DEF 14A of RGC Resources Inc, Dec 1, 2023

DEF 14A of RGC Resources Inc

Filed Dec 1, 2023 · FY20230001437749-23-033400

Open on EDGAR

  1. PROPOSAL 1: ELECTION OF DIRECTORS OF RESOURCES

    PROPOSAL 1: ELECTION OF DIRECTORS OF RESOURCES The Company’s Board of Directors consists of ten members and is divided into three classes (A, B, and C) with staggered three-year terms. The current term of office of the Class C directors expires at the 2024 Annual Meeting. The terms of Class A and B directors expire in 2025 and 2026, respectively. Each of the Company’s current directors and nominees for election are independent directors, as determined under the Company’s independence standards adopted in accordance with the applicable rules of the Securities and Exchange Commission (the “SEC”) and Nasdaq, except Paul W. Nester. There are three nominees for Class C directors: T. Joe Crawford, Maryellen F. Goodlatte and Paul W. Nester. The Governance and Nominating Committee and the Board of Directors have selected and endorsed each of these candidates because each brings unique talents and business experience to the Board. T. Joe Crawford is the retired Vice President and General Manager of Steel Dynamics Roanoke Bar Division and has been a director of the Company since 2018. Steel Dynamics, a publicly traded company, is one of the largest domestic steel producers and recyclers in the United States. The Roanoke Bar Division is a leading manufacturer of merchant steel products and billets. Mr. Crawford assumed his previous position when Steel Dynamics acquired Roanoke Electric Steel Corporation in 2006. Prior to 2006, Mr. Crawford was President and Chief Operating Officer (COO) of Roanoke Electric Steel Corporation. Mr. Crawford is currently a board member for Center in the Square and has served on numerous boards of community organizations. Mr. Crawford holds a finance degree from Virginia Tech. We believe that Mr. Crawford’s business and leadership experiences, as well as his knowledge of the economic and political environment in the Company’s service area, make him a valuable member of our Board. Maryellen F. Goodlatte is a retired attorney and counsel of Glenn Feldmann Darby and Goodlatte, a leading regional law firm, and has been a director of the Company since 2001. Mrs. Goodlatte, holder of the prestigious Martindale-Hubbell AV Preeminent Rating and a 2020 inductee into the Virginia Lawyers Hall of Fame, practiced law for over 45 years, with an emphasis in land use and development. Mrs. Goodlatte holds an undergraduate degree from Bates College and a law degree from the Washington & Lee University School of Law. We believe that Mrs. Goodlatte’s professional experiences, her knowledge of the economic and political environment in the Company’s service area, her involvement in the community and her leadership as chair of the Governance and Nominating Committee, make her a valuable member of our Board. Paul W. Nester is the Company’s President and Chief Executive Officer (CEO). Appointed to his current role in February 2020, he was formerly Chief Financial Officer (CFO) and Treasurer beginning in May 2012, when he joined the Company. Mr. Nester is also President of Roanoke Gas Company, our largest subsidiary, beginning February 2019. Prior to joining the Company, Mr. Nester was the CFO at a privately-held, multi-national defense contractor and before that held various finance and accounting positions for three Fortune 500 companies. Mr. Nester holds an accounting degree from Radford University and an MBA from the University of Richmond. Mr. Nester currently serves as the Chair of Total Action for Progress (TAP) and is a board member of the Roanoke Regional Chamber of Commerce, the Virginia Chamber of Commerce, the Roanoke Regional Partnership and VA-811. Mr. Nester is an advisory board member of the American Gas Association. We believe that Mr. Nester, as the Company’s CEO, provides in-depth knowledge of the Company’s operation, business strategy, risk and economic climate. This, coupled with his extensive utility, finance and accounting experience, make him a valuable member of the Board. Your Board of Directors recommends a vote FOR each nominee for Class C Director.

