SEAL
Section 1. The seal of this corporation shall be as the impression made
below:
ARTICLE V
CHECKS, DRAFTS, NOTES, ETC.
Section 1. All checks, drafts, notes and orders for the payment of money
issued by the corporation shall be signed by such person or persons as the Board
of Directors may from
7
<PAGE>
time to time designate, and any endorsement of such paper in the ordinary course
of business shall be similarly made.
ARTICLE VI
NOTICE
Section 1. Any notice mailed by the corporation to any director or
stockholder shall be sufficient service of such notice when deposited in the
United States mail, addressed to such stockholder or director at the address
furnished by such stockholder or director to the corporation or its Transfer
Agent, in the event an outside Transfer Agent has been appointed, with postage
thereon prepaid.
ARTICLE VII
STOCK, NOTES, BONDS AND DEBENTURES
Section 1. The shares of the corporation shall be evidenced by
certificates of each class of stock issued in numerical order, signed by the
President or a Vice President and the Secretary or an Assistant Secretary or the
Treasurer or an Assistant Treasurer, or any other officer authorized by these
Bylaws or a resolution of the Board of Directors, and may (but need not) be
sealed with the seal of the corporation or a facsimile thereof. The signatures
of the officers upon a certificate may be facsimiles if the certificate is
countersigned by a Transfer Agent or registered by a Registrar other than the
corporation itself or an employee of the corporation.
Section 2. On any bond, note or debenture issued by the corporation which
is countersigned or otherwise authenticated by the signature of a trustee, the
signatures of the officers of the corporation and its seal may be facsimiles.
Section 3. In case any officer who has signed or whose facsimile signature
has been placed upon a stock certificate or a bond, note or debenture shall have
ceased to be such officer before such certificate or other such document is
issued, it may be issued by the corporation with the same effect as if he were
such officer at the date of its issue.
Section 4. Transfers of stock shall be made only upon the books of the
corporation (whether maintained by the corporation or by a Transfer Agent, in
the event one is appointed) and only by the person named in the certificate or
by attorney lawfully constituted in writing and, subject to the provisions of
Section 6 hereof, only upon surrender of the certificate therefor. The Board of
Directors may by resolution make reasonable regulations for the transfer of
stock.
8
<PAGE>
Section 5. Registered stockholders only shall be entitled to be treated by
the corporation as the holders in fact of the stock standing in their respective
names, and the corporation shall not be bound to recognize any equitable or
other claim to or interest in any shares on the part of any other person whether
or not it shall have express or other notice thereof, except as expressly
provided by the laws of Virginia.
Section 6. In case of loss or destruction of any certificate of stock,
another may be issued in its place upon proof of such loss or destruction, and
upon the giving of a satisfactory bond of indemnity to the corporation in such
sum as the directors may provide, not exceeding double the value of the stock.
ARTICLE VIII
BOOKS AND RECORDS
Section 1. The Board of Directors shall determine from time to time
whether, and, if allowed, when and under what conditions and regulations, the
accounts and books of the corporation (except such as may by statute be
specifically open to inspection), or any of them, shall be open to the
inspection of the stockholders, and the stockholders' rights in this respect are
and shall be restricted and limited accordingly.
ARTICLE IX
AMENDMENT OF BYLAWS
Section 1. These Bylaws may be altered, amended or repealed and new Bylaws
may be adopted by the Board of Directors; but Bylaws made or adopted by the
Board of Directors may be repealed or changed and new Bylaws made by the
stockholders, and the stockholders may prescribe that any Bylaw made by them
shall not be altered, amended or repealed by the directors.
9
<PAGE>
[SPECIMEN STOCK CERTIFICATE OF RGC RESOURCES, INC.]
A Virginia Corporation
No. ____ _____ Share
RGC Resources, Inc.
Common Stock, par value $5.00 per share
This certifies that ________________________ is the owner of
___________________ shares of the Capital Stock of RGC Resources, Inc.
transferable only on the books of the Corporation by the holder hereof in person
or by Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed this ________ day of ___________________ A.D., ____.
s/John B. Williamson, III s/Roger L. Baumgardner
President Secretary
SHARES _______ EACH
<PAGE>
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE
WHATEVER.
For Value Received, _____ hereby sell, assign and transfer unto
__________________________ ___________________________________________ Shares of
the Capital Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint ____________________
__________________________________________ Attorney to transfer the said Stock
on the books of the within named Corporation with full power of substitution in
the premises.
Dated ____________________, _____
In presence of
- --------------------------------- -----------------------------------
CERTIFICATE
FOR
-------
SHARES
of the
CAPITAL STOCK
of
RGC Resources, Inc.
(Common Stock, par value $5.00 per share)
ISSUED TO
------------------------
DATE
------------------------
<PAGE>
Exhibit A-3
ARTICLES OF INCORPORATION
OF
BLUEFIELD GAS COMPANY
<PAGE>
AGREEMENT OF INCORPORATION
I. The undersigned agree to become a corporation by the name of
Carl H. Schwyn Utilities, Incorporated
II. The principal Office or Place of Business of said Corporation will
be located in the city of Bluefield, in county of Mercer and State of
West Virginia. Its chief works will be located at the same place.
III. The objects for which this Corporation is formed are as follows:
To own, lease, hold, develop and operate artificial and natural gas
plants in and about Bluefield, West Virginia, and in other cities, towns
and places in the State of West Virginia, and in cities, towns and
places in other states.
To manufacture gas for light, heat and power, to be made from any and
all substances, or a combination thereof, from which gas can be
obtained, and to sell and dispose of artificial and natural gas in
Bluefield, West Virginia and Virginia, and elsewhere, with full power to
lay pipes and conductors therefor through the avenues, streets, lanes
and alleys thereof, and in such other places as may be necessary and
convenient to supply said avenues, streets, lanes and alleys and any
manufactories, public places, buildings, houses, stores or any other
place or building whatsoever with gas, together with the power to hold,
occupy and use such real and personal estate and to do such other things
as may be necessary or convenient to carry out the objects of this
corporation, and to manufacture and sell coke and all other products,
recovered from or used in the manufacture of gas or the refining or
processing of natural gas.
To manufacture, purchase, produce, distribute, furnish and sell
electricity for light, heat, power and other purposes, and for doing all
things necessary or incident to such purposes.
To drill, dig, mine or otherwise obtain from the earth, petroleum, rock
or carbon oils, natural gas, salt and other volatile mineral substances;
to manufacture, refine, prepare for market, buy, sell and transport the
same in the crude or refined condition; to acquire for these purposes
gas and oil land, leases, leaseholds and other interests in real estate
and gas, oil and other rights; to construct and maintain pipe lines,
conduits and lines of tubing and piping for the transportation of
natural gas, artificial gas or oil; to transport such oil and gas by
means of pipe lines, tank cars, trucks, tank trucks or otherwise and to
sell and supply the same to others; to lay, buy, lease, sell and operate
pipes, pipe lines, truck lines and storage tanks to be used for the
purpose of transporting and storing oils and gas, and of doing a general
pipe line and storage business; to construct and maintain gas wells, oil
wells, salt wells and refineries, and
<PAGE>
to buy, sell and deal in gas, oil and mineral products; to construct and
maintain railways, tramways, telegraph and telephone lines and truck
lines necessary or convenient in the prosecution of the business of the
company; to cut, manufacture and sell timber and products from the lands
of the company; to obtain and prepare for the market such other valuable
minerals or materials as may be discovered in developing the lands of
the company; to lease, own and operate stores or stations for the sale
and distribution of gasoline, oil and all kindred products; to buy and
sell goods, wares and merchandise; to own, hold, lease, occupy and use
real and personal property; and to do and transact all business properly
connected with or incidental to any or all of said objects and purposes.
To acquire by purchase, subscription or otherwise and to hold as
investment or otherwise any bonds or other securities or evidences of
indebtedness, or any shares of capital stock of any corporation
including its own; to acquire the good will, rights, property and assets
of all kinds of any person, firm, association or corporation on such
terms and conditions as may be agreed upon and to pay for same in cash,
stocks, bonds or other securities of this corporation or otherwise.
To issue bonds and other obligations in payment for property purchased
or acquired by it, or for any other object in or about its business; to
mortgage or pledge any stocks, bonds or other obligations or any
property which may be acquired by it, to secure any bonds or other
obligations by it issued or incurred.
To carry on the business of this corporation in all or any of its
branches in any part of the world, and as principal agent, contractor or
otherwise, and by or through trustees, agents or otherwise, and either
alone or in partnership with or in conjunction with, or for the account
of this corporation and any one or more corporations, partnerships,
associations or individuals.
IV. The amount of the total authorized capital stock of said corporation
shall be 10,000 shares, no par value common stock.
The amount of capital stock with which it will commence business is one
thousand dollars ($1,000.00).
V. The names and post office addresses of the incorporators and the
number of shares of stock subscribed for by each are as follows:
<TABLE>
<CAPTION>
No. of Shares No. of Shares Total No. of
Name P.O. Address Common Stock Preferred Stock Shares
---- ------------ ------------ --------------- ------
<S> <C> <C>
Carl W. Haner Bluefield, West Virginia 100 100
Albert M. Lawrence Bluefield, West Virginia 1 1
N. A. Imhoff Bluefield, West Virginia 1 1
</TABLE>
VI. The existence of this corporation is to be perpetual.
<PAGE>
We, the undersigned, for the purpose of forming a Corporation under the
laws of the State of West Virginia do make and file this Agreement; and we have
accordingly hereunto set our respective hands this 5th day of July, 1944.
/s/ Carl W. Haner
------------------------------
/s/Albert M. Lawrence
------------------------------
/s/ N.A. Imhoff
------------------------------
CERTIFICATES
State of West Virginia County of Mercer, to wit:
I, B. C. Harman, a Notary Public in and for the County and State aforesaid,
hereby certify that Carl W. Haner, Albert M. Lawrence and N. A. Imhoff, whose
names are signed to the foregoing agreement bearing date on the 5th day of July,
1944 this day personally appeared before me in my said county and severally
acknowledged their signatures to the same.
Given under my hand and official seal this 5th day of July, 1944.
(SEAL) /s/ B. C. Harman
-----------------------------
Notary Public
My Commission expires on the 14th day of October 1953.
<PAGE>
STATE OF WEST VIRGINIA
CERTIFICATE
I, Wm. S. O'Brien, Secretary of State of the State of West Virginia hereby
certify that
Carl W. Haner, President of
CARL H. SCHWYN UTILITIES, INCORPORATED,
a corporation created and organized under the laws of the State of West
Virginia, has certified to me under his signature and the corporate seal of said
corporation, that, at a meeting of the stockholders of said corporation,
regularly held in accordance with the requirements of the law of said State, at
the office of said corporation in the City of Bluefield, West Virginia, on the
24th day of August, 1944, at which meeting all of the issued and outstanding
voting stock of such corporation being represented by the holders thereof in
person and voting for the following resolution, the same was duly and regularly
adopted and passed, to wit:
"RESOLVED, That the name of Carl H. Schwyn Utilities,
Incorporated, be changed to Bluefield Gas Company by which latter name it
shall hereafter be known."
WHEREFORE, I do declare said change of name to be authorized by law, and
that said corporation shall hereafter be known by the name of BLUEFIELD GAS
COMPANY.
Given under my hand and the Great
Seal of the said State, at the City of
Charleston, this twenty-eighth day of
August, 1944.
/s/Wm. S. O'Brien
---------------------------------
Secretary of the State
<PAGE>
APPLICATION FOR CERTIFICATE OF CHANGE OF NAME
OF
CARL H. SCHWYN UTILITIES, INCORPORATED
I, Carl W. Haner, President of CARL H. SCHWYN UTILITES, INCORPORATED, a
corporation created and organized under the Laws of the State of West Virginia,
do hereby certify to the Secretary of State of the State of West Virginia, that,
at a meeting of the stockholders of said corporation, regularly held in
accordance with the requirements of the Law of said State, at the Office of said
Corporation, in the City of Bluefield, Mercer County, West Virginia, on the 24th
day of August, 1944, at which meeting all of the issued and outstanding voting
stock of such corporation being represented by the holders thereof, in person,
and voting for the following resolution, the same was duly and regularly adopted
and passed, to-wit:
"Resolved, that the name of CARL H. SCHWYN UTILITIES,
INCORPORATED, be changed to BLUEFIELD GAS COMPANY, by which latter
name it shall hereafter be known."
IN TESTIMONY WHEREOF, Carl H. Schwyn Utilities, Incorporated, a
corporation, has caused its name to be signed hereto by Carl W. Haner, its
President, and its corporate seal to be hereunto affixed, duly attested by its
Secretary, this 25th day of August, 1944.
CARL H. SCHWYN UTILITIES, INCORPORATED,
By /s/ Carl W. Haner
President
ATTEST:
/s/ N. A. Imhoff
Secretary
<PAGE>
STATE OF WEST VIRGINIA
CERTIFICATE
I, Wm. S. O'Brien, Secretary of State of the State of West Virginia, hereby
certify that
G. S. Horne, President of
BLUEFIELD GAS COMPANY,
a corporation created and organized under the laws of the State of West
Virginia, has certified to me under his signature and the corporate seal of said
corporation, that at a special meeting of the stockholders of said corporation,
regularly held in accordance with the requirements of the law of said State, at
the office of said corporation, in the City of Charlotte, State of North
Carolina, on the 23rd day of December, 1947, at which meeting all of the issued
and outstanding voting stock of such corporation being represented by the
holders thereof in person or by proxy and voting for the following resolution,
the same was duly and regularly adopted and passed, to wit:
"WHEREAS, it is advisable that the charter of Bluefield Gas
Company, a West Virginia corporation, be amended so as to provide that
its authorized capital stock shall consist of two hundred fifty thousand
(250,000) shares of common capital stock having a par value of One
($1.00) Dollar each, instead of ten thousand (10,000) shares without par
value, and that ten thousand (10,000) shares of stock authorized in such
amendment be substituted for the shares now outstanding on the basis of
one share of the One ($1.00) Dollar par value stock for each one share
of the no par value stock now outstanding,
"NOW, THEREFORE, BE IT RESOLVED:
"1. That the charter of Bluefield Gas Company, a West
Virginia corporation, be amended by striking therefrom all of the first
sentence of the paragraph or article numbered "IV" and by inserting in
lieu and instead thereof the following:
"The amount of the total authorized capital stock of said
corporation shall be two hundred fifty thousand (250,000) shares
of common stock of the par value of One ($1.00) Dollar each."
<PAGE>
"2. That ten thousand (10,000) shares of common stock of the par
value of One ($1.00) Dollar each be substituted for the ten thousand
(10,000) shares of no par value common stock now outstanding, on the
basis of one share of the One ($1.00) Dollar par value common stock for
each one share of the no par value common stock."
WHEREFORE, I do declare said amendment as set forth in the
foregoing resolution authorized by law.
Given under my hand and the Great Seal of the said State, at the
City of Charleston, this Twenty-ninth day of December 1947.
WM. S. O'BRIEN,
Secretary of State
<PAGE>
CERTIFICATE
I, G. S. HORNE, President of Bluefield Gas Company, a corporation
created and organized under the laws of the State of West Virginia do hereby
certify to the Secretary of State of the State of West Virginia that a special
meeting of the stockholders, called for that purpose and held pursuant to waiver
of notice duly signed by all of the stockholders of record, at the office of the
corporation in the City of Charlotte, State of North Carolina, on the 23rd day
of December, 1947, at which meeting all the shares of stock outstanding and
entitled to vote were represented, and voted in favor of the same, the following
resolution was duly and regularly adopted and passed:
"WHEREAS, it is advisable that the charter of Bluefield Gas
Company, a West Virginia corporation, be amended so as to provide that
its authorized capital stock shall consist of two hundred fifty thousand
(250,000) shares of common capital stock having a par value of One
($1.00) Dollar each, instead of ten thousand (10,000) shares without par
value, and that ten thousand (10,000) shares of stock authorized in such
amendment be substituted for the shares now outstanding on the basis of
one share of the One ($1.00) Dollar par value stock for each one share
of the no par value stock now outstanding,
"NOW, THEREFORE, BE IT RESOLVED:
"1. That the charter of Bluefield Gas Company, a West Virginia
corporation, be amended by striking therefrom all of the first sentence
of the paragraph or article numbered "IV" and by inserting in lieu and
instead thereof the following:
"The amount of the total authorized capital
stock of said corporation shall be two hundred fifty thousand
(250,000) shares of common stock of the par value of One ($1.00)
Dollar each."
"2. That ten thousand (10,000) shares of common stock
of the par value of One ($1.00) Dollar each be substituted for the ten
thousand (10,000) shares of no par value common stock now outstanding,
on the basis of one share of the One ($1.00) Dollar par value common
stock for each one share of the no par value common stock."
Given under my hand and seal of said corporation, this 23rd day of
December, 1947.
/s/ G. S. Horne
G. S. Horne, President of Bluefield
Gas Company, a corporation
<PAGE>
STATE OF WEST VIRGINIA
CERTIFICATE
I, WM. S. O'BRIEN, Secretary of State of the State of West Virginia, hereby
certify that
G. S. Horne, President of
BLUEFIELD GAS COMPANY
a corporation created and organized under the laws of the State of West
Virginia, has certified to me under his signature and the corporate seal of said
corporation, that at a special meeting of the stockholders of said corporation,
regularly held in accordance with the requirements of the law of said State, at
the office of said corporation, in the City of Charlotte, State of North
Carolina, on the 23rd day of December, 19947, at which meeting all of the issued
and outstanding voting stock of such corporation being represented by the
holders thereof in person or by proxy and voting for the following resolution,
the same was duly and regularly adopted and passed, to wit:
"WHEREAS, the stockholders of Bluefield Gas Company have
heretofore at this meeting by unanimous action declared it advisable,
and voted unanimously, to amend the charter of the corporation so as to
provide that its authorized capital stock shall consist of two hundred
fifty thousand (250,000) shares of common capital stock having a par
value of One ($1.00) Dollar each instead of ten thousand (10,000) shares
without par value, and that ten thousand (10,000) shares of stock
authorized in such amendment shall be substituted for the shares now
outstanding on the basis of one share of the One ($1.00) Dollar par
value stock for each one share of the no par value stock now
outstanding; and
"WHEREAS, such action effects a reduction in the capital
stock of the corporation as to which a certification to the Secretary of
State of West Virginia and publication of a certificate of the Secretary
of State of West Virginia are required to be made;
"NOW, THEREFORE, BE IT RESOLVED: That the proper officers
of the corporation be and they hereby are authorized, empowered and
directed:
<PAGE>
"1. To make such certification or certifications to the
Secretary of State of West Virginia with regard to the reduction in
capital stock;
"2. To publish such certificate of the Secretary of
State of West Virginia with regard to the reduction of capital
stock; and
"3. To take any and all other action necessary to make
said reduction of capital stock effective and valid,
as may be required by the laws of the State of West Virginia."
WHEREFORE, I do declare said amendment and decrease of the capital stock
as set forth in the foregoing resolution authorized by law.
Given under my hand and the Great Seal of the said State, at the City of
Charleston, this Twenty-ninth day of December, 1947.
WM. S. O'BRIEN
Secretary of State
<PAGE>
CERTIFICATE
I, G. S. Horne, President of Bluefield Gas Company, a corporation
created and organized under the laws of the State of West Virginia, do hereby
certify to the Secretary of State of the State of West Virginia that at a
special meeting of the stockholders, called for that purpose and held pursuant
to waiver of notice duly signed by all of the stockholders of record, at the
office of the corporation in the City of Charlotte, State of North Carolina, on
the 23rd day of December 1947, at which meeting all the shares of stock
outstanding and entitled to vote were represented, and voted in favor of the
same, the following resolution was duly and regularly adopted and passed:
"WHEREAS, the stockholders of Bluefield Gas Company have heretofore at
this meeting by unanimous action declared it advisable, and voted
unanimously, to amend the charter of the corporation so as to provide
that its authorized capital stock shall consist of two hundred fifty
thousand (250,000) shares of common capital stock having a par value of
One ($1.00) Dollar each instead of ten thousand (10,000) shares without
par value, and that ten thousand (10,000) shares of stock authorized in
such amendment shall be substituted for the shares now outstanding on
the basis of one share of the One ($1.00) Dollar par value stock for
each one share of the no par value stock now outstanding; and
"WHEREAS, such action effects a reduction in the capital stock of the
corporation as to which a certification to the Secretary of State of
West Virginia and publication of a certificate of the Secretary of State
of West Virginia are required to be made:
"NOW, THEREFORE, BE IT RESOLVED: That the proper officers of the
corporation be and they hereby are authorized, empowered and directed:
"1. To make such certification or certifications to the Secretary
of State of West Virginia with regard to the reduction in capital stock;
"2. To publish such certificate of the Secretary of State of West
Virginia with regard to the reduction of capital stock; and
"3. To take any and all other action necessary to make said
reduction of capital stock effective and valid,
as may be required by the laws of the State of West Virginia."
Given under my hand and seal of said corporation, this 23rd day of
December, 1947.
/s/ G. S. Horne
G. S. Horne, President of Bluefield Gas
Company, a corporation
<PAGE>
STATE OF WEST VIRGINIA
CERTIFICATE
I, D. PITT O'BRIEN, Secretary of State of the State of West Virginia,
hereby certify that
Max Matz, Vice President of
BLUEFIELD GAS COMPANY,
a corporation created and organized under the laws of the State of West
Virginia, has certified to me under his signature and the corporate seal of said
corporation, that, at a meeting of the stockholders of said corporation,
regularly held in accordance with the requirements of the law of said State, at
the office of said corporation in Bluefield, WV on the 9th day of November,
1950, at which meeting a majority of the issued and outstanding voting stock of
such corporation being represented by the holders thereof, in person, by bodies
corporate or by proxy, and voting for the following resolution, the same was
duly and regularly adopted and passed, to-wit:
"RESOLVED, That the authorized capital of Bluefield
Gas Company be reduced from 250,000 shares of the par value of One
dollar each to 250,000 shares of the par value of 20 cents each, so that
the authorized capital stock of said corporation shall be Fifty Thousand
dollars."
WHEREFORE, I do declare said decrease of the authorized capital stock
and the par value thereof as set forth in the foregoing resolution authorized by
law.
Given under my hand and the Great Seal of the
said State, at the City of Charleston, this
Twenty-Ninth day of January, 1951.
/s/ D. Pitt O'Brien
Secretary of State
<PAGE>
CERTIFICATE
I, Max Matz, Vice President of Bluefield Gas Company, a corporation
created and organized under the laws of the State of West Virginia, do hereby
certify to the Secretary of State of the State of West Virginia that, at a
meeting of the stockholders of said corporation, regularly held in accordance
with the requirements of the law of said State, at the office of said
corporation in Bluefield, WV on the 9th day of November, 1950, at which meeting
a majority of the issued and outstanding voting stock of such corporation being
represented by the holders thereof, in person, by bodies corporate or by proxy,
and voting for the following resolution, the same was duly and regularly adopted
and passed, to-wit:
"RESOLVED, That the authorized capital of Bluefield Gas Company be
reduced from 250,000 shares of the par value one dollar each to 250,000 shares
of the par value of 20 cents each, so that the authorized capital stock of said
corporation shall be fifty thousand dollars."
Given under my hand and the seal of said
corporation, this 27th day of January
(CORPOATE SEAL) /s/ Max Matz, Vice President of
Bluefield Gas Company, Bluefield, WV
<PAGE>
AMENDED AND RESTATED
BYLAWS
OF
BLUEFIELD GAS COMPANY
ARTICLE I
STOCKHOLDERS
Section 1. The stockholders of this corporation shall be those who appear on
the books of the corporation as holders of one or more shares of any class of
stock of the corporation.
Section 2. The annual meeting of the stockholders shall be held annually on
the fourth Monday in January of each year, if not a legal holiday, and if a
legal holiday, then on the next succeeding day not a legal holiday, at such
place and at such hour as may be provided by the Board of Directors or in the
stated notice of the meeting.
At such annual meetings there shall be an election of the Board of Directors
for the ensuing year and the transaction of any business which may properly come
before the meeting.
If in any year the annual meeting shall not be held at the time designated
herein, a meeting shall be held as soon as practicable after the time designated
for the holding of the annual meeting and upon the same notice as required for
an annual meeting, at which time the Board of Directors shall be elected and
such other business may be transacted as might have been transacted at the
annual meeting.
Notice of meetings of stockholders shall be given to the extent and in the
manner required by the West Virginia Corporation Act, or as may be amended from
time to time hereafter (said Act being hereinafter sometimes called "Act"), and
notice of either stockholders' meetings or directors' meetings may be waived to
the extent and in the manner provided in said Act.
Section 3. Special meetings of the stockholders may be called by the
President, the Board of Directors, or by holders of not less than one-tenth of
all the shares entitled to vote at the meeting, or otherwise as may be required
by the Articles of Incorporation.
<PAGE>
Page 2 of 11
Section 4. Any action required under the law of West Virginia to be taken at
a meeting of the stockholders of the corporation, or any action which may be
taken at a meeting of the stockholders, may be taken without a meeting if a
consent or agreement in writing setting forth the action so taken shall be
signed by all the stockholders entitled to vote with respect to the subject
matter thereof.
Such consent or agreement shall have the same force and effect as a
unanimous vote of stockholders and may be stated as such in any article or
document filed with the Secretary of State or others.
Section 5. For the purpose of determining stockholders entitled to notice of
or to vote at any meeting of stockholders, or any adjournment thereof, or
entitled to receive payment of any dividend, or in order to make a determination
of stockholders for any other purpose, the Board of Directors may provide that
the stock transfer books shall be closed for a stated period, but not to exceed
in any case fifty days. In lieu of closing the stock transfer books, the Board
of Directors may fix in advance a date as the record date for any such
determination of stockholders, such date in any case to be not more than fifty
days prior to the date on which the particular action requiring such
determination of stockholders is to be taken.
Section 6. Unless otherwise provided in the Articles of Incorporation, a
majority of the shares entitled to vote, represented in person or by proxy,
shall constitute a quorum at a meeting of the stockholders. If a quorum is
present, the affirmative vote of a majority of the shares represented at the
meeting and entitled to vote on the subject matter shall be the act of the
stockholders, unless the vote of a greater number or voting by classes is
required under the applicable law of West Virginia or the Articles of
Incorporation, and except that in elections of directors those receiving the
greatest numbers of votes shall be deemed elected, even though not receiving a
majority. Less than a quorum may adjourn any stockholder's meeting.
Section 7. Each outstanding share, regardless of class, shall be entitled to
one vote on each matter submitted to a vote at a meeting of the stockholders,
except to the extent that the voting rights of the shares of any class or
classes are limited or denied by the Articles of Incorporation as permitted by
the Act, and except as the Articles of Incorporation may confer on the holders
of shares of any particular class or series the right to more than one vote per
share, either generally or on particular matters. Where the Articles of
Incorporation confer the right to more or less than one vote per share, any
requirement in the Act for the affirmative vote of a specified proportion of the
shares shall be deemed to refer to a like proportion of the votes eligible to be
cast.
A stockholder may vote either in person or by proxy executed in writing by
the stockholder or by his duly authorized attorney in fact and shall have one
vote for each share of stock which he is entitled to vote at such meeting. At
each election for
<PAGE>
Page 3 of 11
directors, every stockholder entitled to vote at such election shall have the
right to vote in person or by proxy the number of shares owned by him for as
many persons as there are directors to be elected at that time and for whose
election he has a right to vote.
Shares of stock of other corporations owned by this corporation may be voted
in person by the President or a Vice President or by proxy executed by the
President or a Vice President; provided, however, the Board of Directors may by
resolution revoke such authority from time to time and thereby designate some
other agent, attorney-in-fact, or proxy to vote such shares.
Section 8. All meetings of the stockholders shall be presided over by the
Chairman of the Board of Directors, if such office is filled, or, if there is no
such officer or in the absence or inability to act of the Chairman of the Board,
by the President, or, if the Chairman of the Board, if any, and the President
are absent or unable to act, by the most senior Vice President present at the
meeting, but if none of the foregoing are present and able to act, a Chairman
shall be elected by the meeting. Such meetings shall be attended by the
Secretary of the corporation, who shall act as Secretary of all such meetings if
present. If the Secretary is absent at any meeting, the Chairman shall appoint a
Secretary of the meeting. The proceedings of all such meetings shall be verified
by the signature of the Secretary of the meeting and approved by the Chairman.
ARTICLE II
DIRECTORS
Section 1. The business and affairs of the corporation shall be managed by
the Board of Directors, subject to any requirement of stockholder action made by
the Act or the Articles of Incorporation.
Section 2. The Board of Directors shall consist of seven (7) in number. The
number of directors may be increased or decreased from time to time by amendment
to these Bylaws. No decrease in number shall have the effect of shortening the
term of any incumbent director. At each annual meeting of stockholders, the
stockholders shall elect directors to hold office until the next succeeding
annual meeting except in case of the classification of directors as permitted by
the Act. Each director shall hold office for the term for which he is elected
and until his successor shall have been elected. The normal retirement date for
directors shall be the date of the Annual Meeting of Stockholders immediately
succeeding the director's 70th birthday.
<PAGE>
Page 4 of 11
Section 3. Any vacancy occurring in the Board of Directors and any
directorship to be filled by reason of an increase of not more than two in the
number of directors, may be filled by the affirmative vote of a majority of the
remaining directors, though less than a quorum of the Board of Directors. A
director elected or appointed, as the case may be, by the remaining directors to
fill a vacancy shall be elected or appointed for the unexpired term of his
predecessor in office. Any directorship to be filled by reason of an increase in
the number of directors may be filled by the Board of Directors for a term of
office continuing only until the next election of directors.
Section 4. A majority of the number of directors fixed by the Bylaws shall
constitute a quorum for the transaction of business. The act of the majority of
the directors present at a meeting, at which a quorum is present, shall be the
act of the Board of Directors.
Section 5. A meeting of the Board of Directors shall be held immediately
after each annual meeting of the stockholders without other notice than is given
by these Bylaws, at which meeting there shall be elected at least a President, a
Treasurer and a Secretary, who shall hold such offices until the first meeting
of the Board following the next annual meeting of the stockholders and until
their successors are elected and qualify, unless sooner removed by the Board of
Directors.
The Board shall also annually (or from time to time as may be deemed
desirable) elect one or more Vice Presidents and any other officers, agents or
factors or fill any vacancy as it may deem necessary, who shall hold office
until others are elected and qualify in their stead, subject to removal by the
Board at any time with or without cause.
The same person may hold one or more offices, except that the same person
may not serve as both President and Secretary.
Section 6. Meetings of the Board of Directors, regular or special, may be
held at such times and places as it may designate.
A special meeting may be called at any time by the President or by any three
elected directors.
Regular meetings of the Board of Directors may be held with or without
notice. Notice of special meetings of the Board of Directors shall be mailed or
telegraphed to each director at least three days prior to the date of the
meeting, or notice may be waived in writing before, at or subsequent to any such
meeting, and the presence of any director at a meting shall be deemed a waiver
of notice of such meeting. Neither the business to be transacted at nor the
purpose of any regular or special meeting of the Board of Directors need be
specified in the notice or waiver of notice of such meeting.
<PAGE>
Page 5 of 11
Members of the Board of Directors and all committees designated by said
Board of Directors may participate in meetings of such Board or committees by
means of a conference telephone or similar communications equipment whereby all
persons participating in the meeting can hear each other, and participation by
such means shall constitute presence in person at such meeting. When such a
meeting is conducted by means of a conference telephone or similar
communications equipment, a written record shall be made of the action taken at
such meeting.
Notwithstanding any provision of these Bylaws to the conrary, notice shall
be given to every director when the meeting is being called for the purpose of
amending the Bylaws or for the purpose of authorizing the sale of all, or
substantially all of the assets of the Corporation.
Section 7. The Board of Directors may, by resolution adopted by a majority
of the number of directors fixed by these Bylaws, designate two or more
directors to constitute an Executive Committee, which, to the extent permitted
by the laws of West Virginia, shall have and may exercise all of the authority
of the Board of Directors, except to approve an amendment to the Articles of
Incorporation or a plan of merger or consolidation, or a sale of all, or
substantially all of the assets of the Corporation.
Other committees with limited authority may be designated by a resolution
adopted by a majority of the directors present at a meeting at which a quorum is
present.
Section 8. The Board of Directors may appoint a Transfer Agent or a Transfer
Agent and Registrar of Transfer any may require all certificates for each
applicable class of stock to be authenticated by the Transfer Agent or by the
Transfer Agent and Registrar, as the case may be, or as the Board may otherwise
direct.
Section 9. At a meeting at any time called expressly for that purpose, any
director, whether elected by the stockholders or appointed or elected by the
directors, may be removed, with or without cause, by a majority vote of the
directors.
Section 10. Unless otherwise provided by the Articles of Incorporation of
this corporation, any action required by the laws of West Virginia to be taken
at a meeting of the directors, or any action which may be taken at a meeting of
the directors or of a committee, may be taken without a meeting if a consent or
agreement in writing, setting forth the action, shall be signed either before or
after such action by all of the directors, or all of the members of the
committee, as the case may be. Such consent or agreement shall have the same
force and effect as a unanimous vote.
<PAGE>
Page 6 of 11
ARTICLE III
OFFICERS - DUTIES AND POWERS
Section 1. The President shall be elected by and from the Board of
Directors, shall preside at all meetings of the Board of Directors, unless there
shall be a Chairman of the Board and such officer shall be present, in which
event such Chairman shall so preside. In the absence of the Chairman of the
Board of Directors, if any, the President and all Vice Presidents, a Chairman of
the meeting shall be elected by the meeting.
The President shall ex officio be a member of all committees, shall sign all
certificates of stock and conveyances of real estate and other instruments in
writing by law requiring the President's signature, and perform such other
duties as may be required of him from time to time by the directors, and shall
have the authority, powers and duties that are usually given such officer.
Section 2. In the case of the absence of the President or of his inability
to act, his duties shall be performed by any Vice President (in the event of
more than one Vice President, the senior Vice President present and able to act
shall be entitled to do so), who, in that event, shall execute any of the above
powers of the President.
Section 3. The Secretary or Secretary-Treasurer shall attend all meetings of
the stockholders and directors and Executive Committee of the corporation and
keep a full and accurate account of their proceedings in a book to be kept for
that purpose.
He shall, unless and until the Board of Directors appoints another person or
corporation the Transfer Agent as hereinabove provided, act as the Transfer
Agent of the corporation and maintain the stock books and addresses of the
stockholders of the corporation. He shall be the custodian of the corporate seal
of the corporation and shall fix and attest the seal, as authorized by the Board
of Directors or the Bylaws of this corporation, to all certificates of stock and
such other instruments requiring the seal. He shall also keep such other books,
deeds, contracts and other valuable papers belonging to the corporation and
perform such other duties as may be required of him by the President, the Board
of Directors, or the Executive Committee.
Section 4. The Treasurer or Secretary-Treasurer shall have the custody of
all monies and securities of the corporation and shall deposit the same in the
name and to the credit of the corporation in such depositories as may be
designated by the Board of Directors. He shall keep a full and accurate account
of the receipts and disbursements of the corporation in books belonging to the
corporation, and shall disburse the funds of the corporation by check or other
warrant to be signed as prescribed by resolution of the Board of Directors. All
books and papers in his care
<PAGE>
Page 7 of 11
shall be always open to the inspection of the President or any director, as well
as of any person whom the President or Board of Directors may appoint to examine
such books and papers. He shall render such reports to the President or Board of
Directors as may be required of him and shall perform such other duties as may
be incident to his office or as may be required of him by the Board of
Directors.
He may be required by the directors at any time to give bond as the
directors may designate.
Section 5. Any person elected by the Board of Directors as an assistant to
an officer, for example, an Assistant Secretary, shall, unless otherwise
restricted by the Board of Directors and in all cases subordinate to the officer
himself, have and exercise all of the rights, duties, functions and powers of
such officer.
Section 6. In the event of the absence of any officer of the corporation or
his disqualification or inability to act where provision therefore is not
expressly made by these Bylaws, the President may by written order, or the Board
of Directors may by resolution, delegate the powers of such officer to any other
officer or employee of the corporation.
Section 7. Any officer or agent may be removed, with or without cause, at
any time whenever the Board of Directors in its absolute discretion shall
consider that the best interests of the corporation would be served thereby. Any
officer or agent appointed otherwise than by the Board of Directors may be
removed, with or without cause, at any time either by the Board of Directors or
by any officer having authority to appoint whenever the Board of Directors or
such appointing officer in its or his absolute discretion shall consider that
the best interests of the corporation will be served thereby.
ARTICLE IV
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 1. The corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative, arbitrative
or investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgements, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in the manner he reasonably believed to be in or not opposed
to the best interests of the corporation, and, with respect to
<PAGE>
Page 8 of 11
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgement, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not of itself create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that his
conduct was unlawful.
Section 2. The corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgement in
its favor by reason of the fact that he is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with defense or settlement of such action or suit if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation and except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of his
duty to the corporation unless and only to the extent that the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
such court shall deem proper.
Section 3. To the extent that a director, officer, employee or agent of this
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 1 and 2, or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
Section 4. Any indemnification under Sections 1 and 2 (unless ordered by a
court) shall be made by the corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in Sections 1 and 2. Such determination shall be made (a)
by the Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (b) if such a
quorum, is not obtainable, or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or (c)
by the shareholders.
Section 5. Expenses (including attorneys' fees) incurred in defending an
action, suit or proceeding, whether civil, criminal, administrative, arbitrative
or investigative, may be paid by the corporation in advance of the final
disposition of
<PAGE>
Page 9 of 11
such action, suit or proceeding as authorized in the manner provided in Section
4 upon receipt of an undertaking by or on behalf of the director, officer,
employee or agent to repay such amount unless it shall ultimately be determined
that he is entitled to be indemnified by the corporation as authorized in this
article.
Section 6. The corporation shall have power to make any other or further
indemnity, including criminal proceedings, to any person referred to in this
section that may be authorized by the Articles of Incorporation or by any Bylaw
made by the stockholders or any resolution adopted, before or after the event,
by the stockholders, except an indemnity against his gross negligence or willful
misconduct. Each such indemnity may continue as to a person who has ceased to
have the capacity referred to above and may inure to the benefit of the heirs,
executors and administrators of such a person.
Section 7. The corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the corporation would have the
power to indemnify him against such liability under the provisions of this
article.
Section 8. For the purposes of this article, references to "corporation"
include all constituent corporations absorbed in a consolidation or merger, as
well as the resulting or surviving corporation, so that any person who is or was
a director, officer, employee or agent of such a constituent corporation or is
or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise shall stand in the same position under the provisions
of this article with respect to the resulting or surviving corporation as he
would if he has served the resulting or surviving corporation in the same
capacity.
ARTICLE V
SEAL
Section 1. The seal of this corporation shall be as the impression made
below:
<PAGE>
Page 10 of 11
ARTICLE VI
CHECKS, DRAFTS, NOTES, ETC.
Section 1. All checks, drafts, notes and orders for the payment of money
issued by the corporation shall be signed by such person or persons as the Board
of Directors may from time to time designate, and any endorsement of such paper
in the ordinary course of business shall be similarly made.
ARTICLE VII
NOTICE
Section 1. Any notice mailed by the corporation to any director or
stockholder shall be sufficient service of such notice when deposited in the
United States mail, addressed to such stockholder or director at the address
furnished by such stockholder or director to the corporation or its Transfer
Agent, in the event an outside Transfer Agent has been appointed, with postage
thereon prepaid.
ARTICLE VIII
STOCK, NOTES, BONDS AND DEBENTURES
Section 1. The shares of the corporation shall be evidenced by certificates
of each class of stock issued in numerical order, signed by the President or a
Vice President and the Secretary or an Assistant Secretary or the Treasurer or
an Assistant Treasurer, or any other officer authorized by these Bylaws or a
resolution of the Board of Directors, and may (but need not) be sealed with the
seal of the corporation or a facsimile thereof. The signatures of the officers
upon a certificate may be facsimiles if the certificate is countersigned by a
Transfer Agent or registered by a Registrar other than the corporation itself or
an employee of the corporation.
Section 2. On any bond, note or debenture issued by the corporation which is
countersigned or otherwise authenticated by the signature of a trustee, the
signatures of the officers of the corporation and its seal may be facsimiles.
Section 3. In case any officer who has signed or whose facsimile signature
has been placed upon a stock certificate or a bond, note or debenture shall have
ceased to be such officer before such certificate or other such document is
issued, it may be issued by the corporation with the same effect as if he were
such officer at the date of its issue.
<PAGE>
Page 11 of 11
Section 4. Transfers of stock shall be made only upon the books of the
corporation (whether maintained by the corporation or by a Transfer Agent, in
the event one is appointed) and only by the person named in the certificate or
by attorney lawfully constituted in writing and, subject to the provisions of
Section 6 hereof, only upon surrender of the certificate therefore. The Board of
Directors may by resolution make reasonable regulations for the transfer of
stock.
Section 5. Registered stockholders only shall be entitled to be treated by
the corporation as the holders in fact of the stock standing in their respective
names, and the corporation shall not be bound to recognize any equitable or
other claim to or interest in any shares on the part of any other person whether
or not it shall have express or other notice thereof, except as expressly
provided by the laws of Virginia.
Section 6. In case of loss or destruction of any certificate of stock,
another may be issued in its place upon proof of such loss or destruction, and
upon the giving of a satisfactory bond of indemnity to the corporation in such
sum as the directors may provide, not exceeding double the value of the stock.
ARTICLE IX
BOOKS AND RECORDS
Section 1. The Board of Directors shall determine from time to time whether,
and, if allowed, when and under what conditions and regulations, the accounts
and books of the corporation (except such as may by statute be specifically open
to inspection), or any of them, shall be open to the inspection of the
stockholders, and the stockholders' rights in this respect are and shall be
restricted and limited accordingly.
ARTICLE X
AMENDMENT OF BYLAWS
Section 1. These Bylaws may be altered, amended or repealed and new Bylaws
may be adopted by the Board of Directors; but Bylaws made or adopted by the
Board of Directors may be repealed or changed and new Bylaws made by the
stockholders, and the stockholders may prescribe that any Bylaw made by them
shall not be altered, amended or repealed by the directors.
Adopted: November 9, 1988
<PAGE>
[SPECIMEN STOCK CERTIFICATE OF BLUEFIELD GAS COMPANY]
INCORPORATED UNDER THE LAWS OF
STATE OF WEST VIRGINIA
NUMBER SHARES
- -------- --------
BLUEFIELD GAS COMPANY
Bluefield, West Virginia
This Certifies that ________________________ is the registered holder of
___________________ Shares of the capital stock of Bluefield Gas Company, fully
paid and non-assessable, transferable only on the books of the Corporation by
the holder hereof in person or by Attorney upon surrender of this Certificate
properly endorsed.
In Witness Whereof the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed this ________ day of ___________________ A.D., 19__.
Countersigned
THE FIRST NATIONAL BANK OF BLUEFIELD
Bluefield, W.Va. - Transfer Agents
By s/illegible signature [Corporate Seal By s/Scott H. Shott
Authorized Officer Appears here] President
By s/John C. Shott
Secretary
<PAGE>
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE
WHATEVER.
For Value Received, _____ hereby sell, assign and transfer unto
__________________________ ___________________________________________ Shares of
the Capital Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint ____________________
__________________________________________ Attorney to transfer the said Shares
on the books of the within named Corporation with full power of substitution in
the premises.
Dated ____________________, 19__
In presence of
- --------------------------------- -------------------------------------
Bluefield
Gas
Company
CERTIFICATE
FOR
------------
SHARES
OF
CAPITAL STOCK
ISSUED TO
------------------------
DATED
------------------------
<PAGE>
Exhibit A-4
ARTICLES OF INCORPORATION
OF
COMMONWEALTH PUBLIC SERVICE CORPORATION
<PAGE>
COMMONWEALTH OF VIRGINIA
DEPARTMENT OF THE STATE CORPORATION COMMISSION
- - - - - - - - - - - - - - - - - - - -
CERTIFICATE FOR AMENDMENT TO THE CHARTER
OF
COMMONWEALTH PUBLIC SERVICE CORPORATION
WHEREAS, Commonwealth Public Service Corporation, a corporation created
under and by virtue of the laws of the Commonwealth of Virginia, desires to have
its charter amended as hereinafter set out; NOW, THEREFORE, to that end, I,
Gilder S. Horne, President of said corporation, under the seal of the
corporation attested by the Secretary thereof, do hereby certify as follows:
FIRST: That on the 25th day of October, 1948, upon waiver of notice duly
signed by all of the directors of the corporation, there was held at the office
of Rulane Gas Company, 2317 Thrift Road, Charlotte, North Carolina, a meeting of
the Board of Directors of the aforesaid corporation, at which meeting at least a
majority of the directors were present, and unanimously passed the following
resolution declaring that such amendment is advisable:
"RESOLVED, That it is advisable that the Certificate of
Incorporation of Commonwealth Public Service Corporation be, and the same
is hereby, amended by striking out of the article or paragraph numbered
"(h)" therein the name "Roanoke, Virginia", and by inserting in lieu and
instead thereof the name"Bluefield, Tazewell County, Virginia".
And the said Board of Directors thereupon passed a further resolution
ordering a meeting of the stockholders to be called for the 29th day of October,
1948, according to law, to take action upon the foregoing resolution proposing
to amend the charter of the corporation.
SECOND: That on the 29th day of October, 1948, there was held at
Bluefield, Virginia, a meeting of the stockholders upon proper waiver of notice
signed by all of the stockholders, such waiver stating the time, place and
general object of the meeting. That at said meeting there was represented in
person and by proxy five shares, out of a total of 5 shares of stock issued and
outstanding having voting powers. That the foregoing resolution, adopted by the
Board of Directors proposing to amend the charter of this corporation in the
<PAGE>
manner hereinbefore set out was in terms laid before the stockholders' meeting
and adopted by a vote of five shares, being at least two-thirds in interest of
the stockholders of this corporation having voting powers.
THIRD: That the proceedings of said corporation were duly entered on the
minutes of the proceedings of the stockholders.
THEREFORE, this certificate is now signed by Gilder S. Horne, President of
Commonwealth Public Service Corporation, aforesaid, with its corporate seal
thereto affixed, attested by W. S. Lander, its Secretary, the 30th day of
October, 1948.
COMMONWEALTH PUBLIC SERVICE CORPORATION
/s/ W. S. Lander By: /s/ Gilder S. Horne
Secretary President
<PAGE>
NORTH CAROLINA
MECKLENBURG COUNTY
I, J. W. Squires, a Notary Public in and for the County and State
aforesaid, do certify that Gilder S. Horne, President, whose name is signed to
the writing above, bearing date on the 30th day of October, 1948, has
acknowledged the same before me, in my County and State aforesaid. My commission
expires on the 14th day of February, 1949. Given under my hand this the 30th day
of October, 1948.
/s/ J. W. Squires
Notary Public
<PAGE>
COMMONWEALTH OF VIRGINIA
DEPARTMENT OF THE STATE CORPORATION COMMISSION
City of Richmond, 5th day of November, 1948
The accompanying certificate for an amendment to the charter of the
Commonwealth Public Service Corporation
signed in accordance with law, by Gilder S. Horne, its President, under the seal
of said corporation, attested by W. S. Lander, its Secretary, and duly
acknowledged by them, having been presented to the State Corporation Commission
and the fee, if any, required by law having been paid, the State Corporation
Commission having examined said application, now declares that the
Commonwealth Public Service Corporation
has complied with the requirements of law, and is entitled to the amendment
or alteration of its charter set forth in said application. Therefore, it is
ordered that the charter of the
Commonwealth Public Service Corporation
a corporation created by the State Corporation Commission be and the same is
amended and altered in the manner and for the purposes set forth in said
application, pursuant to the provisions of law.
The said application, with this order, is hereby ordered to be admitted to
record.
ATTEST:
/s/ H. Lester Hooker
Acting Chairman
/s/ N. W. Atkinson
Clerk of the Commission
<PAGE>
COMMONWEALTH OF VIRGINIA,
Office of the State Corporation Commission
In the CITY OF RICHMOND, the 5th day of November, 1948
The foregoing amendment to the charter of Commonwealth Public Service
Corporation was this day received and duly admitted to record in this office
according to law.
STATE CORPORATION COMMISSION
By /s/ H. Lester Hooker
Acting Chairman
ATTEST:
/s/ N. W. Atkinson
Clerk of the Commission
<PAGE>
ARTICLES OF ASSOCIATION
OF
COMMONWEALTH PUBLIC SERVICE CORPORAITON
This is to certify that we do hereby associate ourselves to establish a
corporation under and by virtue of Chapter 150, Code of Virginia, 1919, and acts
amendatory thereto, for the purpose of establishing a corporation to purchase,
lease, construct, maintain and operate pipe lines and distribution systems for
the transmission and distribution of natural and/or artificial gas: gas plants
and distribution systems for the manufacture, storage, transmission and
distribution of natural and/or artificial gas; franchises for the right to use
the public streets, ways, alleys and public places in various and several cities
and towns in the Commonwealth of Virginia for the purpose of supplying the
citizens and inhabitants thereof with artificial and/or natural gas; and for
that purpose make and sign these articles of association under the corporate
name hereinafter mentioned.
(a) Name: The name of the corporation is to be Commonwealth Public
Service Corporation.
(b.1) The nature of character of the works to be purchased, leased or
constructed are a main or trunk line for the transmission of natural and/or
artificial gas from the boundary line between the State of West Virginia and the
State of Virginia, near the town of Narrows, Giles County, Virginia, and
proposed to be constructed through and across the Counties of Giles, Montgomery
and Roanoke in the Commonwealth of Virginia to the City of Roanoke in Roanoke
County in the Commonwealth of Virginia, and such branch or lateral pipe lines
and extensions as may be necessary to furnish natural and/or artificial gas to
the counties, cities and towns in the Commonwealth of Virginia, enumerated
herein.
(b.2) To secure by grant, purchase, assignment or otherwise franchises for
the right to sue the public streets, ways and alleys in the following cities and
towns in the Commonwealth of Virginia for the purpose of constructing,
maintaining and operating therein manufacturing and/or distributing plants for
the purpose of furnishing the citizens and inhabitants thereof with artificial
and/or natural gas.
Bluefield, Tazewell County, Virginia.
Pearisburg, Giles County, Virginia.
<PAGE>
Pulaski, Pulaski County, Virginia.
Radford, Montgomery County, Virginia.
Dublin, Pulaski County, Virginia.
Cambria Montgomery County, Virginia.
Chrisitansburg, Montgomery County, Virginia.
Blacksburg, Montgomery County, Virginia.
Rocky Mount, Franklin County, Virginia.
Roanoke, Roanoke County, Virginia.
Salem, Roanoke County, Virginia.
Vinton, Roanoke County, Virginia.
Wytheville, Wythe County, Virginia.
Martinsville, Henry County, Virginia.
Danville, Pittsylvania County, Virginia.
Covington, Alleghany County, Virginia.
Clifton Forge, Alleghany County, Virginia
Narrows, Giles County, Virginia.
(c) The principal terminal places of the main or trunk pipe
line will be the town of Narrows, Giles County, Virginia, and the
city of Roanoke, Roanoke County, Virginia.
(d) The estimated extent of such works will be a main or trunk
pipe line of approximately 150 miles in length and such branch or
lateral lines as may be necessary to supply the towns, cities and
counties herein enumerated, and such plants, compressors, holders,
appliances, machinery and distribution systems as may be necessary
to supply the citizens and residents of any such town, city or
county.
The said proposed main or trunk gas line is intended to be constructed
where possible and practicable, through, across and along the public highways,
roads and streets along its proposed route which will extend from the boundary
line of the State of Virginia in Giles County to the city of Roanoke, Roanoke
County, Virginia, passing through or near the towns of Narrows, Giles County,
Virginia, Pearisburg, Giles County, Virginia, Cambria, Montgomery County,
Virginia, Blacksburg, Montgomery County, Virginia, Salem, Roanoke County,
Virginia, Roanoke, Roanoke County, Virginia and such extensions of said lines or
branch or lateral lines as may be necessary to serve the public in any or all of
the cities or towns herein enumerated.
<PAGE>
(e) The period of the duration of this corporation shall be
unlimited.
(f) The maximum amount of capital stock of this corporation
shall be $50,000.00 divided into 500 shares of the par value of
$100.00 per share. The minimum amount of capital stock of this
corporation shall be $500.00 divided into 5 shares of $100.00 each -
all of the stock of this corporation shall be common stock.
(g) The names and places of residence of the directors and
officers who shall manage the affairs of the corporation for the
first year, unless others are sooner chosen from the stockholders to
act in their place, are as follows:
Directors
W. J. McCorkindale, Roanoke, Virginia
S. B. Thompson, Bluefield, West Virginia
Geo. P. Crockett, Bluefield, Virginia
A.G. Fox, Bluefield, West Virginia
L. J. Turner, Roanoke, Virginia
Officers
President: W. J. McCorkindale, Roanoke, Virginia
Vice President & Treasurer: S. B. Thompson, Bluefield, WV
Secretary: Geo. P. Crockett, Bluefield, Virginia
(b) The principal office of the corporation will be located in
Roanoke, Virginia.
(c) This corporation shall have the right to lay, construct,
maintain and operate pipe lines along or across the right of way of
any Road, Turnpike, Street or Alley in the county, city or towns
herein enumerated pursuant to the regulations, conditions or
restrictions now or which may hereafter be imposed by law.
(d) In addition to the powers herein above stated an
enumerated, this corporation shall have the general power, rights
and privileges now or
<PAGE>
which may hereafter be conferred on corporations of similar and like
kind in character.
(e) This corporation shall be a public service utility for the
purpose of furnishing artificial and/or natural gas in the counties,
towns and cities herein enumerated and as such public service
utility shall have the right to bid on, purchase or secure franchise
in any of the cities or towns herein enumerated for the right to use
the streets, alleys and other public places thereof for the
erection, maintenance and operation of manufacturing plants and/or
distribution systems and as such shall have the right to furnish to
persons, firms or corporations in cities, counties and towns along
the routes of its transmission lines artificial and/or natural gas
and shall have the right to charge and collect therefor subject to
the regulations and conditions of the State Corporation Commission
of Virginia or any successor body thereto.
