UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


SCHEDULE 14A INFORMATION


Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No. )


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¨ Preliminary Proxy Statement
¨ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
x Definitive Proxy Statement
¨ Definitive Additional Materials
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RGC RESOURCES, INC.

(Name of registrant as specified in its charter)


(Name of person(s) filing proxy statement, if other than the registrant)


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RGC RESOURCES, INC.

519 Kimball Avenue, N.E.

Roanoke, Virginia 24016




NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD FEBRUARY 3, 2014

1, 2016



NOTICE is hereby given that, pursuant to its Bylaws and call of its directors,Directors, the Annual Meeting of the Shareholders of RGC Resources, Inc. will be held at theThe Hotel Roanoke and Conference Center, 110 Shenandoah Avenue, Roanoke, Virginia 24016, on Monday, February 3, 2014,1, 2016, at 9:00 a.m., Eastern Standard Time, for the following purposes:

purposes of:

1.     Electing three Class A directors.

1.

To elect three Class B directors.

2.

To ratifyRatifying the selection of Brown, Edwards & Company, L.L.P. as the independent registered public accounting firm.


3.

To approve,Approving, on an advisory basis, the compensation of our named executive officers;

officers.


4.

To transactActing on such other business as may properly come before the Annual Meeting and any postponements or adjournments thereof.

Meeting.


Your attention is directed to the Proxy Statement accompanying this Notice for a more complete statement regarding matters proposed to be acted upon at the meeting. Only those shareholders of record as of the close of business on November 27, 201325, 2015 shall receive notice of, and be allowed,entitled to vote at the meeting.

You are urged to sign and date the enclosed form of proxy and return it promptly in the enclosed self addressed, stamped envelope. Should


If you decideplan to attend the meeting, and vote in person, you may withdraw your proxy.

please contact Sherry Shaw at (540) 777-3972 or by emailing Ms. Shaw at Sherry_Shaw@RoanokeGas.com.

By Order of the Board of Directors.

LOGO

DALE P. LEE

Secretary


By Order of the Board of Directors,
John B. Williamson, III
Chairman

December 23, 2013

Your vote is important.16, 2015



YOUR VOTE IS IMPORTANT. Even if you plan to be present at the Annual Meeting, please sign, datemake sure to vote. You may vote by one of the following methods: (1) on-line at www.proxyvote.com (2) completing, signing and promptly returnreturning the enclosed proxy no matter how smallin the postage paid envelope provided (3) telephonically by calling (800) 690-6903 or (4) in person, even if you have previously sent in your holdings, to assureproxy or voted on-line. Please note that your shares are represented. No postage is required on the enclosed proxy if mailed withinmethod by which you vote last will be the United States.vote the Company counts. If your shares are held by a broker, bank or nominee, it is important that you giveprovide them your voting instructions.

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PROXY STATEMENT


ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD FEBRUARY 3, 2014

1, 2016    


This Proxy Statement is furnished on December 23, 2013, in connection with the solicitation of proxies to be used at the Annual Meeting of Shareholders of RGC Resources, Inc. (“Resources”("we", “Resources” or the “Company”"Company") to be held on Monday, February 3, 2014,1, 2016, at 9:00 a.m., Eastern Standard Time, at theThe Hotel Roanoke and Conference Center, 110 Shenandoah Avenue, Roanoke, Virginia 24016 and any adjournments thereof (the “annual meeting”“Annual Meeting”).


Record Date and Voting Securities


Notice of the Company's Annual Meeting was mailed on or about December 16, 2015 to all shareholders of record. Only shareholders of record at the close of business on November 27, 2013,25, 2015, the record date, for the annual meeting (the “record date”), will be entitled to notice of and to vote at the annual meeting. As of the record date, we had 4,710,719 common shares outstanding, which are our only securities entitled to vote at the annual meeting. Each common share is entitled to one vote.

Annual Meeting. A list of shareholders entitled to vote at the annual meetingAnnual Meeting will be open to the examination of any shareholder, for any purpose germane to the meeting, during ordinary business hours for a period of ten days before the meeting at the Company’s offices at 519 Kimball Avenue, N.E., Roanoke, Virginia 24016, and at the time and place of the meeting during the whole time of the meeting.

Electronic Notice and Mailing

Notice of the Company’s annual meeting was mailed on or about December 23, 2013 to all shareholders as


As of the record date.