  2. PROPOSAL 2: NON-BINDING SHAREHOLDER ADVISORY VOTE TO

    PROPOSAL 2: NON-BINDING SHAREHOLDER ADVISORY VOTE TO

  3. APPROVE EXECUTIVE COMPENSATION

    APPROVE EXECUTIVE COMPENSATION At the 2023 Annual Meeting, our shareholders voted to continue the annual shareholder review of executive compensation. We believe that our executive compensation program is competitive within the industry and strongly aligned with the long-term interests of our shareholders. This program has been designed to promote a performance-based culture and ensure a philosophy of long-term value creation by aligning the interests of the executive officers with those of our shareholders by linking a meaningful portion of their compensation to the Company’s performance. The program is also designed to meet short-term objectives and to attract and retain highly-talented executive officers who are critical to the successful execution of the Company’s strategic business plan. We also believe that both the Company and shareholders benefit from constructive and consistent dialogue. The proposal set forth above is intended to give you the opportunity to endorse or not endorse the compensation we paid to our named executive officers for fiscal 2023 and the proposed compensation for fiscal 2024. The Compensation Committee has overseen the development of the executive compensation program, as described more fully in the Compensation Discussion and Analysis section of this Proxy Statement. Please note that your vote is advisory and will not be binding upon the Company or the Board of Directors. However, the Board of Directors and Compensation Committee value the opinions that our shareholders express in their votes and in any additional dialogue. Consequently, the Compensation Committee intends to take into account the outcome of the vote when considering future executive compensation decisions for our executive officers.

  4. Your Board of Directors recommends a vote FOR approval, on an advisory basis, of the

    Your Board of Directors recommends a vote FOR approval, on an advisory basis, of the named executive officers compensation as disclosed in this proxy statement.

  5. BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD OF DIRECTORS

    BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD OF DIRECTORS The Company’s Board of Directors consists of ten directors and is divided into three classes, with staggered three-year terms. The Board has separate persons serving as its Chair and as the President and CEO of the Company. The Board believes this is the appropriate leadership structure at this time. The Board met nine times during the 2023 fiscal year. All Board members attended at least 75 percent of Board and committee meetings in fiscal year 2023. Consistent with Nasdaq rules, a majority of the Company’s non-management directors met at least once each quarter without management present. All directors serving on the Board attended the 2023 Annual Meeting. The present principal occupation and employment during the past five years, and the office held with the Company, if any, of each director:

  6. BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD OF DIRECTORS

    | Name and Age | Year In Which First Elected As Director | Business Experience | | CLASS A DIRECTORS (Serving until the 2025 Annual Meeting) | | | | Abney S. Boxley, III Age 65 | 1994 | President of Boxley Family, LLC and Chairman, Boxley Ready Mix, LLC since 2021; Executive Vice President, Summit Materials 2018-2021; Director, Pinnacle Financial Partners; Director, Insteel Industries, Inc.; Director, Carilion Clinic. Mr. Boxley’s financial and business background, as well as his knowledge of construction and economic development opportunities in the Company’s service area, along with his leadership as chair of the Audit Committee, make him a valuable member of our Board. | | Elizabeth A. McClanahan Age 64 | 2022 | CEO, Virginia Tech Foundation since 2021; President, Dean, and Street Distinguished Professor at Appalachian School of Law 2019-2021; served on the Court of Appeals of Virginia and the Supreme Court of Virginia 2003-2019; Chief Deputy Attorney General of Virginia 2002-2003. Director, Carilion Clinic. Ms. McClanahan’s extensive legal experience and executive leadership make her a valuable member of our Board. | | John B. Williamson, III Age 69 | 1998 | Chairman of the Board, Resources and Roanoke Gas Company since 2002; Director, Bank of Botetourt, Inc.; President and CEO, Resources 1998-2014. Mr. Williamson’s utility industry and board experience as well as his in-depth knowledge of the operational, financial and regulatory aspects of the Company, make him a valuable member of our Board. |

  7. BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD OF DIRECTORS

    | Name and Age | Year In Which First Elected As Director | Business Experience | | CLASS B DIRECTORS (Serving until the 2026 Annual Meeting) | | | | Nancy Howell Agee Age 71 | 2005 | CEO & Director, Carilion Clinic since 2012; President and COO, Carilion Clinic 2010-2011; COO & Executive Vice President, Carilion Clinic 2007-2010; Director, Healthcare Realty Trust Inc.; Director, American National Bank & Trust Company; Chair, GO Virginia; Director, Mytonomy; Chair, VFIC; Vice Chair, VBHEC; Past chair, American Hospital Association; Chair, Virginia Business Council. As CEO of the largest employer in the Company’s service area, and her active leadership and participation in the community, Mrs. Agee is a valuable Board member. | | Jacqueline L. Archer Age 61 | 2020 | President, CEO and Director, Blue Ridge Beverage Company, Inc. since 2023; President, COO and Director, Blue Ridge Beverage Company, Inc. 2017– 2023; Executive Vice President and CFO, Blue Ridge Beverage Company, Inc. 2004-2017; Director and Executive Committee Member, Virginia Tech Foundation; Chair, Constellation Brands National Distributor Council; Director and Past Chair, Virginia Beer Wholesalers Association. Ms. Archer’s executive experience leading a large, regional business, her previous investment banking experience, and her extensive community involvement make her a valuable member of our Board. | | Robert B. Johnston Age 58 | 2022 | Chief Strategy Officer and Executive Vice President, The InterTech Group, Inc. since 2008; Chair, Supremex, Inc.; Director, Swiss Water Decaffeinated Inc.; Director, FIH Group PLC; Director, Colabor Group. Mr. Johnston’s experiences as a former CEO of a large corporation, an experienced director of publicly traded companies, including natural gas utilities, as well as his merger and acquisition expertise, make him a valuable member of our Board. | | J. Allen Layman Age 71 | 1991 | Private Investor. 30-year career in the telecommunication industry during which he served as President & CEO of R&B Communications and Chairman and President of Ntelos, Inc. Mr. Layman’s experience leading a utility as CEO and his in-depth knowledge of the regulatory environment make him a valuable member of our Board. | | CLASS C DIRECTORS (Serving until the 2024 Annual Meeting) | | | | T. Joe Crawford Age 68 | 2018 | See disclosure in Proposal No. 1 above. | | Maryellen F. Goodlatte Age 71 | 2001 | See disclosure in Proposal No. 1 above. | | Paul W. Nester Age 49 | 2020 | See disclosure in Proposal No. 1 above. |