(f) This corporation shall the right to purchase or otherwise
acquire or to guarantee or become surety in respect to the bonds,
stocks or other securities or obligations of other companies to
apply for purchase or otherwise acquire and to hold, sell, assign or
otherwise use or dispose of letter patent, patent rights, license
privileges, processes, formulas, devices, inventions, trade marks
and trade names and all rights territorial or otherwise thereunder
relating to or useful in connection with any of the purposes of this
corporation.
To issue stocks, bonds and other obligations in payment for property
purchased or acquired by the corporation for services rendered or for any other
object in and about its business.
To issue bonds, notes or other negotiable instruments secured by mortgages
or otherwise upon its property real and personal and in such amounts as may from
time to time seem advisable.
To sell, convey and otherwise lawfully transfer and dispose of its entire
property both real and personal, and the rights, privileges and franchises or
any interest therein or any part
<PAGE>
thereof to other corporations, firms or individuals by a majority vote stock of
the stockholders of the corporation at a meeting called by the directors for
that purpose.
The enumeration of any specific powers herein is not to be construed to
limit or impair in any manner the general powers conferred on this corporation
by this charter or general law now in force or effect or which may hereafter be
enacted.
<PAGE>
Given under our hands and seals this 25th day of February, 1930.
/s/ W. J. McCorkindale (Seal)
/s/ S. B. Thompson (Seal)
/s/ Geo. P. Crockett (Seal)
/s/ A. G. Fox (Seal)
/s/ L. J. Turner (Seal)
STATE OF VIRGINIA )
) To-Wit:
COUNTY OF TAZEWELL )
I, R. K. Crockett, a Notary Public within and for the County and State
aforesaid do certify that S. B. Thompson, Geo. P. Crockett, and A. G. Fox, whose
names are signed to the writing above bearing date on the 25th day of February,
1930, have acknowledged the same before me in my County aforesaid. Given under
my hand this 25th day of February, 1930.
/s/ R. K. Crockett
Notary Public within and for
Tazewell County, Virginia
My commission expires September 30, 1931.
<PAGE>
STATE OF VIRGINIA)
) To-wit:
CITY OF ROANOKE )
I, Ruth F. Murphy, a Notary Public within and for the County and State
aforesaid, do hereby certify that W. J. McCorkindale and L. J. Turner whose
names are signed to the foregoing and annexed writing bearing date the 25th day
of February, 1930, have each acknowledged the name before me in my County
aforesaid. Given under my hand this 25th day of February, 1930.
/s/ Ruth F. Murphy
Notary Public within and for
Roanoke City, Virginia
My commission expires October 9, 1931.
<PAGE>
COMMONWEALTH OF VIRGINIA
DEPARTMENT OF THE STATE CORPORATION COMMISSION
CITY OF RICHMOND 27th day of February, 1930
The accompanying Articles of Association, together with a receipt showing
payment of the charter fee required by law, having been presented to the STAE
CORPORATION COMMISSION by W. J. McCorkindale, S. B. Thompson, Geo. P. Crockett,
A. G. Fox and I. J. Turner.
and the State Corporation Commission, having examined said articles now declares
that the said applicants have complied with the requirements of law and have
entitled themselves to a charter and it is therefore ordered that they and their
associates and successors be, and they are hereby, made and created a body
politic and corporate, under and by the name of
Commonwealth Public Service Corporation
Upon the terms and conditions, and for the purposes set forth in said articles,
to the same extent as if the same were now herein transcribed in full and with
all the powers and privileges conferred and subject to all the conditions and
restrictions imposed by law.
And said Articles of Association, with this order, are hereby certified to
the Secretary of the Commonwealth for record.
/s/ Signature Not Legible
Chairman
/s/ N. W. Atkinson
Acting Clerk of the Commission
<PAGE>
COMMONWEALTH OF VIRGINIA
OFFICE OF THE SECRETARY OF THE COMMONWEALTH
In the CITY OF RICHMOND, the 27th day of February 1930.
The foregoing charter of Commonwealth Public Service Corporation was this
day received and duly recorded in this office and certified to the Clerk of the
State Corporation Commission.
/s/ Signature Not Legible
Secretary of the Commonwealth
<PAGE>
AMENDED AND RESTATED
BYLAWS
OF
COMMONWEALTH PUBLIC SERVICE CORPORATION
ARTICLE I
STOCKHOLDERS
Section 1. The stockholders of this corporation shall be those who appear
on the books of the corporation as holders of one or more shares of any class of
stock of the corporation.
Section 2. The annual meeting of the stockholders shall be held annually on
the fourth Monday in January of each year, if not a legal holiday, and if a
legal holiday, then on the next succeeding day not a legal holiday, at such
place and at such hour as may be provided by the Board of Directors or in the
stated notice of the meeting.
At such annual meetings there shall be an election of the Board of
Directors for the ensuing year and the transaction of any business which may
properly come before the meeting.
If in any year the annual meeting shall not be held at the time designated
herein, a meeting shall be held as soon as practicable after the time designated
for the holding of the annual meeting and upon the same notice as required for
an annual meeting, at which time the Board of Directors shall be elected and
such other business may be transacted as might have been transacted at the
annual meeting.
Notice of meetings of stockholders shall be given to the extent and in the
manner required by the Virginia Corporation Act, or as it may be amended from
time to time hereafter (said Act being hereinafter sometimes called "Act"), and
notice of either stockholders' meetings or directors' meetings may be waived to
the extent and in the manner provided in said Act.
Section 3. Special meetings of the stockholders may be called by the
President, the Board of Directors, or by holders of not less than one-tenth of
all the shares entitled to vote at the meeting, or otherwise as may be required
by the Articles of Incorporation.
<PAGE>
Page 2 of 11
Section 4. Any action required under the law of Virginia to be taken at a
meeting of the stockholders of the corporation, or any action which may be taken
at a meeting of the stockholders, may be taken without a meeting if a consent in
writing setting forth the action so taken shall be signed by all the
stockholders entitled to vote with respect to the subject matter thereof.
Such consent shall have the same force and effect as a unanimous vote of
stockholders and may be stated as such in any article or document filed with the
State Corporation Commission.
Section 5. For the purpose of determining stockholders entitled to notice
of or to vote at any meeting of stockholders, or any adjournment thereof, or
entitled to receive payment of any dividend, or in order to make a determination
of stockholders for any other purpose, the Board of Directors may provide that
the stock transfer books shall be closed for a stated period, but not to exceed
in any case fifty days. In lieu of closing the stock transfer books, the Board
of Directors may fix in advance a date as the record date for any such
determination of stockholders, such date in any case to be not more than fifty
days prior to the date on which the particular action requiring such
determination of stockholders is to be taken.
Section 6. Unless otherwise provided in the Articles of Incorporation, a
majority of the shares entitled to vote, represented in person or by proxy,
shall constitute a quorum at a meeting of the stockholders. If a quorum is
present, the affirmative vote of a majority of the shares represented at the
meeting and entitled to vote on the subject matter shall be the act of the
stockholders, unless the vote of a greater number or voting by classes is
required under the applicable law of Virginia or the Articles of Incorporation,
and except that in elections of directors those receiving the greatest numbers
of votes shall be deemed elected, even though not receiving a majority. Less
than a quorum may adjourn.
Section 7. Each outstanding share, regardless of class, shall be entitled
to one vote on each matter submitted to a vote at a meeting of the stockholders,
except to the extent that the voting rights of the shares of any class or
classes are limited or denied by the Articles of Incorporation as permitted by
the Act, and except as the Articles of Incorporation may confer on the holders
of shares of any particular class or series the right to more than one vote per
share, either generally or on particular matters. Where the Articles of
Incorporation confer the right to more or less than one vote per share, any
requirement in the Act for the affirmative vote of a specified proportion of the
shares shall be deemed to refer to a like proportion of the votes eligible to be
cast.
A stockholder may vote either in person or by proxy executed in writing by
the stockholder or by his duly authorized attorney in fact and shall have one
vote for each share of stock which he is entitled to vote at such meeting. At
each election for directors, every stockholder entitled to vote at such election
shall have the right to
<PAGE>
Page 3 of 11
vote in person or by proxy the number of shares owned by him for as many persons
as there are directors to be elected at that time and for whose election he has
a right to vote.
Shares of stock of other corporations owned by this corporation may be
voted in person by the President or a Vice President or by proxy executed by the
President or a Vice President; provided, however, the Board of Directors may by
resolution revoke such authority from time to time and thereby designate some
other agent, attorney-in-fact, or proxy to vote such shares.
Section 8. All meetings of the stockholders shall be presided over by the
Chairman of the Board of Directors, if such office is filled, or, if there is no
such officer or in the absence or inability to act of the Chairman of the Board,
by the President, or, if the Chairman of the Board, if any, and the President
are absent or unable to act, by the most senior Vice President present at the
meeting, but if none of the foregoing are present and able to act, a Chairman
shall be elected by the meeting. Such meetings shall be attended by the
Secretary of the corporation, who shall act as Secretary of all such meetings if
present. If the Secretary is absent at any meeting, the Chairman shall appoint a
Secretary of the meeting. The proceedings of all such meetings shall be verified
by the signature of the Secretary of the meeting and approved by the Chairman.
ARTICLE II
DIRECTORS
Section 1. The business and affairs of the corporation shall be managed by
the Board of Directors, subject to any requirement of stockholder action made by
the Act or the Articles of Incorporation.
Section 2. The Board of Directors shall consist of seven (7) in number. The
number of directors may be increased or decreased from time to time by amendment
to these Bylaws. No decrease in number shall have the effect of shortening the
term of any incumbent director. At or before the first annual meeting of
stockholders and at each annual meeting thereafter, the stockholders shall elect
directors to hold office until the next succeeding annual meeting except in case
of the classification of directors as permitted by the Act. Each director shall
hold office for the term for which he is elected and until his successor shall
have been elected. The normal retirement date for directors shall be the date of
the Annual Meeting of Stockholders immediately succeeding the director's 70th
birthday.
Section 3. Any vacancy occurring in the Board of Directors, including a
vacancy resulting from an increase of not more than two in the number of
directors,
<PAGE>
Page 4 of 11
may be filled by the affirmative vote of a majority of the remaining directors,
though less than a quorum of the Board of Directors.
Section 4. A majority of the number of directors fixed by the Bylaws shall
constitute a quorum for the transaction of business. The act of the majority of
the directors present at a meeting, at which a quorum is present, shall be the
act of the Board of Directors.
Section 5. A meeting of the Board of Directors shall be held immediately
after each annual meeting of the stockholders without other notice than is given
by these Bylaws, at which meeting there shall be elected at least a President, a
Treasurer and a Secretary, who shall hold such offices until the first meeting
of the Board following the next annual meeting of the stockholders and until
their successors are elected and qualify, unless sooner removed by the Board of
Directors.
The Board shall also annually (or from time to time as may be deemed
desirable) elect one or more Vice Presidents and any other officers, agents or
factors or fill any vacancy as it may deem necessary, who shall hold office
until others are elected and qualify in their stead, subject to removal by the
Board at any time with or without cause.
The same person may hold one or more offices, except that the same person
may not serve as both President and Secretary.
Section 6. Meetings of the Board of Directors, regular or special, may be
held at such times and places as it may designate.
A special meeting may be called at any time by the President or by any
three elected directors.
Regular meetings of the Board of Directors may be held with or without
notice. Notice of special meetings of the Board of Directors shall be mailed or
telegraphed to each director at least three days prior to the date of the
meeting, or notice may be waived in writing before, at or subsequent to any such
meeting, and the presence of any director at a meeting shall be deemed a waiver
of notice of such meeting. Neither the business to be transacted at nor the
purpose of any regular or special meeting of the Board of Directors need be
specified in the notice or waiver of notice of such meeting.
Members of the Board of Directors and all committees designated by said
Board of Directors may participate in meetings of such Board or committees by
means of a conference telephone or similar communications equipment whereby all
persons participating in the meeting can hear each other, and participation by
such means shall constitute presence in person at such meeting. When such a
meeting is
<PAGE>
Page 5 of 11
conducted by means of a conference telephone or similar communications
equipment, a written record shall be made of the action taken at such meeting.
Section 7. The Board of Directors may, by resolution adopted by a majority
of the number of directors fixed by these Bylaws, designate two or more
directors to constitute an Executive Committee which shall have and may exercise
all of the authority of the Board of Directors, except to approve an amendment
to the Articles of Incorporation or a plan of merger or consolidation.
Other committees with limited authority may be designated by a resolution
adopted by a majority of the directors present at a meeting at which a quorum is
present.
Section 8. The Board of Directors may appoint a Transfer Agent or a
Transfer Agent and Registrar of Transfer any may require all certificates for
each applicable class of stock to be authenticated by the Transfer Agent or by
the Transfer Agent and Registrar, as the case may be, or as the Board may
otherwise direct.
Section 9. At a meeting at any time called expressly for that purpose, any
director, whether elected by the stockholders or appointed or elected by the
directors, may be removed, with or without cause, by a majority vote of the
directors.
Section 10. Unless otherwise provided by the Articles of Incorporation of
this corporation, any action required by the laws of Virginia to be taken at a
meeting of the directors, or any action which may be taken at a meeting of the
directors or of a committee, may be taken without a meeting if a consent in
writing, setting forth the action, shall be signed either before or after such
action by all of the directors, or all of the members of the committee, as the
case may be. Such consent or agreement shall have the same force and effect as a
unanimous vote.
ARTICLE III
OFFICERS - DUTIES AND POWERS
Section 1. The President shall be elected by and from the Board of
Directors, shall preside at all meetings of the Board of Directors, unless there
shall be a Chairman of the Board and such officer shall be present, in which
event such Chairman shall so preside. In the absence of the Chairman of the
Board of Directors, if any, the President and all Vice Presidents, a Chairman of
the meeting shall be elected by the meeting.
The President shall ex officio be a member of all committees, shall sign
all certificates of stock and conveyances of real estate and other instruments
in writing
<PAGE>
Page 6 of 11
by law requiring the President's signature, and perform such other duties as may
be required of him from time to time by the directors, and shall have the
authority, powers and duties that are usually given such officer.
Section 2. In the case of the absence of the President or of his inability
to act, his duties shall be performed by any Vice President (in the event of
more than one Vice President, the senior Vice President present and able to act
shall be entitled to do so), who, in that event, shall execute any of the above
powers of the President.
Section 3. The Secretary or Secretary-Treasurer shall attend all meetings
of the stockholders and directors and Executive Committee of the corporation and
keep a full and accurate account of their proceedings in a book to be kept for
that purpose.
He shall, unless and until the Board of Directors appoints another person
or corporation the Transfer Agent as hereinabove provided, act as the Transfer
Agent of the corporation and maintain the stock books and addresses of the
stockholders of the corporation. He shall be the custodian of the corporate seal
of the corporation and shall fix and attest the seal, as authorized by the Board
of Directors or the Bylaws of this corporation, to all certificates of stock and
such other instruments requiring the seal. He shall also keep such other books,
deeds, contracts and other valuable papers belonging to the corporation and
perform such other duties as may be required of him by the President, the Board
of Directors, or the Executive Committee.
Section 4. The Treasurer or Secretary-Treasurer shall have the custody of
all monies and securities of the corporation and shall deposit the same in the
name and to the credit of the corporation in such depositories as may be
designated by the Board of Directors. He shall keep a full and accurate account
of the receipts and disbursements of the corporation in books belonging to the
corporation, and shall disburse the funds of the corporation by check or other
warrant to be signed as prescribed by resolution of the Board of Directors. All
books and papers in his care shall be always open to the inspection of the
President or any director, as well as of any person whom the President or Board
of Directors may appoint to examine such books and papers. He shall render such
reports to the President or Board of Directors as may be required of him and
shall perform such other duties as may be incident to his office or as may be
required of him by the Board of Directors.
He may be required by the directors at any time to give bond as the
directors may designate.
Section 5. Any person elected by the Board of Directors as an assistant to
an officer, for example, an Assistant Secretary, shall, unless otherwise
restricted by the Board of Directors and in all cases subordinate to the officer
himself, have and exercise all of the rights, duties, functions and powers of
such officer.
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Page 7 of 11
Section 6. In the event of the absence of any officer of the corporation or
his disqualification or inability to act where provision therefore is not
expressly made by these Bylaws, the President may by written order, or the Board
of Directors may by resolution, delegate the powers of such officer to any other
officer or employee of the corporation.
Section 7. Any officer or agent may be removed, with or without cause, at
any time whenever the Board of Directors in its absolute discretion shall
consider that the best interests of the corporation would be served thereby. Any
officer or agent appointed otherwise than by the Board of Directors may be
removed, with or without cause, at any time either by the Board of Directors or
by any officer having authority to appoint whenever the Board of Directors or
such appointing officer in its or his absolute discretion shall consider that
the best interests of the corporation will be served thereby.
ARTICLE IV
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 1. The corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative, arbitrative
or investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgements, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in the manner he reasonably believed to be in or not opposed
to the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgement, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not of itself create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe that his conduct was unlawful.
Section 2. The corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgement in
its favor by reason of the fact that he is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or
<PAGE>
Page 8 of 11
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation and except that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the corporation unless and only to
the extent that the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem proper.
Section 3. To the extent that a director, officer, employee or agent of
this corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in Sections 1 and 2, or in defense of
any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
Section 4. Any indemnification under Sections 1 and 2 (unless ordered by a
court) shall be made by the corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in Sections 1 and 2. Such determination shall be made (a)
by the Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (b) if such a
quorum, is not obtainable, or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or (c)
by the shareholders.
Section 5. Expenses (including attorneys' fees) incurred in defending an
action, suit or proceeding, whether civil, criminal, administrative, arbitrative
or investigative, may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding as authorized in the manner
provided in Section 4 upon receipt of an undertaking by or on behalf of the
director, officer, employee or agent to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by the
corporation as authorized in this article.
Section 6. The corporation shall have power to make any other or further
indemnity, including criminal proceedings, to any person referred to in this
section that may be authorized by the Articles of Incorporation or by any Bylaw
made by the stockholders or any resolution adopted, before or after the event,
by the stockholders, except an indemnity against his gross negligence or willful
misconduct. Each such indemnity may continue as to a person who has ceased to
have the capacity referred to above and may inure to the benefit of the heirs,
executors and administrators of such a person.
<PAGE>
Page 9 of 11
Section 7. The corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the corporation would have the
power to indemnify him against such liability under the provisions of this
article.
Section 8. For the purposes of this article, references to "corporation"
include all constituent corporations absorbed in a consolidation or merger, as
well as the resulting or surviving corporation, so that any person who is or was
a director, officer, employee or agent of such a constituent corporation or is
or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise shall stand in the same position under the provisions
of this article with respect to the resulting or surviving corporation as he
would if he has served the resulting or surviving corporation in the same
capacity.
ARTICLE V
SEAL
Section 1. The seal of this corporation shall be as the impression made
below:
ARTICLE VI
CHECKS, DRAFTS, NOTES, ETC.
Section 1. All checks, drafts, notes and orders for the payment of money
issued by the corporation shall be signed by such person or persons as the Board
of Directors may from time to time designate, and any endorsement of such paper
in the ordinary course of business shall be similarly made.
<PAGE>
Page 10 of 11
ARTICLE VII
NOTICE
Section 1. Any notice mailed by the corporation to any director or
stockholder shall be sufficient service of such notice when deposited in the
United States mail, addressed to such stockholder or director at the address
furnished by such stockholder or director to the corporation or its Transfer
Agent, in the event an outside Transfer Agent has been appointed, with postage
thereon prepaid.
ARTICLE VIII
STOCK, NOTES, BONDS AND DEBENTURES
Section 1. The shares of the corporation shall be evidenced by certificates
of each class of stock issued in numerical order, signed by the President or a
Vice President and the Secretary or an Assistant Secretary or the Treasurer or
an Assistant Treasurer, or any other officer authorized by these Bylaws or a
resolution of the Board of Directors, and may (but need not) be sealed with the
seal of the corporation or a facsimile thereof. The signatures of the officers
upon a certificate may be facsimiles if the certificate is countersigned by a
Transfer Agent or registered by a Registrar other than the corporation itself or
an employee of the corporation.
Section 2. On any bond, note or debenture issued by the corporation which
is countersigned or otherwise authenticated by the signature of a trustee, the
signatures of the officers of the corporation and its seal may be facsimiles.
Section 3. In case any officer who has signed or whose facsimile signature
has been placed upon a stock certificate or a bond, note or debenture shall have
ceased to be such officer before such certificate or other such document is
issued, it may be issued by the corporation with the same effect as if he were
such officer at the date of its issue.
Section 4. Transfers of stock shall be made only upon the books of the
corporation (whether maintained by the corporation or by a Transfer Agent, in
the event one is appointed) and only by the person named in the certificate or
by attorney lawfully constituted in writing and, subject to the provisions of
Section 6 hereof, only upon surrender of the certificate therefore. The Board of
Directors may by resolution make reasonable regulations for the transfer of
stock.
Section 5. Registered stockholders only shall be entitled to be treated by
the corporation as the holders in fact of the stock standing in their respective
names, and the corporation shall not be bound to recognize any equitable or
other claim to
<PAGE>
Page 11 of 11
or interest in any shares on the part of any other person whether or not it
shall have express or other notice thereof, except as expressly provided by the
laws of Virginia.
Section 6. In case of loss or destruction of any certificate of stock,
another may be issued in its place upon proof of such loss or destruction, and
upon the giving of a satisfactory bond of indemnity to the corporation in such
sum as the directors may provide, not exceeding double the value of the stock.
ARTICLE IX
BOOKS AND RECORDS
Section 1. The Board of Directors shall determine from time to time
whether, and, if allowed, when and under what conditions and regulations, the
accounts and books of the corporation (except such as may by statute be
specifically open to inspection), or any of them, shall be open to the
inspection of the stockholders, and the stockholders' rights in this respect are
and shall be restricted and limited accordingly.
ARTICLE X
AMENDMENT OF BYLAWS
Section 1. These Bylaws may be altered, amended or repealed and new Bylaws
may be adopted by the Board of Directors; but Bylaws made or adopted by the
Board of Directors may be repealed or changed and new Bylaws made by the
stockholders, and the stockholders may prescribe that any Bylaw made by them
shall not be altered, amended or repealed by the directors.
Adopted: November 9, 1988
<PAGE>
[SPECIMEN STOCK CERTIFICATE OF COMMONWEALTH
PUBLIC SERVICE CORPORATION]
INCORPORATED UNDER THE LAWS OF
COMMONWEALTH OF VIRGINIA
No. ____ Shares ____
COMMONWEALTH PUBLIC SERVICE CORPORATION
Common Stock, $100 par value
This certifies that ________________________ is the owner of
___________________ shares of the capital stock of Commonwealth Public Service
Corporation transferable only on the Books of the Corporation by the holder
hereof in person or by duly authorized Attorney, on surrender of this
Certificate properly endorsed.
In Witness Whereof the duly authorized officers of this Corporation have
hereunto subscribed this names and caused the corporate Seal to be hereto
affixed at _________________ this ________ day of ___________________ A.D.,
19__.
s/Frank A. Farmer, Jr. s/Roger L. Baumgardner
President Secretary
Shares $100 Each.
<PAGE>
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE
WHATEVER.
For Value Received, _____ hereby sell, assign and transfer unto
__________________________ ___________________________________________ Shares of
the Capital Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint ____________________
__________________________________________ to transfer the said Stock on the
books of the within named Corporation with full power of substitution in the
premises.
Dated ____________________, 19__
In presence of
- --------------------------------- -----------------------------------
CERTIFICATE
FOR
SHARES
OF THE
CAPITAL STOCK
ISSUED TO
------------------------
DATED
------------------------
<PAGE>
Exhibit A-5
ARTICLES OF INCORPORATION
OF
RGC ACQUISITION CORP.
1. The name of the Corporation is RGC Acquisition Corp.
2. The purpose of the Corporation is to engage in any lawful act or
activity not required to be specifically stated in these Articles of
Incorporation ("Articles") for which corporations may be organized under the
laws of the Commonwealth of Virginia.
3. (a) The aggregate number of shares which the Corporation is authorized
to issue and the par value per share are as follows:
Class Number of Shares Par Value
----- ---------------- ---------
Common 5,000 No Par Value
4. To the full extent that the laws of the Commonwealth of Virginia, as
they now or may hereafter exist, permit the limitation or elimination of the
liability of directors or officers, no director or officer of the Corporation
shall be liable to the Corporation or its shareholders for any monetary damages.
5. (a) The Corporation shall indemnify a director or officer of the
Corporation who is or was a party to any proceeding, including a proceeding by
or in the right of the Corporation, by reason of the fact that he is or was such
a director or officer or is or was serving at the request of the Corporation as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other profit or non-profit
enterprise against all liabilities and expenses incurred in the proceeding,
except such liabilities and
1
<PAGE>
expenses as are incurred because of his willful misconduct or knowing violation
of the criminal law. Unless a determination has been made that indemnification
is not permissible, the Corporation shall make advances and reimbursement for
expenses incurred by a director or officer in a proceeding upon receipt of an
undertaking from him to repay the same if it is ultimately determined that he is
not entitled to indemnification. Such undertaking shall be an unlimited
unsecured general obligation of the director or officer and shall be accepted
without reference to his ability to make repayment. The Board of Directors is
hereby empowered to contract in advance to indemnify and advance the expenses of
any director or officer. The termination of any proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent shall
not, by itself, create a presumption that the director or officer did not meet
the standard of conduct entitling him to indemnity hereunder.
(b) The Board of Directors is hereby empowered to cause the
Corporation to indemnify and make advances and reimbursement for expenses (or
contract in advance for the same) incurred by any person not specified in
paragraph (a) of this Article who was or is a party to any proceeding, by reason
of the fact that he is or was an employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other profit or non-profit enterprise, to the same extent as if
such person were specified as one to whom indemnification is granted in
paragraph (a) of this Article.
(c) The Corporation may purchase and maintain insurance to indemnify
it against the whole or any portion of the liability assumed by it in accordance
with this Article and may also procure insurance, in such amounts as the Board
of Directors may determine, on behalf
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<PAGE>
of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, against any liability
asserted against or incurred by such person in any such capacity or arising from
his status as such, whether or not the Corporation would have power to indemnify
him against such liability under the provisions of this Article.
(d) Except as hereinafter provided, all determinations as to the
permissibility of indemnification and advances and reimbursement for expenses
(including contracts with respect thereto) shall be made by a majority vote of a
quorum consisting of directors not at the time parties to the proceeding. In the
event such a quorum cannot be obtained to make any determination as to the
permissibility of indemnification and advances and reimbursement for expenses
with respect to any claim for indemnification (including contracts with respect
thereto), or in the event there has been a change in the composition of a
majority of the Board of Directors after the date of the alleged act with
respect to which indemnification is claimed, such determination shall be made by
special legal counsel agreed upon by the Board of Directors and the proposed
indemnitee. If the Board of Directors and the proposed indemnitee are unable to
agree upon such special legal counsel, the Board of Directors and the proposed
indemnitee each shall select a nominee, and the nominees shall select such
special legal counsel.
(e) The provisions of this Article shall be applicable to all
actions, claims, suits or proceedings commenced after the adoption hereof,
whether arising from any action taken or failure to act before or after such
adoption. No amendment, modification or repeal of this Article shall diminish
the rights provided hereby or diminish the right to indemnification with
3
<PAGE>
respect to any claim, issue or matter in any then pending or subsequent
proceeding that is based in any material respect on any alleged action or
failure to act prior to such amendment, modification or repeal.
(f) Except to the extent inconsistent with this Article, terms used
herein shall have the same meanings assigned them in the Indemnification Article
of the Virginia Stock Corporation Act, as now in effect or hereafter amended or
replaced. Without limitation, it is expressly understood that reference herein
to directors, officers, employees or agents shall include former directors,
officers, employees and agents and their respective heirs, executors and
administrators.
6. The Corporation's initial registered office shall be located in the
City of Roanoke at 10 South Jefferson Street, Suite 1400, Roanoke, Virginia
24011. The Corporation's initial registered agent shall be Faith M. Wilson,
whose address is the same as the Corporation's registered office and who is a
resident of Virginia and a member of the Virginia State Bar.
Dated: August 7, 1998 s/Faith M. Wilson
--------------------------------
Incorporator
4
<PAGE>
BYLAWS
- ------------------------------------------------------------------------------
RGC ACQUISITION CORP.
ARTICLE I - SHAREHOLDERS
The annual meeting of the shareholders of the corporation shall be held in
its principal office in the month of January of each calendar year at a time and
on a day selected by the Directors. The holders of a majority of the outstanding
stock of the corporation will, if present in person or by proxy and authorized
to vote at the meeting, constitute a quorum, and the majority voting on any
question shall decide it unless otherwise provided by law or the Articles of
Incorporation.
ARTICLE II - DIRECTORS
For the management of the affairs of the corporation, there shall be a
Board of Directors, consisting of nine Directors. The number of directors may be
increased or diminished from time to time by resolution of the Board of
Directors, but shall in any event not be less than one nor more than eleven.
Each Director shall be elected at the annual meeting of the shareholders to
serve for one year, or until the qualification of his successor. Any Director
may be removed by the shareholders at any time without cause. The Board shall
elect the officers and employees of the corporation, fix their compensation and
delegate to each such duties and powers as may be deemed expedient, including
authority to select other employees and agents for the corporation, prescribe
their duties and fix their wages or salaries. The President of the corporation
shall be Chairman of the Board and the Secretary of the corporation shall be
Secretary of the Board, unless the Board shall designate otherwise. A regular
annual meeting of the Board shall be held without further notice than this bylaw
immediately after, and at the same place, as the annual meeting of shareholders.
Special meetings of the Board may be called by or at the request of the
President of the corporation or by resolution of the Board. The person or
persons authorized to call special meetings of the Board may fix the date, place
and time for holding any special meeting of the Board called by him or them,
provided that notice of any such meeting shall be given by written or verbal
notice delivered personally or mailed to each Director at his business address
or by telegram and received by such Director at least one day prior to such
meeting.
ARTICLE III - OFFICERS
The officers of the corporation shall consist of a president, secretary,
and treasurer, and such vice presidents and additional officers as the Board may
from time to time deem necessary. Any two or more offices may be held by one
person. Each officer shall hold office at the pleasure of the Board and may at
any time be removed with or without cause by the Board. The President shall have
general supervision of the corporation and sign all certificates of stock,
deeds, notes, contracts and other instruments of the corporation, unless
otherwise ordered by the Board, and perform all such other duties as are
incident to his office or are properly required of
1
<PAGE>
him by the Board. A Vice President shall, in the absence of the President,
discharge the functions of the President and perform such other duties as may be
assigned to him by the Board. The Secretary shall issue notices of all meetings,
keep the minutes, have charge of the corporate seal, books, records, and sign
with the President all stock certificates, deeds and other instruments requiring
his signature, unless otherwise ordered by the Board, and shall make such
reports as are properly required of him by the Board. The Treasurer shall have
custody of all funds and securities of the corporation and shall sign all
checks, bonds, notes and other instruments of the corporation requiring his
signature, unless otherwise ordered by the Board.
ARTICLE IV - FISCAL YEAR
The corporation shall have a calendar year unless changed by the
appropriate resolution of the Board of Directors.
ARTICLE V - SEAL
The Board of Directors may authorize the use of a corporate seal, but
failure to use the seal shall not affect the validity of any instrument. The use
of a facsimile of a seal, or the affixing of a scroll by way of a seal or the
execution of a document containing words importing a sealed document shall be of
the same force as if actually sealed by physically affixing an impression of a
seal.
ARTICLE VI - DEPOSITORY
All funds of the corporation not otherwise employed shall be deposited
from time to time to the credit of the corporation in such banks, trust
companies or other depositors as the Board of Directors may select.
ARTICLE VII - CERTIFICATES
Certificates representing shares of the corporation shall be in such form
as shall be determined by the Board of Directors.
ARTICLE VIII - AMENDMENT
These bylaws may be amended, repealed or altered from time to time by the
directors or the shareholders as permitted by law.
2
<PAGE>
[SPECIMEN STOCK CERTIFICATE OF RGC ACQUISITION CORP.]
A Virginia Corporation
No. ____ _____ Share
RGC Acquisition Corp.
Common Stock, no par value
This certifies that ________________________ is the owner of
___________________ shares of the Capital Stock of RGC Acquisition Corp.
transferable only on the books of the Corporation by the holder hereof in person
or by Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed this ________ day of ___________________ A.D., ____.
s/John B. Williamson, III s/Roger L. Baumgardner
President Secretary
SHARES _______ EACH
<PAGE>
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE
WHATEVER.
For Value Received, _____ hereby sell, assign and transfer unto
__________________________ ___________________________________________ Shares of
the Capital Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint ____________________
__________________________________________ Attorney to transfer the said Stock
on the books of the within named Corporation with full power of substitution in
the premises.
Dated ____________________, _____
In presence of
- --------------------------------- ---------------------------------------
CERTIFICATE
FOR
-------
SHARES
of the
CAPITAL STOCK
of
RGC Acquisition Corp.
(Common Stock, no par value)
ISSUED TO
------------------------
DATE
------------------------
<PAGE>
Exhibit B-1
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
("Agreement") is made as of September 28, 1998, by and among ROANOKE GAS
COMPANY, a Virginia public service corporation ("Roanoke Gas"), RGC ACQUISITION
CORP., a Virginia corporation ("Acquisition"), RGC RESOURCES, INC., a Virginia
corporation ("Resources"), DIVERSIFIED ENERGY COMPANY, a Virginia corporation
("Diversified"), BLUEFIELD GAS COMPANY, a West Virginia public service
corporation ("Bluefield"), and COMMONWEALTH PUBLIC SERVICE CORPORATION, a
Virginia public service corporation ("Commonwealth"), provides as follows:
RECITALS:
A. Roanoke Gas has authorized capital stock consisting of 3,000,000 shares
of common stock, $5.00 par value per share ("Roanoke Gas Common Stock"), of
which 1,794,416 shares are issued and outstanding; and
B. Acquisition has authorized capital stock consisting of 5,000 shares of
common stock ("Acquisition Common Stock"), no par value per share, of which 10
shares are issued and outstanding and owned beneficially and of record by
Resources; and
C. Resources has authorized capital stock consisting of 10,000,000 shares
of common stock, $5.00 par value per share ("Resources Common Stock"), of which
10 shares are issued and outstanding and owned beneficially and of record by
Roanoke Gas, and 5,000,000 shares of Preferred Stock, no par value per share,
none of which have been issued; and
D. Diversified has authorized capital stock consisting of 15,000 shares of
common stock, $10 par value per share ("Diversified Common Stock"), of which
11,000 shares are issued and outstanding and owned beneficially and of record by
Roanoke Gas; and
E. Bluefield has authorized capital stock consisting of 250,000 shares of
common stock, $0.20 par value per share ("Bluefield Common Stock"), of which
247,520 shares are issued and outstanding and owned beneficially and of record
by Roanoke Gas; and
F. Commonwealth has authorized capital stock consisting of 500 shares of
common stock, $100.00 par value per share ("Commonwealth Common Stock"), of
which 5 shares are issued and outstanding and owned beneficially and of record
by Bluefield; and
G. The Boards of Directors of Roanoke Gas, Acquisition and Resources deem
it advisable to merge Acquisition with and into Roanoke Gas in accordance with
the Virginia Stock
1
<PAGE>
Corporation Act ("Virginia Stock Corporation Act") and this Agreement for the
purpose of establishing Resources as the parent corporation of Roanoke Gas; and
H. The Boards of Directors of the parties hereto deem it advisable to
undertake the other reorganization matters set forth herein.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and agreements contained
herein, the parties agree that (i) Roanoke Gas shall be merged with and into
Acquisition (the "Merger"), (ii) Roanoke Gas shall be the corporation surviving
the Merger, (iii) Commonwealth shall become a wholly owned subsidiary of and
then be merged into, Roanoke Gas, (iv) Bluefield and Diversified shall each
become wholly owned subsidiaries of Resources and (v) the terms and conditions
of the Merger and the other reorganization matters, the mode of carrying them
into effect, the manner of converting, exchanging and/or transferring shares of
capital stock of the parties hereto and other matters relating thereto shall be
as follows:
ARTICLE 1
THE MERGER
1.1 Articles of Merger. Subject to and in accordance with the provisions
of this Agreement, in the event this Agreement and Plan of Merger and
Reorganization is approved by the stockholders of Roanoke Gas in accordance with
the Virginia Stock Corporation Act, Articles of Merger of Roanoke Gas shall be
delivered to the Clerk's Office of the Virginia State Corporation Commission for
filing, all as provided by the Virginia Stock Corporation Act.
1.2 Effective Time. The Merger shall become effective at the time of
filing on the date on which the Articles of Merger are filed with the Clerk's
Office of the Virginia State Corporation Commission, as contemplated by Section
1.1 above, unless otherwise specified in such Articles of Merger (the "Effective
Time"). At the Effective Time, the separate existence of Acquisition shall cease
and Acquisition shall be merged with and into Roanoke Gas, which shall continue
its corporate existence as the surviving corporation (Roanoke Gas and
Acquisition being sometimes referred to herein as the "Constituent Corporations"
and Roanoke Gas, as the surviving corporation, being sometimes referred to
herein as the "Surviving Corporation"). Roanoke Gas shall succeed, without other
transfer, to all the rights and property of Acquisition and shall be subject to
all the debts and liabilities of Acquisition in the same manner as if Roanoke
Gas had itself incurred them. All rights of creditors and all liens upon the
property of each of Roanoke Gas and Acquisition shall be preserved unimpaired.
1.3 Appropriate Actions. Prior to and after the Effective Time, Resources,
Roanoke Gas and Acquisition, respectively, shall take all such actions as may be
necessary or appropriate in order to effectuate the Merger. In this connection,
Resources shall issue and pay the shares of
2
<PAGE>
Resources Common Stock into which outstanding shares of Roanoke Gas Common Stock
will be converted on the basis and to the extent provided in Article 2 of this
Agreement, and shall take such other actions as are necessary to fulfill
Resources' obligations hereunder, including, without limitation, those specified
in Article 6 of this Agreement. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving Corporation with full title to all
properties, assets, privileges, rights, immunities and franchises of either of
the Constituent Corporations, the officers and directors of each of the
Constituent Corporations as of the Effective Time shall take all such further
action.
ARTICLE 2
TERMS OF CONVERSION AND EXCHANGE OF SHARES
2.1 Roanoke Gas Common Stock. At the Effective Time, shares of Roanoke Gas
Common Stock issued and outstanding immediately prior to the Merger shall be
automatically changed and converted into shares of Resources Common Stock, at
the ratio of one share of Resources Common Stock for each one share of Roanoke
Gas Common Stock, and such Resources Common Stock shall thereupon be issued and
fully-paid and non-assessable; provided, however, that such conversion shall not
affect shares of holders, if any, who perfect their rights as dissenting
stockholders under the Virginia Stock Corporation Act with respect to such
shares.
2.2 Acquisition Shares. The shares of Acquisition Common Stock issued and
outstanding immediately prior to the Merger shall be automatically changed and
converted into all of the issued and outstanding shares of Common Stock of the
Surviving Corporation, which shall thereupon be issued and fully-paid and
non-assessable, with the effect that the number of issued and outstanding shares
of Common Stock of the Surviving Corporation shall be the same as the number of
issued and outstanding shares of Acquisition Common Stock immediately prior to
the Effective Time.
2.3 Resources Shares. Each share of Resources Common Stock issued and
outstanding immediately prior to the Merger shall be canceled.
ARTICLE 3
ARTICLES OF INCORPORATION AND BYLAWS
3.1 Roanoke Gas Articles. From and after the Effective Time, and until
thereafter amended as provided by law, the Articles of Incorporation of Roanoke
Gas as in effect immediately prior to the Merger shall be and continue to be the
Articles of Incorporation of the Surviving Corporation.
3
<PAGE>
3.2 Roanoke Gas By-Laws. From and after the Effective Time, and until
thereafter amended as provided by law, the By-Laws of Roanoke Gas as in effect
immediately prior to the Merger shall be and continue to be the By-Laws of the
Surviving Corporation.
3.3 Resources Articles and Bylaws. From and after the Effective Time, and
until thereafter amended as provided by law, the Articles of Incorporation and
Bylaws of Resources as in effect immediately prior to the Merger shall be and
continue unchanged to be the Articles of Incorporation and By-Laws of Resources.
ARTICLE 4
DIRECTORS AND OFFICERS
4.1 Roanoke Gas Directors and Officers. The persons who are directors and
officers of Roanoke Gas immediately prior to the Merger shall continue as
directors and officers, respectively, of the Surviving Corporation and shall
continue to hold office as provided in the Articles of Incorporation and Bylaws
of the Surviving Corporation. If, at or following the Effective Time, a vacancy
shall exist in the Board of Directors or in the position of any officer of the
Surviving Corporation, such vacancy may be filled in the manner provided in the
Articles of Incorporation and Bylaws of the Surviving Corporation.
4.2 Resources Directors and Officers. The persons who are directors and
officers of Resources immediately prior to the Merger shall continue as
directors and officers, respectively, of Resources and shall continue to hold
office as provided in the Articles of Incorporation and Bylaws of Resources. If,
at or following the Effective Time, a vacancy shall exist in the Board of
Directors or in the position of any officer of Resources, such vacancy may be
filled in the manner provided in the Articles of Incorporation and Bylaws of
Resources.
ARTICLE 5
STOCK CERTIFICATES
5.1 Rights of Holders of Certificates. Following the Effective Time,
certificates representing shares of Roanoke Gas Common Stock outstanding at the
Effective Time (herein sometimes referred to as "Roanoke Gas Certificates")
shall evidence only the right of the registered holder thereof to receive, and
may be exchanged for, the shares of Resources Common Stock into which such
shares of Roanoke Gas Common Stock were converted in accordance with Section
2.1. At the Effective Time, Resources shall issue and deliver, or cause to be
issued and delivered, to the transfer agent for Resources (the "Transfer Agent")
certificates representing whole shares of Resources Stock into which outstanding
shares of Roanoke Gas Stock have been converted as provided above. As promptly
as practicable following the Effective Time, Resources shall send or cause to be
sent to each former stockholder of record of Roanoke Gas immediately prior to
the Effective Time written instructions and transmittal materials (a
4
<PAGE>
"Transmittal Letter") for use in surrendering Roanoke Gas Certificates to the
Transfer Agent. Upon the proper surrender and delivery to the Transfer Agent (in
accordance with Resources' instructions, and accompanied by a properly completed
Transmittal Letter) by a former stockholder of Roanoke Gas of such stockholder's
Roanoke Gas Certificate(s), and in exchange therefor, the Transfer Agent shall
as soon as practicable, issue, register and deliver to such stockholder a
certificate evidencing the number of shares of Resources Stock to which such
stockholder is entitled pursuant to Section 2.1 above.
5.2 Outstanding Certificates. Each outstanding certificate which, prior to
the Effective Time, represented Roanoke Gas Common Stock shall be deemed for all
corporate purposes to represent only the right to receive the number of shares
of Resources Common Stock into which such Roanoke Gas Common Stock was
converted.
5.3 Stock Transfer Books. The stock transfer books for Roanoke Gas Common
Stock shall be deemed to be closed at the Effective Time and no transfer of
shares of Roanoke Gas Common Stock outstanding prior to the Effective Time shall
thereafter be made on such books. As of the Effective Time, Resources shall
establish a stock register reflecting ownership of Resources Common Stock by
former holders of record of Roanoke Gas Common Stock.
5.4 Post-Merger Rights of Holders. Following the Effective Time, the
holders of certificates representing Roanoke Gas Common Stock outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to stock of the Surviving Corporation and their sole rights shall be
with respect to the Resources Common Stock into which their shares of Roanoke
Gas Common Stock shall have been converted by the Merger, subject to the rights
of any dissenting stockholders who perfect dissenters' rights under Article 13
of the Virginia Stock Corporation Act.
5.5 Unsurrendered Certificates. Subject to Section 5.6 below, no Resources
Common Stock certificate shall be delivered to any former stockholder of Roanoke
Gas unless and until such stockholder shall have properly surrendered to the
Transfer Agent the Roanoke Gas Certificate(s) formerly representing his or her
shares of Roanoke Gas Stock, together with a properly completed Transmittal
Letter in such form as shall be provided to the stockholder by Resources for
that purpose. Further, until such Roanoke Gas Certificate(s) are so surrendered,
no dividend or other distribution payable to holders of record of Resources
Stock as of any date subsequent to the Effective Time shall be delivered to the
holder of such Roanoke Gas Certificate(s). However, subject to prior escheatment
under applicable law, upon the proper surrender of such Roanoke Gas
Certificate(s), the Transfer Agent shall pay to the registered holder of the
shares of Resources Stock represented by such Roanoke Gas Certificate(s) the
amount of any such cash, dividends or distributions which have accrued but
remain unpaid with respect to such shares. Neither Resources, Roanoke Gas nor
the Transfer Agent shall have any obligation to pay any interest on any such
cash, dividends or distributions for any period prior to such payment.
5
<PAGE>
5.6 Lost, etc., Certificates. Any stockholder of Roanoke Gas whose
certificate evidencing shares of Roanoke Gas Common Stock has been lost,
destroyed, stolen or otherwise is missing shall be entitled to receive a
certificate representing the shares of Resources Common Stock to which he or she
is entitled in accordance with and upon compliance with conditions imposed by
the Transfer Agent or Resources (including, without limitation, a requirement
that the stockholder provide a lost instruments indemnity or surety bond in
form, in substance and amount satisfactory to the Transfer Agent and Resources).
ARTICLE 6
ROANOKE GAS STOCK PLANS
Roanoke Gas and Resources shall take all actions required to provide that,
from and after the Effective Time, all director, officer, employee, customer and
other plans of Roanoke Gas or its affiliates, to the extent they directly or
indirectly utilize Roanoke Gas Common Stock, shall utilize Resources Common
Stock instead of Roanoke Gas Common Stock.
ARTICLE 7
CONDITIONS OF THE MERGER
Completion of the Merger is subject to the satisfaction of the following
conditions:
7.1 Stockholder Approval. The principal terms of this Agreement shall have
been approved by such holders of capital stock of the parties hereto as is
required by the Virginia Stock Corporation Act.
7.2 Resources Common Stock Listed. All conditions for the listing on the
NASDAQ National Market as of the Effective Time of the Resources Common Stock to
be issued and to be reserved for issuance pursuant to the Merger shall have been
satisfied.
7.3 Regulatory Approvals. All necessary orders, consents, authorization,
approvals or waivers from the Securities and Exchange Commission, the Virginia
State Corporation Commission and all other regulatory bodies, boards or
agencies, or from other third parties, shall have been received, remain in full
force and effect, and shall not include, in the sole judgment of the Board of
Directors of Roanoke Gas, unacceptable conditions.
ARTICLE 8
TRANSFER AND MERGER OF COMMONWEALTH
8.1 Dividend. Bluefield, as the holder of all of the Commonwealth Common
Stock, shall pay a non-cash dividend of all of the Commonwealth Common
Stock to its parent
6
<PAGE>
corporation, Roanoke Gas (the "Commonwealth Shares Dividend"). The Commonwealth
Shares Dividend shall, subject to receipt of all required regulatory approvals,
be paid at the Effective Time immediately following the consummation of the
Merger.
8.2 Commonwealth Merger. Immediately following the payment of the
Commonwealth Shares Dividend, Commonwealth shall be merged with and into its
parent, Roanoke Gas (the "Commonwealth Merger"), pursuant to the Articles of
Merger attached hereto as Exhibit 1.
ARTICLE 9
TRANSFER OF DIVERSIFIED AND BLUEFIELD
9.1 Dividend. Roanoke Gas, as the holder of all of the Diversified Common
Stock and as the holder of all of the Bluefield Common Stock, shall pay a
non-cash dividend of all of the Diversified Common Stock and all of Bluefield
Common Stock to Resources (the "Bluefield Shares and Diversified Shares
Dividend"). The Bluefield Shares and Diversified Shares Dividend shall, subject
to receipt of all required regulatory approvals, be paid immediately following
the payment of the Commonwealth Shares Dividend.
9.2 Effect. Immediately following the payment of the Bluefield Shares and
Diversified Shares Dividend, each of Roanoke Gas, Bluefield and Diversified
shall be wholly owned subsidiaries of Resources.
ARTICLE 10
AMENDMENT AND TERMINATION
10.1 Amendment. The parties to this Agreement, by mutual consent of their
respective boards of directors, may amend, modify or supplement this Agreement
in such manner as may be agreed upon by them in writing at any time before or
after approval of this Agreement by the preMerger stockholders of Roanoke Gas
(as provided in Section 7.1 above); provided, however, that no such amendment,
modification or supplement shall, if agreed to after such approval by the
pre-Merger stockholders of Roanoke Gas, change any of the principal terms of
this Agreement in a manner which would materially and adversely affect the
rights of the stockholders of Roanoke Gas.
10.2 Termination. This Agreement may be terminated and the Merger dividend
payments and other transactions provided for by this Agreement may be abandoned
at any time, whether before or after approval of this Agreement by the
pre-Merger stockholders of Roanoke Gas, by action of the board of directors of
Roanoke Gas if such board of directors determines for any reason that the
completion of the transactions provided for herein would for any reason be
inadvisable or not in the best interests of Roanoke Gas or its stockholders.
7
<PAGE>
ARTICLE 11
MISCELLANEOUS
11.1 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original hereof.
11.2 Virginia Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the Commonwealth of Virginia.
IN WITNESS WHEREOF, Roanoke Gas, Resources, Acquisition, Bluefield,
Diversified and Commonwealth, pursuant to approval and authorization duly given
by resolutions adopted by their respective boards of directors, have each caused
this Agreement to be executed by its President or one of its Vice Presidents and
attested by its Secretary or one of its Assistant Secretaries.
Roanoke Gas:
ROANOKE GAS COMPANY, a Virginia public service
corporation
By: s/John B. Williamson, III
Its: President and CEO
Attest:
By: s/Roger L. Baumgardner
Its: Secretary
Resources:
RGC RESOURCES, INC., a Virginia corporation
By: s/John B. Williamson, III
Its: President and CEO
Attest:
By: s/Roger L. Baumgardner
Its: Secretary
8
<PAGE>
Acquisition:
RGC ACQUISITION CORP., a Virginia corporation
By: s/John B. Williamson, III
Its: President
Attest:
By: s/Roger L. Baumgardner
Its: Secretary
Bluefield:
BLUEFIELD GAS COMPANY, a West Virginia public
service corporation
By: s/John B. Williamson, III
Its: President
Attest
By: s/Roger L. Baumgardner
Its: Secretary
Diversified:
DIVERSIFIED ENERGY COMPANY, a Virginia
corporation
By: s/John B. Williamson, III
Its: President
Attest:
By: s/Roger L. Baumgardner
Its: Secretary
9
<PAGE>
Commonwealth:
COMMONWEALTH PUBLIC SERVICE
CORPORATION,
a Virginia public service corporation
By: s/John B. Williamson, III
Its: President
Attest
By: s/Roger L. Baumgardner
Its: Secretary
10
<PAGE>
Exhibit 1
ARTICLES OF MERGER
OF
COMMONWEALTH PUBLIC SERVICE CORPORATION
INTO
ROANOKE GAS COMPANY
The undersigned corporations hereby execute these Articles of Merger for
the purpose of merging Commonwealth Public Service Corporation ("Commonwealth"),
a Virginia public service corporation and wholly-owned subsidiary of Roanoke Gas
Company ("Roanoke Gas"), a Virginia public service corporation, into Roanoke Gas
in accordance with Section 13.1-719 of
the Virginia Stock Corporation Act.
I. PLAN OF MERGER. The following Plan of Merger was duly approved by the
Board of Directors of Roanoke Gas in the manner prescribed by law and
shareholder approval was not required under Section 13.1-719 of the Virginia
Stock Corporation Act:
PLAN OF MERGER
A. CORPORATIONS PARTICIPATING IN MERGER
Commonwealth Public Service Corporation (the "Merging Corporation")
shall merge with and into Roanoke Gas Company. Roanoke Gas Company shall
be the surviving corporation (the "Surviving Corporation").
B. TERMS AND CONDITIONS OF THE MERGER, CONVERSION AND
CANCELLATION OF STOCK
On the Effective Date (as hereinafter defined) of the merger of the
Merging Corporation into the Surviving Corporation (the "Merger"), the
separate existence of the Merging Corporation shall cease and each share
of stock of the Merging Corporation outstanding immediately prior thereto
shall, without any action by the holder thereof, be surrendered and
extinguished. The Surviving Corporation shall succeed to all of the
properties, rights, and other assets and shall be subject to all of the
liabilities of the Merging Corporation and the Surviving Corporation. The
stock of the Surviving Corporation outstanding on the Effective Date shall
remain unchanged by reason of the Merger.
1
<PAGE>
C. ARTICLES OF INCORPORATION AND BYLAWS OF SURVIVING
CORPORATION
The Articles of Incorporation and the Bylaws of the Surviving
Corporation shall not be changed by the Merger and shall continue as the
Surviving Corporation's Articles of Incorporation and Bylaws.
D. THE DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
The Directors and Officers of the Surviving Corporation at the
Effective Date of the Merger shall continue to be the Directors and
Officers of the Surviving Corporation until their successors are duly
elected and qualified.
II. SHARES ENTITLED TO VOTE. Shareholder approval is not required for the
Merger pursuant to Section 13.1-719 of the Code of Virginia.
III. EFFECTIVE DATE. This Merger shall become effective at 11:59 p.m. on
_____________, 1999 (the "Effective Date").
IN WITNESS WHEREOF, these Articles of Merger are signed by the President
of each corporation this ______ day of ___________, 1999.
COMMONWEALTH PUBLIC SERVICE CORPORATION
By____________________________
Its ____________________________
Attest:
By: _____________________
Its: Secretary
ROANOKE GAS COMPANY
By______________________________
Its_____________________________
Attest:
By: _____________________
Its: Secretary
2
<PAGE>
Exhibit B-2
PRESENT STRUCTURE
[ Shareholders ]
|
|
|
|
|
[ Roanoke Gas ]
/ \
/ \
/ \
/ \
/ \
[ Diversified ] [ Bluefield ]
|
|
|
|
|
|
[ Commonwealth ]
<PAGE>
PROPOSED REORGANIZATION
[ Shareholders ]
/ |
/ |
/ |
4 / |
/ |
/ |
/ |
[ Resources ] |
| |
| [ Roanoke Gas ]
| 1 / / \
| / / \
| 2 & 3 / / \
| / / \
| / / \
| / / \
[ Acquisition ]/ / \
/ \
[ Diversified ] [ Bluefield ]
|
|
|
|
|
[ Commonwealth ]
1. Form RGC Resources, Inc. ("Resources") and its wholly owned subsidiary,
RGC Acquisition Corp. ("Acquisition").
2. Merge Acquisition and Roanoke Gas, with Roanoke Gas being the survivor.
3. Convert Acquisition common stock into Roanoke Gas common stock. Roanoke
Gas becomes a wholly owned subsidiary of Resources, and Acquisition
disappears.
4. Convert outstanding Roanoke Gas common stock held by Shareholders into the
right to receive Resources common stock, on a share-for-share basis.
<PAGE>
PROPOSED REORGANIZATION -
CONTINUED
[ Shareholders ]
|
|
|
|
|
|-------------------------[ Resources ] ------------------------|
| | |
| | |
| | |
| | |
| | |
| |
6 | [ Roanoke Gas ] | 6
| / ^ \ |
| / | \ |
| / | \ |
| / | \ |
| / | \ |
| / | \ |
| / 5 & 7 | \ |
/ | \ |
[ Bluefield ] | [ Diversified ]
| |
| |
| |
[ Commonwealth ] ---------------------|
5. Bluefield, by noncash dividend, transfers to Roanoke Gas all of the
outstanding common stock of Commonwealth.
6. Roanoke Gas, by noncash dividend, transfers to Resources all of the
outstanding common stock of Bluefield and Diversified.
7. Commonwealth is merged into Roanoke Gas.
<PAGE>
FINAL CONFIGURATION
[ Shareholders ]
|
|
|
|
|
|
|
|
[ Resources ]
/ | \
/ | \
/ | \
/ | \
/ | \
/ | \
/ | \
/ | \
/ | \
[ Roanoke Gas ] [ Bluefield ] [ Diversified ]
<PAGE>
Exhibit E-1
[Map appears here]
[Description: A map showing the interconnection and relationship of the
properties of Roanoke Gas Company and subsidiaries. The map was filed in paper
with the SEC on October 16, 1998 under cover of Form SE.]
<PAGE>
[WOODS, ROGERS & HAZLEGROVE, P.L.C. LETTERHEAD]
Exhibit F-1
October 15, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
In Re:Roanoke Gas Company and RGC Resources, Inc. Form U-1 Application
Gentlemen:
We have examined the Form U-1 Joint Application dated October 15, 1998
(the "Application") of Roanoke Gas Company ("Roanoke Gas") and RGC Resources,
Inc. ("Resources"), to which this opinion is an exhibit, requesting an order of
the Commission under the Public Utility Holding Company Act of 1935 (the "Act")
approving, in connection with a proposed merger and reorganization, (i) the
acquisition by Resources of all of the outstanding shares of common stock of
Roanoke Gas and of Bluefield Gas Company ("Bluefield") and (ii) the acquisition
by Roanoke Gas of all of the outstanding shares of common stock of Commonwealth
Public Service Corporation ("Commonwealth"). The merger and reorganization is to
be effected by means of an Agreement and Plan of Merger and Reorganization (the
"Plan") between and among Resources, Roanoke Gas, Bluefield, Commonwealth and
RGC Acquisition Corp. (the "Subsidiary"), a copy of which is included as an
exhibit to the Application.
Based upon our examination of such instruments, documents and matters of
law as we have deemed requisite, it is our opinion that:
1. Resources, Roanoke Gas, Commonwealth and the Subsidiary are
corporations duly organized and existing under the laws of the Commonwealth of
Virginia.
2. Bluefield is a corporation duly organized and existing under the laws
of the State of West Virginia.
3. Assuming the proposed merger and reorganization is accomplished in
accordance with the Plan and as described in the Application:
a. All state laws applicable to the merger and reorganization will
have been complied with.
<PAGE>
Securities and Exchange Commission
October 15, 1998
Page 2
b. Resources' common stock, $5.00 par value, when issued in
accordance with the Plan, will be validly issued, fully paid and
non-assessable, and the holders thereof will be entitled to the
rights and privileges appertaining thereto set forth in Resources'
Articles of Incorporation.
c. Roanoke Gas' common stock, $5.00 par value, and Bluefield's
common stock, $0.20 par value, when acquired by Resources in
accordance with the Plan, will be validly issued, fully paid and
non-assessable, and Resources, as sole holder thereof, will be
entitled to the rights and privileges appertaining thereto as set
forth in Roanoke Gas' Articles of Incorporation and Diversified's
Charter, respectively.
d. Commonwealth's common stock, $100.00 par value, when acquired by
Roanoke Gas in accordance with the Plan will be validly issued,
fully paid and nonassessable, and Roanoke Gas, as the sole holder
thereof, will be entitled to the rights and privileges appertaining
thereto as set forth in Commonwealth's Articles of Incorporation.
e. Resources will legally acquire all of the outstanding shares of
common stock, $5.00 par value, of Roanoke Gas and all of the
outstanding shares of common stock, $0.20 par value, of Bluefield.
f. Roanoke Gas will legally acquire all of the outstanding shares of
common stock, $100.00 par value, of Commonwealth.
g. The consummation of the proposed merger and reorganization will
not violate the legal rights of the holders of any securities issued
by Resources, Roanoke Gas, Bluefield, Commonwealth or the
Subsidiary, or of any associate company thereof.
In rendering this opinion, we have relied as to matters of fact on
representations and certificates of management of Resources, Roanoke Gas,
Bluefield, Commonwealth and the Subsidiary.
This opinion is limited in all respects to laws and facts existing on the
date hereof. The opinions contained herein are provided solely for the
information and benefit of the Commission in connection with the Application,
and may not be relied upon by the Commission for any other purpose or by any
other person, entity or agency for any purpose. Without our prior written
consent,
<PAGE>
Securities and Exchange Commission
October 15, 1998
Page 3
this opinion may not be quoted or otherwise referred to in any financial
statement or other document, in whole or in part, or furnished to any other
person, entity or agency.
We hereby consent to the filing of this opinion as an exhibit to the
Application.
Very truly yours,
s/Woods, Rogers & Hazlegrove, P.L.C.
WOODS, ROGERS & HAZLEGROVE, P.L.C.
<PAGE>
<TABLE>
<CAPTION>
Exhibit G-1
Roanoke Gas Company and Subsidiaries
Consolidated Balance Sheet
June 30, 1998
Consolidated Pro Forma Adjusted
Balance Adjustments Balance (1)
------- ----------- -----------
ASSETS
<S> <C> <C> <C> <C> <C> <C>
UTILITY PLANT:
Utility Plant in Service $ 68,398,270 $ 134,000 $ 68,532,270
Accumulated Depreciation (24,129,104) (24,129,104)
------------ ------------ ------------
Utility Plant in Service, Net 44,269,166 134,000 44,403,166
Construction Work-In-Progress 1,475,023 1,475,023
------------ ------------ ------------
Utility Plant, Net 45,744,189 134,000 45,878,189
------------ ------------ ------------
NONUTILITY PROPERTY:
Propane 9,143,884 9,143,884
Accumulated Depreciation (2,952,632) (2,952,632)
------------ ------------
Nonutility Property, Net 6,191,252 6,191,252
------------ ------------ ------------
CURRENT ASSETS:
Cash and Cash Equivalents 1,437,122 (134,000) 1,303,122
Accounts Receivables 4,303,225 4,303,225
Inventories 5,340,528 5,340,528
Deferred Income Taxes 2,740,325 2,740,325
Other 487,108 487,108
------------ ------------ ------------
Total Current Assets 14,308,308 (134,000) 14,174,308
------------ ------------ ------------
OTHER ASSETS 837,571 837,571
TOTAL $ 67,081,320 $ 0 $ 67,081,320
============ ============ ============
<PAGE>
LIABILITIES
CAPITALIZATION:
Stockholders' Equity:
Common Stock $ 8,861,795 $ 8,861,795
Capital in Excess of Par Value 8,629,787 8,629,787
Retained Earnings 9,719,102 9,719,102
------------ ------------ ------------
Total Stockholders= Equity 27,210,684 - 27,210,684
Long-Term Debt (Less Current Maturities) 20,700,000 20,700,000
------------ ------------ ------------
Total Capitalization 47,910,684 - 47,910,684
------------ ------------ ------------
CURRENT LIABILITIES:
Current Maturities of Long-Term Debt 5,313 5,313
Notes Payable 1,295,000 1,295,000
Dividends Payable 470,035 470,035
Accounts Payable 4,430,303 4,430,303
Income Taxes Payable 997,872 997,872
Customers= Deposits 398,714 398,714
Accrued Expenses 4,633,496 4,633,496
Refunds From Suppliers - Due Customers 115,143 115,143
Purchased Gas Adjustments 3,070,878 3,070,878
------------ ------------ ------------
Total Current Liabilities 15,416,754 - 15,416,754
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred Income Taxes 3,289,785 3,289,785
Deferred Investment Tax Credits 464,097 464,097
------------ ------------ ------------
Total Deferred Credits and Other Liabilities 3,753,882 - 3,753,882
------------ ------------ ------------
TOTAL $ 67,081,320 $ 0 $ 67,081,320
============ ============ ============
</TABLE>
(1) As required pursuant to Section 5.13 of the note agreement for Roanoke
Gas Company's $5,000,000, 7.804% First Mortgage Note due July 1, 2008
(the "First Mortgage Note"), Resources will guarantee payment of the
First Mortgage Note. The First Mortgage Note is secured by a first deed
of trust and security interest on all of Roanoke Gas' real and personal
<PAGE>
property. The June 30, 1998 book value of Roanoke Gas' real and personal
property subject to the lien securing the First Mortgage Note was
$41,165,456. Roanoke Gas is also subject to a financial covenant under
Section 5.7 of the note agreement for the First Mortgage Note limiting
additional secured debt to no more than 15% of the Company's
consolidated total capitalization.
<PAGE>
<TABLE>
<CAPTION>
Exhibit G-2
Roanoke Gas Company and Subsidiaries
Consolidated Income Statement
For the Twelve Months Ended June 30, 1998
Pro Forma Adjusted
Consolidated Adjustments Total
------------ ----------- -----
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Gas utilities $ 52,113,329 $ 52,113,329
Propane operations 7,575,518 7,575,518
------------ ------------- ------------
Total operating revenues 59,688,847 0 59,688,847
COST OF GAS:
Gas utilities 32,651,936 32,651,936
Propane operations 3,691,387 3,691,387
------------ ------------- ------------
Total cost of gas 36,343,323 0 36,343,323
OPERATING MARGIN 23,345,524 0 23,345,524
------------ ------------- ------------
OTHER OPERATING EXPENSES:
Gas utilities:
Other operations 7,746,890 7,746,890
Maintenance 1,442,695 1,442,695
Taxes - general 2,412,594 2,412,594
Taxes - income 1,048,070 1,048,070
Depreciation and amortization 2,751,687 2,751,687
Propane operations 3,149,513 3,149,513
------------ ------------- ------------
Total other operating expenses 18,551,449 0 18,551,449
OPERATING EARNINGS 4,794,075 0 4,794,075
OTHER INCOME AND DEDUCTIONS:
Gas utilities:
Interest income 22,582 22,582
Merchandising and jobbing, net 165,997 165,997
Other deductions (108,595) (108,595)
Taxes - income (40,347) (40,347)
Propane operations, net 106,788 106,788
------------ ------------- ------------
Total other income and deductions 146,425 0 146,425
<PAGE>
EARNINGS BEFORE INTEREST CHARGES 4,940,500 0 4,940,500
INTEREST CHARGES:
Gas utilities:
Long-term debt 1,608,230 1,608,230
Other interest 425,753 425,753
Propane operations 125,453 125,453
------------ ------------- ------------
Total interest charges 2,159,436 0 2,159,436
NET EARNINGS $ 2,781,064 $ 0 $ 2,781,064
============ ============= ============
</TABLE>
<PAGE>
Exhibit G-3
Financial Data Schedules (See Exhibit 27)
<PAGE>
Exhibit H-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1997 Commission file number 0-367
------------------ -----
ROANOKE GAS COMPANY
- ----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Virginia 54-0359895
- ----------------------------------------- -------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
519 Kimball Ave., N.E., Roanoke, VA 24016
- ----------------------------------------- -------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (540) 983-3800
----------------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
- --------------------------- ------------------------
OTC (Nasdaq
Common Stock, $5 Par Value National Market)
- --------------------------- ------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
State the aggregate market value of the voting stock held by nonaffiliates
of the registrant as of November 21, 1997. $27,636,246
-----------
<PAGE>
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date.
Class Outstanding at November 21, 1997
- -------------------------- --------------------------------
COMMON STOCK, $5 PAR VALUE 1,535,347 SHARES
- -------------------------- --------------------------------
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the 1997 Annual Report to Stockholders are incorporated by reference
into Parts II and IV hereof.
Portions of the Proxy Statement for the Annual Meeting of Stockholders to be
held on January 26, 1998 are incorporated by reference into Part III hereof.
<PAGE>
PART I
------
Item 1. Business.
- ------ --------
Historical Development
----------------------
Roanoke Gas Company ("Roanoke Gas") was organized as a public service
corporation under the laws of the Commonwealth of Virginia in 1912.
The principal service of Roanoke Gas was, and continues to be, the
distribution and sale of natural gas. Commencing in 1972, the
distribution and sale of propane gas was added to Roanoke Gas' line
of business. The propane business was transferred to Diversified
Energy Company, d/b/a Highland Propane Company ("Highland"), in
January 1979. Highland, which is not a public utility, distributes
and sells propane in Southwestern Virginia and Southern West
Virginia.
On May 15, 1987, Roanoke Gas, through a series of merger
transactions, acquired 100 percent of the outstanding stock of
Bluefield Gas Company ("Bluefield"), a public service corporation,
organized in 1944 under the laws of the State of West Virginia and
principally engaged in the distribution of natural gas in Bluefield,
West Virginia and surrounding areas, and Gas Service, Inc. ("Gas
Service"), a nonpublic utility affiliate (through common directors
and shareholders) of Bluefield, which was engaged in the sale of
propane in southwestern Virginia and southern West Virginia. After
obtaining requisite shareholder approval and the approvals of the
Virginia State Corporation Commission ("Virginia Commission") and the
West Virginia Public Service Commission ("West Virginia Commission"),
Gas Service was merged into Highland, and Bluefield became a
wholly-owned subsidiary of Roanoke Gas. Bluefield owns all of the
issued and outstanding stock of Commonwealth Public Service
Corporation ("Commonwealth"), a small Virginia public service
corporation organized in 1930 as the subsidiary of a predecessor
corporation to Bluefield.
In March 1994, the gas marketing division of Highland Propane was
established to broker natural gas to several industrial
transportation customers of Roanoke Gas and Bluefield Gas.
Services
--------
Roanoke Gas Company and its subsidiaries (together "Company")
maintain an integrated natural gas distribution system. Natural gas
is purchased from suppliers and distributed to residential,
commercial and large industrial users through underground mains and
services. Approximately 90.1 percent of the Company's customers are
residential, approximately 9.8 percent are small commercial users,
and the remaining percentage is made up of large industrial
customers, who received approximately 27 percent of the Company's
total annual delivered volume under the Company's interruptible
tariff and transportation gas services.
<PAGE>
Item 1. Business. (continued)
- ------ --------
Services (continued)
--------
The Company's natural gas distribution business accounted for 89
percent of the total revenues generated by the Company in fiscal
1997, and 92 percent and 91 percent of the Company's total revenues
in fiscals 1996 and 1995, respectively. The Company's revenues are
affected by the cost of natural gas, economic conditions in the areas
that the Company serves and weather conditions. Higher gas costs,
which the Company is generally able to pass through to customers, may
cause customers to conserve, or in the case of industrial customers,
to use alternative energy sources. In recent years, however,
regulatory changes at the federal level and excess supply in the
natural gas industry have led to a national spot market for natural
gas and an increase in the number of suppliers of natural gas.
The Company's retail sales are seasonal and temperature- sensitive as
the majority of the gas sold by the Company is used for heating. For
the fiscal year ended September 30, 1997, more than 50 percent of the
Company's total MCF of natural gas sales were made in the four-month
period of December through March. Retail gas deliveries for fiscal
1997 were 10,804,045 MCF, as compared to 11,169,948 MCF and 9,961,877
MCF in fiscals 1996 and 1995, respectively. The Company's actual
heating degree days in fiscal 1997 were approximately 102 percent of
normal, as compared with approximately 111 percent of normal in
fiscal 1996 and approximately 90 percent of normal in fiscal 1995.
In prior years, the Company and its public service subsidiaries sold
and installed gas appliances and parts and offered servicing of such
appliances. These unregulated activities did not contribute
materially to the Company's consolidated gross revenues. Management's
analysis during 1995 indicated that it is more cost effective to
outsource gas appliance sales. Accordingly, the Company discontinued
general merchandising operations during the fourth quarter of fiscal
1995.
The risks and uncertainties that may affect the operations,
performance, development and results of the Company's business
include the following: (i) obtaining adequate rate relief from
regulatory authorities on a timely basis; (ii) earning on a
consistent basis an adequate return on invested capital; (iii)
increasing expenses and labor costs and availability; (iv) price
competition from alternate fuels; (v) volatility in the price of
natural gas and propane; (vi) some uncertainty in the projected rate
of growth of natural gas and propane requirements in the Company's
service area; and (vii) general economic conditions both locally and
nationally. In addition, the Company's business is seasonal in
character and strongly influenced by weather conditions. Extreme
changes in winter heating degree days from the normal or mean can
have significant short-term impacts on revenues and gross margin.
Management of the Company believes that the Company has the resources
to deal successfully with these and other issues.
<PAGE>
Item 1. Business. (continued)
- ------ --------
Suppliers
---------
Effective November 1, 1993, the natural gas transportation pipelines
supplying the Company, including Columbia Gas Transmission
Corporation and Columbia Gulf Transmission Corporation (together
"Columbia") and East Tennessee Natural Gas Company and Tennessee Gas
Pipeline (together "East Tennessee"), have operated under Federal
Energy Regulatory Commission ("FERC") Order 636. This Order 636
restructuring was the start of a new era in the natural gas industry
when the responsibility of gas supply procurement and management was
shifted from the pipeline companies to the local distribution
companies and to other "shippers" of natural gas.
The cornerstone of Order 636 is the "unbundling" of pipeline services
to provide a number of choices to shippers. The Company can now elect
to choose who it buys its gas from, how much storage gas to purchase,
how much transportation capacity to keep and how much to release. The
Company constantly monitors its gas requirements to minimize exposure
to pipeline penalties for insufficient supplies or excessive gas
injections. The Company's new "shipper" responsibilities are expected
to bring increased scrutiny from the state commissions as they
monitor the Company's gas purchasing practices to assure that a
"least cost with adequate reliability" policy is followed.
Accordingly, the Company has worked diligently to ensure its
customers will have an economical and reliable gas supply. Management
believes the relationships the Company has built with its suppliers
as it constructed a supply portfolio will allow it to continue to
attain this goal.
The Company currently uses long-term (multi-year), mid-term
(seasonal) and short-term (spot) gas purchases to meet its system
requirements. The Company has entered into, or is in the process of
entering into, long-term supply agreements to cover the majority of
its firm transportation needs. Long-term suppliers currently include
Amoco Energy Trading, Columbia Energy Services, and L,G&E Natural
Gas. The Company has also entered into nine short-term contracts with
seven natural gas suppliers to purchase approximately 2,149,000 DTH
of natural gas at varying prices during the period October 1, 1997
through September 30, 1998. The Company has also provided notice of
bid awards to two natural gas suppliers, and anticipates these
notices to result in contracts to purchase an additional 1,703,000
DTH of natural gas at varying prices during fiscal year 1998.
With the growth of the spot gas market, gas prices have developed a
pronounced seasonal pattern, with summer to winter price swings of as
much as 40 percent. The Company tries to take advantage of this
opportunity by injecting lower-priced summer gas into its liquefied
natural gas storage facility, which is capable of storing 220,000 DTH
for use during peak winter periods. In addition, the Company has
contracted for extensive storage reserves from Columbia, Tennessee
Gas Pipeline and Virginia Gas Storage Company, with a combined total
of
<PAGE>
Item 1. Business. (continued)
- ------ --------
Suppliers (continued)
---------
4,358,631 DTH of underground storage capacity for Roanoke and
Bluefield. These reserves were available for summer 1997 storage
injections using spot market supply. This increased storage capacity
provides supply security with reduced exposure to potential supply
interruptions. It also offers the Company the flexibility to balance
supply with its highly-variable, weather-sensitive customer
consumption patterns. In addition, the Company participates in
pipeline capacity release programs to further minimize the cost of
firm service to its customers by reselling pipeline capacity not
needed during the warmer months.
Columbia continues to be the Company's primary transporter of natural
gas. Columbia historically has delivered two-thirds of Roanoke Gas'
gas supply and 100 percent of Bluefield's gas supply. East Tennessee
continues to be the Company's other major source of supply.
Historically, East Tennessee has delivered one-third of the Company's
natural gas supply. The rates paid for natural gas transportation and
storage services purchased from Columbia and East Tennessee are
established by tariffs approved by the FERC. These tariffs contain
flexible pricing provisions which, in some instances, authorize these
suppliers to reduce rates and charges to meet price competition.
Having two major pipeline transporters, an adequate peak shaving
facility and a number of underground storage options, the Company
believes that it is well positioned to provide adequate gas supply
for future customer growth. The Company has been, and will continue
to be, flexible and creative as it markets its own transportation
capacity and makes its gas purchasing decisions. The Company believes
that Order 636 provides regulatory stability. Additionally, the
increased opportunities available in a deregulated natural gas supply
environment may result in additional market forces that establish gas
prices and help keep them more consistent and competitive.
Highland has entered into storage and purchase contracts for a
substantial portion of its winter supply of propane. At September 30,
1997, Highland has three short-term contracts with propane suppliers
for the purchase of 2,952,500 gallons of propane at varying prices
per gallon during the period October 1, 1997 through September 30,
1998. Management believes these storage and purchase contracts will
help control the effects of wholesale price swings during peak sales
months and provide added supply security.
In addition to storage contracts, Highland Propane has nine storage
facilities, providing a combined total storage of 384,000 gallons.
Management believes its propane supply strategies have made Highland
well positioned to provide an adequate propane supply to current
customers and allow for future customer growth.
<PAGE>
Item 1. Business. (continued)
- ------ --------
Competition
-----------
The Company competes with other energy sources such as fuel oil,
electricity and coal. Competition is intense among the competing
energy sources and is based primarily on price. This is particularly
true for industrial applications where sales are at risk to price
competition in markets which may swing to residual and other fuel
oils.
Roanoke Gas and Commonwealth currently hold the only franchises
and/or certificates of public convenience and necessity to distribute
natural gas in their respective Virginia service areas. The
franchises generally extend for multi-year periods and are renewable
by the municipalities. Certificates of public convenience and
necessity, which are issued by the Virginia Commission, are of
perpetual duration, subject to compliance with regulatory standards.
Bluefield Gas Company holds the only franchise to distribute natural
gas in its West Virginia service area. Its franchise extends for a
period of 30 years from August 23, 1979.
Management anticipates that the Company will be able to renew all of
its franchises when they expire. There can be no assurance, however,
that a given jurisdiction will not refuse to renew a franchise or
will not in connection with the renewal of a franchise, impose
certain restrictions or conditions that could adversely affect the
Company's business operations or financial condition.
Supervision and Regulation
--------------------------
Roanoke Gas and its public service subsidiaries are subject to
regulation at federal and state levels. Federally, the interstate gas
transmission between Bluefield and Commonwealth is regulated by the
FERC. At the state level, Roanoke Gas and its public service
subsidiaries are regulated by the Virginia and West Virginia
Commissions. Such regulation includes the prescription of rates and
charges at which natural gas is sold to customers and the approval of
agreements between or among affiliated companies involving the
provision of goods and services and other corporate activities of the
Company, including mergers, acquisitions and the issuance of
securities. The Virginia Commission also grants certificates of
public convenience and necessity to distribute natural gas in
counties in the Commonwealth of Virginia. Bluefield's West Virginia
operations are regulated by the West Virginia Commission, which
regulates the rates at which natural gas may be sold, certain
corporate activities of Bluefield and pipeline safety.
<PAGE>
Item 1. Business. (continued)
- ------ --------
Supervision and Regulation (continued)
--------------------------
Roanoke Gas' and its public service subsidiaries' Virginia and West
Virginia operations are further supervised by municipalities and
localities which grant franchises for the placement of gas
distribution pipelines and the operation of a gas distribution
network.
Both Roanoke Gas and Bluefield operated manufactured gas plants
(MGPs) as a source of fuel for lighting and heating until the early
1950's. The process involved heating coal in a low-oxygen environment
to produce a manufactured gas that could be distributed through
Roanoke Gas' and Bluefield's pipeline systems to customers. A
by-product of the process was coal tar, and the potential exists for
on-site tar waste contaminants at both former plant sites. The extent
of contaminants at these sites is unknown at this time, and the
Company has not performed formal analysis at the Roanoke Gas MGP
site. An analysis at the Bluefield site indicates some soil
contamination. The Company, with concurrence of legal counsel, does
not believe any events have occurred requiring regulatory reporting.
Further, the Company has not received any notices of violation or
liabilities associated with environmental regulations related to the
MGP sites and is not aware of any off-site contamination or pollution
as a result of these prior operations. Therefore, the Company has no
plans for subsurface remediation at either of the MGP sites. Should
the Company eventually be required to remediate either of the MGP
sites, the Company will pursue all prudent and reasonable means to
recover any related costs, including insurance claims and regulatory
approval for rate case recognition of expenses associated with any
work required. Based upon prior orders of the Virginia Commission
related to environmental matters at other companies, Roanoke Gas
believes it will be able to recover prudently incurred costs.
Additionally, a stipulated rate case agreement between Bluefield and
the West Virginia Commission recognizes Bluefield's right to defer
MGP clean-up costs, should any be incurred, and to seek rate relief
for such costs. If the Company eventually incurs costs associated
with a required clean-up of either MGP site, the Company anticipates
recording a regulatory asset for such clean-up costs which are
anticipated to be recoverable in futur rates. Based on anticipated
regulatory actions and current practices, management believes that
any costs incurred related to the previously-mentioned environmental
matters will not have a material effect on the Company's consolidated
financial position.
<PAGE>
Item 1. Business. (continued)
- ------ --------
Employees
---------
At September 30, 1997, the Company had 155 full-time employees. As of
that date, approximately 35 percent of the Company's full-time
employees belonged to the Oil, Chemical and Atomic Workers
International Union, AFL-CIO Local No. 3-515, which has entered into
a collective bargaining agreement with the Company. The union has
been in place at the Company since 1952. A new collective bargaining
agreement became effective on August 1, 1997. That agreement will
expire on July 31, 1998. The Company considers its employee relations
to be satisfactory.
Item 2. Properties.
- ------ ----------
Roanoke Gas owns and operates five metering stations through which it
measures and regulates the gas being delivered by its suppliers. The
location and physical description of the properties are as follows:
Plantation Station - Parcel on Virginia Highway #601 near point
of intersection of Hershberger Road (Rt. 623) and Rt. 601 -
1.590 acres.
J. M. Mason Station - S/E corner of Lakeside Circle and east of Lot
#4 of Mill Road subdivision just east of Kessler Mill Road - .842
acres.
Sugarloaf Station - Parcel fronting on S/L of Rt. 686 and W/L of
Lynnson Drive - .111 acres.
Clearbrook Station - Parcel 356' west of Rt. 675 and 0.2 mile
south of Rt. 220 - .255 acres.
Cave Spring Station - N/L Route 221 just west of Route 688 - 3.93
acres.
The network of distribution lines includes the cities of Roanoke and
Salem, the Town of Vinton, and the counties of Roanoke, Montgomery,
Botetourt and Bedford.
Located in Botetourt County is a liquefied natural gas storage
facility which has the capacity to hold 220,000 DTH of natural gas.
The County issued Industrial Revenue Bonds to finance this facility.
Roanoke Gas had a twenty-year lease on the facility with the option
to purchase for a nominal amount. The lease expired May 1, 1991, and
the facility was purchased by Roanoke Gas.
<PAGE>
Item 2. Properties. (continued)
- ------ ----------
Roanoke Gas' general and business offices and the maintenance
and service departments are located in Roanoke, Virginia on an
irregularly shaped parcel of land running from H. L. Lawson and
Son, Inc. south to Norfolk Southern Computer Center fronting on
Kimball Avenue to the west to the Norfolk Southern Railway yard.
The land area is 8.3 acres.
Bluefield Gas Company's main corporate office and warehouse is
located on 6.09 acres at 4699 East Cumberland Road and consists of a
one-story metal building with brick front. Bluefield owns a lot at
800 Pulaski Street, Bluefield, West Virginia. In addition, Bluefield
owns two lots in the City of Bluefield, West Virginia, comprising
approximately 1.23 acres, upon which its high pressure regulator
stations are located.
In West Virginia, Highland Propane owns an office, loading platform,
garage and storage tank facility in Rainelle. The storage facility
consists of two 18,000 gallon tanks, pumps and related equipment. A
30,000 gallon storage facility is also located in Ansted.
Another storage facility, comprising two 30,000 gallon tanks, one
18,000 gallon tank, pumps and related equipment, is located on
Bluefield Gas Company's property at 800 Pulaski Street, Bluefield,
West Virginia.
In Virginia, Highland Propane owns and operates six storage
facilities. A facility at Thirlane Road, N.W. in Roanoke consists of
two 30,000 gallon tanks. A second facility at Fort Chiswell, Virginia
consists of two 30,000 gallon tanks. The third facility is located on
the property of Consolidated Glass in Galax, Virginia and consists of
one 30,000 gallon tank. A fourth storage facility is located in Craig
County, Virginia, near the town of New Castle, and also consists of
one 30,000 gallon tank. A fifth facility located in Floyd County,
Virginia consists of one 30,000 gallon tank. A sixth facility is
located on the property of Virginia Forging in Botetourt County, near
the town of Buchanan, and consists of one 30,000 gallon tank.
The Company considers present properties adequate. Additional
distribution lines will be constructed as communities develop.
Item 3. Legal Proceedings.
- ------ -----------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
- ------ ---------------------------------------------------
There were no matters submitted to a vote of security holders during
the fourth quarter of the year ended September 30, 1997.
<PAGE>
Executive Officers of the Registrant
------------------------------------
Pursuant to General Instruction G(3) of Form 10-K, the following list
is included as an unnumbered Item in Part I of this report in lieu of
being included in the Proxy Statement for the Annual Meeting of
Stockholders to be held on January 26, 1998.
The names, ages and positions of all of the executive officers of
Roanoke Gas as of September 30, 1997 are listed below with their
business experience for the past five years. Officers are appointed
annually by the Board of Directors at the meeting of directors
immediately following the Annual Meeting of Stockholders. There are
no family relationships among these officers, nor any agreement or
understanding between any officer and any other person pursuant to
which the officer was selected.
Previous and present duties and responsibilities:
<TABLE>
<CAPTION>
Position and Business
Name and Age Experience for Past Five Years
- --------------------------- ---------------------------------------------------------
<S> <C> <C>
Frank A. Farmer, Jr., 65 January 1991 to present Director, President
and Chief Executive
Officer
Roger L. Baumgardner, 55 January 1986 to present Vice President,
Secretary and
Treasurer
Arthur L. Pendleton, 46 January 1991 to present Vice President -
Operations
John B. Williamson, III, 43 January 1993 to present Vice President -
Rates and Finance
April 1992 to January 1993 Director of Rates and
Finance
Prior to April 1992 County Administrator
of Botetourt County,
Virginia
J. David Anderson, 50 January 1986 to present Assistant Secretary
and Assistant
Treasurer
</TABLE>
<PAGE>
PART II
-------
Item 5. Market for Registrant's Common Equity and Related Stockholder
- ------ -------------------------------------------------------------
Matters.
-------
The information set forth under the caption "Market Price and
Dividend Information" on page 6 of the 1997 Annual Report to
Stockholders is incorporated herein by reference.
Item 6. Selected Financial Data.
- ------ -----------------------
The information set forth under the caption "Selected Financial
Data" on page 7 of the 1997 Annual Report to Stockholders is
incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
- ------ ---------------------------------------------------------------
Results of Operations.
---------------------
The information set forth under the captions "Review of Operations"
and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" on pages 3 through 12 of the 1997 Annual
Report to Stockholders is incorporated
herein by reference.
Item 8. Financial Statements and Supplementary Data.
- ------ -------------------------------------------
The following consolidated financial statements of the registrant
and the Independent Auditors' Report set forth on pages 13 through
31 of the 1997 Annual Report to Stockholders are incorporated herein
by reference:
1. Independent Auditors' Report
2. Consolidated Balance Sheets as of September 30, 1997 and 1996
3. Consolidated Statements of Earnings for the Years Ended September
30, 1997, 1996 and 1995
4. Consolidated Statements of Stockholders' Equity for the Years
Ended September 30, 1997, 1996 and 1995
5. Consolidated Statements of Cash Flows for the Years Ended
September 30, 1997, 1996 and 1995
6. Notes to Consolidated Financial Statements as of September 30,
1997 and 1996 and Years Ended September 30, 1997, 1996 and 1995
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
- ------ ---------------------------------------------------------------
Financial Disclosure.
--------------------
At its meeting on July 28, 1997, the Board of Directors of Roanoke
Gas Company (the "Company"), upon recommendation of the Audit
Committee, appointed Deloitte & Touche LLP as independent
accountants to audit the financial statements of the Company and its
subsidiaries for the years ending September 30, 1998, 1999 and 2000.
KPMG Peat Marwick LLP ("KPMG") previously had served as the
Company's certifying accountants since 1990. The Board of Directors
solicited competitive bids from accountants interested in serving as
the Company's auditor. From the bids received, the Audit Committee
recommended Deloitte & Touche LLP to the Board of Directors.
KPMG's auditors' report on the Company's financial statements for
the past two fiscal years ended September 30, 1997 contained no
adverse opinion or a disclaimer of opinion, nor were they qualified
or modified as to uncertainty, audit scope, or accounting
principles. During the Company's two most recent fiscal years and
the subsequent interim period through December 19, 1997, there were
no disagreements with KPMG on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or
procedure which, if not resolved to the satisfaction of KPMG, would
have caused it to make a reference to the subject matter of the
disagreement in connection with its auditors' report.
PART III
--------
Item 10. Directors and Executive Officers of the Registrant.
- ------- --------------------------------------------------
For information with respect to the executive officers of the
registrant, see "Executive Officers of the Registrant" at the end of
Part I of this report. For information with respect to the Directors
of the registrant, see "Election of Directors" at pages 3 and 4 of
the Proxy Statement for the Annual Meeting of Stockholders to be
held January 26, 1998, which information is incorporated herein by
reference. The information with respect to compliance with Section
16(a) of the Exchange Act, which is set forth under the caption
"Section 16(a) Beneficial Ownership Reporting Compliance" at page 10
of the Proxy Statement for the Annual Meeting of Stockholders to be
held January 26, 1998, is incorporated herein by reference.
Item 11. Executive Compensation.
- ------- ----------------------
The information set forth under the captions "Executive
Compensation," "Report of the Compensation Committee of the Board of
Directors," and "Performance Graph" at pages 5 through 8 of the
Proxy Statement for the Annual Meeting of Stockholders to be held
January 26, 1998, is incorporated herein by reference.
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management.
- ------- --------------------------------------------------------------
The information pertaining to stockholders beneficially owning more
than five percent of the registrant's common stock and the security
ownership of management, which is set forth under the captions
"Voting Securities" and "Security Ownership of Management" on pages
2 and 3 of the Proxy Statement for the Annual Meeting of
Stockholders to be held January 26, 1998, is incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions.
- ------- ----------------------------------------------
The information with respect to certain transactions with management
of the registrant, which is set forth under the caption
"Transactions with Management" at page 9 of the Proxy Statement for
the Annual Meeting of Stockholders to be held on January 26, 1998,
is incorporated herein by reference.
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
- ------- ---------------------------------------------------------------
(a) List of documents filed as part of this report:
1. Financial statements:
All financial statements of the registrant as set forth
under Item 8 of this Report on Form 10-K.
2. Financial statement schedules:
All schedules are omitted, as the required information is
inapplicable or the information is presented in the
consolidated financial statements or related notes thereto.
3. Exhibits to this Form 10-K are as follows:
Exhibit No. Description
---------- -----------
3 (a) Articles of Incorporation, as amended, of Roanoke
Gas Company
3 (b) Bylaws, as amended, of Roanoke Gas Company
4 (a) Specimen copy of certificate for Roanoke Gas
Company common stock, $5.00 par value (incorporated
herein by reference to Exhibit 4(a) of the Annual
Report on Form 10-K for the fiscal year ended
September 30, 1992)
<PAGE>
Item 14. Exhibits, Financial Statement Schedules and Reports on
- ------- ------------------------------------------------------
Form 8-K. (continued)
--------
Exhibit No. Description
---------- -----------
4 (b) Article I of the Bylaws of Roanoke Gas Company
(included in Exhibit 3(a) hereto)
4 (c) Instruments defining the rights of holders of
long-term debt (incorporated herein by reference to
Exhibit 4(c) of the Annual Report on Form 10-K for the
fiscal year ended September 30, 1991)
10(a) Firm Transportation Agreement between East Tennessee
Natural Gas Company and Roanoke Gas Company dated
November 1, 1993 (incorporated herein by reference to
Exhibit 10(a) of the Annual Report on Form 10-K for
the fiscal year ended September 30, 1994)
10(b) Interruptible Transportation Agreement between East
Tennessee Natural Gas Company and Roanoke Gas Company
dated July 1, 1991 (incorporated herein by reference
to Exhibit 10(b) of the Annual Report on Form 10-K for
the fiscal year ended September 30, 1994)
10(c) NTS Service Agreement between Columbia Gas
Transmission Corporation and Roanoke Gas Company dated
October 25, 1994 (incorporated herein by reference to
Exhibit 10(c) of the Annual Report on Form 10-K for
the fiscal year ended September 30,
10(d) SIT Service Agreement between Columbia Gas
Transmission Corporation and Roanoke Gas Company dated
November 30, 1993 (incorporated herein by reference to
Exhibit 10(d) of the Annual Report on Form 10-K for
the fiscal year ended September 30, 1994)
10(e) FSS Service Agreement between Columbia Gas
Transmission Corporation and Roanoke Gas Company dated
November 1, 1993 (incorporated herein by reference to
Exhibit 10(e) of the Annual Report on Form 10-K for
the fiscal year ended September 30, 1994)
10(f) FTS Service Agreement between Columbia Gas
Transmission Corporation and Roanoke Gas Company dated
November 1, 1993 (incorporated herein by reference to
Exhibit 10(f) of the Annual Report on Form 10-K for
the fiscal year ended September 30, 1994)
<PAGE>
Item 14. Exhibits, Financial Statement Schedules and Reports on
- ------- ------------------------------------------------------
Form 8-K. (continued)
--------
Exhibit No. Description
---------- -----------
10(g) SST Service Agreement between Columbia Gas
Transmission Corporation and Roanoke Gas Company dated
November 1, 1993 (incorporated herein by reference to
Exhibit 10(g) of the Annual Report on Form 10-K for
the fiscal year ended September 30, 1994)
10(h) ITS Service Agreement between Columbia Gas
Transmission Corporation and Roanoke Gas Company dated
November 1, 1993 (incorporated herein by reference to
Exhibit 10(h) of the Annual Report on Form 10-K for
the fiscal year ended September 30, 1994)
10(i) FTS-1 Service Agreement between Columbia Gulf
Transmission Company and Roanoke Gas Company dated
November 1, 1993 (incorporated herein by reference to
Exhibit 10(i) of the Annual Report on Form 10-K for
the fiscal year ended September 30, 1994)
10(j) ITS-1 Service Agreement between Columbia Gulf
Transmission Company and Roanoke Gas Company dated
November 1, 1993 (incorporated herein by reference to
Exhibit 10(j) of the Annual Report on Form 10-K
10(k) Gas Transportation Agreement, for use under FT-A rate
schedule, between Tennessee Gas Pipeline Company and
Roanoke Gas Company dated November 1, 1993
(incorporated herein by reference to Exhibit 10(k) of
the Annual Report on Form 10-K for the fiscal year
ended September 30, 1994)
10(l) Gas Transportation Agreement, for use under IT rate
schedule, between Tennessee Gas Pipeline Company and
Roanoke Gas Company dated September 1, 1993
(incorporated herein by reference to Exhibit 10(l) of
the Annual Report on Form 10-K for the fiscal year
ended September 30, 1994)
10(m) Gas Storage Contract under rate schedule FS
(Production Area) Bear Creek II between Tennessee Gas
Pipeline Company and Roanoke Gas Company dated
November 1, 1993 (incorporated herein by reference to
Exhibit 10(m) of the Annual Report on Form 10-K for
the fiscal year ended September 30, 1994)
<PAGE>
Item 14. Exhibits, Financial Statement Schedules and Reports on
- ------- ------------------------------------------------------
Form 8-K. (continued)
--------
Exhibit No. Description
---------- -----------
10(n) Gas Storage Contract under rate schedule FS
(Production Area) Bear Creek I between Tennessee
Gas Pipeline Company and Roanoke Gas Company dated
September 1, 1993 (incorporated herein by
reference to Exhibit 10(n) of the Annual Report on
Form 10-K for the fiscal year ended September 30,
1994)
10(o) Certificate of Public Convenience and Necessity
for Bedford County dated February 21, 1966
(incorporated herein by reference to Exhibit 10(o)
of Registration Statement No. 33-36605, on
Form S-2, filed with the Commission on August 29,
1990, and amended by Amendment No. 1, filed with
the Commission on September 19, 1990)
10(p) Certificate of Public Convenience and Necessity
for Roanoke County dated October 19, 1965
(incorporated herein by reference to Exhibit 10(p)
of Registration Statement No. 33-36605, on
Form S-2, filed with the Commission on August 29,
1990, and amended by Amendment No. 1, filed with
the Commission on September 19, 1990)
10(q) Certificate of Public Convenience and Necessity
for Botetourt County dated August 30, 1966
(incorporated herein by reference to Exhibit 10(q)
of Registration Statement No. 33-36605, on
Form S-2, filed with the Commission on August 29,
1990, and amended by Amendment No. 1, filed with
the Commission on September 19, 1990)
10(r) Certificate of Public Convenience and Necessity
for Montgomery County dated July 8, 1985
(incorporated herein by reference to Exhibit 10(r)
of Registration Statement No. 33-36605, on
Form S-2, filed with the Commission on August 29,
1990, and amended by Amendment No. 1, filed with
the Commission on September 19, 1990)
10(s) Certificate of Public Convenience and Necessity
for Tazewell County dated March 25, 1968
(incorporated herein by reference to Exhibit 10(s)
of Registration Statement No. 33-36605, on
Form S-2, filed with the Commission on August 29,
1990, and amended by Amendment No. 1, filed with
the Commission on September 19, 1990)
<PAGE>
Item 14. Exhibits, Financial Statement Schedules and Reports on
- ------- ------------------------------------------------------
Form 8-K. (continued)
--------
Exhibit No. Description
---------- -----------
10(t) Certificate of Public Convenience and Necessity
for Franklin County dated September 8, 1964
(incorporated herein by reference to Exhibit 10(t)
of Registration Statement No. 33-36605, on
Form S-2, filed with the Commission on August 29,
1990, and amended by Amendment No. 1, filed with
the Commission on September 19, 1990)
10(u) Ordinance of the Town of Bluefield, Virginia dated
August 25, 1986 (incorporated herein by reference
to Exhibit 10(u) of Registration Statement
No. 33-36605, on Form S-2, filed with the
Commission on August 29, 1990, and amended by
Amendment No. 1, filed with the Commission on
September 19, 1990)
10(v) Ordinance of the City of Bluefield, West Virginia
dated as of August 23, 1979 (incorporated herein
by reference to Exhibit 10(v) of Registration
Statement No. 33-36605, on Form S-2, filed with
the Commission on August 29, 1990, and amended by
Amendment No. 1, filed with the Commission on
September 19, 1990)
10(w) Resolution of the Council for the Town of Fincastle,
Virginia dated June 8, 1970 (incorporated herein by
reference to Exhibit 10(f) of Registration Statement
No. 33-11383, on Form S-4, filed with the Commission
on January 16,
1987)
10(x) Resolution of the Council for the Town of Troutville,
Virginia dated November 4, 1968 (incorporated herein
by reference to Exhibit 10(g) of Registration
Statement No. 33-11383, on Form S-4, filed with the
Commission on January 16,
1987)
10(y)* Consulting Agreement between Albert W. Buckley and
Roanoke Gas Company dated February 20, 1992
(incorporated herein by reference to Exhibit 10(b)(b)
of the Annual Report on Form 10-K for the fiscal year
ended September 30, 1992)
10(z)* Consulting Contract between A. Anson Jamison and
Roanoke Gas Company dated March 27, 1990
(incorporated herein by reference to
Exhibit 10(c)(c) of Registration Statement
No. 33-36605, on Form S-2, filed with the
Commission on August 29, 1990, and amended by
Amendment No. 1, filed with the Commission on
September 19, 1990)
<PAGE>
Item 14. Exhibits, Financial Statement Schedules and Reports on
- ------- ------------------------------------------------------
Form 8-K. (continued)
--------
Exhibit No. Description
---------- -----------
10(a) (a) Contract between Roanoke Gas Company and
Diversified Energy Services, Inc. dated
December 18, 1978 (incorporated herein by
reference to Exhibit 10(e)(e) of Registration
Statement No. 33-36605, on Form S-2, filed with
the Commission on August 29, 1990, and amended by
Amendment No. 1, filed with the Commission on
September 19, 1990)
10(b) (b) Service Agreement between Bluefield Gas Company
and Commonwealth Public Service Corporation dated
January 1, 1981 (incorporated herein by reference
to Exhibit 10(f)(f) of Registration Statement
No. 33-36605, on Form S-2, filed with the
Commission on August 29, 1990, and amended by
Amendment No. 1, filed with the Commission on
September 19, 1990)
10(c) (c)* Retirement Payment Agreement between Arthur T.
Ellett and Roanoke Gas Company dated April 6, 1972
(incorporated herein by reference to Exhibit
10(g)(g) of Registration Statement No. 33-36605,
on Form S-2, filed with the Commission on
August 29, 1990, and amended by Amendment No. 1,
filed with the Commission on September 19, 1990)
10(d) (d)* Consulting Services Agreement between Edward C.
Dunbar and Roanoke Gas Company dated February 25, 1991
(incorporated herein by reference to Exhibit 10(h)(h)
of the Annual Report on Form 10-K for the fiscal year
ended September 30, 1991)
10(e) (e)* Consultation Contract between Gordon C. Willis
and Roanoke Gas Company dated April 29, 1991
(incorporated herein by reference to Exhibit 10(i)(i)
of the Annual Report on Form 10-K for the fiscal year
ended September 30, 1991)
10(f) (f) Gas Storage Contract under rate schedule FS
(Market Area) Portland between Tennessee Gas Pipeline
Company and Roanoke Gas Company dated November 1, 1993
(incorporated herein by reference to Exhibit 10(k)(k)
of the Annual Report on Form 10-K for the fiscal year
ended September 30, 1994)
<PAGE>
Item 14. Exhibits, Financial Statement Schedules and Reports on
- ------- ------------------------------------------------------
Form 8-K. (continued)
--------
Exhibit No. Description
---------- -----------
10(g) (g) FTS Service Agreement between Columbia Gas
Transmission Corporation and Bluefield Gas Company
dated November 1, 1993 (incorporated herein by
reference to Exhibit 10(l)(l) of the Annual Report on
Form 10-K for the fiscal year ended September 30,
1994)
10(h) (h) ITS Service Agreement between Columbia Gas
Transmission Corporation and Bluefield Gas Company
dated November 1, 1993 (incorporated herein by
reference to Exhibit 10(m)(m) of the Annual Report on
Form 10-K for the fiscal year ended September 30,
1994)
10(i) (i) FSS Service Agreement between Columbia Gas
Transmission Corporation and Bluefield Gas Company
dated November 1, 1993 (incorporated herein by
reference to Exhibit 10(n)(n) of the Annual Report on
Form 10-K for the fiscal year ended September 30,
1994)
10(j) (j) SST Service Agreement between Columbia Gas
Transmission Corporation and Bluefield Gas Company
dated November 1, 1993 (incorporated herein by
reference to Exhibit 10(o)(o) of the Annual Report on
Form 10-K for the fiscal year ended September 30,
1994)
10(k) (k) FTS-1 Service Agreement between Columbia Gulf
Transmission Company and Bluefield Gas Company dated
November 1, 1993 (incorporated herein by reference to
Exhibit 10(p)(p) of the Annual Report on Form 10-K for
the fiscal year ended September 30, 1994)
10(l) (l)* Roanoke Gas Company Key Employee Stock Option
Plan (incorporated herein by reference to Exhibit
10(q)(q) of the Annual Report on Form 10-K for the
fiscal year ended September 30, 1995)
10(m) (m)* Roanoke Gas Company Stock Bonus Plan
(incorporated herein by reference to Exhibit 10(r)(r)
of the Annual Report on Form 10-K for the fiscal year
ended September 30, 1995)
10(n) (n) Gas Franchise Agreement between the Town of
Vinton, Virginia, and Roanoke Gas Company dated July
2, 1996 (incorporated herein by reference to Exhibit
10(n)(n) of Annual Report on Form 10-K for the fiscal
year ended September 30, 1996)
<PAGE>
Item 14. Exhibits, Financial Statement Schedules and Reports on
- ------- ------------------------------------------------------
Form 8-K. (continued)
--------
Exhibit No. Description
---------- -----------
10(o) (o) Gas Franchise Agreement between the City of Salem,
Virginia, and Roanoke Gas Company dated July 9, 1996
(incorporated herein by reference to Exhibit 10(o)(o)
of Annual Report on Form 10-K for the fiscal year
ended September 30, 1996)
10(p) (p) Gas Franchise Agreement between the City of
Roanoke, Virginia, and Roanoke Gas Company dated July
12, 1996 (incorporated herein by reference to Exhibit
10(p)(p) of Annual Report on Form 10-K for the fiscal
year ended September 30, 1996)
10(q) (q)* Consulting Agreement between W. Bolling Izard and
Roanoke Gas Company dated January 27, 1997
10(r) (r)* Roanoke Gas Company Restricted Stock Plan for
Outside Directors
13 1997 Annual Report to Stockholders (such report,
except to the extent incorporated herein by reference,
is being furnished for the information of the
Commission only and is not to be deemed filed as part
of this Annual Report on Form 10-K)
21 Subsidiaries of the Company (incorporated herein by
reference to Exhibit (22) of Registration Statement
No. 33-36605, on Form S-2, filed with the Commission
on August 29, 1990, and amended by Amendment No. 1,
filed with the Commission on September 19, 1990)
23 Accountants' Consent
27 Financial Data Schedule
99 Letter of KPMG Peat Marwick
---------------------
*Management contract or compensatory plan or agreement required to
be filed as an Exhibit to this Form 10-K pursuant to Item 14(c).
(b) Reports on Form 8-K:
Form 8-K dated July 28, 1997 reporting a change in the
Company's principal accountants for fiscal years 1998, 1999
and 2000.