  8. BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD OF DIRECTORS

    The Board has standing Compensation, Audit and Governance and Nominating committees. The Board has affirmatively determined that the Company’s current directors are considered independent directors in respect to each committee on which he or she serves, as determined under the Company’s independence standards adopted in accordance with the applicable rules of the SEC and Nasdaq. In addition, the Board has determined that Abney S. Boxley, III and Jacqueline L. Archer are audit committee financial experts under applicable SEC rules. The following table summarizes each committee.

  9. BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD OF DIRECTORS

    | Committee | Members | Responsibilities | Independence | | Compensation | Nancy Howell Agee, Chair Abney S. Boxley, III T. Joe Crawford J. Allen Layman | Assists the Board in fulfilling its responsibility for the oversight of the compensation programs for the Company's directors and executive officers. Reviews with management the Compensation, Discussion and Analysis disclosures and succession plans for executive officers. | Each Member is Independent | | Audit | Abney S. Boxley, III, Chair Jacqueline L. Archer T. Joe Crawford Maryellen Goodlatte | Assesses the integrity of our financial statements, and reviews the Company’s identified risks, policies for its risk assessment, and steps management has taken to control significant risks, except those delegated by the Board to other committees. Includes appointment, compensation (including advance approval of audit fees), retention and oversight of the independent registered public accounting firm, assessment of external audits, as well as overall compliance with legal and regulatory requirements. | Each Member is Independent | | Governance and Nominating | Maryellen F. Goodlatte, Chair Nancy Howell Agee Robert B. Johnston J. Allen Layman Elizabeth A. McClanahan | Responsible for the oversight of a broad range of issues surrounding the composition and operation of the Board, including identifying individuals qualified to become Board members, recommending nominees for Board election and recommending governance principles to the Board. It also provides assistance to the Board in the areas of committee member selection and rotation practices, evaluation of the overall effectiveness of the Board and consideration of developments in corporate governance practices. The Committee also has oversight of ESG initiatives. | Each Member is Independent |

  10. BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD OF DIRECTORS

    Each charter of the Audit Committee, the Compensation Committee, and the Governance and Nominating Committee is available on the Company’s website at www.rgcresources.com/corporate-governance/.

  11. Compensation of Directors

    Compensation of Directors Director fees are set by the Compensation Committee and approved by the Board of Directors after the Committee considers the competitive market for directors and fee levels provided by comparable companies both within the utility industry and in the Company's geographic area. Mr. Nester is not compensated for attendance at Board and committee meetings and does not receive the annual retainer for service as a Board member. The 2024 schedule of director fees is as follows:

  12. Compensation of Directors

    | Annual Director Retainer | $48,000 | | Additional Annual Retainer - Board Chair | 20,000 | | Additional Annual Retainer - Audit Committee Chair | 12,000 | | Additional Annual Retainer - Other Committee Chair | 10,000 | | Additional Annual Retainer - Audit Committee | 8,000 | | Additional Annual Retainer - Other Committee | 2,000 |

  13. Compensation of Directors

    Restricted Stock Plan for Outside Directors. Under the Company's Amended and Restated Restricted Stock Plan for Outside Directors (the "Director Restricted Plan"), originally adopted January 27, 1997, as amended on March 28, 2016 and effective October 1, 2016, a minimum of 40% of the annual retainer fee paid to each non-employee director of the Company on a monthly basis is paid in shares of Company common stock restricted under the terms of the Director Restricted Plan ("Director Restricted Stock"). If the director owns more than 10,000 shares of Resources stock, the minimum requirement is waived. The number of shares of Director Restricted Stock paid each month is calculated based on the first business day of the month closing price of Resources’ common stock on Nasdaq. A participant can, subject to approval of the Compensation Committee, elect to receive up to 100% of the retainer fee in Director Restricted Stock. Such election cannot be revoked or amended during the fiscal year. The following table lists directors who elected to receive a higher percentage of fees as Director Restricted Stock in fiscal 2023:

  14. Compensation of Directors

    | Name | Percent if Greater than 40% | | Nancy Howell Agee | 100% | | Jacqueline L. Archer | 100% | | Abney S. Boxley, III | 100% | | John B. Williamson, III | 100% |

  15. Compensation of Directors

    The shares of Director Restricted Stock vest only in the case of a director’s death, disability, retirement (including not standing for re-election to the Board) or in the event of a change in control of Resources. There is no option to take cash in lieu of stock upon vesting of shares under this Plan. The Director Restricted Stock may not be sold, transferred, assigned or pledged by the participant until the shares have vested under the terms of this Plan. The shares of Director Restricted Stock will be forfeited to Resources by a director’s voluntary resignation during his or her term on the Board or removal for cause.

  16. Fiscal Year 2023 Director Fees and Restricted Stock Holdings

    | Name | Fees paid in cash | Fees paid in Restricted Stock(1) | Total Fees | Shares of Restricted Stock as of 9/30/23 | | Nancy Howell Agee | $— | $62,000 | $62,000 | 37,078 | | Jacqueline L. Archer | — | 56,000 | 56,000 | 9,644 | | Abney S. Boxley, III | — | 70,000 | 70,000 | 39,029 | | T. Joe Crawford | 34,800 | 23,200 | 58,000 | 5,717 | | Maryellen F. Goodlatte | 68,000 | — | 68,000 | 20,914 | | Robert B. Johnston | 49,333 | — | 49,333 | — | | J. Allen Layman | 52,000 | — | 52,000 | 44,150 | | Elizabeth A. McClanahan | 30,000 | 20,000 | 50,000 | 1,696 | | John B. Williamson, III | — | 68,000 | 68,000 | 16,126 |

  17. AND MANAGEMENT

    | (4) Includes stock options shown in the Outstanding Equity Awards at Fiscal Year End section on page 18 for Messrs. Oliver and Shockley. All are exercisable and included as shares beneficially owned. Includes 5,000 stock options for Ms. Miles and Mr. Oliver awarded October 18, 2023. |

  18. COMPENSATION DISCUSSION AND ANALYSIS

    COMPENSATION DISCUSSION AND ANALYSIS We are committed to creating shareholder value. Our 2023 net income was $11.3 million, or $1.14 per share. Also in 2023, the Board approved a 1.3% annual cash dividend increase to $0.79 per share. The Board has increased the annual cash dividend every year since 2004. Our compensation philosophy is designed to incentivize management to create shareholder value by attracting and retaining talent, rewarding performance and instilling an ownership culture. Our Restricted Stock Plan is intended to advance those goals, by further aligning senior management with our shareholders. As described below, we pay a portion of incentive compensation in the form of restricted stock, based on earnings targets. This section will provide an overview of our executive compensation philosophy and why we believe it is appropriate for the Company and its shareholders. We also discuss the Compensation Committee’s methodology for determining appropriate and competitive levels of compensation for the named executive officers. Details of compensation paid to the named executive officers can be found in the tables that follow.