Form 8-K dated September 8, 1997 reporting the acquisition of
assets of U.S. Gas, Inc.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ROANOKE GAS COMPANY
By: /s/ Roger L. Baumgardner 12/19/97
---------------------------- --------
Roger L. Baumgardner Date
Vice President, Secretary and
Treasurer
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
/s/F. A. Farmer, Jr. 12/19/97 President, Chief Executive Officer and
- -----------------------------------
Frank A. Farmer, Jr. Date Director
/s/John B. Williamson, III 12/19/97 Vice President - Rates and Finance
- ------------------------------------
John B. Williamson, III Date (Principal Financial Officer)
/s/Roger L. Baumgardner 12/19/97 Vice President, Secretary and
- ------------------------------------
Roger L. Baumgardner Date Treasurer (Principal Accounting
Officer)
/s/Lynn D. Avis 12/19/97 Director
- ------------------------------------
Lynn D. Avis Date
/s/Abney S. Boxley, III 12/19/97 Director
- ------------------------------------
Abney S. Boxley, III Date
/s/Frank T. Ellett 12/19/97 Director
- ------------------------------------
Frank T. Ellett Date
/s/Wilbur L. Hazlegrove 12/19/97 Director
- ------------------------------------
Wilbur L. Hazlegrove Date
/s/J. Allen Layman 12/19/97 Director
- ------------------------------------
J. Allen Layman Date
/s/John H. Parrott 12/19/97 Director
- ------------------------------------
John H. Parrott Date
/s/Thomas L. Robertson 12/19/97 Director
- ------------------------------------
Thomas L. Robertson Date
/s/S. Frank Smith 12/19/97 Director
- ------------------------------------
S. Frank Smith Date
<PAGE>
INDEX TO EXHIBITS
-----------------
Exhibit No. Description
- ----------- -----------
3 (a) Articles of Incorporation, as amended, of
Roanoke Gas Company
3 (b) Bylaws, as amended, of Roanoke Gas Company
4 (a) Specimen copy of certificate for Roanoke Gas Company common
stock, $5.00 par value (incorporated herein by reference to
Exhibit 4(a) of the Annual Report on Form 10-K for the fiscal year
ended September 30, 1992)
4 (b) Article I of the Bylaws of Roanoke Gas Company (included in
Exhibit 3(a) hereto)
4 (c) Instruments defining the rights of holders of long-term debt
(incorporated herein by reference to Exhibit 4(c) of the Annual
Report on Form 10-K for the fiscal year ended September 30, 1991)
10 (a) Firm Transportation Agreement between East Tennessee Natural
Gas Company and Roanoke Gas Company dated November 1, 1993
(incorporated herein by reference to Exhibit 10(a) of the Annual
Report on Form 10-K for the fiscal year ended September 30, 1994)
10 (b) Interruptible Transportation Agreement between East Tennessee
Natural Gas Company and Roanoke Gas Company dated July 1, 1991
(incorporated herein by reference to Exhibit 10(b) of the Annual
Report on Form 10-K for the fiscal year ended September 30, 1994)
10 (c) NTS Service Agreement between Columbia Gas Transmission
Corporation and Roanoke Gas Company dated October 25, 1994
(incorporated herein by reference to Exhibit 10(c) of the Annual
Report on Form 10-K for the fiscal year ended September 30, 1994)
10 (d) SIT Service Agreement between Columbia Gas Transmission
Corporation and Roanoke Gas Company dated November 30, 1993
(incorporated herein by reference to Exhibit 10(d) of the Annual
Report on Form 10-K for the fiscal year ended September 30, 1994)
10 (e) FSS Service Agreement between Columbia Gas Transmission
Corporation and Roanoke Gas Company dated November 1, 1993
(incorporated herein by reference to Exhibit 10(e) of the Annual
Report on Form 10-K for the fiscal year ended September 30, 1994)
<PAGE>
10 (f) FTS Service Agreement between Columbia Gas Transmission
Corporation and Roanoke Gas Company dated November 1, 1993
(incorporated herein by reference to Exhibit 10(f) of the Annual
Report on Form 10-K for the fiscal year ended September 30, 1994)
10 (g) SST Service Agreement between Columbia Gas Transmission
Corporation and Roanoke Gas Company dated November 1, 1993
(incorporated herein by reference to Exhibit 10(g) of the Annual
Report on Form 10-K for the fiscal year ended September 30, 1994)
10 (h) ITS Service Agreement between Columbia Gas Transmission
Corporation and Roanoke Gas Company dated November 1, 1993
(incorporated herein by reference to Exhibit 10(h) of the Annual
Report on Form 10-K for the fiscal year ended September 30, 1994)
10 (i) FTS-1 Service Agreement between Columbia Gulf Transmission
Company and Roanoke Gas Company dated November 1, 1993
(incorporated herein by reference to Exhibit 10(i) of the Annual
Report on Form 10-K for the fiscal year ended September 30, 1994)
10 (j) ITS-1 Service Agreement between Columbia Gulf Transmission
Company and Roanoke Gas Company dated November 1, 1993
(incorporated herein by reference to Exhibit 10(j) of the Annual
Report on Form 10-K for the fiscal year ended September 30, 1994)
10 (k) Gas Transportation Agreement, for use under FT-A rate
schedule, between Tennessee Gas Pipeline Company and Roanoke Gas
Company dated November 1, 1993 (incorporated herein by reference
to Exhibit 10(k) of the Annual Report on Form 10-K for the fiscal
year ended September 30, 1994)
10 (l) Gas Transportation Agreement, for use under IT rate schedule,
between Tennessee Gas Pipeline Company and Roanoke Gas Company
dated September 1, 1993 (incorporated herein by reference to
Exhibit 10(l) of the Annual Report on Form 10-K for the fiscal
year ended September 30, 1994)
10 (m) Gas Storage Contract under rate schedule FS (Production Area)
Bear Creek II between Tennessee Gas Pipeline Company and Roanoke
Gas Company dated November 1, 1993 (incorporated herein by
reference to Exhibit 10(m) of the Annual Report on Form 10-K for
the fiscal year ended September 30, 1994)
10 (n) Gas Storage Contract under rate schedule FS (Production Area)
Bear Creek I between Tennessee Gas Pipeline Company and Roanoke
Gas Company dated September 1, 1993 (incorporated herein by
reference to Exhibit 10(n) of the Annual Report on Form 10-K for
the fiscal year ended September 30, 1994)
<PAGE>
10 (o) Certificate of Public Convenience and Necessity for Bedford
County dated February 21, 1966 (incorporated herein by reference
to Exhibit 10(o) of Registration Statement No. 33-36605, on Form
S-2, filed with the Commission on August 29, 1990, and amended by
Amendment No. 1, filed with the Commission on September 19, 1990)
10 (p) Certificate of Public Convenience and Necessity for Roanoke
County dated October 19, 1965 (incorporated herein by reference to
Exhibit 10(p) of Registration Statement No. 33-36605, on Form S-2,
filed with the Commission on August 29, 1990, and amended by
Amendment No. 1, filed with the
Commission on September 19, 1990)
10 (q) Certificate of Public Convenience and Necessity for Botetourt
County dated August 30, 1966 (incorporated herein by reference to
Exhibit 10(q) of Registration Statement No. 33-36605, on Form S-2,
filed with the Commission on August 29, 1990, and amended by
Amendment No. 1, filed with the Commission on
September 19, 1990)
10 (r) Certificate of Public Convenience and Necessity for Montgomery
County dated July 8, 1985 (incorporated herein by reference to
Exhibit 10(r) of Registration Statement No. 33-36605, on Form S-2,
filed with the Commission on August 29, 1990, and amended by
Amendment No. 1, filed with the Commission on September 19,
1990)
10 (s) Certificate of Public Convenience and Necessity for Tazewell
County dated March 25, 1968 (incorporated herein by reference to
Exhibit 10(s) of Registration Statement No. 33-36605, on Form S-2,
filed with the Commission on August 29, 1990, and amended by
Amendment No. 1, filed with the Commission on
September 19, 1990)
10 (t) Certificate of Public Convenience and Necessity for Franklin
County dated September 8, 1964 (incorporated herein by reference
to Exhibit 10(t) of Registration Statement No. 33-36605, on Form
S-2, filed with the Commission on August 29, 1990, and amended by
Amendment No. 1, filed with the
Commission on September 19, 1990)
10 (u) Ordinance of the Town of Bluefield, Virginia dated August 25,
1986 (incorporated herein by reference to Exhibit 10(u) of
Registration Statement No. 33-36605, on Form S-2, filed with the
Commission on August 29, 1990, and amended by Amendment No. 1,
filed with the Commission on September 19, 1990)
10 (v) Ordinance of the City of Bluefield, West Virginia dated as of
August 23, 1979 (incorporated herein by reference to Exhibit 10(v)
of Registration Statement No. 33-36605, on Form S-2, filed with
the Commission on August 29, 1990, and amended by Amendment No. 1,
filed with the Commission on September 19,
1990)
<PAGE>
10 (w) Resolution of the Council for the Town of Fincastle, Virginia
dated June 8, 1970 (incorporated herein by reference to Exhibit
10(f) of Registration Statement No. 33-11383, on Form S-4, filed
with the Commission on January 16, 1987)
10 (x) Resolution of the Council for the Town of Troutville, Virginia
dated November 4, 1968 (incorporated herein by reference to
Exhibit 10(g) of Registration Statement No. 33-11383, on Form S-4,
filed with the Commission on January 16, 1987)
10 (y)* Consulting Agreement between Albert W. Buckley and Roanoke
Gas Company dated February 20, 1992 (incorporated herein by
reference to Exhibit 10(b)(b) of the Annual Report on Form 10-K
for the fiscal year ended September 30, 1992)
10 (z)* Consulting Contract between A. Anson Jamison and Roanoke Gas
Company dated March 27, 1990 (incorporated herein by reference to
Exhibit 10(c)(c) of Registration Statement No. 33-36605, on Form
S-2, filed with the Commission on August 29, 1990, and amended by
Amendment No. 1, filed with the Commission on
September 19, 1990)
10 (a) (a) Contract between Roanoke Gas Company and Diversified
Energy Services, Inc. dated December 18, 1978 (incorporated herein
by reference to Exhibit 10(e)(e) of Registration Statement No.
33-36605, on Form S-2, filed with the Commission on August 29,
1990, and amended by Amendment No. 1, filed with the Commission on
September 19, 1990)
10 (b) (b) Service Agreement between Bluefield Gas Company and
Commonwealth Public Service Corporation dated January 1, 1981
(incorporated herein by reference to Exhibit 10(f)(f) of
Registration Statement No. 33-36605, on Form S-2, filed with the
Commission on August 29, 1990, and amended by Amendment No. 1,
filed with the Commission on September 19, 1990)
10 (c) (c)* Retirement Payment Agreement between Arthur T. Ellett and
Roanoke Gas Company dated April 6, 1972 (incorporated herein by
reference to Exhibit 10(g)(g) of Registration Statement No.
33-36605, on Form S-2, filed with the Commission on August 29,
1990, and amended by Amendment No. 1, filed with the Commission on
September 19, 1990)
10 (d) (d)* Consulting Services Agreement between Edward C. Dunbar
and Roanoke Gas Company dated February 25, 1991 (incorporated
herein by reference to Exhibit 10(h)(h) of the Annual Report on
Form 10-K for the fiscal year ended September 30, 1991)
10 (e) (e)* Consultation Contract between Gordon C. Willis and
Roanoke Gas Company dated April 29, 1991 (incorporated herein by
reference to Exhibit 10(i)(i) of the Annual Report on Form 10-K
for the fiscal year ended September 30, 1991)
<PAGE>
10 (f) (f) Gas Storage Contract under rate schedule FS (Market Area)
Portland between Tennessee Gas Pipeline Company and Roanoke Gas
Company dated November 1, 1993 (incorporated herein by reference
to Exhibit 10(k)(k) of the Annual Report on Form 10- K for the
fiscal year ended September 30, 1994)
10 (g) (g) FTS Service Agreement between Columbia Gas Transmission
Corporation and Bluefield Gas Company dated November 1, 1993
(incorporated herein by reference to Exhibit 10(l)(l) of the
Annual Report on Form 10-K for the fiscal year ended September 30,
1994)
10 (h) (h) ITS Service Agreement between Columbia Gas Transmission
Corporation and Bluefield Gas Company dated November 1, 1993
(incorporated herein by reference to Exhibit 10(m)(m) of the
Annual Report on Form 10-K for the fiscal year ended September 30,
1994)
10 (i) (i) FSS Service Agreement between Columbia Gas Transmission
Corporation and Bluefield Gas Company dated November 1, 1993
(incorporated herein by reference to Exhibit 10(n)(n) of the
Annual Report on Form 10-K for the fiscal year ended September 30,
1994)
10 (j) (j) SST Service Agreement between Columbia Gas Transmission
Corporation and Bluefield Gas Company dated November 1, 1993
(incorporated herein by reference to Exhibit 10(o)(o) of the
Annual Report on Form 10-K for the fiscal year ended September 30,
1994)
10 (k) (k) FTS-1 Service Agreement between Columbia Gulf
Transmission Company and Bluefield Gas Company dated November 1,
1993 (incorporated herein by reference to Exhibit 10(p)(p) of the
Annual Report on Form 10-K for the fiscal year ended September
30, 1994)
10 (l) (l)* Roanoke Gas Company Key Employee Stock Option Plan
(incorporated herein by reference to Exhibit 10(q)(q) of the
Annual Report on Form 10-K for the fiscal year ended September
30, 1995)
10 (m) (m)* Roanoke Gas Company Stock Bonus Plan (incorporated
herein by reference to Exhibit 10(r)(r) of the Annual Report on
Form 10- K for the fiscal year ended September 30, 1995)
10 (n) (n) Gas Franchise Agreement between the Town of Vinton,
Virginia, and Roanoke Gas Company dated July 2, 1996
(incorporated herein by reference to Exhibit 10(n)(n) of Annual
Report on Form 10-K for the fiscal year ended September 30, 1996)
<PAGE>
10 (o) (o) Gas Franchise Agreement between the City of Salem,
Virginia, and Roanoke Gas Company dated July 9, 1996
(incorporated herein by reference to Exhibit 10(o)(o) of Annual
Report on Form 10-K for the fiscal year ended September 30, 1996)
10 (p) (p) Gas Franchise Agreement between the City of Roanoke,
Virginia, and Roanoke Gas Company dated July 12, 1996
(incorporated herein by reference to Exhibit 10(p)(p) of Annual
Report on Form 10-K for the fiscal year ended September 30, 1996)
10 (q) (q)* Consulting Agreement between W. Bolling Izard and Roanoke Gas
Company dated January 27, 1997
10 (r) (r)* Roanoke Gas Company Restricted Stock Plan for Outside
Directors
13 1997 Annual Report to Stockholders (such report, except to the
extent incorporated herein by reference, is being furnished
for the information of the Commission only and is not to be
deemed filed as part of this Report on Form 10-K)
21 Subsidiaries of the Company (incorporated herein by reference
to Exhibit (22) of Registration Statement No. 33-36605, on
Form S-2, filed with the Commission on August 29, 1990, and
amended by Amendment No. 1, filed with the Commission on
September 19, 1990)
23 Accountants' Consent
27 Financial Data Schedule
99 Letter of KPMG Peat Marwick LLP
- -----------------------------
*Management contract or compensatory plan or agreement required to be filed as
an Exhibit to this Form 10-K pursuant to Item 14(c).
<PAGE>
EXHIBIT 3(A)
ARTICLES OF AMENDMENT
----------------------
OF THE ARTICLES OF INCORPORATION
--------------------------------
OF ROANOKE GAS COMPANY
----------------------
Pursuant to Section 13.1-710 of the Code of Virginia, the Articles of
Amendment of the Articles of Incorporation of Roanoke Gas Company are hereby set
forth as follows:
A. The name of the Corporation is Roanoke Gas Company.
B. The Amendment of the Articles of Incorporation is as follows:
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."
<PAGE>
C. The Amendment was adopted at the Annual Meeting of Shareholders held on
January 27, 1997.
D. The Amendment was proposed by the Board of Directors of the Corporation
and submitted to the shareholders in accordance with the requirements of the
Virginia Stock Corporation Act.
E. The only voting group entitled to vote on the Amendment is the holders
of the Corporation's common stock. As of November 22, 1996, the record date for
the Annual Meeting, there were 1,483,462 shares of common stock of the
Corporation issued and outstanding and entitled to vote. 1,035,254 votes were
cast "for" the Amendment, and 16,931 votes were withheld or cast "against" such
Amendment. The number of votes cast "for" the Amendment was sufficient for
approval of the Amendment by the shareholders.
EXECUTED this 29th day of January, 1997, on behalf of Roanoke Gas Company,
by its President.
ROANOKE GAS COMPANY
By: s/Frank A. Farmer
---------------------------------
Frank A. Farmer, Jr., President
<PAGE>
COMMONWEALTH OF VIRGINIA
STATE CORPORATION COMMISSION
February 5, 1997
The State Corporation Commission has found the accompanying articles submitted
on behalf of
ROANOKE GAS COMPANY
to comply with the requirements of law, and confirms payment of all related
fees.
Therefore, it is ORDERED that this
CERTIFICATE OF AMENDMENT
be issued and admitted to record with the articles of amendment in the Office of
the Clerk of the Commission, effective February 5, 1997 at 12:30 PM.
The corporation is granted the authority conferred on it by law in accordance
with the articles, subject to the conditions and restrictions imposed by law.
STATE CORPORATION COMMISSION
By T. V. Morrison, Jr.
-------------------------
Commissioner
AMENACPT
CIS20318
97-02-03-0198
<PAGE>
ARTICLES OF AMENDMENT
OF THE ARTICLES OF INCORPORATION
OF ROANOKE GAS COMPANY
Pursuant to Section 13.1-710 of the Code of Virginia, the Articles of
Amendment of the Articles of Incorporation of Roanoke Gas Company are hereby set
forth as follows:
(a) The name of the Corporation is ROANOKE GAS COMPANY.
(b) Paragraph "Third" of the Articles of Incorporation, as amended, shall
be amended to read in its entirety as follows:
"Third: The aggregate number of shares which the
corporation shall have the authority to issue and the par value
per share are as follows:
Par Value
Class Number of Shares Per Share
----- ---------------- ---------
Common 3,000,000 $5.00"
(c) New paragraph "Fifth" shall be added to the Articles of Incorporation,
as amended, to read as follows:
"Fifth: No shareholder shall have any
preemptive or preferential right to subscribe for or
acquire unissued shares of the corporation's capital
stock, or any security convertible into or carrying a
right to subscribe for or acquire shares of the
corporation's capital stock, when issued."
(d) Both of the amendments were adopted at a Special Meeting of the
Corporation's shareholders held on March 23, 1992.
(e) Each amendment was proposed by the Board of Directors of the
Corporation and submitted to the shareholders in accordance with the
requirements of the Virginia Stock Corporation Act.
(f) The only voting group entitled to vote on the amendments is the
holders of the Corporation's common stock. As of February 7, 1992, the record
date for the Special Meeting, there were 631,551 shares of common stock of the
Corporation issued and outstanding. 499,092 votes were cast "For" the amendment
to paragraph "Third" increasing the Corporation's authorized common stock, and
34,818 votes were withheld or cast "Against" that amendment. 473,597 votes were
cast "For" the amendment adding paragraph "Fifth" to delete preemptive rights of
shareholders, and 37,975 votes were withheld or cast "Against" that amendment.
The number of votes cast "For" each amendment was sufficient for approval of the
amendment by the shareholders.
EXECUTED this 23rd day of March, 1992, on behalf of Roanoke Gas Company,
by its President.
ROANOKE GAS COMPANY
By: s/Frank A. Farmer, Jr.
-------------------------
Frank A. Farmer, Jr.
President
<PAGE>
COMMONWEALTH OF VIRGINIA
STATE CORPORATION COMMISSION
March 24, 1992
The State Corporation Commission has found the accompanying articles submitted
on behalf of
ROANOKE GAS COMPANY
to comply with the requirements of law, and confirms payment of all related
fees.
Therefore, it is ORDERED that this
CERTIFICATE OF AMENDMENT
be issued and admitted to record with the articles of amendment in the Office of
the Clerk of the Commission, effective March 24, 1992.
The corporation is granted the authority conferred on it by law in accordance
with the articles, subject to the conditions and restrictions imposed by law.
STATE CORPORATION COMMISSION
By s/[illegible signature]
-------------------------
Commissioner
AMENACPT
CIS20436
92-03-24-0506
<PAGE>
ARTICLES OF AMENDMENT
OF
THE ARTICLES OF INCORPORATION
OF
ROANOKE GAS COMPANY
a. The name of the corporation is Roanoke Gas Company.
b. Paragraph "THIRD" of the Articles of Incorporation of the
corporation, as amended, reads in its entirety as follows:
"THIRD: The aggregate number of shares which the
Corporation shall have the authority to issue and the par value per
share are as follows:
Par Value
Class Number of Shares Per Share
----- ---------------- ---------
Common 1,000,000 $5.00"
c. The Board of Directors of Roanoke Gas Company at a meeting held on
August 22, 1977, found the foregoing amendment of its Articles of Incorporation
to be in the best interests of the corporation and directed that it be submitted
to a vote of the stockholders of the corporation at a Special Meeting called on
October 19, 1977. Notice of the Special Meeting of Stockholders was given to
each stockholder of record entitled to vote on September 16, 1977, in the manner
and within the time provided by the Virginia Stock Corporation Act, which notice
included a copy of the amendment, and the amendment was adopted by requisite
vote of the stockholders at the Special Meeting of Stockholders of the
corporation held on October 19, 1977.
d. The number of shares of the one class of common stock of the
corporation outstanding and entitled to vote on the amendment was 188,057.
e. The number of shares voted for adoption of the amendment was
161,882 and against such amendment was 1,199.
f. The foregoing amendment increases the aggregate number of shares
authorized for issue from 200,000 to 1,000,000, but does not effect a change in
the amount of the stated capital of the corporation.
g. The foregoing amendment does not effect a restatement of the
Articles of Incorporation.
ROANOKE GAS COMPANY
By s/A. N. Buckley
-----------------------
Its President
and
By s/E. C. Dunbar
-----------------------
Its Vice President - Finance
and Secretary
<PAGE>
COMMONWEALTH OF VIRGINIA
STATE CORPORATION COMMISSION
AT RICHMOND,
December 6, 1977
The accompanying articles having been delivered to the State Corporation
Commission on behalf of
Roanoke Gas Company
and the Commission having found that the articles comply with the requirements
of law and that all required fees have been paid, it is
ORDERED that this CERTIFICATE OF AMENDMENT
be issued, and that this order together with the articles, be admitted to record
in the office of the Commission; and that the corporation have the authority
conferred on it by law in accordance with the articles, subject to the
conditions and restrictions imposed by law.
Upon the completion of such recordation, this order and the articles shall
be forwarded for recordation in the office of the clerk of the
Circuit Court City of Roanoke
STATE CORPORATION COMMISSION
By s/[illegible signature]
-----------------------
Commissioner
VIRGINIA:
In the Clerk's Office of the Circuit Court City of Roanoke
The foregoing certificate (including the accompanying articles) has been
duly recorded in my office this 19th day of December, 1977 and is now returned
---- --------------
to the State Corporation Commission by certified mail.
s/WALKER R. CARTER, JR., Clerk
------------------------------------
By: s/Brenda Scott Clerk
<PAGE>
ARTICLES OF AMENDMENT
OF
ROANOKE GAS COMPANY
A. The name of the corporation is ROANOKE GAS COMPANY.
B. The amendments so adopted are as follows:
RESOLVED that it is in the best interests of Roanoke Gas Company that
its Articles of Incorporation (Association) be amended and restated so
that they shall read in their entirety as follows:
First: The name of the corporation is ROANOKE GAS COMPANY.
Second: The purpose or purposes for which the corporation is
organized and is authorized to pursue shall be to acquire, own, manage,
control and conduct in the State of Virginia properties, systems and
plants for the manufacture, storage, transmission, sale and delivery to
the public, as a public service company, of gas, whether natural,
manufactured or mixed, for power, heat, light and all other uses under
such Certificates of Convenience and Necessity as have been or may in the
future from time to time be granted to it by the State Corporation
Commission of Virginia. In addition, the corporation may conduct in the
State of Virginia any other business so far as the same may be related or
incidental to its herein-stated business and purposes, and may further
conduct in any other state such business as may be authorized or permitted
by the laws thereof.
Third: The aggregate number of shares which the corporation
shall have authority to issue and the par value per share are as
follows:
Number Par Value
Class Of Shares Per Share
----- --------- ---------
Common 200,000 $5.00
Fourth: The number of directors, not less than three, shall be fixed
by the bylaws, and, in the absence of such a bylaw fixing the same, the
number shall be eight.
C. The Board of Directors of the corporation at its meeting held February
25, 1965, found the foregoing amendments in the best interests of the
corporation and directed them to be submitted to a vote at the annual meeting of
the stockholders of the corporation to be held April 6, 1965; written notice of
the stockholders' meeting was given to each stockholder of record entitled to
vote at said meeting on March 8, 1965 (more than 25 days prior to the April 6,
1965 meeting date); the foregoing notice was given in the manner provided by the
Virginia Stock Corporation Act and was accompanied by a copy of the proposed
amendments; and said amendments were adopted by the stockholders of the
corporation on April 6, 1965.
D. The number of shares of the corporation outstanding and the number of
shares entitled to vote thereon is 155,697 shares of common stock. No other
class of shares of the corporation is outstanding.
<PAGE>
E. 125,593 shares of common stock of the corporation voted for the
amendments; and no shares of the common stock voted against the amendments.
F. The amendments do not effect a change in the amount of stated capital
of the corporation.
G. The amendments do effect a restatement in their entirety of the
Articles of Incorporation of the corporation, and the amount of stated capital
of the corporation on the effective date of such amendments is and will be
$778,485.00
WITNESS the signature of Roanoke Gas Company by its President and its
corporate seal affixed hereto and attested by its Secretary, this 6th day of
April, 1965.
ROANOKE GAS COMPANY
By s/John C. Parrott
-----------------------
President
ATTEST:
s/E. C. Dunbar
- --------------------
Secretary
[Company seal appears here]
<PAGE>
STATE OF VIRGINIA)
)to wit:
CITY OF ROANOKE )
I, Ruth T. Murphy, a Notary Public in and for the City of Roanoke,
Virginia, do hereby certify that John C. Parrott, President of Roanoke Gas
Company, whose name is signed to the foregoing Articles of Amendment bearing
date the 6th day of April, 1965, has personally appeared before me and
acknowledged the same in my City and State aforesaid.
GIVEN under my hand this 6th day of April.
s/Ruth T. Murphy
-------------------------------------------
Notary Public
My commission expires:
My Commission Expires August 3, 1967
- ------------------------------------
<PAGE>
COMMONWEALTH OF VIRGINIA
STATE CORPORATION COMMISSION
AT RICHMOND, April 9, 1965
The accompanying articles having been delivered to the State Corporation
Commission on behalf of
Roanoke Gas Company
and the Commission having found that the articles comply with the requirements
of law and that all required fees have been paid, it is
ORDERED that this CERTIFICATE OF AMENDMENT AND RESTATEMENT
be issued, and that this order, together with the articles, be admitted to
record in the office of the Commission; and that the corporation have the
authority conferred on it by law in accordance with the articles, subject to the
conditions and restrictions imposed by law.
Upon the completion of such recordation, this order and the articles shall
be forwarded for recordation in the office of the clerk of the Hustings Court of
the City of Roanoke.
STATE CORPORATION COMMISSION
By: s/Jessee Dillon
-------------------------
Chairman
VIRGINIA:
In the Clerk's Office of the Hustings Court of the City of Roanoke
The foregoing certificate (including the accompanying articles) has been duly
recorded in my office this 20th day of April, 1965 and is now returned to the
State Corporation Commission by certified mail.
WALKER R. CARTER JR., CLERK
---------------------------------
By: s/Ruth Keith Deputy Clerk
<PAGE>
ARTICLES OF ASSOCIATION
of
ROANOKE GAS LIGHT COMPANY
--0--
KNOW ALL MEN BY THESE PRESENTS, That we do hereby make and sign these
Articles of Association for the purpose of forming a corporation under and by
virtue of the provisions of an Act of the General Assembly of Virginia, entitled
"An Act Concerning Corporations", which became a law on the twenty-first day of
May, 1903, and the several supplements thereto and acts amendatory thereof, for
the purpose of purchasing, leasing or constructing, maintaining and operating
works for the manufacture and sale of gas for light, heat or power, or for any
and all other purposes, and to that end we do set forth, as follows:
I.
The name of this Corporation shall be Roanoke Gas Company.
II.
The nature and character of the works to be purchased, leased, constructed
and otherwise acquired maintained, sold or otherwise disposed of is a plant or
plants with machinery, equipment and appliances for the manufacture, production,
receipt, storage and transmission of gas, including natural gas and mixed gases
of all kinds, gas products, coke, coal tar, coal tar products and by-products,
to be sold and supplied in Roanoke, Virginia, Roanoke County, Virginia,
Botetourt County, Virginia, Montgomery County, Virginia, and Bedford County,
Virginia, and all towns, cities, municipalities and settlements located in said
counties, and to the public generally, for power, heat, light and all other
uses, including, but not being limited to, domestic, commercial, industrial and
governmental uses; the purposes being to manufacture, transmit, receive, store,
sell, distribute and supply gas, natural gas and mixed gases of all kinds in
Roanoke, Virginia, Roanoke County, Virginia, Botetourt County, Virginia,
Montgomery County, Virginia, and Bedford County, Virginia, and towns, cities,
municipalities and settlements located in said counties, and to operate a gas
plant or plants at Roanoke, Virginia, or its vicinity; also to construct,
maintain and operate works for receiving, holding, transmitting and distributing
gas, natural gas and mixed gases of all kinds, and the incidental products of
gas production; also to manufacture, buy, transmit, receive, sell and generally
deal in gas, natural gas, mixed gases of all kinds, coke, coal tar, coal tar
products and by-products, gas meters, pipes, stoves, burners and other
appliances, machinery and fixtures pertaining to the production of and the use
of gas, natural gas and mixed gases of all kinds, coke, coal tar, coal tar
products and by-products; also to purchase and obtain, by any and all means,
supplies of natural gas and mixed gases of all kinds, and to that end to acquire
construct, maintain, operate, lease, sell and otherwise dispose of gas lines,
including gas transmission lines and other fixtures, appliances and works
necessary and convenient for procuring, carrying and distributing natural gas
and mixed gases of all kinds; also to acquire, hold, use and dispose of all
necessary lands, interests in lands, pipe lines, transmission lines, and all
necessary and convenient facilities for the conduct of the purposes and objects
above mentioned, with full power to mortgage, lease, sell or encumber any part
or all of the property, works and franchises for the said objects and purposes;
likewise to purchase, lease, sell or otherwise acquire the property, works and
franchises or other corporations or companies of like or similar purposes, and
generally to do all things relating to the control, operation, management and
conduct of said purposes and objects.
<PAGE>
The said works are not local to any one city but are to be confined to the
corporate limits of the City of Roanoke, Virginia, and the limits of Roanoke
County, Virginia, Botetourt County, Virginia, Montgomery County, Virginia, and
Bedford County, Virginia.
III.
The principal terminal places to and from which it is proposed to
construct, purchase or otherwise acquire, maintain and operate said works are:
the corporate limits of the City of Roanoke, Virginia, and limits of Roanoke
County, Virginia, Botetourt County, Virginia, Montgomery County, Virginia, and
Bedford County, Virginia, and all towns, cities, municipalities and settlements
located in said counties, with the main or chief producing plant or plants and
the main or chief receiving station or stations at the City of Roanoke,
Virginia, or its vicinity, with auxiliary or supplemental producing, receiving
or storing plants or stations and other integral parts of its plant or system at
such other places as may become necessary or advantageous in the conduct of the
affairs of the Company.
IV.
The proposed works are estimated and intended to be sufficient to furnish
gas, natural gas and mixed gases of all kinds for heating, lighting, power and
all other uses to the City of Roanoke, Virginia, and its inhabitants and
residents tributary to the pipe lines which the Company owns and may construct
within the said city, as well as to Roanoke County, Virginia, Botetourt County,
Virginia, Montgomery County, Virginia, and Bedford County, Virginia, the
inhabitants and residents therein, and all towns, cities, municipalities and
settlements located in said counties, into which the Company has and may extend
its pipe lines and facilities.
V.
The period for the duration of the corporation is unlimited.
VI.
The maximum amount of the capital stock of the corporation is to be
200,000 shares and the minimum amount of the capital stock is to be 10,000
shares, all of which shall be common stock divided into shares of the par value
of $5.00 each.
VII.
The names and places of residence of the officers and directors, who,
unless others are sooner chosen by the stockholders to act in their places,
shall manage the affairs of the corporation for the first year, are as follows:
OFFICERS.
---------
Name. Office. Residence.
---- ------ ---------
Clarence H. Geist President Philadelphia, Pa.
W. H. Lewis Vice President Roanoke, Va.
Joseph A. Slattery Secretary & Treasurer Philadelphia, Pa.
<PAGE>
DIRECTORS.
Name. Residence.
---- ---------
Clarence H. Geist Philadelphia, Pa.
W. H. Lewis Roanoke, Va.
Joseph A. Slattery Philadelphia, Pa.
Canton Geist Atlantic City, N.J.
H.S. Schutt Wilmington, Del.
VIII.
The place in this State, in which its principal office will be located, is
City of Roanoke, Virginia.
IX.
The Board of Directors of the said "Roanoke Gas Light Company" shall have
the power to name and appoint any executive committee or other committees to be
chosen from its membership, and may appoint within or without its membership,
managers and agents for the corporation; and may vest in such agents, managers
or committees, such authority as may be deemed advisable and advantageous to the
said corporation; not, however, in conflict with the laws of this State.
For the conduct or the business of the corporation and in providing for
its financial organization, the said corporation:
(a) May merge or consolidate its franchises, property or works with those
of any corporation created for like purposes, as provided for in Chapter 5 of
said "Act Concerning Corporations", or as may be hereafter allowed by law to
similar corporations, and may purchase or lease the franchises, property and
works, or any portion thereof, of such other corporation, or may sell or lease
its franchises, property and works, or any part thereof, to any such other
corporation;
(b) May borrow money and make and issue bonds payable to bearer, or
otherwise, with or without interest coupons attached; may make and issue notes
or drafts for loans or for any other debts or obligations incurred by it for any
of the purposes of the corporation; and may secure such loans by mortgage, or
deed of trust, upon all or any part of its property, works and franchises.
(c) The said Board of Directors may, whenever they deem proper, increase
the issue of the capital stock of the corporation to the maximum limit
hereinabove set out, or the limit of any amendment thereof, and may dispose of
the additional issues at such prices, or for such consideration, and on such
terms and conditions as they may deem best, having, however, fully complied with
the provisions of Section 167 of the Constitution of this State, so far as
applicable thereto.
(d) And the said corporation may have and exercise all the general powers
and be subject to all the restrictions conferred generally by Chapter 5 of said
"Act Concerning Corporations" and the laws of this State so far as they are
relative thereto; and shall have and may exercise all the special powers
conferred upon corporations of like character by Chapter 3 of said "Act
Concerning Corporations", and by the laws of this State, so far as not in
conflict with this Act, and by all acts hereinafter passed supplementary thereto
or amendatory thereof.
<PAGE>
GIVEN under our hands this 22nd day of March, 1912.
CLARENCE H. GEIST
W. H. LEWIS
JOSEPH A. SLATTERY
CARLTON GEIST
H.S. SCHUTT
<PAGE>
STATE OF VIRGINIA)
TO-WIT:
CITY OF ROANOKE )
I, J. A. Martin, a notary Public in and for the City of Roanoke, in the
State of Virginia, do certify that Clarence H. Geist, W.H. Lewis, Joseph A.
Slattery, Carlton Geist and H.S. Schutt, whose names are signed to the
foregoing writing, bearing date the 22nd day of March, 1912, have each
acknowledged the same before me in my City aforesaid.
GIVEN under my hand this 22nd day of March, 1912.
J.A. Martin,
Notary Public
My commission expires July 11, 1914.
<PAGE>
EXHIBIT 3(B)
BYLAWS
OF
ROANOKE GAS COMPANY
<PAGE>
BYLAWS
OF
ROANOKE GAS COMPANY
ARTICLE I
---------
STOCKHOLDERS
- ------------
Sec. 1. The stockholders of this corporation shall be those who
appear on the books of the corporation as holders of one or more shares of any
class of stock of the corporation.
Sec. 2. The annual meeting of the stockholders shall be held annually on
the fourth Monday in January of each year, if not a legal holiday, and if a
legal holiday, then on the next succeeding day not a legal holiday, at such
place and at such hour as may be provided by the Board of Directors or in the
stated notice of the meeting.
At such annual meetings there shall be an election of the Board of
Directors for the ensuing year and the transaction of any business which may
properly come before the meeting.
If in any year the annual meeting shall not be held at the time designated
herein, a meeting shall be held as soon as practicable after the time designated
for the holding of the annual meeting and upon the same notice as required for
an annual meeting, at which time the Board of Directors shall be elected and
such other business may be transacted as might have been transacted at the
annual meeting.
Notice of meetings of stockholders shall be given to the extent and in the
manner required by the Virginia Stock Corporation Act adopted in 1956, or as it
may be amended from time to time hereafter (said Act being hereinafter sometimes
called "Act"), and notice of either stockholders' meetings or directors'
meetings may be waived to the extent and in the manner provided in said Act.
Sec. 3. Special meetings of the stockholders may be called by the
President, the Board of Directors, or by holders of not less than one-tenth of
all the shares entitled to vote at the meeting, or otherwise as may be
required by the Certificate of Incorporation.
Sec. 4. Any action required under the law of Virginia to be taken at a
meeting of the stockholders of the corporation, or any action which may be taken
at a meeting of the stockholders, may be taken without a meeting if a consent in
writing setting forth the action so taken shall be signed by all the
stockholders entitled to vote with respect to the subject matter thereof.
Such consent shall have the same force and effect as a unanimous vote of
stockholders and may be stated as such in any article or document filed with the
State Corporation Commission or others.
<PAGE>
Sec. 5. For the purpose of determining stockholders entitled to notice of
or to vote at any meeting of stockholders, or any adjournment thereof, or
entitled to receive payment of any dividend, or in order to make a determination
of stockholders for any other proper purpose, the Board of Directors may provide
that the stock transfer books shall be closed for a stated period, but not to
exceed in any case seventy days. In lieu of closing the stock transfer books,
the Board of Directors may fix in advance a date as the record date for any such
determination of stockholders, such date in any case to be not more than seventy
days prior to the date on which the particular action requiring such
determination of stockholders is to be taken.
Sec. 6. Unless otherwise provided in the Articles of Incorporation, a
majority of the shares entitled to vote, represented in person or by proxy,
shall constitute a quorum at a meeting of the stockholders. If a quorum is
present, the affirmative vote of a majority of the shares represented at the
meeting and entitled to vote on the subject matter shall be the act of the
stockholders, unless the vote of a greater number or voting by classes is
required under the applicable law of Virginia or the Articles of Incorporation,
and except that in elections of directors those receiving the greatest numbers
of votes shall be deemed elected, even though not receiving a majority. Less
than a quorum may adjourn.
Sec. 7. Each outstanding share, regardless of class, shall be entitled to
one vote on each matter submitted to a vote at a meeting of the stockholders,
except to the extent that the voting rights of the shares of any class or
classes are limited or denied by the Articles of Incorporation as permitted by
the Act, and except as the Articles of Incorporation may confer on the holders
of shares of any particular class or series the right to more than one vote per
share, either generally or on particular matters. Where the Articles of
Incorporation confer the right to more or less than one vote per share, any
requirement in the Act for the affirmative vote of a specified proportion of the
shares shall be deemed to refer to a like proportion of the votes eligible to be
cast.
A stockholder may vote either in person or by proxy executed in writing by
the stockholder or by his duly authorized attorney in fact and shall have one
vote for each share of stock which he is entitled to vote at such meeting. At
each election for directors, every stockholder entitled to vote at such election
shall have the right to vote in person or by proxy the number of shares owned by
him for as many persons as there are directors to be elected at that time and
for whose election he has a right to vote.
Shares of stock of other corporations owned by this corporation may be
voted in person by the President or a Vice President or by proxy executed by the
President or a Vice President; provided, however, the Board of Directors may by
resolution revoke such authority from time to time and thereby designate some
other agent, attorney-in-fact, or proxy to vote such shares.
Sec. 8. All meetings of the stockholders shall be presided over by the
Chairman of the Board of Directors, if such office is filled, or, if there is no
such officer or in the absence or inability to act of the Chairman of the Board,
by the President, or, if the Chairman of the Board, if any, and the President
are absent or unable to act, by the most senior Vice President present at the
meeting, but if none of the foregoing are present and able to act, a Chairman
shall be elected by the meeting. Such meetings shall be attended by the
Secretary of the corporation, who shall act as Secretary of all such meetings if
present. If the Secretary is absent at any meeting, the Chairman shall appoint a
Secretary of the meeting. The proceedings of all such meetings shall be verified
by the signature of the Secretary of the meeting and approved by the Chairman.
<PAGE>
ARTICLE II
-----------
DIRECTORS
- ---------
Sec. 1. The business and affairs of the corporation shall be managed
by the Board of Directors, subject to any requirement of stockholder action
made by the Act or the Articles of Incorporation.
Sec. 2. The Board of Directors shall consist of nine members. The number
of directors may be increased or decreased from time to time within the variable
range established by the Articles. At each Annual Meeting of Stockholders, the
number of directors equal to the number of the class whose term expires at the
time of such meeting shall be elected to hold office until the third succeding
annual meeting, and until their successors shall have been elected and
qualified. No decrease in the number of directors shall have the effect of
shortening the term of any incumbent director. The normal retirement date for
directors shall be the date of the Annual Meeting of Stockholders succeeding the
director's 70th birthday.
Sec. 3. Any vacancy occurring in the Board of Directors, including a
vacancy resulting from an increase in the number of directors, shall be filled
by the affirmative vote of a majority of the remaining directors, whether or
not a quorum.
Sec. 4. A majority of the number of directors fixed by the Bylaws
shall constitute a quorum for the transaction of business. The act of the
majority of the directors present at a meeting, at which a quorum is present,
shall be the act of the Board of Directors.
Sec. 5. A meeting of the Board of Directors shall be held immediately
after each annual meeting of the stockholders without other notice than is given
by these Bylaws, at which meeting there shall be elected at least a President, a
Treasurer and a Secretary, who shall hold such offices until the first meeting
of the Board following the next annual meeting of the stockholders and until
their successors are elected and qualify, unless sooner removed by the Board of
Directors.
The Board shall also annually (or from time to time as may be deemed
desirable) elect one or more Vice Presidents and any other officers, agents or
factors or fill any vacancy as it may deem necessary, who shall hold office
until others are elected and qualify in their stead, subject to removal by the
Board at any time with or without cause.
The same person may hold one or more offices, except that the same person
may not serve as both President and Secretary.
Sec. 6. Meetings of the Board of Directors, regular or special, may
be held at such times and places as it may designate.
A special meeting may be called at any time by the President or by any
three elected directors.
Regular meetings of the Board of Directors may be held with or without
notice. Notice of special meetings of the Board of Directors shall be mailed or
telegraphed to each director at least three days prior to the date of the
meeting, or notice may be waived in writing before, at or subsequent to any
<PAGE>
such meeting, and the presence of any director at a meeting shall be deemed a
waiver of notice of such meeting. Neither the business to be transacted at nor
the purpose of any regular or special meeting of the Board of Directors need be
specified in the notice or waiver of notice of such meeting.
Members of the Board of Directors and all committees designated by said
Board of Directors may participate in meetings of such Board or committees by
means of a conference telephone or similar communications equipment whereby all
persons participating in the meeting can hear each other, and participation by
such means shall constitute presence in person at such meeting. When such a
meeting is conducted by means of a conference telephone or similar
communications equipment, a written record shall be made of the action taken at
such meeting.
Sec. 7. The Board of Directors may, by resolution adopted by a majority of
the number of directors fixed by these Bylaws, designate two or more directors
to constitute an Executive Committee, which shall have and may exercise all of
the authority of the Board of Directors, except to approve an amendment to the
Articles of Incorporation or a plan of merger or consolidation.
Other committees with limited authority may be designated by a resolution
adopted by a majority of the directors present at a meeting at which a quorum is
present.
Sec. 8. The Board of Directors may appoint a Transfer Agent or a Transfer
Agent and Registrar of Transfer and may require all certificates for each
applicable class of stock to be authenticated by the Transfer Agent or by the
Transfer Agent and Registrar, as the case may be, or as the Board may otherwise
direct.
Sec. 9. A director may be removed from office only for cause.
Sec. 10. Unless otherwise provided by the Articles of Incorporation of
this corporation, any action required by the laws of Virginia to be taken at a
meeting of the directors, or any action which may be taken at a meeting of the
directors or of a committee, may be taken without a meeting if a consent in
writing, setting forth the action, shall be signed either before or after such
action by all of the directors, or all of the members of the committee, as the
case may be. Such consent shall have the same force and effect as a unanimous
vote.
ARTICLE III
------------
OFFICERS - DUTIES AND POWERS
- ----------------------------
Sec. 1. The President shall be elected by the Board of Directors and shall
preside at all meetings of the Board of Directors, unless there shall be a
Chairman of the Board and such officer shall be present, in which event such
Chairman shall so preside. In the absence of the Chairman of the Board of
Directors, if any, the President and all Vice Presidents, a Chairman of the
meeting shall be elected by the meeting.
The President shall ex officio be a member of all committees, shall sign
all certificates of stock and conveyances of real estate and other instruments
in writing by law requiring the President's signature, and perform such other
duties as may be required of him from time to time by the directors, and shall
have the authority, powers and duties that are usually given such officer.
<PAGE>
Sec. 2. In the case of the absence of the President or of his inability to
act, his duties shall be performed by any Vice President (in the event of more
than one Vice President, the senior Vice President present and able to act shall
be entitled to do so), who, in that event, shall execute any of the above powers
of the President.
Sec. 3. The Secretary or Secretary-Treasurer shall attend all
meetings of the stockholders and directors and Executive Committee of the
corporation and keep a full and accurate account of their proceedings in a
book to be kept for that purpose.
He shall, unless and until the Board of Directors appoints another person
or corporation the Transfer Agent as hereinabove provided, act as the Transfer
Agent of the corporation and maintain the stock books and addresses of the
stockholders of the corporation. He shall be the custodian of the corporate seal
of the corporation and shall fix and attest the seal, as authorized by the Board
of Directors or the Bylaws of this corporation, to all certificates of stock and
such other instruments requiring the seal. He shall also keep such other books,
deeds, contracts and other valuable papers belonging to the corporation and
perform such other duties as may be required of him by the President, the Board
of Directors, or the Executive Committee.
Sec. 4. The Treasurer or Secretary-Treasurer shall have the custody of all
monies and securities of the corporation and shall deposit the same in the name
and to the credit of the corporation in such depositories as may be designated
by the Board of Directors. He shall keep a full and accurate account of the
receipts and disbursements of the corporation in books belonging to the
corporation, and shall disburse the funds of the corporation by check or other
warrant to be signed as prescribed by resolution of the Board of Directors. All
books and papers in his care shall be always open to the inspection of the
President or any director, as well as of any person whom the President or Board
of Directors may appoint to examine such books and papers. He shall render such
reports to the President or Board of Directors as may be required of him and
shall perform such other duties as may be incident to his office or as may be
required of him by the Board of Directors.
He may be required by the directors at any time to give bond as the
directors may designate.
Sec. 5. Any person elected by the Board of Directors as an assistant to an
officer, for example, an Assistant Secretary, shall, unless otherwise restricted
by the Board of Directors and in all cases subordinate to the officer himself,
have and exercise all of the rights, duties, functions and powers of such
officer.
Sec. 6. In the event of the absence of any officer of the corporation or
his disqualification or inability to act where provision therefore is not
expressly made by these Bylaws, the President may by written order, or the Board
of Directors may by resolution, delegate the powers of such officer to any other
officer or employee of the corporation.
Sec. 7. Any officer or agent may be removed, with or without cause, at any
time whenever the Board of Directors in its absolute discretion shall consider
that the best interests of the corporation would be served thereby. Any officer
or agent appointed otherwise than by the Board of Directors may be removed, with
or without cause, at any time either by the Board of Directors or by any officer
having authority to appoint whenever the Board of Directors of such appointing
officer in its or his absolute discretion shall consider that the best interests
of the corporation will be served thereby.
<PAGE>
ARTICLE IV
----------
INDEMNIFICATION OF OFFICERS AND DIRECTORS
- -----------------------------------------
Sec. 1. The corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative, arbitrative
or investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys' fees)
, judgements, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in the manner he reasonably believed to be in or not opposed
to the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgement, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not of itself create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe that his conduct was unlawful.
Sec. 2. The corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgement in
its favor by reason of the fact that he is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with defense or settlement of such action or suit if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation and except that no indemnification shall be made in
respect of any claim. Issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of his
duty to the corporation unless and only to the extent that the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
such court shall deem proper.
Sec. 3. To the extent that a director, officer, employee or agent of
this corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in Sections 1 and 2, or in defense
of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him
in connection therewith.
<PAGE>
Sec. 4. Any indemnification under Sections 1 and 2 (unless ordered by a
court) shall be made by the corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in Sections 1 and 2. Such determination shall be made (a)
by the Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (b) if such a quorum
is not obtainable, or, even if obtainable, a quorum of disinterested directors
so directs, by independent legal counsel in a written opinion, or (c) by the
shareholders.
Sec. 5. Expenses (including attorneys' fees) incurred in defending an
action, suit or proceeding, whether civil, criminal, administrative, arbitrative
or investigative, may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding as authorized in the manner
provided in Section 4 upon receipt of an undertaking by or on behalf of the
director, officer, employee or agent to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by the
corporation as authorized in this article.
Sec. 6. The corporation shall have power to make any other or further
indemnity, including criminal proceedings, to any person referred to in this
section that may be authorized by the Articles of Incorporation or by any Bylaw
made by the stockholders or any resolution adopted, before or after the event,
by the stockholders, except an indemnity against his gross negligence or willful
misconduct. Each such indemnity may continue as to a person who has ceased to
have the capacity referred to above and may inure to the benefit of the heirs,
executors and administrators of such a person.
Sec. 7. The corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify him
against such liability under the provisions of this article.
Sec. 8. For the purposes of this article, references to "corporation"
include all constituent corporations absorbed in a consolidation or merger, as
well as the resulting or surviving corporation, so that any person who is or was
a director, officer, employee or agent of such a constituent corporation or is
or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise shall stand in the same position under the provisions
of this article with respect to the resulting or surviving corporation as he
would if he had served the resulting or surviving corporation in the same
capacity.
ARTICLE V
---------
SEAL
- ----
Sec. 1. The seal of this corporation shall be as the impression made
below:
<PAGE>
ARTICLE VI
----------
CHECKS, DRAFTS, NOTES, ETC.
- ---------------------------
Sec. 1. All checks, drafts, notes and orders for the payment of money
issued by the corporation shall be signed by such person or persons as the Board
of Directors may from time to time designate, and any endorsement of such paper
in the ordinary course of business shall be similarly made.
ARTICLE VII
-----------
NOTICE
- ------
Sec. 1. Any notice mailed by the corporation to any director or
stockholder shall be sufficient service of such notice when deposited in the
United States mail, addressed to such stockholder or director at the address
furnished by such stockholder or director to the corporation or its Transfer
Agent, in the event an outside Transfer Agent has been appointed, with postage
thereon prepaid.
ARTICLE VIII
------------
STOCK, NOTES, BONDS AND DEBENTURES
- ----------------------------------
Sec. 1. The shares of the corporation shall be evidenced by certificates
of each class of stock issued in numerical order, signed by the President or a
Vice President and the Secretary or an Assistant Secretary or the Treasurer or
an Assistant Treasurer, or any other officer authorized by these Bylaws or a
resolution of the Board of Directors, and may (but need not) be sealed with the
seal of the corporation or a facsimile thereof. The signatures of the officers
upon a certificate may be facsimiles if the certificate is countersigned by a
Transfer Agent or registered by a Registrar other than the corporation itself or
an employee of the corporation.
Sec. 2. On any bond, note or debenture issued by the corporation
which is countersigned or otherwise authenticated by the signature of a
trustee, the signatures of the officers of the corporation and its seal may be
facsimiles.
Sec. 3. In case any officer who has signed or whose facsimile signature
has been placed upon a stock certificate or a bond, note or debenture shall have
ceased to be such officer before such certificate or other such document is
issued, it may be issued by the corporation with the same effect as if he were
such officer at the date of its issue.
Sec. 4. Transfers of stock shall be made only upon the books of the
corporation (whether maintained by the corporation or by a Transfer Agent, in
the event one is appointed) and only by the person named in the certificate or
by attorney lawfully constituted in writing and, subject to the provisions of
Section 6 hereof, only upon surrender of the certificate therefore. The Board of
Directors may by resolution make reasonable regulations for the transfer of
stock.
<PAGE>
Sec. 5. Registered stockholders only shall be entitled to be treated by
the corporation as the holders in fact of the stock standing in their respective
names, and the corporation shall not be bound to recognize any equitable or
other claim to or interest in any shares on the part of any other person whether
or not it shall have express or other notice thereof, except as expressly
provided by the laws of Virginia.
Sec. 6. In case of loss or destruction of any certificate of stock,
another may be issued in its place upon proof of such loss or destruction, and
upon the giving of a satisfactory bond of indemnity to the corporation in such
sum as the directors may provide, not exceeding double the value of the stock.
ARTICLE IX
-----------
BOOKS AND RECORDS
- -----------------
Sec. 1. The Board of Directors shall determine from time to time whether,
and, if allowed, when and under what conditions and regulations, the accounts
and books of the corporation (except such as may by statute be specifically open
to inspection), or any of them, shall be open to the inspection of the
stockholders, and the stockholders' rights in this respect are and shall be
restricted and limited accordingly.
ARTICLE X
---------
AMENDMENT OF BYLAWS
- -------------------
Sec. 1. These Bylaws may be altered, amended or repealed and new Bylaws
may be adopted by the Board of Directors; but Bylaws made or adopted by the
Board of Directors may be repealed or changed and new Bylaws made by the
stockholders, and the stockholders may prescribe that any Bylaw made by them
shall not be altered, amended or repealed by the directors.
Effective: Oct. 1, 1979
Amended: Feb. 28, 1983 - Article 2, Section 2
Amended: Oct. 22, 1984 - Article 2, Section 2
Amended: Jun. 23, 1986 - Article 2, Section 2
Amended: Oct. 31, 1990 - Article 1, Section 5
Amended: Nov. 25, 1996 - Article 2, Section 2
Amended: May 19, 1997 - Article 2, Section 2, 3, 9 and Article 3, Section 1
<PAGE>
EXHIBIT 10(Q)(Q)
CONSULTATION CONTRACT
This is an agreement signed this 27th day of January, 1997, between
Roanoke Gas Company ("Company") and W. Bolling Izard ("Retired Director").
In consideration of the premises and the mutual promises and covenants of
the parties to this contract, it is agreed as follows:
1. Engagement: The Company agrees to engage the Retired Director
and the Retired Director agrees to serve the Company as a
consultant.
2. Term: The term of this agreement shall commence on February 1, 1997
and shall continue for ten years until January 31, 2007.
3. Services: The Retired Director shall use his best efforts on a
strictly part-time basis to consult with the Company and help the
Company on such matters as the Company deems reasonably appropriate.
By example, the Company may request the Retired Director to help the
Company improve a business relationship with another business in the
operating area of the Company, etc.
4. Compensation: As compensation for the services to be rendered by the
Retired Director, the Company shall pay the Retired Director
compensation at the rate of $7,200.00 per year for each year this
agreement is in effect, such compensation to be paid on a monthly
basis on the first day of each month this agreement is in effect.
5. Expenses: The Retired Director shall also be entitled to
reimbursement for all reasonable expenses necessarily incurred by him
in the performance of his duties upon presentation of a voucher
indicating the amount and business purposes. Such expenses must
normally be approved in advance by a person or persons designated by
the Company.