  19. Compensation Philosophy and Objectives

    Compensation Philosophy and Objectives Who are the named executive officers for fiscal year 2023? The named executive officers of the Company are Paul W. Nester, Lawrence T. Oliver and C. James Shockley. What person or group is responsible for determining the compensation levels of named executive officers? The Compensation Committee has a charter, pursuant to which it reviews and recommends to the Board the compensation, including base salary and annual incentive or discretionary compensation, of the Company’s CEO and the other executive officers. The CEO is actively involved in the executive compensation process. The CEO reviews the performance of each of the executive officers, other than his own, and, within the defined program parameters, recommends to the Compensation Committee base salary increases and incentive awards for such individuals. He provides the Compensation Committee with financial performance goals for the Company that are used to link pay with performance. The CEO also provides his review to the Compensation Committee with respect to the executive compensation program’s ability to attract, retain and motivate the level of executive talent necessary to achieve the Company’s business goals. The CEO attends the meetings of the Compensation Committee but does not participate in the Committee executive sessions. What are the Company’s executive compensation principles and objectives? The Company’s overall executive compensation philosophy is that pay should be competitive with the relevant market for executive talent, be performance based, vary with the attainment of specific objectives and be aligned with the interests of the Company’s shareholders. The core principles of the Company’s executive compensation program include the following: Pay competitively. The Compensation Committee believes in positioning executive compensation at levels necessary to attract and retain exceptional leadership talent. An individual’s performance and importance to the Company can result in total compensation being higher or lower than the target market position. Pay-for-performance. The Compensation Committee structures executive compensation programs to balance annual and long-term corporate objectives, including specific measures which focus on operational and financial performance through incentive bonuses and the goal of fostering shareholder value creation through restricted stock grants. Create an ownership culture. The Compensation Committee believes that using compensation to instill an ownership culture effectively aligns the interests of executive officers and the shareholders. A significant portion of our incentive compensation awarded to executive officers is based on earnings and in the form of restricted common stock. The restrictions are intended to promote stock ownership. In addition, the Committee oversees a modest stock option plan providing another form of equity incentive. The CEO and the Compensation Committee periodically review the executive compensation philosophy. No recent changes have been made to the compensation philosophy, but programmatic changes have been implemented at various times to enhance the effectiveness of the various compensation elements. What is the CEO stock ownership requirement? The CEO is expected to achieve and then maintain a level of stock ownership equivalent to 5 times, or 500%, of annual base salary. Does the Company have a Clawback Provision? Yes. For any incentive compensation or bonus award calculated upon the achievement of certain financial results or other performance metrics that, in either case, were subsequently found to be materially inaccurate, the Compensation Committee may seek recovery of the award. Further, if the Compensation Committee determined that the executive officers engaged in misconduct, malfeasance or gross negligence in the performance of their duties that either caused or significantly contributed to the material inaccuracy in financial statements or other performance metrics, there is no time limit on this right of recovery. In all other circumstances, the right of recovery is limited to one year after the date of payment of each award. Does the Company have an anti-hedging and pledging of Company securities policy? Yes. Directors, executive officers and employees of the Company may not engage in hedging transactions related to the Company's securities. Specifically, pursuant to Company policy, no director, executive officer or employee of the Company (or any of his or her designees) may purchase any financial instruments (including prepaid variable forward contracts, equity swaps, collars, and exchange funds), or otherwise engage in any transactions, that hedge or offset, or are designed to hedge or offset, any decrease in the market value of any “registrant equity securities” (i) granted to such director, executive officer or employee by the Company as part of such person’s compensation or (ii) held, directly or indirectly, by such director, executive officer or employee. Also, directors and executive officers may not pledge the Company's stock as collateral for a loan or hold the Company's stock in a margin account. How do we determine executive pay? The Compensation Committee benchmarks base salary, annual and other forms of incentive compensation and the Company's financial performance to a comparison group consisting of publicly traded companies. The Compensation Committee believes this process is the best way to determine whether such compensation is competitive. The comparison group is selected based on six criteria:

  20. Compensation Philosophy and Objectives

    In addition to the comparison group, the Compensation Committee utilizes market compensation data from Salary.com for each of its executive positions. This data provides benchmark information for both base pay and total compensation for energy and utility companies in the $50 million to $200 million size range. While the Compensation Committee has not established a specific target for each executive officer position, the Committee uses the comparison group and salary benchmark data to help ensure compensation is reasonably competitive in the industry and local job market. The Compensation Committee did not utilize an outside consultant in fiscal year 2023. How do we consider the results of the most recent shareholder advisory vote on executive compensation? Annually, we ask our shareholders for a non-binding advisory vote on our overall executive compensation. The Compensation Committee and the Board review and consider the voting results. In 2023, 98% of votes cast were in favor of the proposal. The Committee determined that since a substantial majority of our shareholders voted in favor of our executive compensation philosophy and program, the Committee recommended and the Board agreed that changing our overall approach to executive compensation was not necessary at this time.

  21. Compensation Elements

    Compensation Elements Base Salary. Base salary is fixed compensation and is necessary to attract and retain talent and is the only non-variable element of the Company’s total compensation program. Base salaries are set to reflect each executive officer’s responsibilities, the impact of each executive officer’s position and the contribution each executive officer delivers to the Company. Salaries are determined after analyzing competitive levels in the market, using the Company’s comparison group and the Salary.com compensation data for executives with comparable responsibilities and job scope. Salary increases, if any, are based on individual responsibility and performance, Company performance and market conditions. To gauge market conditions, the Compensation Committee evaluated the comparison group and market data and established recommended salary levels based on the executive’s experience, tenure, performance and potential. Based in part on the executive compensation benchmarking and the target levels for base salary set forth above, the Board, acting on the recommendation of Compensation Committee, set the executive officers’ base salaries for 2024. Performance Incentive Plan Compensation. The Performance Incentive Plan provides for a bonus based on the achievement of (1) certain qualitative goals for each executive officer, which may be individual in nature or for the Company as a whole, and (2) targets for fiscal year earnings per share. The plan bases 50% of the cash bonus on qualitative goals and 50% on earnings targets. The Compensation Committee evaluates achievement by each executive officer of their qualitative goals and then recommends to the Board an amount of bonus to be awarded in respect of such achievement. The plan sets forth minimum, target and maximum earnings per share that may be achieved. The Company is paying a portion of the 2023 bonuses, based on the earnings target, in the form of restricted stock under the Restricted Stock Plan described below and also plans the same for fiscal 2024. RGC Resources, Inc. Restricted Stock Plan. The Company has a Restricted Stock Plan, which is intended to incentivize key employees through stock ownership. Each restricted stock award will be evidenced by an agreement with the recipient. The agreement shall set forth the "Vesting Period" and "Restriction Period" for the award and any other conditions or restrictions that the Compensation Committee deems advisable, including requirements established pursuant to the Securities Act, the Exchange Act, the Internal Revenue Code and any securities trading system or stock exchange upon which such restricted shares are listed. The "Vesting Period" for an award represents substantial risk of forfeiture until certain dates, at which time such shares or a portion of such shares shall begin to "vest" over time and no longer be subject to a substantial risk of forfeiture. The default Vesting Period for an award shall be three years with one-third of the shares vesting on the first, second and third anniversaries of the effective date of the award, respectively, unless the Compensation Committee establishes otherwise. If a recipient resigns or is otherwise terminated from employment with the Company prior to the end of the Vesting Period, he or she will forfeit all interest to his or her unvested shares of restricted stock granted in an award unless the Compensation Committee accelerates vesting for the recipient. Unless otherwise established in an award agreement by the Compensation Committee, in the event of a recipient's death, disability or normal retirement (as considered under our defined benefit pension plan), all of the awarded shares shall vest and no longer be subject to a substantial risk of forfeiture. Likewise, all awarded shares shall vest in the event of a change in control, as defined in the recipient's agreement with the Company that relates to recipient's compensation and benefits upon the occurrence of a change in ownership of the Company or similar event (i.e., the change in control agreement). The "Restriction Period" for an award represents a period during which the recipient may not transfer, sell, pledge, assign, or otherwise alienate or hypothecate shares of restricted stock and all cash dividends on such shares must be re-invested in our common stock. Unless the Compensation Committee otherwise determines, the Restriction Period shall apply so long as shares of restricted stock are unvested and thereafter apply to 75% of such vested shares unless the recipient satisfies the following minimum ownership levels of our common stock:

  22. Compensation Elements

    | *This requirement is specific to the vesting requirements of the Restricted Stock Plan. The Compensation Committee has established Mr. Nester’s stock ownership requirement at 500% of annual base salary, as discussed on page 14. |

  23. Compensation Elements

    The Compensation Committee will use its discretion to determine when and how such minimum levels are measured. Once a recipient satisfies the minimum level of ownership or once a recipient is no longer employed by the Company, the Restriction Period will no longer be applicable to vested shares. A change in control will not affect the Restriction Period. Key Employee Stock Option Plan of RGC Resources, Inc. The Company has a Key Employee Stock Option Plan, which is intended to provide the Company’s executive officers and other key employees with long-term incentives and future rewards tied to the price of Resources’ common shares over time. This Plan requires each option’s exercise price per share to equal the fair value of the Company’s common shares as of the date of the grant. Under the terms of this Plan, the options become exercisable six months from the grant date and expire ten years subsequent to the grant date. The Key Employee Stock Option Plan has 22,000 options available for issue as of September 30, 2023. RGC Resources, Inc. Nonqualified Deferred Compensation Plan. At its October 2020 meeting, the Compensation Committee proposed and the Board of Directors approved a Nonqualified Deferred Compensation Plan intended to attract, incentivize and retain certain officers and key employees of the Company. This Plan allows discretionary contributions, based on the achievement toward certain targets, as determined by the Compensation Committee. This Plan also allows a participant to defer up to 80% of their cash compensation earned as base salary or incentive. The Board approved $22,400 in discretionary contributions to the Plan for services rendered during fiscal 2023.