6. Termination: Either party may terminate this agreement upon any
annual, anniversary date of signing of this agreement. Further,
this agreement shall be terminated upon the death or complete
disability of the Retired Director. The foregoing
notwithstanding, this agreement shall be terminated upon the
expiration of ten years from the anniversary date of signing of
this agreement, whether or not the Retired Director is deceased
or permanently disabled at that time. Finally, this agreement is
immediately terminable by the Company, if the Retired Director
directly or indirectly competes with the Company or reveals
confidential information of the Company to an organization,
person or entity which is directly or indirectly competing with
the Company. Upon any termination under this agreement, the
Retired Director shall be entitled to compensation through the
date of termination.
7. Successors and Assigns: This agreement shall inure to the benefit of
and be binding upon the parties hereto; their successors and heirs.
<PAGE>
8. Applicable Law: This agreement shall be governed by the laws of
Virginia.
ROANOKE GAS COMPANY
s/Frank A. Farmer
----------------------------------
President
s/W. Bolling Izard
---------------------------------
Retired Director
<PAGE>
EXHIBIT 10(R)(R)
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
<PAGE>
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 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.
<PAGE>
(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.
(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.
<PAGE>
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 (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.
<PAGE>
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.
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
<PAGE>
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 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 23 day of September, 1996.
By s/F. A. Farmer
----------------------
Chairman of the Board
and President of
Roanoke Gas Company
<PAGE>
EXHIBIT 13
RGCO
[Graphic: Roanoke Gas Company Logo Flame]
Roanoke Gas Company
1997 Annual Report
[GRAPHIC: Depicted are illustrations of Roanoke Gas Company's liquified
natural gas facility in Botetourt County, Virginia, one of Highland Propane
Company's bulk storage facilities, and Bluefield Gas Company's office in
Bluefield, West Virginia.]
<PAGE>
Contents
1 Letter To Stockholders
2 A Message From John Williamson -President
Elect
3 Review Of Operations
7 Management's Discussion & Analysis
12 1997 Financial Highlights
13 Independent Auditors' Report
14 Consolidated Balance Sheets
16 Consolidated Statements Of Earnings
17 Consolidated Statements Of Stockholders'
Equity
18 Consolidated Statements Of Cash Flows
20 Notes To Consolidated Financial
Statements
32 Summary Of Gas Sales & Statistics
33 Summary Of Capitalization Statistics
35 A Tribute To Frank Farmer
36 Corporate Mission Statement
Notice Of Annual Meeting - Back Cover
Depicted on the front of the report are illustrations by Karen Kessler of
Roanoke Gas Company's liquified natural gas facility in Botetourt County,
Virginia, one of Highland Propane Company's bulk storage facilities, and
Bluefield Gas Company's office in Bluefield, West Virginia.
<PAGE>
Letter To Stockholders
Dear Stockholder:
I am pleased to say that the year ended September 30, 1997 was one of new
records for Roanoke Gas Company. We set records for earnings, customer growth
and gallons of propane sold. Earnings were $2.3 million, 5 percent higher than
last year despite 8 percent warmer weather. Earnings per share increased to
$1.54 from $1.51, while the number of shares outstanding increased by 3 percent.
Our number of customers increased over 4,000, a 7 percent growth rate
overall, with natural gas customers increasing 3 percent and the number of
propane customers increasing by an exciting 38 percent. Despite the warmer
weather, propane volumes increased by 10 percent, associated with customer
growth occurring throughout the year. Natural gas volumes were down by 3
percent, associated with fewer space heating sales during the milder winter,
particularly January and February.
Our dividend reinvestment and stock purchase plan remains attractive for
investors, and over 50,000 shares were sold to existing stockholders during the
year. Approximately 20 percent of dividends paid in 1997 were reinvested through
the plan. Our dividend record remains strong, with 53 years of consecutive
quarterly dividends, and 1997 marked our second consecutive yearly dividend
increase.
We are particularly pleased with our marketing efforts and the resulting
customer growth. Our 3 percent annual growth rate in natural gas customers is
well above the national average of 1.9 percent published by the American Gas
Association. Our 38 percent propane customer growth rate is outstanding and
reflects our commitment to growth through service territory expansion, market
saturation and acquisition of available propane distributorships. Propane is
clearly becoming the fuel of choice for home space and hot water heating in
areas where extending natural gas lines is not economically practical.
We are very active in the regulatory arena, as we have rate cases pending
for Roanoke Gas Company, Bluefield Gas Company and Commonwealth Public Service
Corporation. The rate cases are necessary to both keep returns on the capital
invested in the public utility systems up-to-date with current interest rate
costs and ensure timely recovery of the added capital and depreciation costs for
replacement of the older portions of the distribution plant. We remain committed
to our long-term plan to replace all bare steel and cast iron piping in the
natural gas distribution systems, and we replaced 8.1 miles of bare steel and
cast iron mains in 1997.
We continued our efforts at streamlining operations to control costs
through increased investment in technology, increased employee training and
continued use of outsourcing where economies of scale indicated savings were
available. Our customer-to-employee ratio at September 30, 1997 was over 397
compared to 285 in 1991 when I became President of Roanoke Gas Company.
I plan to retire at the end of January 1998, but I will be leaving the
Company in good hands with a strong management team in place and ready to take
over. John B. Williamson, III will become President and Chief Executive Officer,
and I have every confidence in his leadership abilities and knowledge. Arthur L.
Pendleton will become Executive Vice President and Chief Operating Officer, and
he has worked closely with me for the last 20 years as we have grown and
improved our operations. I plan to stay active in the Company and the industry.
I will remain as Chairman of the Board of Roanoke Gas Company, and I will
continue to be Chairman of the Coordinating Council for Smaller Company Programs
of the American Gas Association (AGA) and will continue on the Board of
Directors of the AGA.
<PAGE>
On behalf of the Board of Directors of Roanoke Gas Company and our
management, I once again invite you to join us for a stockholders breakfast and
social hour prior to our Annual Meeting on January 26, 1998. Also on behalf of
the Board and Management, I extend our continuing appreciation to you for your
investment as a stockholder of Roanoke Gas Company.
Sincerely,
s/F. A. Farmer
Frank A. Farmer, Jr.
Chairman of the Board, President & CEO
Graphic: Photograph of Photo Caption: Frank A. Farmer, Jr.
Frank Farmer Chairman, President &
CEO Roanoke Gas Company
<PAGE>
A Message From John Williamson -
President Elect
I am very pleased to have the opportunity to lead Roanoke Gas Company
following Mr. Farmer's retirement, and I am most appreciative of the Board of
Directors' vote of confidence. I will strive to continue earning that confidence
year after year.
I come to the position with a strong management team in place. Art
Pendleton as Chief Operating Officer will ensure that the skill and knowledge
built by Mr. Farmer over the years in Company operations will continue. Roger
Baumgardner has been Vice President, Secretary and Treasurer for 15 years and
will continue to provide his talents and stable influence in Company activities.
We also have a staff of managers with industry experience ranging from 5
to 20 years. Jane O'Keeffe, our Assistant Vice President for Human Resources,
has 6 years with Roanoke Gas Company and 20 years of human resource management
experience. John D'Orazio runs our Marketing and New Construction Department and
is the engine behind our outstanding customer growth. He has been with the
Company for 5 years and has 15 years of industry experience. Robert Wells, our
Director of Information Systems, has 14 years with the Company and is the
guiding force in our expanding utilization of state-of-the-art technology.
David Anderson, our Assistant Secretary and Assistant Treasurer, who has
been with the Company 18 years, will continue his work in regulatory and rate
case affairs. Our Controller, Howard Lyon, has been with the Company 10 years.
He has prior experience with a national accounting firm and gives unparalleled
commitment in his role with the Company. Richard Pevarski, our Director of
Distribution Service, has 12 years with the Company and 13 years of industry
experience. He is the steady hand on the natural gas distribution system in
Roanoke. James Devens, who directs our propane operations, has been with us 6
years and has great enthusiasm for the growth opportunity that the propane
market holds.
Jim Shockley has been with us 13 years and has risen up through the ranks,
starting as an entry-level employee in distribution, to become Manager of
Bluefield Gas Company. Ed Painter, with 10 years of experience, oversees our
Customer Service Department. Ann Miller has 7 years with the Company and
oversees our materials purchasing and warehousing. Mike Gagnet, who manages the
acquisition and shipment of over 12 million MCFs of natural gas and 6 million
gallons of propane, has 13 years with the Company. In addition, there are
several employees in our management development program with great promise, and
we have a number of experienced supervisors in all major areas of the Company to
help guide the efforts of a dedicated and well-trained workforce. (We also have
a very strong Board of Directors, many of whom are CEOs of regional businesses
in areas ranging from health care to public utilities.)
I am excited about leading this committed and talented team. I believe we
have the right combination of creativity, experience and drive to carry Roanoke
Gas Company into the next millennium and to respond aggressively to the changing
energy market and the opportunities that these changes will bring. We look
forward to growing and diversifying Roanoke Gas Company to help ensure that we
remain an attractive and rewarding investment for our stockholders. We plan to
make Roanoke Gas into the premier locally owned and operated Company in our
region, known as an exciting place to work and as an outstanding investment for
its owners.
<PAGE>
I thank you for being a stockholder of Roanoke Gas Company. I hope you not
only will continue, but increase, your level of interest and ownership in this
growing Company, which I believe is located in one of the best regions in the
country in which to live and work.
s/John B. Williamson, III
John B. Williamson, III
President Elect
Graphic: Photograph of Photo Caption: John B. Williamson, III
John Williamson President Elect
Roanoke Gas Company
<PAGE>
Review Of Operations
Financial
The Company established a new benchmark as it surpassed the record
earnings of fiscal 1996 to post net income for fiscal 1997 of $2,309,880 or
$1.54 per share. The previous record was $2,196,672 or $1.51 per share. The
stockholders' investment in the Company grew by $1,621,950 to $20,596,951, which
amounts to $13.48 per share. At September 30, 1997, the market value of the
Company's stock was $18.00 per share, or 134% of book value.
In November 1996, the directors voted to increase the regular quarterly
dividend to $.26 per share from $.255 per share effective February 1997. The
current annual dividend of $1.04 per share is a 5.8% yield on the current market
value of the Company's stock and represents a payout of 67.5% based on earnings
for fiscal 1997.
In December 1996, the Company issued $8,000,000 unsecured senior notes
payable by Roanoke Gas Company and $1,300,000 unsecured notes payable by
Bluefield Gas Company. The Company increased its equity capitalization by
issuing $882,719 in stock through its Dividend Reinvestment and Stock Purchase
Plan and its Restricted Stock Plan For Outside Directors.
The Company has unsecured lines of credit through its cash management
system totaling $20,000,000 at interest rates of prime or less. These lines are
subject to annual renewal and do not require compensating balances. The average
month-end balance of short-term debt in 1997 was approximately $8,098,000, at an
average interest rate of approximately 5.97%. The month-end balance at September
30, 1997 was $7,129,000, at an average interest rate of 6.14%.
Please refer to "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for additional information on the Company's
capital resources and for an analysis of changes in revenues and expenses.
Gas Supply
Weather patterns brought unseasonably cool weather in late fall and early
winter to the Company's service areas. Roanoke recorded 712 heating degree days
for the month of November, which was 33% more heating degree days than the
long-term norm for the month. In late January the pattern shifted, bringing
warmer than normal weather to the service area. Roanoke recorded 611 heating
degree days for the month of February, which was 17.5% fewer heating degree days
than the long-term norm for the month.
One consequence of the early cold weather was an unusually early and sharp
increase in natural gas supply acquisition costs. However, the unseasonably warm
weather in February resulted in a dramatic decline in natural gas commodity
prices. Tempered by the warm weather in late winter, commodity indexes relevant
to Roanoke Gas Company purchases averaged only around 6% higher than the
previous fiscal year.
Roanoke Gas Company continues to use a mixture of long-term (multi-year),
mid-term (seasonal) and short-term (spot) gas purchase contracts. Our objective
is to create a reliable and economical mixture of gas supply contracts with
terms that will not prohibit our ability to adapt to changing market conditions
or further unbundling. We were extremely pleased with the performance of our
natural gas suppliers. Long-term suppliers currently include Amoco Energy
Trading, Cabot Oil and Gas, Engage Energy, Columbia Energy Services, LG&E
Natural Gas and Duke Energy Company.
<PAGE>
[This pulled quote appears in a box: "The Company established a new
benchmark as it surpassed the record earnings of fiscal 1996 to post net
income for fiscal 1997 of $2,309,880 or $1.54 per share."]
Roanoke Gas Company continues to regard storage supplies as an integral
component of our gas supply portfolio. The Roanoke and Bluefield operations
combined hold the rights to about 2.9 billion cubic feet (BCF) of natural gas
storage space, up about 0.1 BCF from last year. This storage includes pipeline
and third party underground facilities in both the Gulf Coast and Appalachian
areas, as well as our own liquefied natural gas (LNG) storage in Botetourt
County, Virginia.
Having storage space allows Roanoke Gas Company to minimize gas costs by
purchasing and injecting natural gas in the summer when the commodity prices are
traditionally lower. When withdrawn in the winter, storage supplies are
generally relatively economical, as well as highly reliable. The Company
participates in pipeline capacity release programs to further minimize the cost
of firm service to our customers.
Nonutility Operations
Total sales by Diversified Energy Company, trading as Highland Propane
Company, for fiscal year 1997 were 6,568,066 gallons, an increase of 10% from
1996 levels on 8% warmer weather. The increased volume is attributed to customer
growth resulting from service territory expansion, increased sales efforts in
existing territories and the leasing of certain of the assets of U.S. Gas, Inc.
On September 5, 1997, the Company executed an agreement with U.S. Gas,
Inc. located in Moneta, Virginia to acquire certain of the propane assets of
U.S. Gas, Inc., which Highland Propane is currently leasing, in exchange for
approximately 35,000 shares of Roanoke Gas common stock. The Company is
currently serving the customers of U.S. Gas, Inc., and expects to complete the
final purchase in November 1997. The pending acquisition accounted for
approximately 500 of the 2,419 customer increase by Highland in 1997 and
established a service
1997 Annual Report
<PAGE>
Review Of Operations
presence for the Company around Smith Mountain Lake.
The Company continued its geographic expansions into Bedford,
Rockbridge and Alleghany counties in Virginia and Fayette, Summers and Raleigh
counties in West Virginia and established four new bulk storage plants,
including a pending acquisition in Bedford with the purchase of certain of the
assets of U.S. Gas, Inc. Propane operations are organized into geographic
divisions based on market concentrations and location of bulk propane storage
facilities. Current divisions include Roanoke, Southwest Virginia, Bluefield,
Beckley, Rainelle, Bedford and Rockbridge. The Company continuously evaluates
potential areas for expansion or acquisition and believes that new propane
territories and customer additions offer significant growth opportunities.
Diversified Energy Company, trading as Highland Gas Marketing, sold
1,154,834 decatherms of natural gas in 1997, an increase of 14% over 1996.
Highland Gas Marketing buys interruptible supplies of spot gas and temporary
interstate pipeline transportation services, and resells them to large
industrial customers that contract with the local utility for delivery from the
interstate pipeline to the customer's meter. The natural gas marketing business
is highly competitive with relatively low margins; however, it also has a low
cost of operation with minimal facility and personnel requirements.
[This pulled quote appears in a box: "Roanoke Gas Company, Bluefield Gas
Company and Highland Propane Company experienced record customer growth in
1997. The Company's total combined customer base increased from
approximately 57,000 customers to over 61,000."]
Plant Additions
Capital additions for fiscal 1997 totaled $8,052,801 for the consolidated
companies, substantially greater than the $5,522,977 total for last year. The
increase was driven by record setting growth, primarily for Highland Propane
Company. Bluefield Gas accounted for 7.6% of the total capital spending or
$608,106, Highland Propane additions were 28.9% of the total or $2,326,222 and
Roanoke Gas added $5,118,473 in capital or 63.5% of total capital additions. New
business expenditures, including mains, meters, new service lines and new
propane installations, totaled $5,072,000, compared to last year's $2,773,000.
The natural gas companies installed 1,667 new service lines and 19.9 miles of
new mains compared to 1,563 new service lines and 18.1 miles of new mains last
year. Highland Propane Company installed 2,280 new tank sets compared to 1,075
last year, a 112% increase.
Main replacement and service renewal expenditures totaled $1,384,000, just
under the $1,508,000 spent last year. During the year the Company replaced 598
service lines and 8.14 miles of main compared to previous year totals of 800
service lines and 8.7 miles of main. The Company continues to maintain the
25-year program schedule to replace, by the year 2017, approximately 12,000 bare
steel services and 210 miles of cast iron and bare steel distribution mains.
This program is designed to reduce maintenance costs and improve system
integrity by reducing unaccounted for gas volumes caused by leakage.
Other major increases in plant additions included: $151,000 for facility
relocations due to road construction projects, $536,000 for new equipment,
including replacement vehicles, and $486,000 to add new support services
equipment, including a new local area computer network in Roanoke and a wide
area network in our Bluefield and Rainelle, West Virginia offices.
<PAGE>
For fiscal year 1998, the Company has budgeted $7,667,000 for capital
expenditures. Major items will include $2.1 million to support Highland Propane
customer growth, $3.1 million in new natural gas customer additions, $1.3
million to replace existing mains and services, $175,000 for relocations due to
road construction projects, $400,000 for new equipment, including automotive
replacements, and $460,000 for support services, including computer software and
an upgrade of our central processing system.
Marketing & Sales
Roanoke Gas Company, Bluefield Gas Company and Highland Propane Company
experienced record customer growth in 1997. Customer growth was approximately 3%
at Roanoke Gas Company, 3% at Bluefield Gas Company and 38% at Highland Propane
Company. Combined, over 4,000 new customers were added in 1997, with an overall
growth rate of 7%, more than three times the national average. The Company's
total combined customer base increased from approximately 57,000 customers to
over 61,000. On the natural gas side, conversions represented approximately 50%
of the new customer growth for Roanoke Gas Company and 64% for Bluefield Gas
Company.
Highland Propane surpassed 2,000 tank installations in a single year for
the first time in the Company's history. This represented a 112% increase over
last year's tank installations. Tank installations were up in all divisions of
Highland Propane with Southwest Virginia up 190% from fiscal 1996, followed by
Rainelle, West Virginia up 135%, Roanoke, Virginia up 84% and Bluefield, West
Virginia up 63%. Highland has expanded its marketing efforts over the past year
to include Beckley, West Virginia and Rockbridge County, Alleghany County, and
Bedford County, Virginia.
The marketing strategy for both propane and natural gas is centered around
strong trade ally relationships, one-on-one contacts with members of the sales
team and providing superior, real-time
Roanoke Gas Company
<PAGE>
customer service. This program has been extremely successful, and the number of
trade allies has grown and expanded into Beckley, West Virginia and Alleghany
County, Rockbridge County and Bedford County, Virginia. The Company has been
proactive in its efforts to seek feedback from the trade allies and has made
improvements to operations based on their suggestions.
Commission sales representatives, whose primary goal is the addition of
new gas customers along existing gas mains or the addition of new propane
customers, have proven to be highly successful. Natural gas conversion customers
exceeded the 650 customer mark for the second year in a row, and the number of
new propane tank sets more than doubled compared to the number of new tank sets
last year. Highland Propane Company has added commissioned sales personnel to
cover Bedford County and Montgomery County, Virginia, which are two of the
fastest growing areas in our propane service territory.
The Company has been working closely with prospective industrial and
commercial (I/C) customers and regional economic development groups. In 1997, we
added several new I/C customers to our system, including R.R. Donnelley, Towers
Automotive, Dynax Corporation and Virginia Forging.
The Company remains actively involved in various leadership positions
within the community, including, but not limited to, the Roanoke Regional
Chamber of Commerce, The Arts Council of the Blue Ridge, Junior Achievement, The
New Century Council, United Way, The Salvation Army, Community School and the
Roanoke Regional and New River Valley Homebuilders Associations. The Company
takes its community responsibilities seriously and encourages employees to
become involved in community affairs.
[Pulled quote appears in a box: "Roanoke Gas Company is responding to its growth
by improving employee efficiency through enhancing the end user's day-to-day
work environment with better user interfaces, desktop functionality, system
integration, and user training."]
Customer Service
Roanoke Gas Company is committed to providing quality customer service for
all of its customers via its Customer Service Department, a blend of human
resources and technology. The Company utilizes an automated attendant answering
system to direct callers to their appropriate area of interest.
During the winter of 1996, as customers responded to rising gas costs
brought on by the natural gas market reaction to an unusually cold November, the
telephone call volumes exceeded the capacity of the Department to respond in a
timely fashion and, accordingly, an answering service was employed to assist
with the problem. Customer calls are automatically forwarded by the automated
attendant to the answering service after the caller has been on hold one minute
and thirty seconds. The answering service takes messages from customers, and
Company personnel then return calls in non-peak calling times. This method
functioned well and is anticipated to provide relief during the busy fall
furnace light-up season.
Roanoke Gas Company is exploring other technological advances, such as
integrated voice response units which will allow customers to call the Company
and obtain account balances, date of last payments and other information without
having to speak directly with a Customer Service Representative. As the customer
base continues to grow, the Company will diligently search for new technology to
better serve its customers, while always offering a human contact for those
needing it.
The Company again conducted its annual HeatShare Program, designed to
provide monetary assistance to low income customers having difficulty paying
their winter bills. Now in its sixteenth season, the program has helped more
than 6,000 families with nearly $850,000 donated by the Company, employees,
customers and concerned individuals. The program is administered each year by
The Salvation Army. In addition, customer service employees provide information
to the needy families on additional sources of financial assistance.
<PAGE>
Information Systems
Customer growth, while controlling costs, requires improved employee
efficiency and reliable systems that can be scaled to meet the increasing needs
of the business. Roanoke Gas Company is responding to its growth by improving
employee efficiency through enhancing the end user's day-to-day work environment
with better user interfaces, desktop functionality, system integration, and user
training. To help assure system reliability and stability, considerable progress
has been made on the Year 2000 situation.
With the installation of a new Local Area Network (LAN) and Wide Area
Network (WAN), employees use a graphical user interface (GUI) that provides a
seamless environment between IBM AS/400 applications and PC applications. The
environment utilizes a standardized PC application suite on the network that
provides consistency for both the end user and technical support. Structured
training for our PC applications has been outsourced to a vendor that is focused
on user training. This provides uniform training for end users and allows
technical human resources to be committed to technology. The functionality and
integration built into the PC applications and the IBM AS/400 reduces the
efforts required by the end user.
The implementation of our Purchase Requisition and Electronic
Authorization Systems continued our progress toward the goal of complete
system integration. The Purchase Requisition System assists the
1997 Annual Report
<PAGE>
Review Of Operations
authorized end user to request the purchase of materials, equipment and other
supplies electronically. The Electronic Authorization System receives end user
requisitions and routes them for proper approval. Once a requisition has been
completely approved, a purchase order is automatically created for the items to
be ordered. These systems have reduced paperwork and the time required to
process a requisition and have increased control through system authority.
On-line inquiry and reports can be executed to provide current and historical
information on requisitions.
New technology and efficiencies gained through the use of new systems is
no more important than the reliability and stability of existing systems. With
this commitment, significant progress is being made on the Year 2000 Project.
Critical financial applications, such as General Ledger, Payroll and Budgeting,
have all been converted to handle the turn of the century. All new systems such
as LAN, WAN, and Purchase Requisitions, were required to be Year 2000 compliant
prior to installation. All remaining IBM AS/400 systems, such as Customer
Information, Work Orders, and Inventory, are to be Year 2000 compliant by
December 31, 1997.
To help ensure adequate system performance, to enable the continued
application system growth, and to facilitate the maintenance of existing
systems, the IBM AS/400 was upgraded subsequent to fiscal year end.
Market Price & Dividend Information
The Company's common stock is listed on the Nasdaq National Market under
the trading symbol RGCO. This provides stockholders, brokers and others with
immediate access to the latest bid and ask prices and creates greater liquidity
in the Company's stock. The table below sets forth the range of bid prices for
shares of the Company's common stock, as reported in the Nasdaq National Market.
Although the Company has paid continuous quarterly dividends to its
stockholders since August 1, 1944, and has increased dividends for the past two
years, the Company has not established a formal policy with respect to
dividends. Payment of dividends is within the discretion of the Company's Board
of Directors and will depend upon, among other factors, earnings, capital
requirements and the operating and financial condition of the Company. There can
be no assurance that these or other conditions will not in the future negatively
affect the Company's ability to pay dividends. In addition, the Company's
long-term indebtedness contains restrictions on cumulative net earnings of the
Company and dividends previously paid. At September 30, 1997 and 1996,
respectively, the Company had 1,853 and 1,713 common shareholders of record in
conjunction with 1,527,486 and 1,475,843 common shares outstanding.
<PAGE>
<TABLE>
<CAPTION>
Range of Cash
Bid Prices Dividends
Declared
Fiscal Year Ended High Low
September 30,
<S> <C> <C> <C>
1997
First Quarter $18.000 $16.750 $.26
Second Quarter 18.250 17.000 .26
Third Quarter 17.750 15.750 .26
Fourth Quarter 18.125 16.000 .26
1996
First Quarter $16.250 $14.250 $.255
Second Quarter 18.500 15.000 .255
Third Quarter 18.250 16.500 .255
Fourth Quarter 17.250 14.750 .255
</TABLE>
Roanoke Gas Company
<PAGE>
Management's Discussion & Analysis
Of Financial Condition And Results Of Operations
<TABLE>
<CAPTION>
Roanoke Gas Company and Subsidiaries
SELECTED FINANCIAL DATA
Years Ended September 30,
1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Revenues $ 65,047,826 $ 65,770,873 $ 48,611,147 $ 58,195,857 $ 57,715,679
Operating Margin 22,464,921 22,030,795 19,435,864 19,902,497 18,297,030
Operating Earnings 4,403,423 4,035,304 3,522,258 3,537,267 3,235,269
Earnings Before Interest Charges 4,550,333 4,113,044 3,701,907 3,592,351 3,264,713
Net Earnings 2,309,880 2,196,672 1,777,240 1,677,098 1,441,336
Net Earnings Per Share 1.54 1.51 1.26 1.25 1.13
Cash Dividends Declared
Per Share 1.04 1.02 1.00 1.00 1.00
Book Value Per Share 13.48 12.86 12.25 11.88 11.36
Average Shares Outstanding 1,503,388 1,455,999 1,408,659 1,339,402 1,280,176
Total Assets 62,593,258 58,921,099 51,614,667 49,579,447 48,758,728
Long-Term Debt
(Less Current Installments) 17,079,000 20,222,124 17,504,047 16,414,900 16,530,499
Stockholders' Equity 20,596,951 18,975,001 17,555,172 16,424,919 14,652,663
Shares Outstanding At September 30, 1,527,486 1,475,843 1,432,512 1,382,343 1,289,302
</TABLE>
<PAGE>
General
The core business of Roanoke Gas Company and its public utility
affiliates, collectively, the Company, is the distribution of natural gas to
approximately 53,000 active customers in the cities of Roanoke, Salem and
Bluefield, Virginia and Bluefield, West Virginia, and the surrounding areas, at
rates and charges regulated by the State Corporation Commission in Virginia (the
Virginia Commission) and the Public Service Commission in West Virginia (the
West Virginia Commission). The Company is required, as a public utility, to help
ensure that it has the capacity to adequately serve the ongoing needs of its
customers. The Company also continues to expand its facilities to keep pace with
the industrial and commercial development and residential growth in its service
areas. The Company continues to experience steady customer growth, and
anticipates continuing this trend by attracting adequate investment capital,
along with adequate and timely increases in rates when needed from the state
commissions. The Company also serves approximately 8,800 active propane accounts
in southwestern Virginia and southern West Virginia and serves natural gas
industrial transportation customers by brokerage of natural gas supplies through
its subsidiary, Diversified Energy Company, which trades as Highland Propane
Company and Highland Gas Marketing. Propane sales are becoming an increasingly
important aspect of the Company's operations, with the annual growth in propane
customers now exceeding the annual growth in natural gas customers.
Continued public acceptance and a growing preference for natural gas and
propane as a competitively priced, clean and efficient fuel for space heating
and other residential, commercial and industrial applications have prompted the
steady increase in the number of customers served and in the cost of
constructing facilities required to serve them. Energy conservation and the
availability of modern, highly efficient furnaces and other appliances for
replacement and new services in better-insulated homes
<PAGE>
continue to result in a slight decline in annual weather normalized per capita
residential usage. The effect of such per capita declines, unless offset by new
customer growth, abnormally cold weather, or requested rate relief, could result
in a decline or attrition in the Company's net operating earnings as a
percentage of the equity component of the rate base. Competition from
alternative fuels and/or suppliers could also impact the Company's profitability
levels. Forward-Looking Statements
From time to time, the Company may publish forward-looking statements
relating to such matters as anticipated financial performance, business
prospects, technological developments, new products, research and development
activities and similar matters. The Private Securities Litigation Reform Act of
1995 provides a safe harbor for forward-looking statements. In order to comply
with the terms of the safe harbor, the Company notes that a variety of factors
could cause the Company's actual results and experience to differ materially
from the anticipated results or other expectations expressed in the Company's
forward-looking statements. The risks and uncertainties that may affect the
operations, performance, development and results of the Company's business
include the following: (i) obtaining adequate rate relief from regulatory
authorities on a timely basis; (ii) earning on a consistent basis an adequate
return on invested capital; (iii) increasing expenses and labor costs and
availability; (iv) price competition from alternative fuels; (v) volatility in
the price of natural gas and propane; (vi) some uncertainty in the projected
rate of growth of natural gas and propane requirements in the Company's service
area; and (vii) general economic conditions both locally and nationally. In
addition, the Company's business is seasonal in character and strongly
influenced by weather conditions. Extreme changes in winter heating
1997 Annual Report
<PAGE>
Management's Discussion & Analysis
Of Financial Condition And Results Of Operations
[Graph Appears here: NATURAL GAS CUSTOMERS]
<TABLE>
<CAPTION>
NATURAL GAS
CUSTOMERS
<S> <C> <C> <C> <C> <C>
Year 1993 1994 1995 1996 1997
Customers 46,788 48,544 49,813 51,094 52,763
</TABLE>
degree days from the normal or mean can have significant short-term impacts on
revenues and gross margin.
Capital Resources & Liquidity
Roanoke Gas Company's primary capital needs are the funding of its
continuing construction program and the seasonal funding of its stored gas
inventories. The Company's capital expenditures for the year were a combination
of replacements and expansions, reflecting the need to replace older cast iron
and bare steel pipe with plastic pipe, while continuing to meet the demands of
customer growth. Total capital expenditures for the period were approximately
$8.05 million, allocated as follows: $5.12 million for Roanoke Gas Company, $.61
million for Bluefield Gas Company and $2.32 million for Highland Propane
Company. Depreciation cash flow provided approximately $3.2 million in support
of capital expenditures, or approximately 40% of total investment. Historically,
consolidated capital expenditures were $5.5 million in 1996 and $5.6 million in
1995. It is anticipated that future capital expenditures will be funded with the
combination of depreciation cash flow, retained earnings, sale of Company equity
securities and issuance of debt.
At September 30, 1997, the Company had available lines of credit totaling
$20 million for its short-term borrowing needs, of which $7,129,000 was
outstanding. Short-term borrowing, in addition to providing limited capital
project bridge financing, is used to finance summer and fall gas purchases,
which are stored in the underground facilities of Columbia Gas Transmission
Corporation, Tennessee Gas Pipeline Company and Virginia Gas Storage Company, as
well as in the Company's above-ground LNG storage facility, to help ensure
adequate winter supplies to meet customer demand. At September 30, 1997, the
Company had $6,485,028 in inventoried natural gas supplies.
Short-term borrowings, together with internally-generated funds, long-term
debt and the sale of common stock through the Company's Dividend Reinvestment
and Stock Purchase Plan (the Plan), have been adequate to cover construction
costs, debt service and dividend payments to stockholders. The terms of
short-term borrowings are negotiable, with average rates of 5.97% in 1997, 5.84%
in 1996 and 6.07% in 1995. The lines do not require compensating balances. The
Company utilizes a cash management program, which provides for daily balancing
of the Company's temporary investment and short-term borrowing needs with
interest rates indexed to the 30-day LIBOR interest rate plus a premium. The
program allows the Company to maximize returns on temporary investments and
minimize the cost of short-term borrowings.
Stockholders' equity increased by $1,621,950, reflecting an increase of
$739,231 in retained earnings and proceeds of $882,719 of new common stock
purchases through the Plan and the Restricted Stock Plan For Outside Directors
for the period. The purchase price of Company common stock under these plans is
based upon the fair market value of such common stock,
<PAGE>
determined by the Board of Directors based on the closing sales price of the
Company's common stock on the Nasdaq National Market on the investment date, if
the investment date is a trading day, or if not, the first trading day prior to
such day.
At September 30, 1997, the Company's consolidated capitalization was 50%
equity and 50% debt, compared to 48% equity and 52% debt at September 30, 1996.
Regulatory & Rate Case Proceedings
The Company has three rate case applications pending before regulatory
bodies. A Bluefield Gas Company rate case application was filed with the West
Virginia Commission in April 1997 with a decision expected in February 1998.
Roanoke Gas Company filed an application with the Virginia Commission in
December 1996 with rates placed into effect, subject to refund, on January 1,
1997. A hearing was held on the application in June 1997, and an order in the
case is not expected until sometime early in 1998. The Company has established
reserves for an estimated level of refund in the case, and management believes
the reserves are adequate to cover any refunds ordered by the Virginia
Commission.
Commonwealth Public Service Corporation, the Virginia portion of Bluefield
Gas Company, filed a rate case with the Virginia Commission in June 1997, and
expects to put the rates into effect, subject to refund, in December 1997. The
hearing and final order are not expected until sometime in 1998.
The Company filed a stipulated settlement with Virginia Gas Company and
the Virginia Commission in the contested certificated territory applications for
Tazewell County, Virginia. The settlement provides for Commonwealth Public
Service Corporation to expand its certificated service territory for several
miles around Bluefield, Virginia in eastern Tazewell County and provides for
Virginia Gas Company to serve the other areas of Tazewell County. The Company
believes this is a reasonable settlement which allows Commonwealth Public
Service Corporation adequate opportunity for future growth. Management expects
the Virginia Commission to approve the settlement.
Roanoke Gas Company
<PAGE>
Results Of Operations
Fiscal Year 1997 Compared With Fiscal Year 1996
OPERATING REVENUES - Operating revenues for the natural gas utilities decreased
$2,225,226 to $57,842,181 in 1997 from $60,067,407 in 1996. The decrease in
revenues is attributed to weather that was approximately 8% warmer in 1997 than
in 1996. Operating revenues for propane increased $1,502,179 to $7,205,645 in
1997 from $5,703,466 in 1996 due to the tremendous growth in the number of
customer additions and higher billing rates impacted by propane cost.
ENERGY VOLUMES - The volume of natural gas delivered to customers was down
365,903 MCF to 10,804,045 MCF in 1997 from 11,169,948 MCF in 1996, primarily
attributable to weather that was approximately 8% warmer than the weather in
1996. While customer growth was on par for the period, sales were down in all
categories, with the exception of transportation volumes, due to warmer weather.
Propane sales volumes for 1997 were 6,568,066 gallons compared to 5,997,912
gallons in 1996, an increase of 570,154 gallons; again, indicative of the
increase in customer growth.
COST OF ENERGY - The cost of natural gas was $38,675,337 in 1997 compared to
$40,763,104 in 1996. The $2,087,767 decrease was due to a 3% decline in volume
and a 2% decrease in unit cost, both of which were impacted by weather that was
approximately 8% warmer in 1997 than in 1996. The cost of propane was up
$930,594 due to an increase in sales volume of 570,154 gallons associated with
customer growth and a 20% increase in unit cost.
OTHER OPERATING EXPENSES - Other operations and maintenance expenses decreased
$411,894, or 4.15%, to $9,512,597 in 1997 from $9,924,491 in 1996. Although the
Company had modest increases in expenses associated with health insurance and
bad debt accruals, legal expenses and the write-off of regulatory assets, these
were more than offset by reductions in FAS 106 accruals and maintenance
expenses.
General taxes increased $54,631 to $2,456,399 in 1997 from $2,401,768 in
1996. While there were decreases in the revenue-sensitive taxes (gross receipts
and occupation taxes), the business license and merchants taxes, franchise taxes
and property taxes increased.
Income taxes were down $105,931 to $857,964 in 1997 from $963,895 in 1996.
See note 5 of the notes to consolidated financial statements for information on
income taxes.
Depreciation and amortization expenses increased $239,465 to $2,533,912 in
1997 from $2,294,447 in 1996 due to depreciation on normal additions to plant in
service.
Other operating expenses - propane operations includes the operating and
maintenance expenses, taxes and depreciation of Highland Propane Company. These
costs increased $289,736 to $2,700,626 in 1997 from $2,410,890 in 1996. The
increase was mainly due to depreciation on increased plant associated with
customer growth and increased income taxes associated with higher taxable
income.
OTHER INCOME - Other income, net of other deductions, increased $69,170 to
$146,910 in 1997 from $77,740 in 1996. The increase was primarily due to jobbing
revenues and interest income and the elimination of a write-down of nonutility
property which occurred in 1996.
[Graph appears here: COMPARISON MCF to HDD (Heating Degree Days)]
<PAGE>
<TABLE>
<CAPTION>
COMPARISON
MCF to HDD (Heating Degree Days)
Year 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C>
MCFs Delivered 9,820,345 10,267,038 9,961,877 11,169,948 10,804,045
HDD 4,356 4,416 3,791 4,696 4,298
</TABLE>
[Graph appears here: COMPARISON Gallons Delivered to HDD (Heating Degree
Days)]
<TABLE>
<CAPTION>
COMPARISON
Gallons Delivered to HDD (Heating Degree Days)
Year 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C>
Gallons Propane 4,586,334 5,012,830 4,822,277 5,997,912 6,568,066
HDD 4,356 4,416 3,791 4,696 4,298
</TABLE>
INTEREST CHARGES - Total interest charges increased $324,081 to $2,240,453 in
1997 from $1,916,372 in 1996. The increase was associated with higher borrowings
under lines of credit due to under-collections of gas costs in the early winter
months, higher receivable balances, higher inventories, increases in capital
additions and interest on rate refund reserve.
NET EARNINGS AND DIVIDENDS - Net earnings for 1997 were $2,309,880 as compared
to $2,196,672 for 1996. Earnings per share of common stock were $1.54 in 1997
compared to $1.51 in 1996. Dividends per share of common stock were $1.04 in
1997 compared to $1.02 in 1996. The $113,208 increase in net earnings can be
attributed to cost containment and customer growth.
1997 Annual Report
<PAGE>
Management's Discussion & Analysis
Of Financial Condition And Results Of Operations
[Graph appears here: COMPARISON Net Income to HDD (Heating Degree Days)]
<TABLE>
<CAPTION>
COMPARISON
Net Income to HDD (Heating Degree Days)
Year 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C>
Net Income $1,441,336 $1,677,098 $1,777,240 $2,196,672 $2,309,880
HDD 4,356 4,416 3,791 4,696 4,298
</TABLE>
Fiscal Year 1996 Compared With Fiscal Year 1995
OPERATING REVENUES - Operating revenues for the natural gas utilities increased
$16,005,670 to $60,067,407 in 1996 from $44,061,737 in 1995. The increase in
revenues is attributed to weather that was approximately 24% colder in 1996 than
in 1995 and a 34% increase in the unit cost of gas. Operating revenues for
propane increased $1,154,056 to $5,703,466 in 1996 from $4,549,410 in 1995. The
increase in revenues is also attributed to the colder weather and customer
growth.
ENERGY VOLUMES - The volume of natural gas delivered to customers was up
1,208,071 MCF or approximately 12% in 1996. The interruptible and transportation
volumes were down due to curtailments but the firm volumes were up 21% due to
the colder weather. Propane sales volumes in 1996 were up 1,175,635 gallons, or
24%, due to the colder weather and an increase in customer growth.
COST OF ENERGY - The cost of natural gas was $40,763,104 in 1996 compared to
$27,027,507 in 1995. The $13,735,597 increase was due to a 12% increase in the
volume of gas delivered to customers and a 34% increase in the unit cost of gas.
Both the volume and price increases in 1996 were impacted by the weather that
was 11% colder than normal. Likewise, the cost of propane in 1996 was up
$829,198 due to a 24% increase in sales volume associated with the colder
weather and customer growth, and an 11% increase in the unit cost of propane.
OTHER OPERATING EXPENSES - Other operations and maintenance expenses increased
11% to $9,924,491 in 1996 from $8,959,677 in 1995. The largest increases were in
bad debt accruals (associated with higher billings), collection and billing
expenses, legal expenses, general office renovations and maintenance of
distribution system.
General taxes increased 15% to $2,401,768 in 1996 from $2,082,896 in 1995,
due primarily to revenue-sensitive taxes (gross receipts and business and
occupation taxes).
Income taxes on the natural gas utilities increased $252,458 to $963,895
in 1996 from $711,437 in 1995, primarily due to increased taxable income. See
note 5 of the notes to consolidated financial statements for additional
information on income taxes.
Depreciation and amortization expenses increased $160,959 to $2,294,447
in 1996 from $2,133,488 in 1995 due to depreciation on normal additions to
plant in service.
<PAGE>
Other operating expenses - propane operations consist of the operating and
maintenance expenses, taxes and depreciation of Highland Propane. These costs
increased to $2,410,890 in 1996 from $2,026,108 in 1995. The $384,782 increase
was mainly attributable to (1) tank sets in regard to customer growth, (2)
additional delivery costs associated with increased volumes and foul weather,
(3) additional sales expense associated with market area expansion and the
resulting customer growth and sales commissions, (4) tank maintenance, and (5)
greater depreciation on additional customer tanks and delivery vehicles.
OTHER INCOME - Other income, net of other deductions, decreased significantly in
1996 to $77,740 from $179,649 in 1995. The decrease was primarily due to Roanoke
Gas Company being in a borrowing mode instead of an investment mode on the cash
management system, a reduction in net jobbing revenues, and the elimination of
interest income and a capital gain on the sale of investment property of
Highland Propane.
INTEREST CHARGES - Total interest charges were down $8,295 for 1996 versus 1995
due to the liquidity of Highland Propane Company. NET EARNINGS AND DIVIDENDS -
Net earnings for fiscal 1996 were $2,196,672 as compared to $1,777,240 for
fiscal 1995. The $419,432 increase in net earnings can be attributed to weather
that was 11% colder than normal and 24% colder than fiscal 1995 and increased
sales from
<PAGE>
[Graph appears here: GROSS UTILITY PLANT]
<TABLE>
<CAPTION>
GROSS UTILITY PLANT
(Including Construction Work-In-Progress)
Millions Of Dollars: 1997 - $66,678,107
Year 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$33,034,999 $36,013,885 $39,346,347 $41,586,792 $45,100,044 $48,258,419 $52,729,927 $57,369,281 $61,732,904 $66,678,107
</TABLE>
Roanoke Gas Company
<PAGE>
customer growth. Earnings per share of common stock were $1.51 in 1996 compared
to $1.26 in 1995. Dividends per share of common stock were $1.02 in 1996 and
$1.00 in 1995.
Accounting Changes
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of (Statement 121), on October 1, 1996.
Statement 121 requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The adoption of Statement 121 in 1997 did not have a material
impact on the Company's consolidated financial position, results of operations
or liquidity.
Prior to October 1, 1996, the Company accounted for its stock options in
accordance with the provisions of Accounting Principles Board (APB) Opinion No.
25, Accounting for Stock Issued to Employees, and related interpretations. As
such, compensation expense was recorded on the date of grant only if the current
market price of the underlying stock exceeded the option price. On October 1,
1996, the Company adopted Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation (Statement 123), which permits entities
to recognize as expense over the vesting period the fair value of all
stock-based awards on the date of grant. Alternatively, Statement 123 allows
entities to continue to apply the provisions of APB Opinion No. 25 and provide
pro forma net earnings and pro forma net earnings per share disclosures for
stock option grants made in 1996 and future years as if the fair-value-based
method defined in Statement 123 had been applied. The Company has elected to
continue to apply the provisions of APB Opinion No. 25 and provide the pro forma
disclosure provisions of Statement 123.
Recent Accounting Developments
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings Per Share
(Statement 128). Statement 128 supersedes APB Opinion No. 15, Earnings Per
Share, and specifies the computation, presentation and disclosure requirements
for earnings per share (EPS) for entities with publicly-held common stock or
potential common stock. The Company is required to adopt the provisions of
Statement 128 on October 1, 1997. The Company believes the adoption of Statement
128 will not have a material impact on its EPS calculations.
The Financial Accounting Standards Board has also issued Statement of
Financial Accounting Standards (SFAS) No. 129, Disclosure of Information about
Capital Structure, SFAS No. 130, Reporting Comprehensive Income, and SFAS No.
131, Disclosures about Segments of an Enterprise and Related Information. These
Statements are effective for fiscal years beginning after December 15, 1997. The
Company does not anticipate the adoption of these Statements will have a
material impact on its consolidated financial position, results of operations or
liquidity.
[Graph appears here: GAS SALES]
<PAGE>
<TABLE>
<CAPTION>
GAS SALES
Volume (Millions)
1997 - 10,804,045 MCF
Year 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Volume 9,212,194 9,316,868 9,066,558 8,335,292 9,339,521 9,820,345 10,267,038 9,961,877 11,169,948 10,804,045
</TABLE>
<PAGE>
Impact Of Inflation
The cost of natural gas represented approximately 72% for fiscals 1997 and
1996 and 66% for fiscal 1995 of the total operating expenses of the Company's
gas utilities' operations. However, under the present regulatory Purchased Gas
Adjustment mechanisms, the increases and decreases in the cost of gas are passed
through to the Company's customers.
Inflation impacts the Company through increases in non-gas costs such as
insurance, labor costs, supplies and services used in operations and maintenance
and on the replacement cost of plant and equipment. The margin charged to
natural gas customers to cover these costs can only be increased through the
regulatory process via a rate increase application. In addition to stressing
performance improvements and higher gas sales volumes to offset inflation,
management must continually review operations and economic conditions to assess
the need for filing and receiving adequate and timely rate relief from the state
commissions.
Franchises
Roanoke Gas Company and Commonwealth Public Service Corporation, a
subsidiary of Bluefield Gas Company, currently hold the only franchises and/or
certificates of public convenience and necessity to distribute natural gas in
their respective Virginia service areas. The franchises generally extend for
multi-year periods and are renewable by the municipalities. Certificates of
public convenience and necessity, which are issued by the Virginia Commission,
are exclusive and of perpetual duration, subject to compliance with regulatory
standards.
1997 Annual Report
<PAGE>
Management's Discussion & Analysis
Of Financial Condition And Results Of Operations
In July 1996, Roanoke Gas signed new 20-year franchise agreements with the
cities of Roanoke and Salem and the Town of Vinton effective as of January 1,
1996. Bluefield Gas Company holds the only franchise to distribute natural gas
in its West Virginia service area. Its franchise extends for a period of 30
years from August 23, 1979.
Management anticipates that the Company will be able to renew all of its
franchises when they expire. There can be no assurance, however, that a given
jurisdiction will not refuse to renew a franchise or will not, in connection
with the renewal of a franchise, attempt to impose certain restrictions or
conditions that could adversely affect the Company's business operations or
financial condition.
Environmental Issues
Both Roanoke Gas Company and Bluefield Gas Company operated manufactured
gas plants (MGPs) as a source of fuel for lighting and heating until the early
1950s. The process involved heating coal in a low-oxygen environment to produce
a manufactured gas that could be distributed through the Company's pipeline
system to customers. A by-product of the process was coal tar, and the potential
exists for on-site tar waste contaminants at both former plant sites. The extent
of contaminants at these sites is unknown at this time, and the Company has not
performed formal analysis at the Roanoke Gas Company MGP site. An analysis at
the Bluefield Gas Company site indicates some soil contamination. The Company,
with concurrence of legal counsel, does not believe any events have occurred
requiring regulatory reporting. Further, the Company has not received any
notices of violation or liabilities associated with environmental regulations
related to the MGP sites and is not aware of any off-site contamination or
pollution as a result of these prior sites. Therefore, the Company has no plans
for subsurface remediation at either of the MGP sites. Should the Company
eventually be required to remediate either of the MGP sites, the Company will
pursue all prudent and reasonable means to recover any related costs, including
insurance claims and regulatory approval for rate case recognition of expenses
associated with any work required. Based upon prior orders of the Commission
related to environmental matters at other companies, the Company believes it
would be able to recover prudently incurred costs. Additionally, a stipulated
rate case agreement between the Company and the West Virginia Commission
recognizes the Company's right to defer MGP clean-up costs, should any be
incurred, and to seek rate relief for such costs. If the Company eventually
incurs costs associated with a required clean-up of either MGP site, the Company
anticipates recording a regulatory asset for such clean-up costs which are
anticipated to be recoverable in future rates. Based on anticipated regulatory
actions and current practices, management believes that any costs incurred
related to the previously-mentioned environmental matters will not have a
material effect on the Company's consolidated financial position.