  24. Summary Compensation Table

    Summary Compensation Table

  25. Summary Compensation Table

    | Name | Year | Salary | Bonus(1) | Stock Awards(2)(3) | Option Awards | Non-equity Incentive Plan Compensation | Change in Pension Value and Non Qualified Deferred Compensation Earnings(4)(5)(6) | All Other Compensation | Total | | Paul W. Nester | 2023 | $422,576 | $— | $321,300 | $— | $220,626 | $10,673 | $78,866 | $1,054,041 | | President & CEO | 2022 | 408,126 | 20,000 | — | — | 49,980 | — | 110,244 | 588,350 | | | 2021 | 405,793 | — | 285,600 | — | 199,920 | 28,526 | 57,510 | 977,349 | | C. James Shockley, Jr. | 2023 | 243,440 | — | 122,269 | — | 106,374 | 2,207 | 51,102 | 525,392 | | COO | 2022 | 237,863 | 10,000 | — | — | 21,558 | — | 36,727 | 306,148 | | | 2021 | 231,591 | — | 116,280 | — | 93,140 | 57,549 | 46,658 | 545,218 | | Lawrence T. Oliver | 2023 | 219,111 | — | 100,800 | — | 89,600 | 5,367 | 40,269 | 455,147 | | Sr. Vice President, | 2022 | 204,569 | 15,000 | — | 10,780 | 25,750 | 6,963 | 35,794 | 298,856 | | Corp. Secretary | 2021 | 181,860 | — | 90,000 | 16,650 | 80,000 | 15,344 | 44,436 | 428,290 |

  26. Summary Compensation Table

    | (1) The Compensation Committee has sole discretion to issue a one-time cash bonus payment to the Company's named executive officers. The Compensation Committee approved a discretionary cash bonus given their level of performance in fiscal 2022. | | (2) In October 2023, in respect of fiscal 2023 performance, the Company approved a total of 35,303 shares of restricted stock to be issued to our named executive officers effective January 3, 2024. Mr. Nester received 20,837 shares, which is equal to $321,300 based on the closing price of $15.42 as reported on NASDAQ on October 27, 2023. Mr. Oliver received 6,537 shares, which is equal to $100,800 based on such closing price. Mr. Shockley received 7,929 shares, which is equal to $122,269 based on such closing price. | | (3) In November 2021, in respect of fiscal 2021 performance, the Company approved a total of 22,667 shares of restricted stock to be issued to our named executive officers effective January 3, 2022. Mr. Nester received 13,161 shares, which is equal to $285,600 based on the closing price of $21.70 as reported on NASDAQ on November 29, 2021. Mr. Oliver received 4,147 shares, which is equal to $90,000 based on such closing price. Mr. Shockley received 5,359 shares, which is equal to $116,280 based on such closing price. | | (4) The Change in Pension Value is an actuarial calculation and was not realized as compensation. Only Mr. Nester and Mr. Shockley have a pension benefit. In 2022, the significant increase in discount rate greatly reduced the accumulated pension value. | | (5) The Change in Nonqualified Deferred Compensation Expense represents plan contributions and unrealized gains and losses. | | (6) The Change in Pension Value in 2022 for Mr. Nester ($153,456) and Mr. Shockley ($448,425) was negative due to the higher discount rate and has been excluded from the table above in accordance with SEC guidance. |

  27. Grants of Plan-Based Awards for 2023

    Grants of Plan-Based Awards for 2023 The Board awarded the incentive compensation below for fiscal year 2023 performance to be paid in 2024. .

  28. Grants of Plan-Based Awards for 2023

    | Name | Grant Date | Type | Metric | Threshold | Target | Maximum | Awarded | % of Target | | Paul W. Nester | 10/27/2023 | Cash | Performance Achievements | $— | $149,940 | $235,620 | $220,626 | 147% | | | 10/27/2023 | Equity(1) | Earnings | — | 171,360 | 321,300 | 321,300 | 188% | | C. James Shockley, Jr. | 10/27/2023 | Cash | Performance Achievements | — | 73,361 | 110,042 | 106,374 | 145% | | | 10/27/2023 | Equity(1) | Earnings | — | 73,361 | 122,269 | 122,269 | 167% | | Lawrence T. Oliver | 10/27/2023 | Cash | Performance Achievements | — | 56,000 | 89,600 | 89,600 | 160% | | | 10/27/2023 | Equity(1) | Earnings | — | 56,000 | 100,800 | 100,800 | 180% |

  29. Grants of Plan-Based Awards for 2023

    (1) These are awards of restricted stock under the Company's Restricted Stock Plan as described above.

  30. Outstanding Equity Awards at Fiscal Year End

    Outstanding Equity Awards at Fiscal Year End The following table shows all outstanding unexercised stock options held by our named executive officers as of September 30, 2023. All stock options are vested and exercisable and have an intrinsic value of $18,387.