[Graph appears here: Roanoke Gas Company & Subsidiaries - HOW 1997 REVENUE
DOLLARS WERE SPENT]
<PAGE>
<TABLE>
<CAPTION>
Roanoke Gas Company & Subsidiaries
HOW 1997 REVENUE DOLLARS WERE SPENT
Year Ended September 30, 1997
Gross Revenues - $68,494,365
Amount
<S> <C>
Cost Of Gas & Propane $42,582,905
Salaries & Wages $ 5,057,225
All Other Expenses $ 9,290,285
Taxes $ 3,766,602
Interest Charges $ 2,240,453
Depreciation & Amortization $ 3,247,015
Dividends Declared To Owners $ 1,570,649
Earnings Retained In Business $ 739,231
</TABLE>
[Graph appears here: Roanoke Gas Company & Subsidiaries - 1997 FINANCIAL
HIGHLIGHTS]
<TABLE>
<CAPTION>
Roanoke Gas Company & Subsidiaries
1997 FINANCIAL HIGHLIGHTS
<S> <C>
Operating Revenues - Gas $ 57,842,181
Propane Revenues - Propane $ 7,205,645
Other Revenues - Gas Marketing $ 2,869,514
Merchandising And Jobbing $ 567,128
Interest Income $ 9,897
Gross Revenues $ 68,494,365
Net Earnings $ 2,309,880
Net Earnings Per Share $ 1.54
Dividends Per Share - Cash $ 1.04
Total Customers - Natural Gas 52,763
Total Customers - Propane 8,829
Total Natural Gas Deliveries - MCF 10,804,045
Total Propane Sales - Gallons 6,568,066
Number Of Full-Time Employees 155
Total Payroll Chargeable To
Operations & Construction $ 5,820,863
Total Additions To Plant $ 8,052,801
</TABLE>
Roanoke Gas Company
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
Roanoke Gas Company:
We have audited the accompanying consolidated balance sheets of Roanoke
Gas Company and subsidiaries as of September 30, 1997 and 1996, and the related
consolidated statements of earnings, stockholders' equity and cash flows for
each of the years in the three-year period ended September 30, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Roanoke Gas
Company and subsidiaries as of September 30, 1997 and 1996, and the results of
their operations and their cash flows for each of the years in the three-year
period ended September 30, 1997, in conformity with generally accepted
accounting principles.
s/KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Roanoke, Virginia
October 17, 1997
1997 Annual Report
<PAGE>
<TABLE>
<CAPTION>
Roanoke Gas Company and Subsidiaries
Consolidated Balance Sheets
September 30, 1997 and 1996
Assets 1997 1996
- ------------------------------------------------------============-------===========-
<S> <C> <C>
Utility Plant:
In service $ 65,590,024 60,454,905
Accumulated depreciation and amortization (22,612,963) (20,822,398)
- --------------------------------------------------------------------------------------
In service, net 42,977,061 39,632,507
Construction work-in-progress 1,088,083 1,277,999
- --------------------------------------------------------------------------------------
Utility plant, net 44,065,144 40,910,506
- --------------------------------------------------------------------------------------
Nonutility Property:
Propane 6,634,369 4,403,630
Accumulated depreciation and amortization (2,540,274) (2,070,405)
- --------------------------------------------------------------------------------------
Nonutility property, net 4,094,095 2,333,225
- --------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 116,045 633,322
Accounts receivable, less allowance for
doubtful accounts of $368,345 in
1997 and $279,316 in 1996 4,188,984 3,857,407
Inventories 7,427,581 7,402,586
Prepaid income taxes 7,368 297,521
Deferred income taxes 1,206,995 379,356
Purchased gas adjustments 587,457 1,782,590
Other 420,674 479,926
- --------------------------------------------------------------------------------------
Total current assets 13,955,104 14,832,708
- --------------------------------------------------------------------------------------
Other Assets 478,915 844,660
- --------------------------------------------------------------------------------------
$ 62,593,258 58,921,099
======================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
Roanoke Gas Company
<PAGE>
<TABLE>
<CAPTION>
Liabilities And Stockholders' Equity 1997 1996
- ------------------------------------------------------============------============--
<S> <C> <C>
Capitalization:
Stockholders' equity:
Common stock, $5 par value. Authorized
3,000,000 shares; issued and outstanding
1,527,486 and 1,475,843 shares in 1997
and 1996, respectively $ 7,637,430 7,379,215
Capital in excess of par value 5,271,667 4,647,163
Retained earnings 7,687,854 6,948,623
- --------------------------------------------------------------------------------------
Total stockholders' equity 20,596,951 18,975,001
Long-term debt, excluding current installments 17,079,000 20,222,124
- --------------------------------------------------------------------------------------
Total capitalization 37,675,951 39,197,125
- --------------------------------------------------------------------------------------
Current Liabilities:
Current installments of long-term debt 3,143,124 669,423
Borrowings under lines of credit 7,129,000 6,652,500
Dividends payable 397,530 376,795
Accounts payable 5,512,348 4,931,467
Customer deposits 427,895 362,384
Accrued expenses 4,233,860 3,214,953
Refunds from suppliers - due customers 425,860 23,865
- --------------------------------------------------------------------------------------
Total current liabilities 21,269,617 16,231,387
- --------------------------------------------------------------------------------------
Deferred Credits And Other Liabilities:
Deferred income taxes 3,145,932 2,960,795
Deferred investment tax credits 492,357 531,792
Other deferred credits 9,401 -
- --------------------------------------------------------------------------------------
Total deferred credits and other liabilities 3,647,690 3,492,587
- --------------------------------------------------------------------------------------
$ 62,593,258 58,921,099
======================================================================================
</TABLE>
1997 Annual Report
<PAGE>
<TABLE>
<CAPTION>
Roanoke Gas Company and Subsidiaries
Consolidated Statements Of Earnings
Years Ended September 30, 1997, 1996 and 1995
1997 1996 1995
- ------------------------------------------------------============------============-----============-
<S> <C> <C> <C>
Operating Revenues:
Gas utilities $ 57,842,181 60,067,407 44,061,737
Propane operations 7,205,645 5,703,466 4,549,410
- ------------------------------------------------------------------------------------------------------
Total operating revenues 65,047,826 65,770,873 48,611,147
- ------------------------------------------------------------------------------------------------------
Cost Of Gas:
Gas utilities 38,675,337 40,763,104 27,027,507
Propane operations 3,907,568 2,976,974 2,147,776
- ------------------------------------------------------------------------------------------------------
Total cost of gas 42,582,905 43,740,078 29,175,283
- ------------------------------------------------------------------------------------------------------
Operating Margin 22,464,921 22,030,795 19,435,864
- ------------------------------------------------------------------------------------------------------
Other Operating Expenses:
Gas utilities:
Other operations 8,049,833 8,056,211 7,726,611
Maintenance 1,462,764 1,868,280 1,233,066
Taxes - general 2,456,399 2,401,768 2,082,896
Taxes - income 857,964 963,895 711,437
Depreciation and amortization 2,533,912 2,294,447 2,133,488
Propane operations (including taxes - income
of $309,137, $177,059 and $224,017
in 1997, 1996 and 1995, respectively) 2,700,626 2,410,890 2,026,108
- ------------------------------------------------------------------------------------------------------
Total other operating expenses 18,061,498 17,995,491 15,913,606
- ------------------------------------------------------------------------------------------------------
Operating Earnings 4,403,423 4,035,304 3,522,258
- ------------------------------------------------------------------------------------------------------
Other Income (Deductions):
Gas utilities:
Interest income 8,204 274 26,652
Merchandising and jobbing, net 147,522 99,334 120,475
Other deductions (87,486) (120,539) (142,389)
Taxes - income (37,552) (22,486) (14,547)
Propane operations, net 116,222 121,157 189,458
- ------------------------------------------------------------------------------------------------------
Total other income (deductions) 146,910 77,740 179,649
- ------------------------------------------------------------------------------------------------------
Earnings Before Interest Charges 4,550,333 4,113,044 3,701,907
- ------------------------------------------------------------------------------------------------------
Interest Charges:
Gas utilities:
Long-term debt 1,740,998 1,621,661 1,680,078
Other 441,444 292,301 231,142
Propane operations 58,011 2,410 13,447
- ------------------------------------------------------------------------------------------------------
Total interest charges 2,240,453 1,916,372 1,924,667
- ------------------------------------------------------------------------------------------------------
Net Earnings $ 2,309,880 2,196,672 1,777,240
- ------------------------------------------------------------------------------------------------------
Net Earnings Per Share $ 1.54 1.51 1.26
======================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
Roanoke Gas Company
<PAGE>
<TABLE>
<CAPTION>
Roanoke Gas Company and Subsidiaries
Consolidated Statements Of Stockholders' Equity
Years Ended September 30, 1997, 1996 and 1995
Capital In Total
Common Excess Of Retained Stockholders'
Stock Par Value Earnings Equity
- -------------------------------------------------===========-------===========-----============------=============--
<S> <C> <C> <C> <C>
Balances, September 30, 1994 $ 6,911,715 3,631,335 5,881,869 16,424,919
Net earnings - - 1,777,240 1,777,240
Cash dividends ($1.00 per share) - - (1,416,081) (1,416,081)
Issuance of common stock (50,169 shares) 250,845 522,699 - 773,544
Common stock issuance costs - (4,450) - (4,450)
- --------------------------------------------------------------------------------------------------------------------
Balances, September 30, 1995 7,162,560 4,149,584 6,243,028 17,555,172
Net earnings - - 2,196,672 2,196,672
Cash dividends ($1.02 per share) - - (1,491,077) (1,491,077)
Issuance of common stock (43,331 shares) 216,655 497,579 - 714,234
- --------------------------------------------------------------------------------------------------------------------
Balances, September 30, 1996 7,379,215 4,647,163 6,948,623 18,975,001
Net earnings - - 2,309,880 2,309,880
Cash dividends ($1.04 per share) - - (1,570,649) (1,570,649)
Issuance of common stock (51,643 shares) 258,215 624,504 - 882,719
- --------------------------------------------------------------------------------------------------------------------
Balances, September 30, 1997 $ 7,637,430 5,271,667 7,687,854 20,596,951
====================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
1997 Annual Report
<PAGE>
<TABLE>
<CAPTION>
Roanoke Gas Company and Subsidiaries
Consolidated Statements Of Cash Flows
Years Ended September 30, 1997, 1996 and 1995
1997 1996 1995
- ------------------------------------------------------------=============------============-----============--
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net earnings $ 2,309,880 2,196,672 1,777,240
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization 3,247,015 2,810,314 2,563,128
Loss (gain) on disposal of utility plant and
nonutility property (961) (4,202) 4,823
Loss (gain) on sale of other asset 3,293 - (67,556)
Write-down of other asset 4,230 - -
Write-off of regulatory assets 132,523 - -
Decrease (increase) in purchased gas adjustments 1,195,133 (2,019,589) 931,422
Changes in assets and liabilities which provided
(used) cash, exclusive of changes and noncash
transactions shown separately 1,471,321 (3,608,875) 3,139,960
- --------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 8,362,434 (625,680) 8,349,017
- --------------------------------------------------------------------------------------------------------------
Cash Flows From Investing Activities:
Additions to utility plant in service and under
construction and nonutility property (8,052,801) (5,522,977) (5,609,292)
Proceeds from disposal of property 50,094 42,511 70,403
Cost of removal of utility plant, net (158,855) (423,221) (122,523)
Proceeds from sale of other asset 141,969 - -
Proceeds from collection of note receivable - - 490,000
- --------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (8,019,593) (5,903,687) (5,171,412)
- --------------------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities:
Proceeds from issuance of long-term debt - - 2,700,000
Retirement of long-term debt and payments on
obligations under capital leases (669,423) (1,179,415) (1,124,703)
Net borrowings (repayments) under lines of credit 476,500 8,598,000 (3,793,000)
Proceeds from issuance of common stock 882,719 714,234 773,544
Common stock issuance costs - - (4,450)
Cash dividends paid (1,549,914) (1,473,025) (1,403,370)
- --------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (860,118) 6,659,794 (2,851,979)
- --------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents (517,277) 130,427 325,626
Cash and Cash Equivalents, Beginning of Year 633,322 502,895 177,269
- --------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents, End of Year $ 116,045 633,322 502,895
==============================================================================================================
continued
</TABLE>
Roanoke Gas Company
<PAGE>
<TABLE>
<CAPTION>
1997 1996 1995
- ------------------------------------------------------------=============------============-----============--
<S> <C> <C> <C>
Changes in Assets and Liabilities Which Provided (Used)
Cash, Exclusive of Changes and Noncash Transactions
Shown Separately:
Accounts receivable and customer deposits, net $ (266,066) (346,566) (304,927)
Inventories (24,995) (2,054,592) 1,028,359
Prepaid income taxes 290,153 (297,521) 260,609
Other noncurrent assets 83,730 160,936 (277,339)
Accounts payable 580,881 (613,180) 224,166
Income taxes payable - (476,410) 476,410
Accrued expenses and other current assets, net 1,078,159 (111,608) 2,011,166
Refunds from suppliers - due customers 401,995 (658,986) 183,953
Deferred taxes, including amortization of deferred
investment tax credits (681,937) 789,052 (350,121)
Other deferred credits 9,401 - (112,316)
- --------------------------------------------------------------------------------------------------------------
$ 1,471,321 (3,608,875) 3,139,960
==============================================================================================================
Supplemental Disclosures Of Cash Flows Information:
Cash paid during the year for:
Interest $ 2,065,893 1,493,801 1,867,816
==============================================================================================================
Income taxes, net of refunds $ 1,575,952 1,148,319 675,418
==============================================================================================================
Noncash Transactions:
The Company refinanced $9,300,000 of current installments of long-term debt
and borrowings under lines of credit as long-term debt in 1996.
A capital lease obligation of $21,119 was incurred in 1995 when the Company
entered into an equipment lease.
- --------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
1997 Annual Report
<PAGE>
Roanoke Gas Company and Subsidiaries
Notes To Consolidated Financial Statements
September 30, 1997 and 1996 and Years Ended September 30, 1997, 1996 and 1995
(1) Summary of Significant Accounting Policies
General
The consolidated financial statements include the accounts of Roanoke Gas
Company and its wholly-owned subsidiaries (the Company), Bluefield Gas Company
and Diversified Energy Company, trading as Highland Propane Company and Highland
Gas Marketing. Roanoke Gas Company and Bluefield Gas Company are gas utilities,
which distribute and sell natural gas to residential, commercial and industrial
customers within their service areas. The gas utilities are subject to
regulation by the Federal Energy Regulatory Commission and their applicable
state regulatory commissions. Highland Propane Company, which is not a public
utility, distributes and sells propane in southwestern Virginia and southern
West Virginia. Highland Gas Marketing brokers natural gas to several industrial
transportation customers of Roanoke Gas Company and Bluefield Gas Company.
The Company maintains its financial records in accordance with the
accounting policies as prescribed by its regulatory commissions and generally
accepted accounting principles. The Company's regulated operations meet the
criteria, and accordingly, follow the reporting and accounting requirements of
Statement of Financial Accounting Standards No. 71, Accounting for the Effects
of Certain Types of Regulation (Statement 71). Statement 71 sets forth the
application of generally accepted accounting principles to those companies whose
rates are determined by an independent third-party regulator. The economic
effects of regulation can result in regulated companies recording costs that
have been or are expected to be allowed in the rate-setting process in a period
different from the period in which the costs would be charged to expense by an
unregulated enterprise. When this results, costs are deferred as assets in the
consolidated balance sheet (regulatory assets) and recorded as expenses as those
same amounts are reflected in rates. Additionally, regulators can impose
liabilities upon a regulated company for amounts previously collected from
customers and for recovery of costs that are expected to be incurred in the
future (regulatory liabilities).
The amounts recorded by the Company as regulatory assets and regulatory
liabilities follow:
<PAGE>
<TABLE>
<CAPTION>
September 30,
- --------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------
<S> <C> <C>
Regulatory Assets:
Early retirement incentive plan costs $ 33,481 246,768
Statement 106 implementation cost - 18,884
Rate case costs 6,598 20,879
Franchise negotiation costs - 41,846
LNG tank painting costs - 25,720
Union organization costs - 29,325
Purchased gas adjustments 587,457 1,782,590
Statement 109 implementation - 20,484
Other - 12,938
- --------------------------------------------------------------------------
$ 627,536 2,199,434
==========================================================================
Regulatory Liabilities:
Refunds from suppliers - due customers 425,860 23,865
- --------------------------------------------------------------------------
$ 425,860 23,865
==========================================================================
</TABLE>
During 1997, the Company wrote off regulatory assets totaling $132,523
upon management's determination that, for rate-making purposes, recovery of
these costs in future revenues was no longer probable.
All significant intercompany transactions have been eliminated in
consolidation.
Utility Plant
Utility plant is stated at original cost. The cost of additions to
utility plant includes direct labor and overhead. The cost of depreciable
property retired, plus cost of dismantling, less salvage, is charged to
accumulated depreciation. Maintenance, repairs, and minor renewals and
betterments of property are charged to operations.
Depreciation and Amortization
Provisions for depreciation and amortization are computed principally on
composite straight-line rates for financial statement purposes and on
accelerated rates for income tax purposes. Depreciation and amortization for
financial statement purposes are provided on annual composite rates ranging from
2 percent to 20 percent, except for propane plant and certain other utility
plant which are depreciated on a straight-line basis over the assets' estimated
useful lives. The annual composite rates are determined by depreciation studies
performed for rate-making purposes; however, these studies provide estimated
useful lives which are materially consistent with generally accepted accounting
principles, and accordingly, no significant differences in annual depreciation
and amortization expense amounts occur as a result of regulation.
Roanoke Gas Company
<PAGE>
Roanoke Gas Company and Subsidiaries
Notes To Consolidated Financial Statements
September 30, 1997 and 1996 and Years Ended September 30, 1997, 1996 and 1995
(1) Summary of Significant Accounting Policies (continued)
Cash and Cash Equivalents
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid debt instruments purchased with an original
maturity of three months or less to be cash equivalents.
Inventories
Inventories, which consist primarily of propane gas and natural gas firm
and winter storage, are valued at the lower of cost (average cost) or market.
Unbilled Revenues
The Company bills most of its customers on a monthly cycle basis, although
certain large industrial customers are billed at or near the end of each month.
The Company records revenue based on service rendered to the end of the
accounting period. The amounts of unbilled revenues receivable included in
accounts receivable on the consolidated balance sheets in 1997 and 1996 were
$915,192 and $863,480, respectively. Income Taxes
Income taxes are accounted for using the asset and liability method. Under
the asset and liability method, deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates in effect for the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in earnings in the period
that includes the enactment date.
Bond Expenses
Bond expenses are being amortized over the lives of the bonds using the
bonds outstanding method.
Purchased Gas Adjustments
Pursuant to the provisions of the Company's purchased gas adjustment (PGA)
clause, increases or decreases in gas costs are passed on to its customers.
Accordingly, the difference between actual costs incurred and costs recovered
through the application of the PGA is reflected as a net deferred charge or
credit. At the end of the deferral period, the balance of the net deferred
charge or credit is amortized over the next 12-month period and amounts are
reflected in customer billings. Pension and Other Postretirement Benefit Plans
The Company has a defined benefit pension plan covering substantially all
of its employees. Generally, the Company's funding policy is to contribute
annually an amount equal to that which can be deducted for federal income tax
purposes. Pension costs are computed based upon the provisions of Statement of
Financial Accounting Standards No. 87.
The Company also provides certain health care, supplemental retirement
and life insurance benefits to active and retired employees. Postretirement
benefit costs are computed based upon the provisions of Statement of
Financial Accounting Standards No. 106.
<PAGE>
Net Earnings Per Share
Net earnings per share are based on the weighted average number of shares
outstanding during the year (1,503,388 shares in 1997, 1,455,999 shares in 1996
and 1,408,659 shares in 1995). The calculations of weighted average shares
outstanding for 1997 and 1996 do not include the effect of common stock
equivalents (CSEs), since the impact of including CSEs in the weighted average
shares outstanding is less than three percent.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Stock Options
Prior to October 1, 1996, the Company accounted for its stock options in
accordance with the provisions of Accounting Principles Board (APB) Opinion No.
25, Accounting for Stock Issued to Employees, and related interpretations. As
such, compensation expense was recorded on the date of grant only if the current
market price of the underlying stock exceeded the exercise price. On October 1,
1996, the Company adopted Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation (Statement 123), which permits entities
to recognize as expense over the vesting period the fair value of all
stock-based awards on the date of grant. Alternatively, Statement 123 allows
entities to continue to apply the provisions of APB Opinion No. 25 and provide
pro forma net earnings and pro forma net earnings per share disclosures for
stock option grants made in 1996 and future years as if the fair-value-based
method defined in Statement 123 had been applied. The Company has elected to
continue to apply the provisions of APB Opinion No. 25 and provide the pro forma
disclosure provisions of Statement 123.
1997 Annual Report
<PAGE>
Roanoke Gas Company and Subsidiaries
Notes To Consolidated Financial Statements
September 30, 1997 and 1996 and Years Ended September 30, 1997, 1996 and 1995
(1) Summary of Significant Accounting Policies (continued)
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of (Statement 121), on October 1, 1996.
Statement 121 requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future undiscounted net cash
flows expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less
costs to sell. Adoption of Statement 121 in 1997 did not have a material impact
on the Company's consolidated financial position, results of operations or
liquidity.
(2) Allowance for Doubtful Accounts
A summary of the changes in the allowance for doubtful accounts follows:
<TABLE>
<CAPTION>
Years Ended September 30,
- --------------------------------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Balances, beginning of year $ 279,316 171,947 318,834
Provision for doubtful accounts 660,400 550,777 345,585
Recoveries of accounts written off 125,035 131,499 91,941
Accounts written off (696,406) (574,907) (584,413)
- --------------------------------------------------------------------------
Balances, end of year $ 368,345 279,316 171,947
==========================================================================
</TABLE>
(3) Borrowings Under Lines of Credit
The Company had total short-term lines of credit of $20,000,000 in 1997,
$18,000,000 in 1996 and $13,000,000 in 1995. The balances outstanding under
these lines of credit at September 30, 1997, 1996 and 1995 were $7,129,000,
$6,652,500 and $1,442,000, respectively. The highest month-end balances
outstanding under these lines of credit were $15,896,000, $7,587,000 and
$7,186,000 in 1997, 1996 and 1995, respectively. The average month-end balances
outstanding were approximately $8,098,000, $4,453,000 and $2,809,000 in 1997,
1996 and 1995, respectively. The average interest rates on the lines of credit
were approximately 5.97 percent, 5.84 percent and 6.07 percent for 1997, 1996
and 1995, respectively. The lines are subject to annual renewal and do not
require compensating balances. The average interest rates were 6.14 percent,
5.71 percent and 6.27 percent on balances outstanding at September 30, 1997,
1996 and 1995, respectively.
<PAGE>
(4) Long-term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
September 30,
- ----------------------------------------------------------------------------------------------------------------------
1997 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Roanoke Gas Company:
First mortgage bonds, collateralized by utility plant:
Series K, 10%, due July 1, 2002, with provision for retirement of
$265,000 each year through 2001, with a final payment
of $290,000 $1,350,000 1,615,000
Series L, 10.375%, due April 1, 2004, with provision for retirement
of $334,000 each year through 2003, with a final payment
of $324,000 2,328,000 2,662,000
Term debentures, collateralized by indenture dated October 1, 1991,
with provision for retirement in varying annual payments through
October 1, 2016 and interest rates ranging from 6.75% to 9.625% 7,200,000 7,200,000
Unsecured senior notes payable, with interest rate fixed at 7.66%,
with provision for retirement of $1,600,000 for each year beginning
December 1, 2014 through 2018 8,000,000 8,000,000
Obligations under capital leases, due in aggregate monthly payments
of $3,076, including imputed interest, through August 1998 31,624 64,547
</TABLE>
Roanoke Gas Company
<PAGE>
Roanoke Gas Company and Subsidiaries
Notes To Consolidated Financial Statements
September 30, 1997 and 1996 and Years Ended September 30, 1997, 1996 and 1995
(4) Long-term Debt (continued)
<TABLE>
<CAPTION>
September 30,
- ----------------------------------------------------------------------------------------------------------------------
1997 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Bluefield Gas Company:
Unsecured installment loan, with interest rate based on prime (8.75% and
8.25% at September 30, 1997 and 1996, respectively), with provision for
retirement of $50,000 for each year through
1997 and a final payment of $12,500 on October 31, 1997 $ 12,500 50,000
Unsecured note payable, with interest rate fixed at 7.28%,
with provision for retirement of $25,000 quarterly beginning January 1,
2002 and a final payment of $1,000,000 on October 1, 2003 1,300,000 1,300,000
- ----------------------------------------------------------------------------------------------------------------------
Total long-term debt 20,222,124 20,891,547
Less current installments of long-term debt (3,143,124) (669,423)
- ----------------------------------------------------------------------------------------------------------------------
Total long-term debt, excluding current installments $ 17,079,000 20,222,124
======================================================================================================================
</TABLE>
The above debt obligations contain various provisions including a minimum
interest charge coverage ratio, limitations on debt as a percentage of total
capitalization, and limitations on total liabilities as a percentage of tangible
net worth. The obligations also contain a provision restricting the payment of
dividends, primarily based on the earnings of the Company and dividends
previously paid. At September 30, 1997, approximately $4,400,000 of retained
earnings was available for dividends.
The aggregate annual maturities of long-term debt, including obligations
under capital leases, subsequent to September 30, 1997 are as follows:
<PAGE>
<TABLE>
<CAPTION>
Years Ending September 30,
- --------------------------------------------------------------
<S> <C>
1998 $ 3,143,124
1999 599,000
2000 599,000
2001 599,000
2002 1,399,000
Thereafter 13,883,000
- --------------------------------------------------------------
Total $ 20,222,124
==============================================================
</TABLE>
1997 Annual Report
<PAGE>
Roanoke Gas Company and Subsidiaries
Notes To Consolidated Financial Statements
September 30, 1997 and 1996 and Years Ended September 30, 1997, 1996 and 1995
(5) Income Taxes
The details of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
Years Ended September 30,
- ---------------------------------------------------------------------------------------------------------
1997 1996 1995
=========================================================================================================
<S> <C> <C> <C>
Charged to other operating expenses - gas utilities:
Current:
Federal $ 1,561,779 206,399 1,104,505
State (15,946) (40,248) 48,649
- ---------------------------------------------------------------------------------------------------------
Total current 1,545,833 166,151 1,153,154
- ---------------------------------------------------------------------------------------------------------
Deferred:
Federal (668,660) 777,772 (370,870)
State 20,226 58,621 (32,198)
- ---------------------------------------------------------------------------------------------------------
Total deferred (648,434) 836,393 (403,068)
- ---------------------------------------------------------------------------------------------------------
Investment tax credits, net (39,435) (38,649) (38,649)
- ---------------------------------------------------------------------------------------------------------
Total charged to other operating expenses - gas utilities 857,964 963,895 711,437
- ---------------------------------------------------------------------------------------------------------
Charged to other income and deductions - gas utilities:
Current:
Federal 37,787 22,195 14,587
State 105 665 (40)
- ---------------------------------------------------------------------------------------------------------
Total current 37,892 22,860 14,547
- ---------------------------------------------------------------------------------------------------------
Deferred:
Federal (340) (374) -
State - - -
- ---------------------------------------------------------------------------------------------------------
Total deferred (340) (374) -
- ---------------------------------------------------------------------------------------------------------
Total charged to other income and deductions - gas utilities 37,552 22,486 14,547
- ---------------------------------------------------------------------------------------------------------
Charged to other operating expenses - propane operations:
Current:
Federal 233,323 153,044 200,022
State 49,057 32,333 44,715
- ---------------------------------------------------------------------------------------------------------
Total current 282,380 185,377 244,737
- ---------------------------------------------------------------------------------------------------------
<PAGE>
Deferred:
Federal 21,832 (6,052) (15,528)
State 4,925 (2,266) (5,192)
- ---------------------------------------------------------------------------------------------------------
Total deferred 26,757 (8,318) (20,720)
- ---------------------------------------------------------------------------------------------------------
Total charged to other operating expenses - propane operations 309,137 177,059 224,017
- ---------------------------------------------------------------------------------------------------------
Total income tax expense $ 1,204,653 1,163,440 950,001
=========================================================================================================
</TABLE>
Roanoke Gas Company
<PAGE>
Roanoke Gas Company and Subsidiaries
Notes To Consolidated Financial Statements
September 30, 1997 and 1996 and Years Ended September 30, 1997, 1996 and 1995
(5) Income Taxes (continued)
Income tax expense for the years ended September 30, 1997, 1996 and 1995
differed from amounts computed by applying the U.S. Federal income tax rate of
34 percent to earnings before income taxes as a result of the following:
<TABLE>
<CAPTION>
Years Ended September 30,
- ---------------------------------------------------------------------------------------------------------
1997 1996 1995
=========================================================================================================
<S> <C> <C> <C>
Net earnings $ 2,309,880 2,196,672 1,777,240
Income tax expense 1,204,653 1,163,440 950,001
- ---------------------------------------------------------------------------------------------------------
Earnings before income taxes $ 3,514,533 3,360,112 2,727,241
=========================================================================================================
Computed "expected" income tax expense 1,194,941 1,142,438 927,262
Increase (reduction) in income tax expense resulting from:
Amortization of deferred investment tax credits (39,435) (38,649) (38,649)
Other, net 49,147 59,651 61,388
- ---------------------------------------------------------------------------------------------------------
Total income tax expense $ 1,204,653 1,163,440 950,001
=========================================================================================================
</TABLE>
The tax effects of temporary differences that give rise to the deferred tax
assets and deferred tax liabilities are as follows:
<PAGE>
<TABLE>
<CAPTION>
September 30,
- ---------------------------------------------------------------------------------------------------------
1997 1996
=========================================================================================================
<S> <C> <C>
Deferred tax assets:
Accounts receivable, due to allowance for doubtful accounts $ 132,818 105,602
Accrued pension and medical benefits, due to accrual for
financial reporting purposes in excess of actual contributions 803,852 682,471
Accrued vacation and bonuses, due to accrual for financial reporting
purposes 173,731 164,542
Purchased gas adjustments, due to accrual for financial reporting
purposes in excess of actual payments to customers 176,972 -
Other 213,976 92,456
- ---------------------------------------------------------------------------------------------------------
Total gross deferred tax assets 1,501,349 1,045,071
Less valuation allowance - -
- ---------------------------------------------------------------------------------------------------------
Net deferred tax assets 1,501,349 1,045,071
- ---------------------------------------------------------------------------------------------------------
Deferred tax liabilities:
Utility plant, due to differences in depreciation 3,154,190 2,912,432
Purchased gas adjustments, due to actual payments to
customers in excess of accrual for financial reporting purposes 225,309 620,788
Prepaid expenses and other assets, due to capitalization for financial
reporting purposes 60,787 93,290
- ---------------------------------------------------------------------------------------------------------
Total gross deferred tax liabilities 3,440,286 3,626,510
- ---------------------------------------------------------------------------------------------------------
Net deferred tax liability $ 1,938,937 2,581,439
=========================================================================================================
</TABLE>
The Company has determined that a valuation allowance for the gross
deferred tax assets was not necessary at September 30, 1997 and 1996, since
realization of the entire gross deferred tax assets can be supported by the
amount of taxes paid during the carryback period available under current tax
laws, as well as the reversal of the temporary differences which gave rise to
the deferred tax liabilities.
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of deferred
tax assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, projected future
taxable income and tax planning strategies in making this assessment.
1997 Annual Report
<PAGE>
Roanoke Gas Company and Subsidiaries
Notes To Consolidated Financial Statements
September 30, 1997 and 1996 and Years Ended September 30, 1997, 1996 and 1995
(6) Employee Benefit Plans
The Company has a defined benefit pension plan covering substantially all
of its employees. The benefits are based on years of service and employee
compensation. Plan assets are invested principally in cash equivalents and
corporate stocks and bonds. Company contributions are intended to provide not
only for benefits attributed to date, but also for those expected to be earned
in the future.
Pension expense includes the following components:
<TABLE>
<CAPTION>
Years Ended September 30,
- ---------------------------------------------------------------------------------------------------------
1997 1996 1995
=========================================================================================================
<S> <C> <C> <C>
Service cost for the current year $ 142,467 148,465 127,908
Interest cost on the projected benefit obligation 419,474 397,458 376,147
Actual return on assets held in the plan (1,030,919) (717,703) (988,813)
Net amortization and deferral of unrecognized gains and losses 647,436 372,234 727,706
Special termination benefits cost related to the early retirement
incentive plan - - 168,730
- ---------------------------------------------------------------------------------------------------------
Net pension expense $ 178,458 200,454 411,678
=========================================================================================================
</TABLE>
The Plan's funded status is as follows:
<TABLE>
<CAPTION>
September 30,
- ---------------------------------------------------------------------------------------------------------
1997 1996
=========================================================================================================
<S> <C> <C>
Actuarial present value of accumulated benefit obligation:
Vested $ (4,285,717) (4,241,528)
Nonvested (143,901) (30,872)
- ---------------------------------------------------------------------------------------------------------
Accumulated benefit obligation (4,429,618) (4,272,400)
Effect of anticipated future compensation levels and other events (1,510,433) (1,343,289)
- ---------------------------------------------------------------------------------------------------------
Projected benefit obligation (5,940,051) (5,615,689)
Fair value of assets held in the plan 6,324,249 5,498,868
- ---------------------------------------------------------------------------------------------------------
Excess (deficiency) of plan assets over projected benefit obligation $ 384,198 (116,821)
=========================================================================================================
</TABLE>
The excess (deficiency) of plan assets over the projected benefit obligation
consists of the following:
<PAGE>
<TABLE>
<CAPTION>
September 30,
- ---------------------------------------------------------------------------------------------------------
1997 1996
=========================================================================================================
<S> <C> <C>
Net unrecognized gain from past experience different than assumed $ 1,709,103 1,283,944
Unamortized transition liability (329,977) (435,421)
Unrecognized prior service cost (75,503) (94,377)
Accrued pension cost included in the consolidated balance sheets (919,425) (870,967)
- ---------------------------------------------------------------------------------------------------------
Total $ 384,198 (116,821)
=========================================================================================================
</TABLE>
The weighted average discount rate used in determining the actuarial
present value of the projected benefit obligation was 7.75 percent for 1997,
1996 and 1995. The rates of increase in future compensation levels used in
determining the actuarial present value of the projected benefit obligation were
5 percent in 1997 and 4 percent for compensation increases through December 31,
1996 and 5 percent for compensation increases thereafter in 1996 and 1995. The
assumed long-term rate of return on assets was 8.5 percent for 1997, 1996 and
1995.
In addition to pension benefits, the Company has a postretirement benefits
plan which provides certain health care, supplemental retirement and life
insurance benefits to active and retired employees who meet specific age and
service requirements. The plan is contributory. The Company has elected to fund
the plan over future years. Approximately 67 percent of the consolidated annual
cost of the plan is recovered from the Company's customers through rates.
Roanoke Gas Company
<PAGE>
Roanoke Gas Company and Subsidiaries
Notes To Consolidated Financial Statements
September 30, 1997 and 1996 and Years Ended September 30, 1997, 1996 and 1995
(6) Employee Benefit Plans (continued)
The following table presents the plan's funded status reconciled with the
amounts recognized in the Company's consolidated balance sheets:
<TABLE>
<CAPTION>
September 30,
- ---------------------------------------------------------------------------------------------------------
1997 1996
=========================================================================================================
<S> <C> <C>
Accumulated postretirement benefits obligation:
Retirees $ 2,846,193 2,448,483
Fully eligible active plan participants 712,308 646,587
Other active plan participants 1,262,063 1,202,667
- ---------------------------------------------------------------------------------------------------------
Total accumulated postretirement benefits obligation 4,820,564 4,297,737
Plan assets at fair value, principally cash equivalents and mutual funds (995,411) (971,630)
- ---------------------------------------------------------------------------------------------------------
Accumulated postretirement benefits obligation in excess of plan assets 3,825,153 3,326,107
Unrecognized net gain 938,540 1,322,715
Unrecognized transition obligation (3,796,800) (4,034,100)
- ---------------------------------------------------------------------------------------------------------
Postretirement benefits cost included in accrued expenses $ 966,893 614,722
=========================================================================================================
</TABLE>
Net periodic postretirement benefits cost includes the following components:
<TABLE>
<CAPTION>
Years Ended September 30,
- ---------------------------------------------------------------------------------------------------------
1997 1996 1995
=========================================================================================================
<S> <C> <C> <C>
Service cost for the current year $ 96,255 89,000 86,613
Interest cost on the accumulated postretirement
benefits obligation 325,036 363,000 320,992
Return on assets held in the plan (89,542) (40,000) (35,000)
Amortization of transition obligation 237,300 237,300 237,300
Net total of other components (25,201) (16,000) (7,583)
Special termination benefits cost related to the early
retirement incentive plan - - 242,319
- ---------------------------------------------------------------------------------------------------------
Net periodic postretirement benefits cost $ 543,848 633,300 844,641
=========================================================================================================
</TABLE>
<PAGE>
For measurement purposes, 10 percent, 10.5 percent and 11 percent annual
rates of increase in the per capita cost of covered benefits (i.e., medical
trend rate) were assumed for 1997, 1996 and 1995, respectively; the rates were
assumed to decrease gradually to 6.25 percent by the year 2005 and remain at
that level thereafter. The medical trend rate assumption has a significant
effect on the amounts reported. For example, increasing the assumed medical cost
trend rate by one percentage point each year would increase the accumulated
postretirement benefits obligation as of September 30, 1997 by approximately
$577,834, or 12 percent, and the aggregate of the service and interest cost
components of net postretirement benefits cost by approximately $68,513, or 16
percent.
The weighted average discount rate used in determining the accumulated
postretirement benefits obligation was 7.75 percent at September 30, 1997, 1996
and 1995.
During 1995, the Company offered a voluntary early retirement incentive
plan to all employees over age 55 who were vested in the Company's pension plan.
Of the 25 eligible employees, 12 accepted the early retirement offer by the
April 26, 1995 deadline. The total cost of the early retirement incentive plan
was $444,367, of which $125,904 was expensed directly in the Company's third
quarter of 1995 and $318,463 was established as a regulatory asset, with
amortization beginning in fiscal year 1996 when rates were placed into effect to
allow recovery of the capitalized costs. The costs expensed during the third
quarter of 1995 related to the portion of the plan costs that would be amortized
during the period between the recognition of the plan costs and the
implementation of new rates, which provided for plan cost recovery, in fiscal
year 1996. The Company recorded $139,482 and $71,695 of amortization expense
related to this regulatory asset during the years ended September 30, 1997 and
1996. The unamortized balance of the regulatory asset of $73,805, excluding the
balance relative to Bluefield Gas Company, was written off in 1997 (see note 1).
The Company also has a defined contribution plan covering all of its
employees who elect to participate. The Company made annual matching
contributions to the plan based on 70 percent in 1997 and 50 percent in 1996 and
1995 of the net participants' basic contributions (from 1 percent to 6 percent
of their total compensation). The annual cost of the plan was $217,466, $134,188
and $132,261 for 1997, 1996 and 1995, respectively.
1997 Annual Report
<PAGE>
Roanoke Gas Company and Subsidiaries
Notes To Consolidated Financial Statements
September 30, 1997 and 1996 and Years Ended September 30, 1997, 1996 and 1995
(7) Common Stock Options
During 1996, the Company's stockholders approved the Roanoke Gas Company
Key Employee Stock Option Plan. The plan provides for the issuance of common
stock options to officers and certain other full-time salaried employees to
acquire a maximum of 50,000 shares of the Company's common stock. The plan
requires each option's exercise price per share to equal the fair value of the
Company's common stock as of the date of grant.
The aggregate number of shares under option pursuant to the Roanoke Gas
Company Key Employee Stock Option Plan are as follows:
<TABLE>
<CAPTION>
Number Of Weighted Average Option Price
Shares Exercise Price Per Share
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding, September 30, 1996 13,000 15.500 15.500
Options granted 21,500 16.875 16.875
- -------------------------------------------------------------------------------------------------
Options outstanding, September 30, 1997 34,500 16.357 15.500-16.875
=================================================================================================
</TABLE>
Under the terms of the plan, the options become exercisable six months
from the grant date and expire ten years subsequent to the grant date. All
options outstanding were fully vested and exercisable at September 30, 1997.
The per share weighted-average fair values of stock options granted during
1997 and 1996 were $1.08 and $1.63 on the dates of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions:
1997-expected dividend yield of 5.78 percent, risk-free interest rate of 6.29
percent, expected volatility of 10 percent and an expected life of 10 years;
1996-expected dividend yield of 5.83 percent, risk-free interest rate of 6.44
percent, expected volatility of 42 percent and an expected life of 10 years.
The Company uses the intrinsic value method of APB Opinion No. 25 for
recognizing stock-based compensation in the consolidated financial statements.
Had the Company determined compensation cost based on the fair value at the
grant date for its stock options under the provisions of Statement 123, the
Company's net earnings and net earnings per share would have been decreased to
the pro forma amounts indicated below:
<TABLE>
<CAPTION>
Years Ended September 30,
- ---------------------------------------------------------------------------
1997 1996
===========================================================================
<S> <C> <C>
Net earnings:
As reported $ 2,309,880 2,196,672
Pro forma 2,278,093 2,182,681
Net earnings per share:
As reported $ 1.54 1.51
Pro forma $ 1.52 1.50
===========================================================================
</TABLE>
<PAGE>
(8) Related Party Transactions
Certain of the Company's directors render business services or sell
products to the Company. The significant services included legal fees of
approximately $182,000, $69,000 and $173,000 in 1997, 1996 and 1995,
respectively. The products included natural gas purchases of approximately
$3,052,000, $1,950,000 and $1,250,000 in 1997, 1996 and 1995, respectively. It
is anticipated that similar services and products will be provided to the
Company in 1998.
Roanoke Gas Company
<PAGE>
Roanoke Gas Company and Subsidiaries
Notes To Consolidated Financial Statements
September 30, 1997 and 1996 and Years Ended September 30, 1997, 1996 and 1995
(9) Quarterly Financial Information (Unaudited)
Quarterly financial data as previously reported for the years ended
September 30, 1997 and 1996 is summarized as follows:
<TABLE>
<CAPTION>
First Second Third Fourth
1997 Quarter Quarter Quarter Quarter
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating revenues $ 22,412,424 24,580,783 9,894,442 8,160,177
===========================================================================================
Operating earnings (loss) $ 1,840,530 2,394,999 261,537 (93,643)
===========================================================================================
Net earnings (loss) $ 1,331,276 1,831,756 (247,734) (605,418)
===========================================================================================
Net earnings (loss) per share $ 0.90 1.22 (.16) (.42)
===========================================================================================
</TABLE>
<TABLE>
<CAPTION>
First Second Third Fourth
1996 Quarter Quarter Quarter Quarter
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating revenues $ 17,993,759 29,625,390 10,435,031 7,716,693
===========================================================================================
Operating earnings (loss) $ 1,865,501 2,412,749 38,336 (281,282)
===========================================================================================
Net earnings (loss) $ 1,434,772 1,954,256 (407,940) (784,416)
===========================================================================================
Net earnings (loss) per share $ 1.00 1.35 (.28) (.56)
===========================================================================================
</TABLE>
The pattern of quarterly earnings is the result of the highly seasonal
nature of the business, as variations in weather conditions generally result in
greater earnings during the winter months.
(10) Business and Credit Concentrations
The primary business of the Company is the distribution of natural gas to
residential, commercial and industrial customers in Roanoke, Virginia;
Bluefield, Virginia; Bluefield, West Virginia; and the surrounding areas. The
Company distributes natural gas to its customers at rates and charges regulated
by the State Corporation Commission in Virginia and the Public Service
Commission in West Virginia. The Company also serves propane customers in
southwestern Virginia and southern West Virginia through its nonregulated
subsidiary.
<PAGE>
During 1997, 1996 and 1995, no single customer accounted for more than 5
percent of the Company's sales, and no account receivable from any customer
exceeded 5 percent of the Company's total stockholders' equity at September 30,
1997 and 1996.
(11) Franchises
Roanoke Gas Company (Roanoke Gas) and Commonwealth Public Service
Corporation, a subsidiary of Bluefield Gas Company, currently hold the only
franchises and/or certificates of public convenience and necessity to distribute
natural gas in their respective Virginia service areas. The franchises generally
extend for multi-year periods and are renewable by the municipalities.
Certificates of public convenience and necessity, which are issued by the State
Corporation Commission of Virginia, are of perpetual duration, subject to
compliance with regulatory standards.
Management anticipates that the Company will be able to renew all of its
franchises when they expire. There can be no assurance, however, that a given
jurisdiction will not refuse to renew a franchise or will not in connection with
the renewal of a franchise, impose certain restrictions or conditions that could
adversely affect the Company's business operations or financial condition.
(12) Environmental Matters
Both Roanoke Gas Company and Bluefield Gas Company operated manufactured
gas plants (MGPs) as a source of fuel for lighting and heating until the early
1950s. The process involved heating coal in a low-oxygen environment to produce
a manufactured gas that could be distributed through the Company's pipeline
system to customers. A by-product of the process was coal tar, and the potential
exists for on-site tar waste contaminants at both former plant sites. The extent
of contaminants at these sites is unknown at this time, and the Company has not
performed a formal analysis at the Roanoke Gas Company MGP site. An analysis at
the Bluefield Gas Company site indicates some soil contamination. The Company,
with concurrence of legal counsel, does not believe any events have occurred
requiring regulatory reporting. Further, the Company has not received any
notices of violation or liabilities associated with environmental regulations
related to the MGP sites and is not aware of any off-site contamination or
pollution as a result of these prior operations. Therefore, the Company has no
plans for subsurface remediation at either of the MGP sites. Should the Company
eventually be required to remediate either of the MGP sites, the Company will
pursue all prudent and reasonable means to recover any related costs, including
insurance claims and regulatory approval for rate case recognition of expenses
associated with any work required. Based upon prior orders of the State
Corporation Commission of Virginia related to environmental matters at other
companies, the Company believes it will be able to recover prudently incurred
costs. Additionally, a stipulated rate case agreement between the Company and
the West Virginia Public Service Commission recognizes the Company's right to
1997 Annual Report
<PAGE>
Roanoke Gas Company and Subsidiaries
Notes To Consolidated Financial Statements
September 30, 1997 and 1996 and Years Ended September 30, 1997, 1996 and 1995
(12) Environmental Matters (continued)
defer MGP clean-up costs, should any be incurred, and to seek rate relief for
such costs. If the Company eventually incurs costs associated with a required
clean-up of either MGP site, the Company anticipates recording a regulatory
asset for such clean-up costs which are anticipated to be recoverable in future
rates. Based on anticipated regulatory actions and current practices, management
believes that any costs incurred related to the previously-mentioned
environmental matters will not have a material effect on the Company's
consolidated financial position.
(13) Commitments
The Company has nine short-term contracts with seven natural gas suppliers
requiring the purchase of approximately 2,149,000 DTH of natural gas at varying
prices during the period October 1, 1997 through September 30, 1998. The Company
has also provided notice of bid awards to two natural gas suppliers, and
anticipates these notices to result in contracts to purchase an additional
1,703,000 DTH of natural gas at varying prices during fiscal year 1998. In
addition, the Company has short-term contracts with three propane suppliers
requiring the purchase of 2,952,500 gallons of propane during the period October
1, 1997 through September 30, 1998. Management does not anticipate that these
contracts will have a material impact on the Company's fiscal year 1998
consolidated results of operations.
During 1997, the Company entered into a purchase commitment to acquire
certain net assets of an area propane company. The total purchase price under
this commitment will be satisfied through the issuance of 35,097 shares of
Company common stock. The acquisition, which is expected to be consummated in
November 1997, will be accounted for under the purchase method of accounting.
(14) Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, Disclosures About
Fair Value of Financial Instruments (Statement 107), requires the Company to
disclose estimated fair values of certain of its financial instruments.
Statement 107 defines the fair value of a financial instrument as the amount at
which the instrument could be exchanged in a current transaction between willing
parties.
The following methods and assumptions were used to estimate the fair value
of each class of financial instrument for which it is practicable to estimate
fair value.
Cash and Cash Equivalents
The carrying amount is a reasonable estimate of fair value.
Long-term Debt
The fair value of long-term debt is estimated by discounting the future
cash flows of each instrument at rates currently offered to the Company for
similar debt instruments of comparable maturities.
<PAGE>
Borrowings Under Lines of Credit
The carrying amount is a reasonable estimate of fair value since the rates
of interest paid on borrowings under lines of credit approximate market rates.
The carrying amounts and approximate fair values of the Company's
financial instruments requiring disclosure under Statement 107 at September 30,
1997 and 1996 are as follows:
<TABLE>
<CAPTION>
September 30,
- --------------------------------------------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------------------------------------------
Carrying Approximate Carrying Approximate
Amounts Fair Values Amounts Fair Values
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial Assets:
Cash and cash equivalents $ 116,045 116,045 633,322 633,322
- --------------------------------------------------------------------------------------------------------------
Total financial assets $ 116,045 116,045 633,322 633,322
==============================================================================================================
Financial Liabilities:
Long-term debt $ 20,222,124 21,384,604 20,891,547 22,057,130
Borrowings under lines of credit 7,129,000 7,129,000 6,652,500 6,652,500
- --------------------------------------------------------------------------------------------------------------
Total financial liabilities $ 27,351,124 28,513,604 27,544,047 28,709,630
==============================================================================================================
</TABLE>
Roanoke Gas Company
<PAGE>
Roanoke Gas Company and Subsidiaries
Notes To Consolidated Financial Statements
September 30, 1997 and 1996 and Years Ended September 30, 1997, 1996 and 1995
(14) Fair Value of Financial Instruments (continued)
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates do not reflect any premium or discount that could result from
offering for sale at one time the Company's entire holdings of a particular
financial instrument. Because no market exists for a significant portion of the
Company's financial instruments, fair value estimates are based on judgments
regarding current economic conditions, risk characteristics of various financial
instruments and other factors. These estimates are subjective in nature and
involve uncertainties and matters of significant judgment, and therefore, cannot
be determined with precision. Changes in assumptions could significantly affect
the estimates.
Fair value estimates are based on existing financial instruments without
attempting to estimate the value of anticipated future business and the value of
assets and liabilities that are not considered financial instruments.
Significant assets that are not considered financial assets include utility
plant, nonutility property, current deferred income taxes, purchased gas
adjustments and other assets; significant liabilities that are not considered
financial liabilities are refunds from suppliers - due customers, noncurrent
deferred income taxes and deferred investment tax credits. In addition, the tax
ramifications related to the realization of the unrealized gains and losses can
have a significant effect on fair value estimates and have not been considered
in the estimates.
1997 Annual Report
<PAGE>
Roanoke Gas Company and Subsidiaries
Summary Of Gas Sales And Statistics
Years Ended September 30,
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Revenues: 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
Residential Sales $ 32,595,261 $ 33,981,835 $ 25,078,211 $ 29,844,636 $ 27,841,933
Commercial Sales 19,879,180 20,219,289 14,313,723 16,979,230 16,005,765
Interruptible Sales 3,892,301 4,569,766 3,513,181 5,607,002 9,262,947
Transportation Gas Sales 1,107,922 943,215 909,515 610,682 53,611
Backup Services 173,655 190,310 107,652 222,025 -
Late Payment Charges 157,369 135,838 115,130 194,156 147,814
Miscellaneous 36,493 27,154 24,325 67,576 193,449
Propane 7,205,645 5,703,466 4,549,410 4,670,550 4,210,160
- ---------------------------------------------------------------------------------------------------------------------------
Total $ 65,047,826 $ 65,770,873 $ 48,611,147 $ 58,195,857 $ 57,715,679
- ---------------------------------------------------------------------------------------------------------------------------
Net Income $ 2,309,880 $ 2,196,672 $ 1,777,240 $ 1,677,098 $ 1,441,336
===========================================================================================================================
MCF's Delivered:
- ---------------------------------------------------------------------------------------------------------------------------
Residential 4,651,819 5,108,553 4,204,222 4,701,703 4,508,694
Commercial 3,230,714 3,385,962 2,834,884 2,981,888 2,853,079
Interruptible 959,146 1,088,921 1,240,658 1,521,663 2,377,236
Transportation Gas 1,933,236 1,549,854 1,660,504 1,022,892 81,336
Backup Service 29,130 36,658 21,609 38,892 -
- ---------------------------------------------------------------------------------------------------------------------------
Total 10,804,045 11,169,948 9,961,877 10,267,038 9,820,345
===========================================================================================================================
Gallons Delivered (Propane) 6,568,066 5,997,912 4,822,277 5,012,830 4,586,334
===========================================================================================================================
Heating Degree Days 4,298 4,696 3,791 4,416 4,356
===========================================================================================================================
Number Of Customers:
- ---------------------------------------------------------------------------------------------------------------------------
Residential 47,539 46,007 44,873 43,734 42,232
Commercial 5,181 5,043 4,896 4,767 4,512
Interruptible And Interruptible
Transportation Service 43 44 44 43 44
- ---------------------------------------------------------------------------------------------------------------------------
Total 52,763 51,094 49,813 48,544 46,788
===========================================================================================================================
<PAGE>
Gas Account (MCF):
Natural Gas Purchases And
Storage 11,406,613 11,756,089 10,453,696 10,795,928 10,430,635
Gas Made - Propane - - - 14,008 -
- ---------------------------------------------------------------------------------------------------------------------------
Total Available 11,406,613 11,756,089 10,453,696 10,809,936 10,430,635
===========================================================================================================================
Natural Gas Deliveries 10,804,045 11,169,948 9,961,877 10,267,038 9,820,345
Storage - LNG 106,892 142,297 118,393 134,893 153,478
Company Use And
Miscellaneous 49,444 54,140 46,532 50,356 66,211
System Loss 446,232 389,704 326,894 357,649 390,601
- ---------------------------------------------------------------------------------------------------------------------------
Total Gas Available 11,406,613 11,756,089 10,453,696 10,809,936 10,430,635
===========================================================================================================================
Total Assets $ 62,593,258 $ 58,921,099 $ 51,614,667 $ 49,579,447 $ 48,758,728
===========================================================================================================================
Long-Term Obligations $ 17,079,000 $ 20,222,124 $ 17,504,047 $ 16,414,900 $ 16,530,499
===========================================================================================================================
</TABLE>
Roanoke Gas Company
<PAGE>
Roanoke Gas Company and Subsidiaries
Summary Of Capitalization Statistics
Years Ended September 30,
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Common Stock: 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
Shares Issued 1,527,486 1,475,843 1,432,512 1,382,343 1,289,302
Net Earnings Per Share $ 1.54 $ 1.51 $ 1.26 $ 1.25 $ 1.13
Dividends Paid Per Share
(Cash) $ 1.04 $ 1.02 $ 1.00 $ 1.00 $ 1.00
Dividends Paid Out Ratio 67.5% 67.5% 79.4% 80.0% 88.9%
Number Of Shareholders 1,853 1,713 1,699 1,625 901
- ---------------------------------------------------------------------------------------------------------------------------
Capitalization Ratios:
- ---------------------------------------------------------------------------------------------------------------------------
Long-Term Debt, Including
Current Installments 49.5 52.4 51.6 51.0 54.5
Stockholders' Equity 50.5 47.6 48.4 49.0 45.5
- ---------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0 100.0 100.0
- ---------------------------------------------------------------------------------------------------------------------------
Long-Term Debt, Including
Current Installments $ 20,222,124 $ 20,891,547 $ 18,683,462 $ 17,087,046 $ 17,549,817
Stockholders' Equity 20,596,951 18,975,001 17,555,172 16,424,919 14,652,663
- ---------------------------------------------------------------------------------------------------------------------------
Total Capitalization
Plus Current Installments $ 40,819,075 $ 39,866,548 $ 36,238,634 $ 33,511,965 $ 32,202,480
===========================================================================================================================
</TABLE>
1997 Annual Report
<PAGE>
Roanoke Gas Company
Board Of Directors
Lynn D. Avis
Avis Construction Company
President
Abney S. Boxley, III
W. W. Boxley Company
President
Frank T. Ellett
Virginia Truck Center, Inc.
President
Frank A. Farmer, Jr.
Chairman Of The Board, President & CEO
Wilbur L. Hazlegrove
Law Firm Of Woods, Rogers & Hazlegrove,
P.L.C. Member
J. Allen Layman
R & B Communications, Inc.
President & CEO
John H. Parrott
John H. Parrott Associates
President
Thomas L. Robertson
Carilion Health System &
Carilion Medical Center
President
S. Frank Smith
Coastal Coal Sales Inc.
Executive Vice President
Officers
Frank A. Farmer, Jr.
Chairman Of The Board, President & CEO
Roger L. Baumgardner
Vice President, Secretary & Treasurer
Arthur L. Pendleton
Vice President - Operations
John B. Williamson, III
Vice President - Rates & Finance
Jane N. O'Keeffe
Assistant Vice President - Human Resources
J. David Anderson
Assistant Secretary & Assistant Treasurer
<PAGE>
Bluefield Gas Company
Board Of Directors
Roger L. Baumgardner
Roanoke Gas Company
Vice President, Secretary & Treasurer
Frank A. Farmer, Jr.
Roanoke Gas Company
Chairman Of The Board, President & CEO
John H. Parrott
John H. Parrott Associates
President
Arthur L. Pendleton
Roanoke Gas Company
Vice President - Operations
John C. Shott
Paper Supply Company
President
Scott H. Shott
Paper Supply Company
Secretary & Treasurer
Officers
Frank A. Farmer
President
Arthur L. Pendleton
Vice President - Operations
John B. Williamson, III
Vice President - Rates & Finance
Roger L. Baumgardner
Secretary & Treasurer
Diversified Energy Company
T/A Highland Propane Company & Highland Gas Marketing
Board Of Directors
Roger L. Baumgardner
Roanoke Gas Company
Vice President, Secretary & Treasurer
Frank T. Ellett
Virginia Truck Center, Inc.
President
Frank A. Farmer, Jr.
Roanoke Gas Company
Chairman Of The Board, President & CEO
<PAGE>
Arthur L. Pendleton
Roanoke Gas Company
Vice President - Operations
S. Frank Smith
Coastal Coal Sales, Inc.
Executive Vice President
Officers
Frank A. Farmer
President
Arthur L. Pendleton
Vice President - Operations
John B. Williamson, III
Vice President - Rates & Finance
Roger L. Baumgardner
Secretary & Treasurer
<PAGE>
A Tribute To Frank Farmer
[Photograph of Frank Farmer appears here]
When Frank Farmer joined Roanoke Gas as construction superintendent in
1964, the Company had 22,000 customers. When he retires January 31, 1998, the
Company will have more than 60,000 customers. However, that is only part of a
story of innovation and change that has characterized Frank's tenure at Roanoke
Gas Company.
One of Frank's first jobs was overseeing the interconnection of Roanoke's
distribution facilities to the new interstate transmission pipeline from East
Tennessee Natural Gas Company. That enabled Roanoke Gas to be one of the first
small companies to receive gas from two major national suppliers, helping to
ensure a steady and economical supply to its customers.
As operations manager in the early 70s, he oversaw construction of the
liquefied natural gas (LNG) plant. Roanoke Gas Company was perhaps the smallest
gas company to install a complete LNG processing plant capable of liquefying and
storing natural gas in the summer for use during extreme cold weather in the
winter months.
When the gas shortage occurred in the 1970s, the Company was frustrated
because it could not add new natural gas customers during a state-imposed
moratorium. Even though earnings became stagnant, no employee was furloughed.
Roanoke Gas Company responded to the no-growth period of the moratorium
and developed a new market alternative by selling propane, a decision which has
proven to have significant consequences for the Company's growth. Propane sales
growth accelerated after the purchase of Gas Services, Inc. of West Virginia and
the Company's decision to market propane as a rural and suburban home and hot
water heating alternative where natural gas lines did not exist.
Deregulation began in the 1980s, which would significantly impact the
entire industry. Roanoke Gas went from a simple distribution utility with the
price of natural gas controlled by federal agencies to a company that had to
find natural gas suppliers and arrange for interstate pipeline delivery at
competitive prices. The evolution of deregulation led to one of the most
significant events in the natural gas industry, passage of the National Gas
Policy Act, which continues to bring changes to the industry.
As president in the 90s, Frank led innovations at Roanoke Gas which
characterized the Company's success in the new era including the installation of
automated meter reading in Bluefield, reading large volume gas meters via
telephone lines, upgrading all of the Company's computer and communications
systems, electronic monitoring and remote control of distribution system
operating pressure, implementing an early retirement program to reduce costs,
and outsourcing of repetitive functions to realize efficiencies through
economics of scale.
For more than 33 years, Frank Farmer has seen and participated in
significant changes in the natural gas industry. He has helped steer the
Company's responses to those changes to the benefit of customers, employees and
stockholders. He retires after the Company's best year of performance with the
directors and management's best wishes for a long, healthy and prosperous
retirement.
<PAGE>
Corporate Mission
Statement
Roanoke Gas Company provides superior customer and stockholder value
by being the preferred choice for safe, dependable, efficient,
economical energy and services in the market it serves.
Key Business
Strategies
[ ] Saturation Program [ ] Trade Ally Relations [ ]
The Propane Alternative [ ] Acquisition and
Geographic Expansion [ ] Positioning for
Deregulation [ ] Diversification
Access up-to-date information on Roanoke Gas Company and its subsidiaries at
http://www.roanokegas.com
<PAGE>
Southwest Virginia And Southern West Virginia's
Choice For Comfort And Economy
Proudly Serving:
Beckley New Castle
Bedford Princeton
Blacksburg Pulaski
Bluefield Radford
Bramwell Rainelle
Buchanan Roanoke
Christiansburg Rocky Mount
Clifton Forge Rupert
Covington Salem
Fincastle Smith Mountain Lake
Floyd Tazewell
Fort Chiswell Troutville
Galax Vinton
Hillsville White Sulphur Springs
Hinton Wytheville
Lewisburg and other area communities
Lexington
Marion
Natural Bridge
[Map of Roanoke Gas Company's Service Area appears here]
<PAGE>
[The following text appear in a box]
Notice Of Annual Meeting
The annual meeting of stockholders
of Roanoke Gas Company will be held
at the Executive Offices of the Company,
519 Kimball Avenue, N. E.,
Roanoke, Virginia at 9:00 a.m., Monday, January 26,
1998.
[Roanoke Gas Company Logo Mark (Flame) appears here]
Roanoke Gas
Your Choice for Comfort and Economy.
Transfer Agent and Dividend Disbursing Agent
First Union National Bank of North Carolina
Dividend Reinvestment Services
P.O. Box 1154
Charlotte, North Carolina 28288-1154
1-800-829-8432
Roanoke Gas Company trades on Nasdaq as RGCO.
<PAGE>
EXHIBIT 23
Accountants' Consent
--------------------
The Board of Directors
Roanoke Gas Company
We consent to incorporation by reference in Registration Statements No. 33-69902
on Form S-2, as amended, and No. 333-02455 on Form S-8 of Roanoke Gas Company of
our report dated October 17, 1997, relating to the consolidated balance sheets
of Roanoke Gas Company and subsidiaries as of September 30, 1997 and 1996, and
the related consolidated statements of earnings, stockholders' equity and cash
flows for each of the years in the three-year period ended September 30, 1997,
which report is incorporated by reference in the September 30, 1997 Annual
Report on Form 10-K of Roanoke Gas Company.
s/KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Roanoke, Virginia
December 19, 1997
<PAGE>
EXHIBIT 27
ARTICLE - UT
LEGEND
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROANOKE GAS
COMPANY'S ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 1997, AS
SET FORTH IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
/LEGEND
<TABLE>
<S> <C>
PERIOD-TYPE 12-MOS
FISCAL-YEAR-END SEP-30-1997
PERIOD-END SEP-30-1997
BOOK-VALUE PER-BOOK
TOTAL-NET-UTILITY-PLANT 44,065,144
OTHER-PROPERTY-AND-INVEST 4,094,095
TOTAL-CURRENT-ASSETS 13,955,104
TOTAL-DEFERRED-CHARGES 0
OTHER-ASSETS 478,915
TOTAL-ASSETS 62,593,258
COMMON 7,637,430
CAPITAL-SURPLUS-PAID-IN 5,271,667
RETAINED-EARNINGS 7,687,854
TOTAL-COMMON-STOCKHOLDERS-EQ 20,596,951
PREFERRED-MANDATORY 0
PREFERRED 0
LONG-TERM-DEBT-NET 17,079,000
SHORT-TERM-NOTES 7,129,000
LONG-TERM-NOTES-PAYABLE 0
COMMERCIAL-PAPER-OBLIGATIONS 0
LONG-TERM-DEBT-CURRENT-PORT 3,143,124
PREFERRED-STOCK-CURRENT 0
CAPITAL-LEASE-OBLIGATIONS 0
LEASES-CURRENT 0
OTHER-ITEMS-CAPITAL-AND-LIAB 14,645,183
TOT-CAPITALIZATION-AND-LIAB 62,593,258
GROSS-OPERATING-REVENUE 65,047,826
INCOME-TAX-EXPENSE 857,964
OTHER-OPERATING-EXPENSES 59,786,439
TOTAL-OPERATING-EXPENSES 60,644,403
OPERATING-INCOME-LOSS 4,403,423
OTHER-INCOME-NET 146,910
INCOME-BEFORE-INTEREST-EXPEN 4,550,333
TOTAL-INTEREST-EXPENSE 2,240,453
NET-INCOME 2,309,880
PREFERRED-STOCK-DIVIDENDS 0
EARNINGS-AVAILABLE-FOR-COMM 2,309,880
COMMON-STOCK-DIVIDENDS 1,570,649
TOTAL-INTEREST-ON-BONDS 1,094,981
CASH-FLOW-OPERATIONS 8,362,434
EPS-PRIMARY 1.54
EPS-DILUTED 1.54
</TABLE>
<PAGE>
EXHIBIT 99
[KPMG Peat Marwick LLP Letterhead]
KPMG PEAT MARWICK LLP
10 S. Jefferson Street, Suite 1710 Telephone 540 982 0505 Fax 540 983 8877
Roanoke, VA 24011-1331
December 19, 1997
Securities and Exchange Commission
Washington, D.C. 20549
Ladies and Gentlemen:
We were previously principal accountants for Roanoke Gas Company and, under the
date of October 17, 1997, we reported on the consolidated financial statements
of Roanoke Gas Company and subsidiaries as of September 30, 1997 and 1996 and
for each of the years in the three-year period ended September 30, 1997. On July
30, 1997, we were informed that our appointment as principal accountants would
be terminated upon the completion of the September 30, 1997 audit. We have read
Roanoke Gas Company's statements included under Item 4 of its Form 8-K dated
December 19, 1997, and we agree with such statements, except that we are not in
a position to agree or disagree with Roanoke Gas Company's statements that the
change was recommended by the audit committee of the board of directors and
approved by the board of directors or their reason for changing principal
accountants.
Very truly yours,
s/KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
<PAGE>
Exhibit H-2
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1998
Commission File Number 0-367
ROANOKE GAS COMPANY
(Exact name of Registrant as Specified in its Charter)
VIRGINIA 54-0359895
(State or Other Jurisdiction of (IRS) Employer
Incorporation or Organization) Identification No)
519 Kimball Avenue, N.E., Roanoke, VA 24016
(Address of Principal Executive Offices) (Zip Code)
(540) 983-3800
(Registrant's Telephone Number, Including Area Code)
None
(Former Name, Former Address and Former Fiscal Year, if
Changed Since Last Report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
Class Outstanding at June 30, 1998
Common Stock, $5 Par Value 1,772,359
<PAGE>
<TABLE>
<CAPTION>
ROANOKE GAS COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
- --------------------------------------------------------------------------------------------------------------
UNAUDITED
- ---------
June 30, September 30,
ASSETS 1998 1997
- ------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
UTILITY PLANT:
Utility Plant in Service $68,398,270 $65,590,024
Accumulated Depreciation (24,129,104) (22,612,963)
------------- -------------
Utility Plant in Service, Net 44,269,166 42,977,061
Construction Work-In-Progress 1,475,023 1,088,083
------------- -------------
Utility Plant, Net 45,744,189 44,065,144
------------- -------------
NONUTILITY PROPERTY:
Propane 9,143,884 6,634,369
Accumulated Depreciation (2,952,632) (2,540,274)
------------- -------------
Nonutility Property, Net 6,191,252 4,094,095
------------- -------------
CURRENT ASSETS:
Cash and Cash Equivalents 1,437,122 116,045
Accounts Receivable - (Less Allowance
for Uncollectibles of $1,079,500,
and $368,345, Respectively) 4,303,225 4,188,984
Inventories 5,340,528 7,427,581
Prepaid Income Taxes - 7,368
Deferred Income Taxes 2,740,325 1,206,995
Purchased Gas Adjustments - 587,457
Other 487,108 420,674
------------- -------------
Total Current Assets 14,308,308 13,955,104
------------- -------------
OTHER ASSETS 837,571 478,915
------------- -------------
TOTAL $67,081,320 $62,593,258
============= =============
</TABLE>
See condensed notes to condensed consolidated financial statements.
- -------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
ROANOKE GAS COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
- --------------------------------------------------------------------------------------------------------------
UNAUDITED
- --------- June 30, September 30,
LIABILITIES 1998 1997
- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
CAPITALIZATION:
Stockholders' Equity:
Common Stock - Par Value $5; Authorized,
3,000,000 Shares; Issued and Outstanding
1,772,359, and 1,527,486 Shares, Respectively $8,861,795 $7,637,430
Capital in Excess of Par Value 8,629,787 5,271,667
Retained Earnings 9,719,102 7,687,854
------------- -------------
Total Stockholders' Equity 27,210,684 20,596,951
Long-Term Debt (Less Current Maturities) 20,700,000 17,079,000
------------- -------------
Total Capitalization 47,910,684 37,675,951
------------- -------------
CURRENT LIABILITIES:
Current Maturities of Long-Term Debt 5,313 3,143,124
Notes Payable 1,295,000 7,129,000
Dividends Payable 470,035 397,530
Accounts Payable 4,430,303 5,512,348
Income Taxes Payable 997,872 -
Customers' Deposits 398,714 427,895
Accrued Expenses 4,633,496 4,233,860
Refunds From Suppliers - Due Customers 115,143 425,860
Purchased Gas Adjustments 3,070,878 -
------------- -------------
Total Current Liabilities 15,416,754 21,269,617
------------- -------------
DEFERRED CREDITS AND OTHER
LIABILITIES:
Deferred Income Taxes 3,289,785 3,145,932
Deferred Investment Tax Credits 464,097 492,357
Other Deferred Credits - 9,401
------------- -------------
Total Deferred Credits and Other Liabilities 3,753,882 3,647,690
------------- -------------
TOTAL $67,081,320 $62,593,258
============= =============
</TABLE>
See condensed notes to condensed consolidated financial statements.
- -------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
ROANOKE GAS COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS FOR THE THREE-MONTH AND NINE-MONTH PERIODS
ENDED JUNE 30, 1998 AND 1997
- ----------------------------------------------------------------------------------------------------------------------------------
UNAUDITED
- --------- Three Months Ended Nine Months Ended
June 30, June 30,
1998 1997 1998 1997
------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Gas utilities $8,222,260 $9,029,327 $44,924,911 $50,653,763
Propane operations 760,056 865,115 6,603,759 6,233,886
------------- ---------------- --------------- ---------------
Total operating revenues 8,982,316 9,894,442 51,528,670 56,887,649
------------- ---------------- --------------- ---------------
COST OF GAS:
Gas utilities 4,704,193 5,468,123 28,448,209 34,471,610
Propane operations 369,132 437,404 3,201,665 3,417,846
------------- ---------------- --------------- ---------------
Total cost of gas 5,073,325 5,905,527 31,649,874 37,889,456
------------- ---------------- --------------- ---------------
OPERATING MARGIN 3,908,991 3,988,915 19,878,796 18,998,193
------------- ---------------- --------------- ---------------
OTHER OPERATING EXPENSES:
Gas utilities:
Other operations 1,762,490 1,929,234 5,759,769 6,062,712
Maintenance 382,959 293,126 1,025,672 1,045,741
Taxes - general 449,294 478,658 1,991,737 2,035,542
Taxes - income (67,118) (88,165) 1,417,967 1,227,861
Depreciation and amortization 713,986 631,681 2,139,668 1,921,893
Propane operations (including taxes - income
of $(105,742), $(58,977), $427,414
and $340,502, respectively) 514,188 482,844 2,656,265 2,207,378
------------- ---------------- --------------- ---------------
Total other operating expenses 3,755,799 3,727,378 14,991,078 14,501,127
------------- ---------------- --------------- ---------------
OPERATING EARNINGS 153,192 261,537 4,887,718 4,497,066
------------- ---------------- --------------- ---------------
OTHER INCOME AND DEDUCTIONS:
Gas utilities:
Interest Income 20,530 - 21,449 7,071
Merchandising and jobbing, net 22,818 13,117 94,921 76,446
Other deductions (18,903) (12,266) (70,616) (49,507)
Taxes - income (8,301) (377) (15,566) (12,771)
Propane operations, net 19,334 26,410 87,750 97,184
------------- ---------------- --------------- ---------------
Total other income and deductions 35,478 26,884 117,938 118,423
------------- ---------------- --------------- ---------------
<PAGE>
EARNINGS BEFORE INTEREST CHARGES 188,670 288,421 5,005,656 4,615,489
------------- ---------------- --------------- ---------------
INTEREST CHARGES:
Gas utilities:
Long-term debt 380,588 458,252 1,158,535 1,291,303
Other interest 48,221 60,411 352,836 368,527
Propane operations 41,077 17,492 107,803 40,361
------------- ---------------- --------------- ---------------
Total interest charges 469,886 536,155 1,619,174 1,700,191
------------- ---------------- --------------- ---------------
NET EARNINGS (LOSS) $(281,216) $(247,734) $3,386,482 $2,915,298
============= ================ =============== ==============
BASIC EARNINGS PER COMMON SHARE $(0.16) $(0.16) $2.02 $1.95
============= ================ =============== ==============
DILUTED EARNINGS PER COMMON SHARE $(0.16) $(0.16) $2.02 $1.95
============= ================ =============== ==============
CASH DIVIDENDS PER COMMON SHARE $0.265 $0.260 $0.795 $0.780
============= ================ =============== ==============
</TABLE>
See condensed notes to condensed consolidated financial statements.
- --------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
ROANOKE GAS COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE-MONTH AND NINE-MONTH PERIODS
ENDED JUNE 30, 1998 AND 1997
- ---------------------------------------------------------------------------------------------------------------------------------
UNAUDITED
- --------- Three Months Ended Nine Months Ended
June 30, June 30,
1998 1997 1998 1997
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $(281,216) $(247,734) $3,386,482 $2,915,298
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 903,397 811,931 2,679,980 2,424,626
(Gain) loss on disposal of utility and nonutility
property 6,923 (2,321) 15,032 (6,490)
Loss on sale of other asset - - 566 -
Increase (decrease) in Deferred taxes and
investment tax credits 317,576 202,912 (1,417,737) (935,431)
Changes in assets and liabilities which provided
cash, exclusive of changes and noncash
transactions shown separately 1,417,288 3,934,908 5,278,346 5,111,783
----------- ----------- ------------ -----------
Net cash provided by operating activities 2,363,968 4,699,696 9,942,669 9,509,786
----------- ----------- ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to utility plant in service and under
construction and nonutility property (2,000,834) (1,577,150) (6,109,106) (6,252,491)
Cost of removal of utility plant, net (18,008) (33,542) (50,426) (126,532)
Proceeds from disposal of equipment 11,750 21,844 33,367 40,788
Proceeds from sale of other asset - - 173,334
----------- ----------- ------------ -----------
Net cash used in investing activities (2,007,092) (1,588,848) (5,952,831) (6,338,235)
----------- ----------- ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 1,656,000 - 3,356,000 -
Retirement of long-term debt and payments on
obligations under capital leases (8,834) (288,544) (2,872,811) (648,444)
Net repayments under lines of credit (785,000) (2,745,000) (5,834,000) (2,622,500)
Cash dividends paid (467,977) (391,627) (1,282,730) (1,155,168)
Proceeds from issuance of stock 185,865 221,487 4,210,494 695,713
Capital stock expense - - (245,714) -
----------- ----------- ------------ -----------
Net cash used in financing activities 580,054 (3,203,684) (2,668,761) (3,730,399)
----------- ----------- ------------ -----------
<PAGE>
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 936,930 (92,836) 1,321,077 (558,848)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 500,192 167,310 116,045 633,322
----------- ----------- ------------ -----------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $1,437,122 $74,474 $1,437,122 $74,474
=========== =========== ============ ===========
SUPPLEMENTAL INFORMATION:
Interest paid 518,824 816,860 1,972,876 1,851,899
Income taxes paid $ 1,012,823 $114,886 $2,273,446 $1,024,786
NONCASH TRANSACTIONS:
The assets of a propane company were acquired in December 1997 in exchange for
34,317 shares of stock for a total value of $617,706.
The Company refinanced the remaining balances of Series K and Series L First
Mortgage Bonds in the amount of $3,344,000 into a First Mortgage Note due July
1, 2008 in June 1998
See condensed notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
ROANOKE GAS COMPANY AND SUBSIDIARIES
CONDENSED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------
UNAUDITED
- ---------
1. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting of
only normal recurring accruals) necessary to present fairly Roanoke Gas
Company's financial position as of June 30, 1998 and September 30, 1997,
and the results of its operations and its cash flows for the three months
and nine months ended June 30, 1998 and 1997. The results of operations for
the nine months ended June 30, 1998 are not indicative of the results to be
expected for the fiscal year ending September 30, 1998.
2. The condensed consolidated financial statements are presented as
permitted by Form 10-Q and do not contain certain information included in
the Company's annual consolidated financial statements and notes thereto.
3. Quarterly earnings are affected by the highly seasonal nature of the
business as variations in weather conditions generally result in greater
earnings during the winter months.
4. The Company refinanced the remaining balances on the Series K and Series
L First Mortgage Bonds in conjunction with an additional borrowing to
create a $5,000,000 First Mortgage Note due in full on July 1, 2008 at a
fixed interest rate of 7.804%. The transaction resulted in net additional
debt of $1,656,000. The additional proceeds are being used to fund capital
expansion in the natural gas system.
5. In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings Per Share
(Statement 128). Statement 128 supersedes APB Opinion No. 15, Earnings Per
Share, and specifies the computation, presentation and disclosure
requirements for basic and diluted earnings per share (EPS) for entities
with publicly-held common stock. The dilutive securities had no effect on
the per share amounts for the current reporting period. The weighted
average number of shares outstanding for the three-month period and nine
month period ended June 30, 1998 were 1,769,654 and 1,672,756 shares
compared to 1,512,023 and 1,496,606 shares for the same periods last year.
6. In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities, effective for all fiscal quarters of
fiscal years beginning after June 15, 1999. SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging
activities. It requires the recognition of all derivative instruments as
assets or liabilities in the Company's balance sheet and measurement of
those instruments at fair value. The accounting treatment of changes in
fair value is dependent upon whether or not an instrument is designated as
a hedge and, if so, the type of hedge. The Company has not fully analyzed
the provisions of SFAS No. 133. Currently, the Company does not have a
material position in derivative instruments.
<PAGE>
ROANOKE GAS COMPANY AND SUBSIDIARIES
CONDENSED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------
UNAUDITED
- ---------
7. Both Roanoke Gas Company and Bluefield Gas Company operated manufactured
gas plants (MGPs) as a source of fuel for lighting and heating until the
early 1950's. The process involved heating coal in a low-oxygen environment
to produce a manufactured gas that could be distributed through the
Company's pipeline system to customers. A by-product of the process was
coal tar, and the potential exists for on-site tar waste contaminants at
both former plant sites. The extent of contaminants at these sites is
unknown at this time, and the Company has not performed formal analyses of
any environmental media at the Roanoke Gas Company MGP site. An analysis at
the Bluefield Gas Company site indicates some contamination. The Company,
with concurrence of legal counsel, does not believe any events have
occurred requiring regulatory reporting. Further, the Company has not
received any notices of violation or liabilities associated with
environmental statutes or regulations related to the MGP sites and is not
aware of any off-site contamination or pollution as a result of these prior
operations. Therefore, the Company has no plans for subsurface remediation
at either of the MGP sites. Should the Company eventually be required to
remediate either of the MGP sites, the Company will pursue all prudent and
reasonable means to recover any related costs, including insurance claims
and regulatory approval for rate case recognition of expenses associated
with any work required. Based upon prior orders of the State Corporation
Commission of Virginia related to environmental matters at other companies,
the Company believes it will be able to recover prudently incurred costs.
Additionally, a stipulated rate case agreement between the Company and the
West Virginia Public Service Commission recognizes the Company's right to
defer MGP clean-up costs, should any be incurred, and to seek rate relief
for such costs. If the Company eventually incurs costs associated with a
required clean-up of either MGP site, the Company anticipates recording a
regulatory asset for such clean-up costs which are anticipated to be
recoverable in future rates. Based on anticipated regulatory actions and
current practices, management believes that any costs incurred related to
the previously-mentioned environmental matters will not have a material
effect on the Company's consolidated financial position or results of
operations, although there can be no assurance this will be the case.
<PAGE>
ROANOKE GAS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- ---------------------------------------------------------------------------
Consolidated net earnings (loss) for the three-month period and nine-month
periods ended June 30, 1998 were ($281,216) and $3,386,482 compared to
($247,734) and $2,915,298 for the same period last year.
Operating margin for the three months ended June 30, 1998 decreased $79,924, or
2 percent, from the same period last year due to declines in delivered gas
volumes offset partially by the effect of rate increases for Bluefield Gas
Company and Commonwealth Public Service Corporation placed into effect earlier
this year. Total natural gas deliveries decreased by 180,928 MCF, or 9 percent,
and propane deliveries declined by 38,897 gallons, or 4 percent, for the
quarter. The decline in volumes of gas delivered is attributable to the current
quarter having 42 percent fewer heating degree-days than the same period last
year. Propane deliveries declined by a lesser rate for the quarter due to the
increase in customers over last year. The customer growth in the propane
operations is attributable to an ongoing aggressive marketing campaign and the
propane acquisition completed in December 1997. Total propane customer base has
increased by 38 percent over last June.
Other operations expenses for the current quarter declined from the same period
last year due to the absence of amortization of regulatory assets included in
last year's expenses, reduced labor and benefit costs and lower bad debt expense
associated with improvements in delinquencies and reductions in billed revenues
for the quarter. Maintenance expenses increased in response to timing of certain
maintenance expenditures including scheduled pipeline leak repairs and meter
repairs. General taxes declined from the same quarter last year as declines in
revenue-sensitive taxes more than offset increases in property and other taxes.
Capital expenditures for adding new customers to the distribution system and
renewing older facilities have increased depreciation expense over last year's
levels. Propane operations increased over the same period last year with
increases in marketing expenses and depreciation expense resulting from the
growth in customers in the Company's propane subsidiary. Interest charges
declined as the proceeds from the stock issue completed in January reduced the
Company's outstanding average total debt position.
For the nine-month period ended June 30, 1998, operating margins increased
$880,603, or 5 percent, over the same period last year. Approximately one third
of the increased margin was generated from a 2 percent increase in natural gas
deliveries for the period resulting from customer growth and greater industrial
usage due to the strength of the economy. Most of the increase in natural gas
volumes was attributable to industrial customers as the temperature sensitive
firm sales were nearly unchanged from last year. A 20 percent increase in
propane deliveries accounted for the remainder of the margin increase. Propane
increases were generated entirely from the growth in new customers as the
propane division continues to be a significant factor in the Company's
performance. The expense fluctuations for the nine-month period ended June 30,
1998, as compared to the same period last year, are consistent with differences
defined for the quarter. Maintenance expenses are consistent with the same
<PAGE>
ROANOKE GAS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- ----------------------------------------------------------------------------
period last year, and propane operations included additional costs associated
with delivering 20 percent more gallons.
The nine-month earnings presented herein should not be considered as reflective
of the Company's consolidated financial results for the fiscal year ending
September 30, 1998. The total revenues during the first nine months reflect
higher billings due to the weather sensitive nature of the gas business.
Improvement or decline in earnings depends primarily on temperature and weather
conditions during the remaining months.
The Company currently has one rate case application pending before regulatory
bodies. Roanoke Gas Company filed an application with the Virginia State
Corporation Commission (SCC) in December 1996 with rates placed into effect,
subject to refund, on January 1, 1997. A hearing was held on the application in
June 1997. On April 30, 1998, the Hearing Examiner for the Virginia State
Corporation Commission issued a recommended decision in the rate case. Once a
final order is issued, the approved rates will be implemented and refunds with
interest will be made. The Company has established reserves for an estimated
level of refund in the case, and management believes the reserves are adequate
to cover any refund ordered by the Virginia Commission.
On April 27, 1998, the SCC approved a two-year extension to the Company's gas
cost hedging pilot program. Financial hedging instruments will be employed to
help protect against supply-related price volatility impacting customer billing
rates.
On July 7, 1998, the West Virginia Division of Administrative Law Judges issued
a Recommended Decision approving a two-year pilot gas cost hedging program for
Bluefield Gas. This pilot program will employ financial hedges for up to fifty
percent of its normal winter demand not supplied from storage.
The Company is in the process of evaluating the Year 2000 Issue and implementing
corrective actions. The Company has developed an inventory of major financial,
informational and operational systems that will require modification to ensure
Year 2000 compliance. Both internal and external resources are being used to
make the necessary modifications and test the results. The Company has already
converted many of the accounting, billing and operations systems to Year 2000
compliant. The Company expects to complete the remaining conversions and testing
by the spring of 1999. The total cost of converting all internal information
systems, equipment and operations for Year 2000 has not been fully quantified,
but is not expected to be a material cost to the Company. All costs incurred to
date have been expensed.
In addition, the Company is communicating with all of its significant suppliers
and large customers to determine their Year 2000 readiness and to attempt to
identify potential areas of risk in this regard. There can be no guarantee that
the systems of other companies on which the Company's systems rely will be
<PAGE>
ROANOKE GAS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- -----------------------------------------------------------------------------
timely converted, or that a failure to convert by a supplier, customer or other
third party, or a conversion that is incompatible with the Company's systems,
would not have a material adverse effect on the Company and its operations.
The board of directors has given management approval to pursue a corporate
restructuring to create a holding company intended to facilitate growth and
diversification. As a regulated public utility, the Company is currently
restricted in the types of businesses it can pursue. Under the proposed
structure, Roanoke Gas Company will continue as a public utility but operate as
a subsidiary of the holding company. The structure would provide for unregulated
services such as propane operations to be subsidiaries of the holding company
rather than the utility company.
The Company has made an informal inquiry with the Securities and Exchange
Commission ("SEC") seeking their input before making a formal restructuring
application. The restructuring must be approved by the SEC, as well as the
Company's shareholders, the Virginia State Corporation Commission and the West
Virginia Public Service Commission. There can be no assurance if or when these
approvals will be received.
Both Roanoke Gas Company and Bluefield Gas Company operated manufactured gas
plants (MGPs) as a source of fuel for lighting and heating until the early
1950's. The process involved heating coal in a low-oxygen environment to produce
a manufactured gas that could be distributed through the Company's pipeline
system to customers. A by-product of the process was coal tar, and the potential
exists for on-site tar waste contaminants at both former plant sites. The extent
of contaminants at these sites is unknown at this time, and the Company has not
performed formal analyses of any environmental media at the Roanoke Gas Company
MGP site. An analysis at the Bluefield Gas Company site indicates some
contamination. The Company, with concurrence of legal counsel, does not believe
any events have occurred requiring regulatory reporting. Further, the Company
has not received any notices of violation or liabilities associated with
environmental statutes or regulations related to the MGP sites and is not aware
of any off-site contamination or pollution as a result of these prior
operations. Therefore, the Company has no plans for subsurface remediation at
either of the MGP sites. Should the Company eventually be required to remediate
either of the MGP sites, the Company will pursue all prudent and reasonable
means to recover any related costs, including insurance claims and regulatory
approval for rate case recognition of expenses associated with any work
required. Based upon prior orders of the State Corporation Commission of
Virginia related to environmental matters at other companies, the Company
believes it will be able to recover prudently incurred costs. Additionally, a
stipulated rate case agreement between the Company and the West Virginia Public
Service Commission recognizes the Company's right to defer MGP clean-up costs,
should any be incurred, and to seek rate relief for such costs. If the Company
eventually incurs costs associated with a required clean-up of either MGP site,
the Company anticipates recording a regulatory asset for such clean-up costs
which are anticipated to be recoverable in future rates. Based on anticipated
<PAGE>
ROANOKE GAS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- -----------------------------------------------------------------------------
regulatory actions and current practices, management believes that any costs
incurred related to the previously-mentioned environmental matters will not have
a material effect on the Company's consolidated financial position and results
of operations, although there can be no assurance this will be the case.
<PAGE>
Part II - Other Information
Item 2. Changes in Securities.
Pursuant to the Roanoke Gas Company Restricted Stock Plan for Outside
Directors (the "Restricted Stock Plan"), 40% of the monthly retainer
fee of each non-employee director of the Company is paid in shares of
unregistered common stock and is subject to vesting and
transferability restrictions ("restricted stock"). A participant can,
subject to approval of the Board, elect to receive up to 100% of his
retainer fee in restricted stock. The number of shares of restricted
stock is 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. The shares of restricted stock are issued in reliance on
section 3(a)(11) and section 4(2) exemptions under the Securities Act
of 1993 (the "Act") and will vest only in the case of the
participant's death, disability, retirement or in the event of a
change in control of the Company. Shares of restricted stock will be
forfeited to the Company by the participant's voluntary resignation
during his term on the Board or removal for cause as a director.
During the quarter ended June 30, 1998, the Company issued a total of
408 shares of restricted stock pursuant to the Restricted Stock Plan
as follows:
<TABLE>
<CAPTION>
Investment Date Price Number of Shares
<S> <C> <C> <C> <C> <C> <C>
4-1-98 $22.250 130
5-1-98 $21.750 133
6-1-98 $20.000 145
</TABLE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the three months
ended June 30, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROANOKE GAS COMPANY
Date: August 11, 1998 By:s/Roger L. Baumgardner
----------------------------------
Roger L. Baumgardner
Vice President/Secretary, Treasurer
And Principal Accounting Officer
<PAGE>
EXHIBIT 27
ARTICLE - UT
LEGEND
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROANOKE
GAS COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENT FOR THE
QUARTER ENDED JUNE 30, 1998, AS SET FORTH IN THE COMPANY'S QUARTERLY REPORT ON
FORM 10-Q, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
/LEGEND
<TABLE>
<S> <C>
PERIOD-TYPE 9-MOS
FISCAL-YEAR-END SEP-30-1998
PERIOD-END JUN-30-1998
BOOK-VALUE PER-BOOK
TOTAL-NET-UTILITY-PLANT 45,744,189
OTHER-PROPERTY-AND-INVEST 6,191,252
TOTAL-CURRENT-ASSETS 14,308,308
TOTAL-DEFERRED-CHARGES 0
OTHER-ASSETS 837,571
TOTAL-ASSETS 67,081,320
COMMON 8,861,795
CAPITAL-SURPLUS-PAID-IN 8,629,787
RETAINED-EARNINGS 9,719,102
TOTAL-COMMON-STOCKHOLDERS-EQ 27,210,684
PREFERRED-MANDATORY 0
PREFERRED 0
LONG-TERM-DEBT-NET 20,700,000
SHORT-TERM-NOTES 1,295,000
LONG-TERM-NOTES-PAYABLE 0
COMMERCIAL-PAPER-OBLIGATIONS 0
LONG-TERM-DEBT-CURRENT-PORT 0
PREFERRED-STOCK-CURRENT 0
CAPITAL-LEASE-OBLIGATIONS 0
LEASES-CURRENT 5,313
OTHER-ITEMS-CAPITAL-AND-LIAB 17,870,323
TOT-CAPITALIZATION-AND-LIAB 67,081,320
GROSS-OPERATING-REVENUE 51,528,670
INCOME-TAX-EXPENSE 1,845,381
OTHER-OPERATING-EXPENSES 44,795,571
TOTAL-OPERATING-EXPENSES 46,640,952
OPERATING-INCOME-LOSS 4,887,718
OTHER-INCOME-NET 117,938
INCOME-BEFORE-INTEREST-EXPEN 5,005,656
TOTAL-INTEREST-EXPENSE 1,619,174
NET-INCOME 3,386,482
PREFERRED-STOCK-DIVIDENDS 0
EARNINGS-AVAILABLE-FOR-COMM 3,386,482
COMMON-STOCK-DIVIDENDS 1,355,235
TOTAL-INTEREST-ON-BONDS 601,799
CASH-FLOW-OPERATIONS 9,942,669
EPS-PRIMARY 2.02
EPS-DILUTED 2.02
</TABLE>
<PAGE>
Exhibit H-3
FORM U-3A-2 ROANOKE GAS COMPANY
FILE NO. 69-331
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
Statement By Holding Company Claiming Exemption
-----------------------------------------------
Under Rule U-3A-2 From the Provisions of the
--------------------------------------------
Public Utility Holding Company Act of 1935
------------------------------------------
Roanoke Gas Company ("Roanoke Gas") hereby files with the Securities and
Exchange Commission, pursuant to Rule 2, its statement claiming exemption as a
holding company from the provisions of the Public Utility Holding Company Act of
1935. In support of such claim for exemption, the following information is
submitted:
1. Roanoke Gas is a public service corporation organized and existing in
good standing under the laws of the Commonwealth of Virginia. Roanoke Gas
distributes natural gas to some 49,324 residential, commercial and industrial
customers located in the City of Roanoke and environs pursuant to certificates
of convenience and necessity at rates and charges issued and prescribed by the
State Corporation Commission of Virginia ("Virginia Commission"). Roanoke Gas
owns all of the issued and outstanding voting securities of Diversified Energy
Company, a Virginia corporation, d/b/a Highland Propane Company ("Highland
Propane"), and d/b/a Highland Gas Marketing. Highland Propane, which is not a
public utility, is operated under two (2) divisions, Highland Propane-Roanoke
and Highland Propane- Bluefield. Highland Propane-Roanoke is engaged in the
business of selling liquefied petroleum gas (propane) in bulk to residential,
commercial and industrial customers in and around Roanoke, Virginia and
Southwest Virginia. Roanoke Gas provides all managerial and other direct labor,
goods and services to Highland Propane-Roanoke under agreement approved by the
Virginia Commission. Highland Propane is not otherwise subject to the regulatory
jurisdiction of the Virginia Commission. Highland Propane-Bluefield is engaged
in the business of selling liquefied petroleum gas (propane) in bulk to
residential, commercial and industrial customers in Southern West Virginia and
has offices in Bluefield and Rainelle, West Virginia. Highland Gas Marketing is
a purchasing and marketing entity that buys fuels on the spot and short-term
market and resells to certain end-users.
Roanoke Gas also owns all of the issued and outstanding securities of
Bluefield Gas Company ("Bluefield Gas"), a West Virginia public service
corporation, which is regulated as to rates and service by the Public Service
Commission of the State of West Virginia ("West Virginia Commission"). Bluefield
Gas provides natural gas service to some 4,297 residential, commercial and
industrial customers located in and around Bluefield, West Virginia. Bluefield
Gas, in turn, owns all of the issued and outstanding voting securities of
Commonwealth Public Service Corporation ("Commonwealth"). Commonwealth is a
small Virginia public service corporation which provides natural gas service to
approximately 961 residential, commercial and industrial customers located in
and around Bluefield, Virginia, under rates and charges prescribed by the
Virginia Commission. Bluefield first claimed exemption under Section 3(a)(2) of
the Public Utility Holding Company Act of 1935 ("The Act") in February 1952.
<PAGE>
2. Columbia Gas Transmission Corporation ("Columbia") is Roanoke Gas'
primary transporter of natural gas. Columbia historically has transported
approximately two-thirds of Roanoke Gas' gas supply and 100% of Bluefield Gas'
gas supply. Prior to Federal Energy Regulatory Commission Order 636, Roanoke Gas
and Bluefield Gas purchased their core market requirements through Demand
Purchases, Firm Transportation Service and Firm Storage Service. Additional
requirements were met through the use of spot and short-term purchases under
contracts with producers and brokers. Under Order 636 the responsibility for
obtaining dependable natural gas supplies shifts from the pipeline companies to
the local distribution companies and to other "shippers" of natural gas. The
Company purchases gas supplies from a variety of producers and marketers. Recent
examples of suppliers or marketers include Amoco Energy Trading Corporation,
Cabot Oil and Gas, Columbia Energy Services, Duke Energy, Engage Energy, LG&E
Energy Marketing, Texaco Natural Gas, and Southern Company Energy.
Roanoke Gas' other major transporter is East Tennessee Natural Gas Company
("East Tennessee"), an El Paso Energy Company. Historically, East Tennessee has
delivered approximately one-third of Roanoke Gas' natural gas supply.
Roanoke Gas receives its gas supply from Columbia at two city gate
stations. Each station is connected by a thirty-three mile transmission line to
Columbia's system at Gala, Virginia. Roanoke Gas receives its gas supply from
East Tennessee at four city gate stations located on East Tennessee's
transmission line. The city gate stations are located on the perimeter of a
network of distributions mains located in the Cities of Roanoke and Salem, the
Towns of Vinton, Fincastle and Troutville, and the Counties of Bedford,
Botetourt, Montgomery and Roanoke, Virginia. Also, located on our transmission
line in Botetourt County, Virginia is a liquefied natural gas storage facility
which has the capacity to hold 200 million cubic feet of natural gas.
Bluefield Gas owns a transmission line extending from Princeton, West
Virginia to Bluefield, West Virginia, and a distribution system within the City
of Bluefield, West Virginia and the immediate surrounding area of Mercer County,
West Virginia. A portion of the gas transported by Bluefield Gas is sold at the
West Virginia-Virginia state line to Commonwealth for resale to its customers
through a distribution network in Bluefield, Virginia and the immediate
surrounding area of Tazewell County, Virginia.
Highland Propane-Bluefield's principal bulk storage facility, located at
its Bluefield, West Virginia facility, is comprised of two 30,000-gallon storage
tanks and one 18,000-gallon storage tank. Two 18,000-gallon storage tanks are
located at its Rainelle, West Virginia facility and one 30,000- gallon tank is
located at Ansted, WV.
Highland Propane-Roanoke owns and operates seven storage facilities. A
facility at Thirlane Road, N.W. in Roanoke, Virginia consists of two 30,000-
gallon tanks. A second facility at Fort Chiswell, Virginia consists of two
35,000-gallon tanks. The third facility is located on the property of
Consolidated Glass in Galax, Virginia and consists of one 30,000-gallon tank.
The fourth facility is located in Craig County, near the town of New Castle,
Virginia and consists of one 30,000-gallon tank. The fifth facility, located
near the intersection of Routes 221 and 679 in Floyd County, consists of a
30,000-gallon tank. The sixth facility is located on the property of Virginia
Forging in Buchanan, Virginia and consists of a 30,000-gallon tank. The seventh
facility is located on the property of Golden West Foods in Bedford, Virginia
and consists of a 30,000-gallon tank.
<PAGE>
3. The following information for the last calendar year with respect to
Roanoke Gas, Bluefield Gas and Commonwealth is submitted:
(a) Roanoke Gas distributed at retail 7,456,760 MCF of gas during the
calendar year 1997. Bluefield Gas distributed at retail 903,416 MCF of gas
during the calendar year 1997. Commonwealth distributed at retail 264,389
MCF of gas during the calendar year 1997.
Neither Roanoke Gas, Bluefield Gas nor Commonwealth distributed at
retail natural gas outside the state of its incorporation.
Roanoke Gas and Commonwealth did not sell at wholesale natural gas
outside the Commonwealth of Virginia. Bluefield Gas sold 264,389 MCF of
natural gas at wholesale to Commonwealth at the Virginia-West Virginia
line.
(d) Roanoke Gas purchased 7,879,446 MCF of natural gas outside the
Commonwealth of Virginia during the calendar year 1997. All such gas was
transported to Roanoke Gas for resale as system supply by Columbia Gas
Transmission Corporation and East Tennessee Natural Gas Company.
Commonwealth purchased 264,389 MCF of natural gas from Bluefield Gas at the
Virginia-West Virginia State line. Bluefield Gas purchased 1,220,855 MCF of
natural gas outside the State of West Virginia. All such gas was
transported to Bluefield Gas for resale as system supply by Columbia Gas
Transmission Corporation. Bluefield Gas transported 20,596 MCF of natural
gas to its end-users for other marketers. Highland Gas Marketing purchased
and resold 1,491,731 MCF of natural gas to certain end-users of Roanoke Gas
Company. In addition to the above volumes of Highland Gas Marketing,
Roanoke transported 793,859 MCF of natural gas to its end-users for other
marketers.
4. (a through e) Not applicable. The Company holds no interest, directly or
indirectly in an exempt wholesale generator (EWG) or foreign utility company.
A consolidating statement of income and surplus and a consolidating balance
sheet of Roanoke Gas and its subsidiaries for the 1997 calendar year is attached
as Exhibit A and Exhibit A(1).
The above-named claimant has caused this statement to be duly executed on
its behalf by its authorized officer on this 23rd day of February, 1998.
ROANOKE GAS COMPANY
By: s/John B. Williamson, III
[Seal appears here] ---------------------------
Its President
(SEAL)
ATTEST:
s/Roger L. Baumgardner
- -------------------------------
Secretary
<PAGE>
Notices and correspondence regarding this statement should be addressed to:
Roger L. Baumgardner
Vice President-Secretary & Treasurer
Roanoke Gas Company
Post Office Box 13007
Roanoke, VA 24030
<PAGE>
<TABLE>
<CAPTION>
Exhibit A
Roanoke Gas Company
Consolidating Statement Of Earnings
Twelve Months Ended December 31, 1997
Roanoke Bluefield Highland Highland
Gas Gas Propane Gas Consolidated
Company Company Company Marketing Eliminations Total
------- ------- ------- --------- ------------ -----
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Gas utilities $ 49,741,801 $ 6,671,948 $ (316,374) $ 56,097,375
Propane operations $ 7,334,048 7,334,048
---------- --------- --------- ------- --------- ----------
Total operating revenues 49,741,801 6,671,948 7,334,048 0 (316,374) 63,431,423
COST OF GAS:
Gas utilities 31,946,104 4,753,640 36,699,744
Propane operations 3,697,591 3,697,591
---------- --------- --------- ------- --------- ----------
Total cost of gas 31,946,104 4,753,640 3,697,591 0 0 40,397,335
OPERATING MARGIN 17,795,697 1,918,308 3,636,457 0 (316,374) 23,034,088
---------- --------- --------- ------- --------- ----------
OTHER OPERATING EXPENSES:
Gas utilities:
Other operations 7,372,109 816,974 (173,108) 8,015,975
Maintenance 1,214,759 192,916 1,407,675
Taxes - general 2,116,592 338,409 2,455,001
Taxes - income 871,688 57,997 929,685
Depreciation and amortization 2,418,926 210,693 (17,609) 2,612,010
Propane operations 3,103,887 (124,983) 2,978,904
---------- --------- --------- ------- --------- ----------
Total other operating expenses 13,994,074 1,616,989 3,103,887 0 (315,700) 18,399,250
OPERATING EARNINGS 3,801,623 301,319 532,570 0 (674) 4,634,838
OTHER INCOME AND DEDUCTIONS:
Gas utilities:
Interest Income 1,133 1,133
Merchandising and jobbing, net 133,392 4,404 137,796
Other deductions (88,723) (6,407) (95,130)
Taxes - income (27,567) (526) (28,093)
Propane operations, net 46,578 88,307 5,391 140,276
---------- --------- --------- ------- --------- ----------
Total other income and deductions 18,235 (2,529) 46,578 88,307 5,391 155,982
<PAGE>
EARNINGS BEFORE INTEREST CHARGES 3,819,858 298,790 579,148 88,307 4,717 4,790,820
INTEREST CHARGES:
Gas utilities:
Long-term debt 1,663,845 105,181 1,769,026
Other interest 312,282 108,401 (173) 420,510
Propane operations 79,409 (963) 78,446
---------- --------- --------- ------- --------- ----------
Total interest charges 1,976,127 213,582 79,409 0 (1,136) 2,267,982
NET EARNINGS $ 1,843,731 $ 85,208 $ 499,739 $ 88,307 $ 5,853 $ 2,522,838
========== ========= ========= ======= ========= ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit A(1)
ROANOKE GAS COMPANY AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1997
Roanoke Bluefield Highland Highland
Gas Gas Propane Gas Consolidated
ASSETS Company Company Company Marketing Eliminations Total
- ------ ------- ------- ------- --------- ------------ -----
<S> <C> <C> <C> <C> <C> <C>
UTILITY PLANT:
Utility Plant in Service $ 61,453,413 $ 6,342,352 $(1,636,290) $ 66,159,475
Accumulated Depreciation (22,337,694) (2,215,192) 1,544,260 (23,008,626)
----------- ---------- ---------- ---------- ---------- -----------
Utility Plant in Service, Net 39,115,719 4,127,160 - - (92,030) 43,150,849
Construction Work-In-Progress 1,024,205 261,910 1,286,115
----------- ---------- ---------- ---------- ---------- -----------
Utility Plant, Net 40,139,924 4,389,070 - - (92,030) 44,436,964
----------- ---------- ---------- ---------- ---------- -----------
NONUTILITY PROPERTY:
Propane 8,331,196 (209,764) 8,121,432
Accumulated Depreciation (3,008,803) 272,972 (2,735,831)
----------- ---------- ---------- ---------- ---------- -----------
Nonutility Property, Net - - 5,322,393 - 63,208 5,385,601
----------- ---------- ---------- ---------- ---------- -----------
Cash and Cash Equivalents (11,480) 64,047 38,578 91,145
Accounts Receivable 8,529,895 1,142,448 1,069,608 1,040,597 1,066,056 12,848,604
Inventories 5,659,509 923,486 154,066 6,737,061
Prepaid Income Taxes -
Deferred Income Taxes 2,005,521 2,005,521
Purchased Gas Adjustments (1,648,337) 486,472 1,161,865 -
Other 292,743 41,034 138,858 (1,300) 471,335
----------- ---------- ---------- ---------- ---------- -----------
Total Current Assets 12,822,330 2,657,487 1,401,110 1,040,597 4,232,142 22,153,666
----------- ---------- ---------- ---------- ---------- -----------
OTHER ASSETS 3,131,443 57,067 405,929 (2,748,106) 846,333
----------- ---------- ---------- ---------- ---------- -----------
TOTAL $ 56,093,697 $ 7,103,624 $ 7,129,432 $ 1,040,597 $ 1,455,214 $ 72,822,564
=========== ========== ========== ========== ========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit A(1)
ROANOKE GAS COMPANY AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1997
Roanoke Bluefield Highland Highland
Gas Gas Propane Gas Consolidated
LIABILITIES Company Company Company Marketing Eliminations Total
- ----------- ------- ------- ------- --------- ------------ -----
<S> <C> <C> <C> <C> <C> <C>
CAPITALIZATION:
Stockholders' Equity:
Common Stock $ 7,857,825 $ 49,704 $ 196,421 $ (246,125) $ 7,857,825
Capital in Excess of Par Value 3,795,149 257,805 833,662 952,386 5,839,002
Retained Earnings 7,776,374 1,870,406 2,447,460 205,115 (3,484,489) 8,814,866
----------- ---------- ---------- --------- ---------- -----------
Total Stockholders' Equity 19,429,348 2,177,915 3,477,543 205,115 (2,778,228) 22,511,693
Long-Term Debt (Less Current
Maturities) 15,779,000 1,300,000 1,700,000 18,779,000
----------- ---------- ---------- --------- ---------- -----------
Total Capitalization 35,208,348 3,477,915 5,177,543 205,115 (2,778,228) 41,290,693
----------- ---------- ---------- --------- ---------- -----------
CURRENT LIABILITIES:
Current Maturities of Long-Term Debt 621,958 621,958
Notes Payable 8,964,000 2,271,000 612,000 11,847,000
Dividends Payable 417,226 417,226
Accounts Payable 4,057,309 511,350 718,448 774,528 1,066,056 7,127,691
Income Taxes Payable 981,785 81,181 369,578 60,954 1,493,498
Customers' Deposits 425,070 59,241 7,129 491,440
Accrued Expenses 3,932,681 342,968 92,979 4,368,628
Refunds From Suppliers - Due Customers 311,899 1,968 313,867
Purchased Gas Adjustments 1,161,865 1,161,865
----------- ---------- ---------- --------- ---------- -----------
Total Current Liabilities 19,711,928 3,267,708 1,800,134 835,482 2,227,921 27,843,173
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred Income Taxes 707,186 341,299 151,755 2,005,521 3,205,761
Deferred Investment Tax Credits 466,235 16,702 482,937
Other Deferred Credits -
----------- ---------- ---------- --------- ---------- -----------
Total Deferred Credits and Other
Liabilities 1,173,421 358,001 151,755 - 2,005,521 3,688,698
----------- ---------- ---------- --------- ---------- -----------
TOTAL $ 56,093,697 $ 7,103,624 $ 7,129,432$ 1,040,597 $ 1,455,214 $ 72,822,564
=========== ========== ========== ========= ========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit A
Bluefield Gas Company
Consolidating Income Statement
Twelve Months Ended December 31, 1997
Bluefield Commonwealth
Gas Public Service Consolidated
Company Corporation Eliminations Total
------- ----------- ------------ -----
<S> <C> <C> <C> <C>
OPERATING REVENUES $ 6,253,205 $ 1,515,310 $ (1,096,567) $ 6,671,948
COST OF GAS 4,753,640 1,081,443 (1,081,443) 4,753,640
---------- ---------- ----------- ----------
OPERATING MARGIN 1,499,565 433,867 (15,124) 1,918,308
OTHER OPERATING EXPENSES:
Gas utilities:
Other operations 626,523 205,575 (15,124) 816,974
Maintenance 124,296 68,620 192,916
Taxes - general 276,299 62,110 338,409
Taxes - income 42,893 15,104 57,997
Depreciation and amortization 159,905 50,788 210,693
---------- ---------- ----------- ----------
Total other operating expenses 1,229,916 402,197 (15,124) 1,616,989
OPERATING EARNINGS 269,649 31,670 - 301,319
OTHER INCOME AND DEDUCTIONS:
Gas utilities:
Interest Income -
Merchandising and jobbing, net 4,404 4,404
Other deductions (6,132) (275) (6,407)
Taxes - income (620) 94 (526)
---------- ---------- ----------- ----------
Total other income and deductions (2,348) (181) - (2,529)
EARNINGS BEFORE INTEREST CHARGES 267,301 31,489 - 298,790
INTEREST CHARGES:
Gas utilities:
Long-term debt 105,181 105,181
Other interest 106,745 1,656 108,401
---------- ---------- ----------- ----------
Total interest charges 211,926 1,656 - 213,582
NET EARNINGS $ 55,375 $ 29,833 $ 0 $ 85,208
========== ========== =========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit A(1)
BLUEFIELD GAS COMPANY
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1997
Bluefield Commonwealth
Gas Public Service Consolidated
ASSETS Company Corporation Eliminations Total
- ------ ------- ----------- ------------ -----
<S> <C> <C> <C> <C>
UTILITY PLANT:
Utility Plant in Service $ 5,130,392 $ 1,211,960 $ 6,342,352
Accumulated Depreciation (1,823,628) (391,564) (2,215,192)
---------- ---------- ----------- ----------
Utility Plant in Service, Net 3,306,764 820,396 0 4,127,160
Construction Work-In-Progress 135,425 126,485 261,910
---------- ---------- ----------- ----------
Utility Plant, Net 3,442,189 946,881 0 4,389,070
---------- ---------- ----------- ----------
CURRENT ASSETS:
Cash and Cash Equivalents 64,047 64,047
Accounts Receivable 1,358,450 (216,002) 1,142,448
Inventories 923,486 923,486
Deferred Income Taxes 0
Purchased Gas Adjustments 453,304 33,168 486,472
Other 41,034 41,034
---------- ---------- ----------- ----------
Total Current Assets 2,840,321 (182,834) 0 2,657,487
---------- ---------- ----------- ----------
OTHER ASSETS 57,674 (107) (500) 57,067
---------- ---------- ----------- ----------
TOTAL $ 6,340,184 $ 763,940 $ (500) $ 7,103,624
========== ========== =========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit A(1)
BLUEFIELD GAS COMPANY
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1997
Bluefield Commonwealth
Gas Public Service Consolidated
LIABILITIES Company Corporation Eliminations Total
- ----------- ------- ----------- ------------ -----
<S> <C> <C> <C> <C>
CAPITALIZATION:
Stockholders' Equity:
Common Stock $ 49,704 $ 500 $ (500) $ 49,704
Capital in Excess of Par Value 220,564 37,241 257,805
Retained Earnings 1,380,608 489,798 1,870,406
---------- -------- ------ ----------
Total Stockholders' Equity 1,650,876 527,539 (500) 2,177,915
Long-Term Debt (Less Current Maturities) 1,300,000 1,300,000
---------- -------- ------ ----------
Total Capitalization 2,950,876 527,539 (500) 3,477,915
---------- -------- ------ ----------
CURRENT LIABILITIES:
Current Maturities of Long-Term Debt 0 0
Notes Payable 2,271,000 2,271,000
Accounts Payable 476,605 34,745 511,350
Income Taxes Payable (24,022) 105,203 81,181
Customers' Deposits 49,666 9,575 59,241
Accrued Expenses 331,337 11,631 342,968
Refunds From Suppliers - Due Customers 0 1,968 1,968
Purchased Gas Adjustments 0
---------- -------- ------ ----------
Total Current Liabilities 3,104,586 163,122 0 3,267,708
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred Income Taxes 271,139 70,160 341,299
Deferred Investment Tax Credits 13,583 3,119 16,702
Other Deferred Credits 0
---------- -------- ------ ----------
Total Deferred Credits and Other
Liabilities 284,722 73,279 0 358,001
---------- -------- ------ ----------
TOTAL $ 6,340,184 $ 763,940 $ (500) $ 7,103,624
========== ======== ====== ==========
</TABLE>
<PAGE>
EXHIBIT B
ROANOKE GAS COMPANY
FINANCIAL DATA SCHEDULE
Item No. Caption Heading
-------- ---------------
1 Total Assets $72,822,564
2 Total Operating Revenues 63,431,423
3 Net Income 2,522,838
<PAGE>
EXHIBIT C
NOT APPLICABLE
<PAGE>
Exhibit 27
ARTICLE - OPUR3
LEGEND
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATING INCOME STATEMENTS OF ROANOKE GAS CO. AND SUBSIDIARIES AND OF
BLUEFIELD GAS CO. AND THE CONSOLIDATING BALANCE SHEETS OF ROANOKE GAS CO. AND
SUBSIDIARIES AND OF BLUEFIELD GAS CO. FOR THE YEAR ENDED DEC. 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
/LEGEND
SUBSIDIARY
NUMBER 2
NAME - DIVERSIFIED ENERGY CO. & COMMONWEALTH PUBLIC SERVICE CORP.