  31. Outstanding Equity Awards at Fiscal Year End

    | Name | Number of Unexercised Options | Option Exercise Price | Option Expiration Date | | C. James Shockley, Jr. | 4,500 | $16.37 | Dec 8, 2026 | | | 4,500 | 14.15 | Dec 3, 2025 | | Lawrence T. Oliver | 1,000 | 19.90 | Jul 25, 2032 | | | 3,000 | 22.93 | May 26, 2031 | | | 5,000 | 27.87 | Apr 1, 2030 |

  32. Outstanding Equity Awards at Fiscal Year End

    The following table sets forth the shares of restricted stock that have been awarded, but not vested, as of September 30, 2023:

  33. Outstanding Equity Awards at Fiscal Year End

    | Name | Grant Date | Restricted Shares Not Vested | Market Value | | Paul W. Nester | Nov 29, 2021 | 4,387 | $75,895 | | C. James Shockley, Jr. | Nov 29, 2021 | 1,786 | 30,898 | | Lawrence T. Oliver | Nov 29, 2021 | 1,382 | 23,909 |

  34. CEO Pay Ratio

    CEO Pay Ratio We believe in the spirit of transparency that we should provide the ratio of the annual total compensation of Mr. Nester, President and CEO, to the annual total compensation of the median employee of the Company. For fiscal 2023, the median total annual compensation of all employees of the Company and its subsidiaries (other than the CEO), was $101,574. Mr. Nester's total annual compensation for fiscal year 2023 was $1,054,041. Based on the information, the ratio of the compensation of the CEO to the medium annual total compensation of all employees was estimated to be 10 to 1. To identify the median employee and to determine the total annual compensation of such employee, we used the following methodology. As defined under SEC regulations, we identified our median employee as of the end of September 30, 2022, using our entire workforce. We defined total annual compensation as base pay, plus annual and long-term incentive compensation, plus benefits as outlined in the Other Compensation Table for the period of October 1, 2022 through September 30, 2023. With respect to the total annual compensation of Mr. Nester, we used the amount reported in the "Total" column of the "Summary Compensation Table". SEC rules for identifying the median employee and calculating the pay ratio allow companies to apply various methodologies and various assumptions and, as a result, the pay ratio reported by the Company may not be comparable to the pay ratio reported by other companies.

  35. Pay Versus Performance

    Pay Versus Performance

  36. Pay Versus Performance

    | Year | Summary Compensation Table Total for PEO(1) | Compensation Actually Paid to PEO(1)(2) | Average Summary Compensation Table Total for Non-PEO Named Executive Officers(1) | Average Compensation Actually Paid to Non-PEO Named Executive Officers(1)(2) | Value of Initial $100 Investment Based on Total Shareholder Return(3) | Net Income | | 2023 | $1,054,041 | $1,050,564 | $490,270 | $489,644 | $82.75 | $11,299,282 | | 2022 | 588,350 | 598,562 | 302,502 | 300,780 | 97.02 | (31,732,602) |

  37. Pay Versus Performance

    | (1) Paul Nester was Chief Executive Officer for both years. C. James Shockley, Jr. and Lawrence T. Oliver were the other NEOs for both years. | | (2) SEC rules require certain adjustments be made to the Summary Compensation Table (SCT) totals to determine “Compensation Actually Paid” as reported in the Pay Versus Performance Table. Adjustments to the SCT total compensation by year to calculate Compensation Actually Paid for our PEO and the Average Compensation Actually Paid to our Non-PEO NEOs are set forth in the table below. |

  38. Pay Versus Performance

    | | PEO | | Average Non-PEO | | | | 2023 | 2022 | 2023 | 2022 | | SCT Total | $1,054,041 | $588,350 | $490,270 | $302,502 | | Stock Awards per SCT | (321,300) | — | (111,535) | — | | Option Awards per SCT | — | — | — | (5,390) | | Fair value of awards in CY that remain unvested | 321,300 | — | 111,535 | — | | Change in fair value of PY awards that are outstanding and unvested | (16,495) | (9,241) | (5,960) | (2,110) | | Change in fair value of PY awards that vested during the year | 8,217 | 9,226 | 3,634 | 2,279 | | Dividend or other earnings paid during the year prior to vesting | 4,801 | 10,227 | 1,700 | 3,499 | | Compensation Actually Paid Total | $1,050,564 | $598,562 | $489,644 | $300,780 |

  39. Pay Versus Performance

    | (3) Assumes $100 invested on October 1, 2021, the first day of the Company's fiscal 2022 year. |

  40. Pay Versus Performance

    The Company recorded after-tax impairment charges of its investment in MVP during 2022 totaling $40.9 million, resulting in a $31.7 million net loss. As a result, the PEO and non-PEO's did not earn and were not awarded cash or equity incentives related to earnings for 2022.