<TABLE>
<S> <C>
PERIOD-TYPE YEAR
FISCAL-YEAR-END SEP-30-1998
PERIOD-END DEC-31-1997
BOOK-VALUE PER-BOOK
TOTAL-ASSETS 72,822,564
TOTAL-OPERATING-REVENUES 63,431,423
NET-INCOME 2,522,838
</TABLE>
<PAGE>
Exhibit H-4
FORM U-3A-2 BLUEFIELD GAS COMPANY
FILE NO. 69-153-3
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
Statement By Holding Company Claiming Exemption
-----------------------------------------------
Under Rule U-3A-2 From the Provisions of the
--------------------------------------------
Public Utility Holding Company Act of 1935
------------------------------------------
Bluefield Gas Company ("Bluefield Gas") hereby files with the Securities
and Exchange Commission, pursuant to Rule 2, its statement claiming exemption as
a holding company from the provisions of the Public Utility Holding Company Act
of 1935. In support of such claim for exemption, the following information is
submitted:
1. Bluefield Gas is a natural gas public utility organized and existing in
good standing under the laws of the State of West Virginia. Bluefield Gas
distributes natural gas to some 4,297 residential, commercial and industrial
customers located in the City of Bluefield, West Virginia and the immediate
surrounding area of Mercer County, West Virginia pursuant to certificates of
convenience and necessity at rates and charges issued and prescribed by the West
Virginia Public Service Commission. Bluefield Gas owns all of the issued and
outstanding voting securities of Commonwealth Public Service Corporation
("Commonwealth"), a Virginia public service corporation, providing natural gas
service to approximately 961 residential, commercial and industrial customers in
Bluefield, Virginia and the immediate surrounding area in Tazewell County,
Virginia pursuant to certificates of convenience and necessity at rates and
charges issued and prescribed by the State Corporation Commission of Virginia.
2. Bluefield Gas owns a transmission line extending from Princeton, West
Virginia to Bluefield, West Virginia, and a distribution system within the City
of Bluefield, West Virginia, and the immediate surrounding area of Mercer
County, West Virginia. Natural Gas is purchased from various producers and
marketers and transported on Columbia Gas Transmission Corporation's system to
Princeton, West Virginia. It is then transported on Bluefield Gas' transmission
line to Bluefield where it is distributed at retail to Bluefield Gas customers.
A portion of the gas is sold at the West Virginia-Virginia state line to
Commonwealth for resale, pursuant to tariff on file with the Federal Energy
Regulatory Commission, to its customers in Bluefield, Virginia and the
surrounding area of Tazewell County, Virginia.
3. The following information for the last calendar year with respect to
Bluefield Gas and Commonwealth is submitted:
(a) Bluefield Gas distributed at retail 903,416 MCF of gas during the
calendar year 1997. Commonwealth distributed at retail 264,389 MCF of gas
during the calendar year 1997.
(b) Neither Bluefield Gas nor Commonwealth distributed at retail
natural gas outside the state of its incorporation.
<PAGE>
(c) Commonwealth did not sell at wholesale natural gas outside the
Commonwealth of Virginia. Bluefield Gas sold 264,389 MCF of natural gas at
wholesale to Commonwealth at the Virginia-West Virginia State line.
(d) Bluefield Gas purchased 1,220,855 MCF of natural gas outside the
State of West Virginia. All such gas was transported to Bluefield Gas for
resale as system supply by Columbia Gas Transmission Corporation. Bluefield
Gas transported 20,596 MCF of natural gas to its end-users for other
marketers. Commonwealth purchased 264,389 MCF of natural gas from Bluefield
Gas at the Virginia-West Virginia State line.
4. (a through e) Not applicable. The Company holds no interest, directly or
indirectly in an exempt wholesale generator (EWG) or foreign utility company.
A consolidating statement of income and surplus and a consolidating balance
sheet for Bluefield Gas and Commonwealth for the 1997 calendar year is attached
as Exhibit A and Exhibit A(1).
The above-named claimant has caused this statement to be duly executed on
its behalf by its authorized officer on this 23rd day of February, 1998.
BLUEFIELD GAS COMPANY
By: s/John B. Williamson, III
[Seal appears here] ---------------------------
Its President
(SEAL)
ATTEST:
s/Roger L. Baumgardner
- -------------------------------
Secretary
Notices and correspondence regarding this statement should be addressed to:
Roger L. Baumgardner
Secretary & Treasurer
Bluefield Gas Company
Post Office Box 13007
Roanoke, VA 24030
<PAGE>
<TABLE>
<CAPTION>
Exhibit A
Bluefield Gas Company
Consolidating Income Statement
Twelve Months Ended December 31, 1997
Bluefield Commonwealth
Gas Public Service Consolidated
Company Corporation Eliminations Total
------- ----------- ------------ -----
<S> <C> <C> <C> <C>
OPERATING REVENUES $ 6,253,205 $ 1,515,310 $ (1,096,567) $ 6,671,948
COST OF GAS 4,753,640 1,081,443 (1,081,443) 4,753,640
---------- ---------- ----------- ----------
OPERATING MARGIN 1,499,565 433,867 (15,124) 1,918,308
OTHER OPERATING EXPENSES:
Gas utilities:
Other operations 626,523 205,575 (15,124) 816,974
Maintenance 124,296 68,620 192,916
Taxes - general 276,299 62,110 338,409
Taxes - income 42,893 15,104 57,997
Depreciation and amortization 159,905 50,788 210,693
---------- ---------- ----------- ----------
Total other operating expenses 1,229,916 402,197 (15,124) 1,616,989
OPERATING EARNINGS 269,649 31,670 - 301,319
OTHER INCOME AND DEDUCTIONS:
Gas utilities:
Interest Income -
Merchandising and jobbing, net 4,404 4,404
Other deductions (6,132) (275) (6,407)
Taxes - income (620) 94 (526)
---------- ---------- ----------- ----------
Total other income and deductions (2,348) (181) - (2,529)
EARNINGS BEFORE INTEREST CHARGES 267,301 31,489 - 298,790
INTEREST CHARGES:
Gas utilities:
Long-term debt 105,181 105,181
Other interest 106,745 1,656 108,401
---------- ---------- ----------- ----------
Total interest charges 211,926 1,656 - 213,582
NET EARNINGS $ 55,375 $ 29,833 $ 0 $ 85,208
========== ========== =========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit A(1)
BLUEFIELD GAS COMPANY
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1997
Bluefield Commonwealth
Gas Public Service Consolidated
ASSETS Company Corporation Eliminations Total
- ------ ------- ----------- ------------ -----
<S> <C> <C> <C> <C>
UTILITY PLANT:
Utility Plant in Service $ 5,130,392 $ 1,211,960 $ 6,342,352
Accumulated Depreciation (1,823,628) (391,564) (2,215,192)
---------- ---------- ----------- ----------
Utility Plant in Service, Net 3,306,764 820,396 0 4,127,160
Construction Work-In-Progress 135,425 126,485 261,910
---------- ---------- ----------- ----------
Utility Plant, Net 3,442,189 946,881 0 4,389,070
---------- ---------- ----------- ----------
CURRENT ASSETS:
Cash and Cash Equivalents 64,047 64,047
Accounts Receivable 1,358,450 (216,002) 1,142,448
Inventories 923,486 923,486
Deferred Income Taxes 0
Purchased Gas Adjustments 453,304 33,168 486,472
Other 41,034 41,034
---------- ---------- ----------- ----------
Total Current Assets 2,840,321 (182,834) 0 2,657,487
---------- ---------- ----------- ----------
OTHER ASSETS 57,674 (107) (500) 57,067
---------- ---------- ----------- ----------
TOTAL $ 6,340,184 $ 763,940 $ (500) $ 7,103,624
========== ========== =========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit A(1)
BLUEFIELD GAS COMPANY
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1997
Bluefield Commonwealth
Gas Public Service Consolidated
LIABILITIES Company Corporation Eliminations Total
- ----------- ------- ----------- ------------ -----
<S> <C> <C> <C> <C>
CAPITALIZATION:
Stockholders' Equity:
Common Stock $ 49,704 $ 500 $ (500) $ 49,704
Capital in Excess of Par Value 220,564 37,241 257,805
Retained Earnings 1,380,608 489,798 1,870,406
---------- -------- ------ ----------
Total Stockholders' Equity 1,650,876 527,539 (500) 2,177,915
Long-Term Debt (Less Current Maturities) 1,300,000 1,300,000
---------- -------- ------ ----------
Total Capitalization 2,950,876 527,539 (500) 3,477,915
---------- -------- ------ ----------
CURRENT LIABILITIES:
Current Maturities of Long-Term Debt 0 0
Notes Payable 2,271,000 2,271,000
Accounts Payable 476,605 34,745 511,350
Income Taxes Payable (24,022) 105,203 81,181
Customers' Deposits 49,666 9,575 59,241
Accrued Expenses 331,337 11,631 342,968
Refunds From Suppliers - Due Customers 0 1,968 1,968
Purchased Gas Adjustments 0
---------- -------- ------ ----------
Total Current Liabilities 3,104,586 163,122 0 3,267,708
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred Income Taxes 271,139 70,160 341,299
Deferred Investment Tax Credits 13,583 3,119 16,702
Other Deferred Credits 0
---------- -------- ------ ----------
Total Deferred Credits and Other
Liabilities 284,722 73,279 0 358,001
---------- -------- ------ ----------
TOTAL $ 6,340,184 $ 763,940 $ (500) $ 7,103,624
========== ======== ====== ==========
</TABLE>
<PAGE>
EXHIBIT B
BLUEFIELD GAS COMPANY
FINANCIAL DATA SCHEDULE
Item No. Caption Heading
-------- ---------------
1 Total Assets $7,103,624
2 Total Operating Revenues 6,671,948
3 Net Income 85,208
<PAGE>
EXHIBIT C
NOT APPLICABLE
<PAGE>
Exhibit 27
ARTICLE - OPUR3
LEGEND
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATING INCOME STATEMENT AND THE CONSOLIDATING BALANCE SHEET OF BLUEFIELD
GAS COMPANY FOR THE YEAR ENDED DECEMBER 31, 1997, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
/LEGEND
SUBSIDIARY
NUMBER 1
NAME - COMMONWEALTH PUBLIC SERVICE CORPORATION
<TABLE>
<CAPTION>
<S> <C>
PERIOD-TYPE YEAR
FISCAL-YEAR-END SEP-30-1998
PERIOD-END DEC-31-1997
BOOK-VALUE PER-BOOK
TOTAL-ASSETS 7,103,624
TOTAL-OPERATING-REVENUES 6,671,948
NET-INCOME 85,208
</TABLE>
<PAGE>
Exhibit I-1
<TABLE>
<CAPTION>
Projections of Natural Gas Demand
and
Income Available for Diversification*
Demand for Dividend Incremental Needed for Excess
Natural Gas Utility Dividends Reinvestment Growth in Utility Plant for
Year (DTH) (000's) Earnings (1) @ 65% (2) @ 20% (3) Equity Inv. Investment (4) Diversification
- -------- ------------- ------------ ----------- ------------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 12,518.15 $ 2,107,000 $ 1,369,550 $ 273,910 $ 1,011,360 $ 921,740 $ 89,620
2000 12,720.07 2,209,000 1,435,850 287,170 1,060,320 845,600 214,720
2001 12,984.71 2,310,000 1,501,500 300,300 1,108,800 892,000 216,800
2002 13,198.86 2,422,000 1,574,300 314,860 1,162,560 910,400 252,160
2003 13,447.90 2,535,000 1,647,750 329,550 1,216,800 869,600 347,200
2004 13,675.17 2,654,000 1,725,100 345,020 1,273,920 904,384 369,536
2005 13,907.83 2,778,000 1,805,700 361,140 1,333,440 940,559 392,881
2006 14,145.95 2,908,000 1,890,200 378,040 1,395,840 978,182 417,658
2007 14,389.67 3,044,000 1,978,600 395,720 1,461,120 1,017,309 443,811
2008 14,639.14 $ 3,187,000 $ 2,071,550 $ 414,310 $ 1,529,760 $ 1,058,001 $ 471,759
</TABLE>
(1) First five years of the forecast are taken from the Company's
approved Five-Year capital Forecast. Years 2004 through
2008 assume a 4.7% growth in net income.
(2) Corporate dividend payout target.
(3) Annual Average stockholder dividend reinvestment rate in the
Company's Dividend Reinvestment Plan.
(4) Years 2004 through 2008 assume a 4.0% growth rate.
<PAGE>
ATTACHMENT TO I-1
NOTICE REGARDING ROANOKE GAS COMPANY PROJECTIONS
The attached assumptions and forecasts are inherently subject to
significant uncertainties and contingencies beyond the control of Roanoke Gas
Company and its subsidiaries (the "Company"), including, but not limited to,
weather conditions, changes in economic conditions in the Company's market area
and regulatory requirements, conditions and restrictions. Such forecasts also
are based upon assumptions with respect to certain business decisions which are
subject to change. THERE CAN BE NO ASSURANCE THAT THE ACTUAL RESULTS WILL MEET
THE FORECASTS, AND ACTUAL RESULTS WILL VARY, PERHAPS MATERIALLY, FROM THOSE
FORECAST. The Company takes no responsibility for, and has no intention of,
updating the attached information.
The attached materials have been prepared by the Company and have not been
verified or approved by the Company's independent auditors or outside counsel.
The forecast information was not prepared with a view to public disclosure or
compliance with the published guidelines of the Securities and Exchange
Commission or the guidelines established by the American Institute of Certified
Public Accountants regarding projections.
<PAGE>
Exhibit J-1
ESTIMATED COSTS AND FEES ATTRIBUTABLE TO THE
FORMATION OF THE HOLDING COMPANY
Estimated
OUT OF POCKET EXPENSES: Amount ($)
- ---------------------- ----------
Registration and Listing Fees 11,000
Legal 75,000
Accounting and Audit Opinions 6,000
Proxy Printing and Solicitation 6,000
Corporate Name Registration 1,000
Miscellaneous Expenses:
Messenger fees, Federal Express, etc. 1,000
Banks, Brokers, and Nominee Expenses 25,000
Communications Expenses for New Corporate
Identification 2,000
Stock Certificates 5,000
Unassigned 35,000
Total Miscellaneous Expenses: 35,000
TOTAL $134,000
<PAGE>
Exhibit K-1
ROANOKE GAS COMPANY
OFFICERS
John B. Williamson, III
President and CEO
Roger L. Baumgardner
Vice President, Secretary & Treasurer
Arthur L. Pendleton
Executive Vice President & COO
John S. D'Orazio
Vice President, Marketing & New Construction
Jane N. O'Keeffe
Assistant Vice President, Human Resources
J. David Anderson
Assistant Secretary & Assistant Treasurer
DIRECTORS
Lynn D. Avis
Avis Construction
President
Abney S. Boxley, III
W. W. Boxley Company
President
Frank T. Ellett
Virginia Truck Center, Inc.
President
Frank A. Farmer, Jr.
Chairman of the Board
<PAGE>
Wilbur L. Hazlegrove
Law Firm of Woods, Rogers & Hazlegrove, P.L.C.
Member
J. Allen Layman
R & B Communications, Inc.
President & CEO
Thomas L. Robertson
Carilion Health System & Carilion Medical Center
President
S. Frank Smith
Coastal Coal Sales, Inc.
Executive Vice President
John B. Williamson, III
Roanoke Gas Company
President & CEO
<PAGE>
BLUEFIELD GAS COMPANY
OFFICERS
John B. Williamson, III
President
Arthur L. Pendleton
Vice President - Operations
John S. D'Orazio
Vice President, Marketing & New Construction
Roger L. Baumgardner
Secretary & Treasurer
BOARD OF DIRECTORS
Roger L. Baumgardner
Roanoke Gas Company
Vice President, Secretary & Treasurer
Arthur L. Pendleton
Roanoke Gas Company
Executive Vice President & CEO
John C. Shott
Paper Supply Company
President
Scott H. Shott
Paper Supply Company
Secretary & Treasurer
John B. Williamson, III
Roanoke Gas Company
President & CEO
<PAGE>
DIVERSIFIED ENERGY COMPANY
T/A HIGHLAND PROPANE COMPANY
& HIGHLAND GAS MARKETING
OFFICERS
John B. Williamson, III
President
Arthur L. Pendleton
Vice President - Operations
John S. D'Orazio
Vice President, Marketing & New Construction
Roger L. Baumgardner
Secretary & Treasurer
BOARD OF DIRECTORS
Roger L. Baumgardner
Roanoke Gas Company
Vice President, Secretary & Treasurer
Frank T. Ellett
Virginia Truck Center, Inc.
President
Arthur L. Pendleton
Roanoke Gas Company
Executive Vice President & CEO
S. Frank Smith
Coastal Coal Sales, Inc.
Executive Vice President
John B. Williamson, III
Roanoke Gas Company
President & CEO
<PAGE>
RGC ACQUISITION CORP.
OFFICERS
John B. Williamson, III
President
Roger L. Baumgardner
Secretary & Treasurer
DIRECTORS
Lynn D. Avis
Avis Construction
President
Abney S. Boxley, III
W. W. Boxley Company
President
Frank T. Ellett
Virginia Truck Center, Inc.
President
Frank A. Farmer, Jr.
Chairman of the Board
Wilbur L. Hazlegrove
Law Firm of Woods, Rogers & Hazlegrove, P.L.C.
Member
J. Allen Layman
R & B Communications, Inc.
President & CEO
Thomas L. Robertson
Carilion Health System & Carilion Medical Center
President
<PAGE>
S. Frank Smith
Coastal Coal Sales, Inc.
Executive Vice President
John B. Williamson, III
Roanoke Gas Company
President & CEO
<PAGE>
RGC RESOURCES, INC.
OFFICERS
John B. Williamson, III
President and CEO
Arthur L. Pendleton
Executive Vice President & COO
Roger L. Baumgardner
Vice President, Secretary & Treasurer
John S. D'Orazio
Vice President, Marketing & New Construction
Jane N. O'Keeffe
Assistant Vice President, Human Resources
J. David Anderson
Assistant Secretary & Assistant Treasurer
DIRECTORS
Lynn D. Avis
Avis Construction
President
Abney S. Boxley, III
W. W. Boxley Company
President
Frank T. Ellett
Virginia Truck Center, Inc.
President
Frank A. Farmer, Jr.
Chairman of the Board
<PAGE>
Wilbur L. Hazlegrove
Law Firm of Woods, Rogers & Hazlegrove, P.L.C.
Member
J. Allen Layman
R & B Communications, Inc.
President & CEO
Thomas L. Robertson
Carilion Health System & Carilion Medical Center
President
S. Frank Smith
Coastal Coal Sales, Inc.
Executive Vice President
John B. Williamson, III
Roanoke Gas Company
President & CEO
<PAGE>
COMMONWEALTH PUBLIC SERVICE CORPORATION
OFFICERS
John B. Williamson, III
President
Arthur L. Pendleton
Vice President - Operations
John S. D'Orazio
Vice President, Marketing & New Construction
Roger L. Baumgardner
Secretary & Treasurer
BOARD OF DIRECTORS
Roger L. Baumgardner
Roanoke Gas Company
Vice President, Secretary & Treasurer
Arthur L. Pendleton
Roanoke Gas Company
Executive Vice President & CEO
John C. Shott
Paper Supply Company
President
Scott H. Shott
Paper Supply Company
Secretary & Treasurer
John B. Williamson, III
Roanoke Gas Company
President & CEO
<PAGE>
Exhibit L-1
UNITED STATES OF AMERICA
before the
SECURITIES AND EXCHANGE COMMISSION
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
Release No.
_______________, 1998
- ------------------------------------
)
In the Matter of )
)
Roanoke Gas Company )
519 Kimball Avenue, N.E. )
Roanoke, Virginia 24016 )
)
and )
)
RGC Resources, Inc. )
519 Kimball Avenue, N.E. )
Roanoke, Virginia 24016 )
)
- ------------------------------------)
NOTICE OF PROPOSED MERGER AND REORGANIZATION OF
NATURAL GAS DISTRIBUTION COMPANIES
NOTICE IS HEREBY GIVEN that Roanoke Gas Company ("Roanoke Gas"), a
Virginia public service corporation, and RGC Resources, Inc. ("Resources"), a
Virginia corporation, have filed with this Commission a joint application
pursuant to the Public Utility Holding Company Act of 1935 (the "Act"),
designating Section 3(a)(1), Section 9(a)(2) and Section 10 of the Act as
applicable to the proposed transaction. The application requests an order of the
Commission (i) approving the acquisition by Resources of all the outstanding
shares of common stock of Roanoke Gas and of all the outstanding shares of
common stock of Bluefield Gas Company ("Bluefield"), a West Virginia public
service corporation, and (ii) approving the acquisition by Roanoke Gas of all
the outstanding shares of common stock of Commonwealth Public Service
Corporation ("Commonwealth"), a Virginia public service corporation. Pursuant to
17 C.F.R. Section
1
<PAGE>
250.2 under the Act, Resources intends, upon consummation of the merger and
reorganization, to file a claim of exemption as a holding company under Section
3(a)(1) of the Act.
Resources was incorporated on July 31, 1998, for the purpose of
accomplishing a proposed merger and reorganization pursuant to an Agreement and
Plan of Merger and Reorganization (the "Plan of Merger"). As more fully
described herein, Resources owns all of the outstanding common stock of RGC
Acquisition Corp. (the "Subsidiary"), a Virginia corporation. Neither Resources
nor the Subsidiary owns any utility assets and currently neither is a "holding
company" under the Act.
Resources and Roanoke Gas propose to accomplish the proposed merger and
reorganization by entering into the Plan of Merger, whereby (i) Roanoke Gas will
be merged into the Subsidiary, with Roanoke Gas as the surviving corporation;
(ii) the common stock of the Subsidiary owned by Resources will be converted
into new common stock of Roanoke Gas; (iii) the outstanding shares of common
stock, $5.00 par value, of Roanoke Gas will be converted, on a share-for-share
basis, into common stock, $5.00 par value, of Resources on the merger effective
date; (iv) Bluefield, by means of a non-cash dividend, will transfer to Roanoke
Gas all of the outstanding common stock of Commonwealth; (v) Roanoke Gas, by
means of a non-cash dividend, will transfer to Resources all of the outstanding
common stock of Bluefield and Diversified Energy Company ("Diversified"), a
Virginia non-utility corporation; and (vi) Commonwealth will be merged into
Roanoke Gas. Following the merger and reorganization, all of the outstanding
common stock of Resources will be owned by the former Roanoke Gas common
shareholders.
It is proposed that there will be no exchange of the outstanding mortgage
notes, debentures and senior notes of Roanoke Gas in connection with the merger
and reorganization and that, immediately following the merger and
reorganization, Resources will have no outstanding securities other than common
stock. Resources may, however, be required to guarantee the payment and
performance of Roanoke Gas' outstanding mortgage notes. Holders of Roanoke Gas
mortgage notes, debentures and senior notes will continue as security holders or
Roanoke Gas.
Roanoke Gas proposes to submit the Plan of Merger to its shareholders for
approval at its annual meeting of shareholders scheduled for February 8, 1999.
In connection with the merger and reorganization, Resources' common stock
will be listed on the Nasdaq National Market, and Roanoke Gas' common stock will
be delisted from the Nasdaq National Market.
Roanoke Gas has its principal executive office at 519 Kimball Avenue, N.
E., Roanoke, Virginia, 24016. Roanoke Gas, a Virginia public service
corporation, is engaged in the retail distribution and sale of natural gas to
approximately 53,625 customers in Roanoke, Virginia and
2
<PAGE>
surrounding areas in Virginia. Roanoke Gas' service area includes the cities of
Roanoke and Salem, Virginia and surrounding regions in Virginia, including
Roanoke County and portions of Bedford, Botetourt, Franklin and Montgomery
counties, Virginia. Bluefield, a West Virginia public service corporation, is a
wholly owned subsidiary of Roanoke Gas. Bluefield provides natural gas service
to approximately 4,100 customers located in and around Bluefield, West Virginia.
Bluefield's service area extends from Princeton, West Virginia to the western
most city limits of Bluefield, West Virginia. Bluefield owns all of the issued
and outstanding stock of Commonwealth, a Virginia public service corporation,
which serves approximately 925 customers in Bluefield, Virginia and surrounding
areas in Virginia. Commonwealth's service area includes principally the Town of
Bluefield, Virginia and a portion of Tazewell County, Virginia. As described
below, Roanoke Gas also distributes and sells propane to customers in
southwestern Virginia and southern West Virginia through its wholly owned
Virginia subsidiary, Diversified, which is not a regulated public utility.
Roanoke Gas' total consolidated operating revenues at June 30, 1998 were
$59,688,847, of which $52,295,469 (87.6%) was from retail distribution and sale
of natural gas.
Roanoke Gas' natural gas distribution operations are subject to regulation
at the federal and state levels. Gas transmission between Bluefield and
Commonwealth is regulated by the Federal Regulatory Commission (the "FERC"),
which regulates the prices, terms and conditions of interstate pipeline
transportation and sales of natural gas. Roanoke and Bluefield are exempt
holding companies under Section 3(a)(2) of the Act and annually file Forms
U-3A-2 with the Commission. At the state level, Roanoke Gas and Commonwealth are
regulated by the Virginia State Corporation Commission (the "Virginia
Commission"), and Bluefield is regulated by the West Virginia Public Service
Commission (the "West Virginia Commission"). The Virginia Commission and the
West Virginia Commission regulate various matters, including rates charged for
services, financings, planning and safety matters. The Virginia Commission also
grants certificates of public convenience and necessity to distribute natural
gas in the Commonwealth of Virginia. In addition, certain municipalities and
localities grant franchises for the placement of natural gas distribution
pipelines and the operation of a natural gas distribution network for Roanoke
Gas, Commonwealth and Bluefield.
Roanoke Gas owns 100% of the voting common stock of Diversified, a
Virginia corporation headquartered in Roanoke, Virginia, which is not a
regulated public utility. Diversified serves approximately 10,450 active propane
accounts in southwestern Virginia and southern West Virginia. Resources' propane
distribution activities are not subject to any federal or state pricing
regulation. In addition to propane operations, Diversified maintains a natural
gas marketing business which assists large industrial customers in the purchase
of natural gas.
The application and any amendments thereto are available for public
inspection through the Commission's Office of Public Reference. Interested
persons wishing to comment or request a hearing should submit their views in
writing by _______________, 199__, to the Secretary, Securities and Exchange
Commission, Washington, D. C. 20549, and serve a copy on Resources and Roanoke
Gas at the address specified above. Proof of service (by affidavit or, in case
of
3
<PAGE>
attorney at law, by certificate) should be filed with the request. Any request
for a hearing must identify specifically the issues of fact or law that are
disputed. A person who so requests will be notified of any hearing, if ordered,
and will receive a copy of any notice or order issued in this matter. After said
date, the application, as filed or as it may be amended, may be authorized.
For the Commission, by the Division of Investment Management pursuant to
delegated authority.
Jonathan G. Katz
Secretary
4
<PAGE>
Exhibit M-1
- ------------------------------------------------------------------------------
MEMORANDUM
- ------------------------------------------------------------------------------
To: The Securities and Exchange Commission
Division of Investment Management
Office of Public Utility Regulation
450 Fifth Street, N.W., Stop 5-3
Washington, DC 20549-1004
Subject: RGC Resources, Inc.: Claim of Section 3(a)(1) Intrastate Exemption
Date: October 15, 1998
This Supplemental Memorandum is being submitted in connection with the
Joint Application on Form U-1 of RGC Resources, Inc. ("Resources") and Roanoke
Gas Company ("Roanoke Gas"), filed pursuant to Section 10 of the Public Utility
Holding Company Act of 1935 (the "Act"), for approval of (i) the acquisition by
Resources, pursuant to a merger and reorganization (the "Reorganization"), of
all the outstanding shares of common stock of Roanoke Gas and Bluefield Gas
Company ("Bluefield")1; and (ii) the acquisition by Roanoke Gas, pursuant to the
Reorganization, of all of the outstanding shares of common stock of Commonwealth
Public Service Corporation ("Commonwealth"), a Virginia public service
corporation. The purpose of this Supplemental Memorandum is to advise the
Commission of the good faith bases upon which Resources will, upon consummation
of the Reorganization, file a Form U-3A-2 claiming exemption as a holding
company in reliance on Section 3(a)(1) of the Act.
Following the Reorganization, Resources will have two public utility
subsidiaries: Roanoke Gas, a Virginia public service corporation, and Bluefield,
a West Virginia public service corporation. Roanoke Gas is the only public
utility subsidiary, however, from which Resources derives (or will derive) a
material part of its income.
I. Intra-State Standards Met
Roanoke Gas is engaged in the retail distribution and sale of natural gas
to approximately 53,625 customers in Roanoke, Virginia and surrounding areas in
Virginia. Roanoke Gas' service
- --------
1Roanoke Gas and Bluefield each is presently exempt from all of the
provisions of the Act (except Section 9(a)(2)) by reason of annual exemption
statements filed under Rule 2 and Section 3(a)(2) of the Act.
1
<PAGE>
area includes the cities of Roanoke and Salem, Virginia and surrounding regions
in Virginia, including Roanoke County and portions of Bedford, Botetourt,
Franklin and Montgomery counties, Virginia. Commonwealth, which will be merged
into Roanoke Gas as part of the Reorganization, provides public utility services
solely in Virginia to approximately 925 customers in a service area that
includes principally the Town of Bluefield and a portion of Tazewell County,
Virginia. After the Reorganization, all of Roanoke Gas' public utility
customers, business and assets will be located in Virginia and all of its public
utility business will be operated, directly and indirectly, in Virginia under
the supervision of the Virginia State Corporation Commission (the "Virginia
Commission").
Although Bluefield also will be a public utility subsidiary of Resources
following the Reorganization, Roanoke Gas does not (and Resources will not)
derive a material part of its earnings, directly or indirectly, from Bluefield.
Bluefield provides natural gas service to approximately 4,100 customers located
in and around Bluefield, West Virginia. Bluefield's service area extends from
Princeton, West Virginia to the western most city limits of Bluefield, West
Virginia.
Bluefield's small operations in West Virginia represent a de minimus
portion of Roanoke Gas' consolidated earnings. For each of the three years in
the period ended September 30, 1997 and for the nine-month period ended June 30
1998, Bluefield accounted for the following percentages of Roanoke Gas'
consolidated operating revenues and consolidated net income:
<TABLE>
<CAPTION>
Fiscal Year Fiscal Year Fiscal Year Nine month
---------------------------- --------------------------- --------------------------- Period ended
1995 1996 1997 June 30, 1998
---------------------------- --------------------------- --------------------------- -------------------------
Bluefield Consolidated Bluefield Consolidated Bluefield Consolidated Bluefield Consolidated
----------- --------------- ------------ -------------- ----------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues $3,849,728 $48,611,147 $4,942,993 $65,770,873 $5,002,307 $65,047,826 $5,345,250 $57,169,872
Percentage of total 7.9% 7.5% 7.6% 9.3%
Net Income $ 96,567 $ 1,777,240 $ 122,754 $ 2,196,672 $ 18,113 $ 2,309,880 $ 112,771 $ 3,382,092
Percentage of total 5.4% 5.6% 0.78% 3.3%
</TABLE>
Further, Bluefield's West Virginia operations accounted for less than 10%
of Roanoke Gas' consolidated service population, number of customers, through
put, gross sales, book value of net plant and net operating income at June 30,
1998.
2
<PAGE>
Percent of Bluefield Gas Company to Roanoke Consolidated
For the Nine Month Period Ended June 30, 1998
Bluefield Consolidated Percent
--------- ------------ -------
Number of Customers 4,082 64,295 6.3
Through Put (MCF's) $ 847,954 9,573,693 8.9
Gross Sales $ 5,345,250 54,589,302 9.8
Book Value of Net Plant $ 3,598,074 51,961,335 6.9
Net Operating Income $ 112,771 3,382,093 3.3
These percentages are expected to decrease in future years because Roanoke Gas'
Virginia market area has a stronger economy and is experiencing faster growth
than the West Virginia market, and Roanke Gas will be focusing its marketing and
growth strategies on expanding its Virginia operations.
II. No Basis for Finding of Detriment
In Pacific Lighting Corporation, Release No. 35-17855 (Jan. 11, 1973), the
Commission set out the guidelines which it follows in scrutinizing non-utility
activities of exempt companies, with a view to preventing the creation of undue
risks or abuses detrimental to the public interest or the interests of investors
or consumers. Roanoke Gas' current nonutility activities, as well as Resources
planned nonutility activities, conform to the limitations inherent in the
guidelines set forth in Pacific Lighting.
Roanoke Gas conducts all of its nonutility operations -- consisting
primarily of the sale of propane -- through Diversified, a separate corporate
subsidiary. Additionally, there are no services, materials or other contracts
between Roanoke Gas' utilities and Diversified that are not subject to the
supervision of the Virginia Commission and/or the West Virginia Public Service
Commission (the "West Virginia Commission"), and there is no use of utility
operating management, funds or credit for nonutility purposes.
The extent of any direct business relationship between Roanoke Gas'
utility companies and Diversified is limited. Diversified is charged for labor
furnished, plus appropriate overhead and employee benefit costs. In connection
with rate proceedings before the Virginia Commission and the West Virginia
Commission, the public utilities are required to submit detailed information
concerning every transaction and allocation between the utility subsidiaries on
the one hand and the nonutility company on the other. In fiscal 1997, Roanoke
Gas provided administrative, engineering and other technical services to
Diversified, for which it billed Diversified on a cost basis. In fiscal 1997,
Roanoke Gas' charges for services to Diversified totaled approximately $295,000.
At June 30, 1998, the nonutility investments represented about
3
<PAGE>
11% of Roanoke Gas' consolidated assets. The magnitude of this investment does
not present a substantial risk to the financial soundness of Roanoke Gas'
utility operations. A further measure of safety derives from the fact that the
Roanoke Gas' nonutility operation has had a history of successful operations.
Diversified has operated at a profit in each year since the early 1980s.
Further, the propane and natural gas marketing operations of Diversified are
complimentary to the operations of Roanoke Gas' natural gas distribution system.
After the Reorganization, the principal activities conducted by the
holding company system that are not incidental to its utility operations will
continue to be carried out through separate corporate entities in accordance
with the Pacific Lighting guidelines. The service contracts between the public
utilities and the nonutility entities will be subject to the supervision and
approval of the Virginia Commission and/or the West Virginia Commission. The
primary and predominant business of the holding company system will be the
distribution of natural gas. Nonutility investments, both individually and on an
aggregate basis, will constitute only a relatively small component of the entire
system or will be restricted to activities which are either complimentary to
utility operations or have an established and successful record. In light of the
foregoing, the exemption of Resources from all provisions of the Act (except
Section 9(a)(2) thereof) would not be detrimental to the public interest or the
interests of investors or consumers.
III. Conclusion
Resources will, in good faith, rely on Section 3(a)(1) of the Act to exempt
it from all provisions of the Act (except Section 9(a)(2)). Resources and every
public utility subsidiary of Resources from which Resources derives, directly or
indirectly, any material part of its income -- namely, Roanoke Gas -- are
predominantly intrastate in character and carry on their businesses in Virginia,
which is the state in which Resources and Roanoke Gas each is organized.
Further, there are no grounds upon which to deny the exemption based on undue
risk to investors or consumers. Resources intends to claim such exemption by
filing a Form U3A-2 contemporaneous with the closing of the Reorganization.
Respectfully submitted,
RGC RESOURCES, INC.
By s/John B. Williamson, III
President
ROANOKE GAS COMPANY
By s/John B. Williamson, III
President
4
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROANOKE
GAS COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENT FOR THE
QUARTER ENDED JUNE 30, 1998, AS SET FORTH IN THE COMPANY'S QUARTERLY REPORT ON
FORM 10-Q, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 001
<NAME> RGC Resources, Inc.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 45,878,189
<OTHER-PROPERTY-AND-INVEST> 6,191,252
<TOTAL-CURRENT-ASSETS> 14,174,308
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 837,571
<TOTAL-ASSETS> 67,081,320
<COMMON> 8,861,795
<CAPITAL-SURPLUS-PAID-IN> 8,629,787
<RETAINED-EARNINGS> 9,719,102
<TOTAL-COMMON-STOCKHOLDERS-EQ> 27,210,684
0
0
<LONG-TERM-DEBT-NET> 20,700,000
<SHORT-TERM-NOTES> 1,295,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 5,313
<OTHER-ITEMS-CAPITAL-AND-LIAB> 17,870,323
<TOT-CAPITALIZATION-AND-LIAB> 67,081,320
<GROSS-OPERATING-REVENUE> 59,688,847
<INCOME-TAX-EXPENSE> 1,444,120
<OTHER-OPERATING-EXPENSES> 53,450,652
<TOTAL-OPERATING-EXPENSES> 54,894,772
<OPERATING-INCOME-LOSS> 4,794,075
<OTHER-INCOME-NET> 146,425
<INCOME-BEFORE-INTEREST-EXPEN> 4,940,500
<TOTAL-INTEREST-EXPENSE> 2,159,436
<NET-INCOME> 2,781,064
0
<EARNINGS-AVAILABLE-FOR-COMM> 2,781,064
<COMMON-STOCK-DIVIDENDS> 1,752,765
<TOTAL-INTEREST-ON-BONDS> 695,931
<CASH-FLOW-OPERATIONS> 8,795,317
<EPS-PRIMARY> 1.70
<EPS-DILUTED> 1.70
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROANOKE
GAS COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENT FOR THE
QUARTER ENDED JUNE 30, 1998, AS SET FORTH IN THE COMPANY'S QUARTERLY REPORT ON
FORM 10-Q, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 001
<NAME> RGC Resources, Inc.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 0
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 0
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 0
<COMMON> 0
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 0
<TOTAL-COMMON-STOCKHOLDERS-EQ> 0
0
0
<LONG-TERM-DEBT-NET> 0
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 0
<TOT-CAPITALIZATION-AND-LIAB> 0
<GROSS-OPERATING-REVENUE> 0
<INCOME-TAX-EXPENSE> 0
<OTHER-OPERATING-EXPENSES> 0
<TOTAL-OPERATING-EXPENSES> 0
<OPERATING-INCOME-LOSS> 0
<OTHER-INCOME-NET> 0
<INCOME-BEFORE-INTEREST-EXPEN> 0
<TOTAL-INTEREST-EXPENSE> 0
<NET-INCOME> 0
0
<EARNINGS-AVAILABLE-FOR-COMM> 0
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROANOKE
GAS COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENT FOR THE
QUARTER ENDED JUNE 30, 1998, AS SET FORTH IN THE COMPANY'S QUARTERLY REPORT ON
FORM 10-Q, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 002
<NAME> Roanoke Gas Company
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 41,299,457
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 11,142,997
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 3,114,320
<TOTAL-ASSETS> 55,556,774
<COMMON> 8,861,795
<CAPITAL-SURPLUS-PAID-IN> 6,585,934
<RETAINED-EARNINGS> 8,149,345
<TOTAL-COMMON-STOCKHOLDERS-EQ> 23,594,074
0
0
<LONG-TERM-DEBT-NET> 17,770,000
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 5,313
<OTHER-ITEMS-CAPITAL-AND-LIAB> 14,254,387
<TOT-CAPITALIZATION-AND-LIAB> 55,556,774
<GROSS-OPERATING-REVENUE> 45,850,656
<INCOME-TAX-EXPENSE> 905,102
<OTHER-OPERATING-EXPENSES> 41,224,130
<TOTAL-OPERATING-EXPENSES> 42,129,232
<OPERATING-INCOME-LOSS> 3,721,424
<OTHER-INCOME-NET> 41,311
<INCOME-BEFORE-INTEREST-EXPEN> 3,762,735
<TOTAL-INTEREST-EXPENSE> 1,836,066
<NET-INCOME> 1,926,669
0
<EARNINGS-AVAILABLE-FOR-COMM> 1,926,669
<COMMON-STOCK-DIVIDENDS> 1,752,765
<TOTAL-INTEREST-ON-BONDS> 695,931
<CASH-FLOW-OPERATIONS> 6,412,382
<EPS-PRIMARY> 1.18
<EPS-DILUTED> 1.18
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROANOKE
GAS COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENT FOR THE
QUARTER ENDED JUNE 30, 1998, AS SET FORTH IN THE COMPANY'S QUARTERLY REPORT ON
FORM 10-Q, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 002
<NAME> Roanoke Gas Company
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 4,165,457
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 11,276,997
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 3,114,320
<TOTAL-ASSETS> 55,556,774
<COMMON> 8,861,795
<CAPITAL-SURPLUS-PAID-IN> 6,585,934
<RETAINED-EARNINGS> 8,149,345
<TOTAL-COMMON-STOCKHOLDERS-EQ> 23,597,074
0
0
<LONG-TERM-DEBT-NET> 17,700,000
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 5,313
<OTHER-ITEMS-CAPITAL-AND-LIAB> 14,254,387
<TOT-CAPITALIZATION-AND-LIAB> 55,556,774
<GROSS-OPERATING-REVENUE> 45,850,656
<INCOME-TAX-EXPENSE> 905,102
<OTHER-OPERATING-EXPENSES> 41,224,130
<TOTAL-OPERATING-EXPENSES> 42,129,232
<OPERATING-INCOME-LOSS> 3,721,424
<OTHER-INCOME-NET> 41,311
<INCOME-BEFORE-INTEREST-EXPEN> 3,762,735
<TOTAL-INTEREST-EXPENSE> 1,836,066
<NET-INCOME> 1,926,669
0
<EARNINGS-AVAILABLE-FOR-COMM> 1,926,669
<COMMON-STOCK-DIVIDENDS> 1,752,765
<TOTAL-INTEREST-ON-BONDS> 695,931
<CASH-FLOW-OPERATIONS> 6,412,382
<EPS-PRIMARY> 1.18
<EPS-DILUTED> 1.18
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROANOKE
GAS COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENT FOR THE
QUARTER ENDED JUNE 30, 1998, AS SET FORTH IN THE COMPANY'S QUARTERLY REPORT ON
FORM 10-Q, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 003
<NAME> Bluefield Gas Company
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 3,598,074
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 1,177,514
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 57,211
<TOTAL-ASSETS> 4,832,799
<COMMON> 49,704
<CAPITAL-SURPLUS-PAID-IN> 220,564
<RETAINED-EARNINGS> 1,430,381
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,700,649
0
0
<LONG-TERM-DEBT-NET> 1,300,000
<SHORT-TERM-NOTES> 876,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 956,150
<TOT-CAPITALIZATION-AND-LIAB> 4,832,799
<GROSS-OPERATING-REVENUE> 5,988,945
<INCOME-TAX-EXPENSE> 101,200
<OTHER-OPERATING-EXPENSES> 5,544,861
<TOTAL-OPERATING-EXPENSES> 5,646,061
<OPERATING-INCOME-LOSS> 342,884
<OTHER-INCOME-NET> (1,798)
<INCOME-BEFORE-INTEREST-EXPEN> 341,086
<TOTAL-INTEREST-EXPENSE> 197,400
<NET-INCOME> 143,686
0
<EARNINGS-AVAILABLE-FOR-COMM> 143,686
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 895,444
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROANOKE
GAS COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENT FOR THE
QUARTER ENDED JUNE 30, 1998, AS SET FORTH IN THE COMPANY'S QUARTERLY REPORT ON
FORM 10-Q, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 003
<NAME> Bluefield Gas Company
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,598,074
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 1,177,514
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 57,211
<TOTAL-ASSETS> 4,832,799
<COMMON> 49,704
<CAPITAL-SURPLUS-PAID-IN> 220,564
<RETAINED-EARNINGS> 1,430,381
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,700,649
0
0
<LONG-TERM-DEBT-NET> 1,300,000
<SHORT-TERM-NOTES> 876,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 956,150
<TOT-CAPITALIZATION-AND-LIAB> 4,832,799
<GROSS-OPERATING-REVENUE> 5,988,945
<INCOME-TAX-EXPENSE> 101,200
<OTHER-OPERATING-EXPENSES> 5,544,861
<TOTAL-OPERATING-EXPENSES> 5,646,061
<OPERATING-INCOME-LOSS> 342,884
<OTHER-INCOME-NET> (1,798)
<INCOME-BEFORE-INTEREST-EXPEN> 341,086
<TOTAL-INTEREST-EXPENSE> 197,400
<NET-INCOME> 143,686
0
<EARNINGS-AVAILABLE-FOR-COMM> 143,686
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 895,444
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROANOKE
GAS COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENT FOR THE
QUARTER ENDED JUNE 30, 1998, AS SET FORTH IN THE COMPANY'S QUARTERLY REPORT ON
FORM 10-Q, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 004
<NAME> Diversified Energy Company
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 0
<OTHER-PROPERTY-AND-INVEST> 6,133,922
<TOTAL-CURRENT-ASSETS> 1,407,449
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 393,983
<TOTAL-ASSETS> 7,935,354
<COMMON> 196,421
<CAPITAL-SURPLUS-PAID-IN> 833,622
<RETAINED-EARNINGS> 2,995,034
<TOTAL-COMMON-STOCKHOLDERS-EQ> 4,025,117
0
0
<LONG-TERM-DEBT-NET> 1,700,000
<SHORT-TERM-NOTES> 419,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,791,237
<TOT-CAPITALIZATION-AND-LIAB> 7,935,354
<GROSS-OPERATING-REVENUE> 7,575,518
<INCOME-TAX-EXPENSE> 396,050
<OTHER-OPERATING-EXPENSES> 6,529,995
<TOTAL-OPERATING-EXPENSES> 6,926,045
<OPERATING-INCOME-LOSS> 649,473
<OTHER-INCOME-NET> 99,899
<INCOME-BEFORE-INTEREST-EXPEN> 749,372
<TOTAL-INTEREST-EXPENSE> 126,108
<NET-INCOME> 623,264
0
<EARNINGS-AVAILABLE-FOR-COMM> 623,264
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 1,217,963
<EPS-PRIMARY> 0.38
<EPS-DILUTED> 0.38
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROANOKE
GAS COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENT FOR THE
QUARTER ENDED JUNE 30, 1998, AS SET FORTH IN THE COMPANY'S QUARTERLY REPORT ON
FORM 10-Q, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 004
<NAME> Diversified Energy Company
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 0
<OTHER-PROPERTY-AND-INVEST> 6,133,922
<TOTAL-CURRENT-ASSETS> 1,407,449
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 393,983
<TOTAL-ASSETS> 7,935,354
<COMMON> 196,421
<CAPITAL-SURPLUS-PAID-IN> 833,622
<RETAINED-EARNINGS> 2,995,034
<TOTAL-COMMON-STOCKHOLDERS-EQ> 4,025,117
0
0
<LONG-TERM-DEBT-NET> 1,700,000
<SHORT-TERM-NOTES> 419,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,791,237
<TOT-CAPITALIZATION-AND-LIAB> 7,935,354
<GROSS-OPERATING-REVENUE> 7,575,518
<INCOME-TAX-EXPENSE> 396,050
<OTHER-OPERATING-EXPENSES> 6,529,995
<TOTAL-OPERATING-EXPENSES> 6,926,045
<OPERATING-INCOME-LOSS> 649,473
<OTHER-INCOME-NET> 99,899
<INCOME-BEFORE-INTEREST-EXPEN> 749,372
<TOTAL-INTEREST-EXPENSE> 126,108
<NET-INCOME> 623,264
0
<EARNINGS-AVAILABLE-FOR-COMM> 623,264
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 1,217,963
<EPS-PRIMARY> 0.38
<EPS-DILUTED> 0.38
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROANOKE
GAS COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENT FOR THE
QUARTER ENDED JUNE 30, 1998, AS SET FORTH IN THE COMPANY'S QUARTERLY REPORT ON
FORM 10-Q, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 005
<NAME> Commonwealth Public Service Corporation
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 1,063,883
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> (63,824)
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 20,663
<TOTAL-ASSETS> 1,020,722
<COMMON> 500
<CAPITAL-SURPLUS-PAID-IN> 37,241
<RETAINED-EARNINGS> 625,904
<TOTAL-COMMON-STOCKHOLDERS-EQ> 663,645
0
0
<LONG-TERM-DEBT-NET> 0
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 357,077
<TOT-CAPITALIZATION-AND-LIAB> 1,020,722
<GROSS-OPERATING-REVENUE> 1,463,234
<INCOME-TAX-EXPENSE> 41,768
<OTHER-OPERATING-EXPENSES> 1,339,003
<TOTAL-OPERATING-EXPENSES> 1,380,771
<OPERATING-INCOME-LOSS> 82,463
<OTHER-INCOME-NET> (181)
<INCOME-BEFORE-INTEREST-EXPEN> 82,282
<TOTAL-INTEREST-EXPENSE> 690
<NET-INCOME> 81,592
0
<EARNINGS-AVAILABLE-FOR-COMM> 81,592
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 269,528
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0.05
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROANOKE
GAS COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENT FOR THE
QUARTER ENDED JUNE 30, 1998, AS SET FORTH IN THE COMPANY'S QUARTERLY REPORT ON
FORM 10-Q, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 005
<NAME> Commonwealth Public Service Corporation
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,063,883
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> (63,824)
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 20,663
<TOTAL-ASSETS> 1,020,722
<COMMON> 500
<CAPITAL-SURPLUS-PAID-IN> 37,241
<RETAINED-EARNINGS> 625,904
<TOTAL-COMMON-STOCKHOLDERS-EQ> 663,645
0
0
<LONG-TERM-DEBT-NET> 0
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 357,077
<TOT-CAPITALIZATION-AND-LIAB> 1,020,722
<GROSS-OPERATING-REVENUE> 1,463,234
<INCOME-TAX-EXPENSE> 41,768
<OTHER-OPERATING-EXPENSES> 1,339,003
<TOTAL-OPERATING-EXPENSES> 1,380,771
<OPERATING-INCOME-LOSS> 82,463
<OTHER-INCOME-NET> (181)
<INCOME-BEFORE-INTEREST-EXPEN> 82,282
<TOTAL-INTEREST-EXPENSE> 690
<NET-INCOME> 81,592
0
<EARNINGS-AVAILABLE-FOR-COMM> 81,592
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 269,528
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0.05
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROANOKE
GAS COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENT FOR THE
QUARTER ENDED JUNE 30, 1998, AS SET FORTH IN THE COMPANY'S QUARTERLY REPORT ON
FORM 10-Q, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 006
<NAME> RGC Acquisition Corp.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 0
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 0
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 0
<COMMON> 0
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 0
<TOTAL-COMMON-STOCKHOLDERS-EQ> 0
0
0
<LONG-TERM-DEBT-NET> 0
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 0
<TOT-CAPITALIZATION-AND-LIAB> 0
<GROSS-OPERATING-REVENUE> 0
<INCOME-TAX-EXPENSE> 0
<OTHER-OPERATING-EXPENSES> 0
<TOTAL-OPERATING-EXPENSES> 0
<OPERATING-INCOME-LOSS> 0
<OTHER-INCOME-NET> 0
<INCOME-BEFORE-INTEREST-EXPEN> 0
<TOTAL-INTEREST-EXPENSE> 0
<NET-INCOME> 0
0
<EARNINGS-AVAILABLE-FOR-COMM> 0
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROANOKE
GAS COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENT FOR THE
QUARTER ENDED JUNE 30, 1998, AS SET FORTH IN THE COMPANY'S QUARTERLY REPORT ON
FORM 10-Q, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 006
<NAME> RGC Acquisition Corp.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 0
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 0
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 0
<COMMON> 0
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 0
<TOTAL-COMMON-STOCKHOLDERS-EQ> 0
0
0
<LONG-TERM-DEBT-NET> 0
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 0
<TOT-CAPITALIZATION-AND-LIAB> 0
<GROSS-OPERATING-REVENUE> 0
<INCOME-TAX-EXPENSE> 0
<OTHER-OPERATING-EXPENSES> 0
<TOTAL-OPERATING-EXPENSES> 0
<OPERATING-INCOME-LOSS> 0
<OTHER-INCOME-NET> 0
<INCOME-BEFORE-INTEREST-EXPEN> 0
<TOTAL-INTEREST-EXPENSE> 0
<NET-INCOME> 0
0
<EARNINGS-AVAILABLE-FOR-COMM> 0
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