Those shareholdersdate, 4,750,645 common shares were issued and outstanding. Each common share is entitled to vote may vote their shares via the Proxy Card by mail following the instructions printed on the Proxy Card.

From the date of the mailing of the Notice of Annual Meeting of Shareholders until the conclusion of the annual meeting, all of the proxy materials will be accessible on the Company’s web site at www.rgcresources.com.

Revocability of Proxies

Shareholders who execute proxies may revoke them by giving written notice to our Corporate Secretary any time before such proxies are voted. Attendance at the annual meeting shall not have the effect of revoking a proxy unless the shareholder so attending shall, in writing, so notify the Secretary of the annual meeting at any time prior to the voting of the proxy at the annual meeting.

Other Matters

The Board does not know of any matter that is expected to be presented for consideration at the annual meeting, other than the election of directors, the ratification of the selection of Brown, Edwards & Company, L.L.P. as the independent registered accounting firm for the 2014 fiscal year, and a shareholder advisory vote on the compensation of our named executive officers. However, if other matters properly come before the annual meeting, the persons named in the accompanying proxy intend to vote thereon in accordance with their judgment.

Solicitation Expenses

We will bear the cost of the annual meeting and the cost of soliciting proxies, including the cost of mailing any proxy materials. In addition to solicitation by mail, our directors, officers and regular employees (who will not be specifically compensated for such services) may solicit proxies by telephone or otherwise. Arrangements will be made with brokerage houses and other custodians, nominees and fiduciaries to forward proxies and proxy material to their principals, and we will reimburse them for their expenses.

The annual report to shareholders and the 2013 Annual Report on Form 10-K are not proxy soliciting materials.

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Voting Procedures; Abstentions; Broker Voting

All proxies received pursuant to this solicitation will be voted except as to matters where authority to vote is specifically withheld and, where a choice is specified as to the proposal, they will be voted in accordance with such specification. If no instructions are given, the persons named in the proxy solicited by the Board intend to vote FOR the nominees for election of our directors listed herein, FOR the ratification of Brown, Edwards & Company, L.L.P. as the independent registered accounting firm for the fiscal year ending September 30, 2014, and FOR the approval of the compensation of our named executive officers.

one vote. A majority of the common shares outstanding entitled to vote on the record date, or at least 2,375,323 common shares, whether present in person or represented by proxy, will constitute a quorum for the transaction of business at the annual meeting and any adjournment or postponement thereof. Abstentions and broker non-votes (which occur with respect to any proposal when a broker holds shares of a customer in its name and is not permitted to vote on that proposal without instruction from the beneficial owner of the shares and no instruction is given) will be counted as present or represented for purposes of establishingAnnual Meeting. Less than a quorum formay adjourn the transaction of business.

Abstentions and broker non-votes will have no effect on the election of directors, which is by plurality of the votes cast in person or by proxy. Brokers may vote their shares in favor of directors so long as they have voting instructions from the beneficial owners of the shares.

Advisory approval of the compensation of our named executive officers requires the affirmative vote of the holders of a majority of the common shares present in person or represented by proxy and entitled to vote on the matter at the annual meeting. Abstentions from voting on this proposal will have the same effect as a vote against this proposal. Brokers may vote their shares on this proposal so long as they have voting instructions from the beneficial owners of the shares. Broker non-votes will not be treated as votes cast on this matter, and therefore will not have any effect on determining the outcome. As disclosed later in this proxy statement, this vote is advisory, and therefore not binding on the Company, the Compensation Committee or the Board of Directors.

Ratification of the appointment of Brown, Edwards & Company, L.L.P. as our independent registered public accounting firm requires the affirmative vote of the holders of a majority of the common shares present in person or represented by proxy and entitled to vote on the matter at the annual meeting. Abstentions from voting on this proposal will have the same effect as a vote against this proposal. Broker non-votes will not be treated as votes cast on this matter, and therefore will not have any effect on determining the outcome.


Proxies in the form enclosed herewith are solicited by management at the direction of the Company’s Board of Directors.

Voting Procedures

Shareholders of record may vote in person at the Annual Meeting, on-line at www.proxyvote.com, by mailing the proxy card, or by telephone by calling (800) 690-6903. Votes cast at the Annual Meeting will be tabulated by an Inspector of Elections, appointed by the Company. All proxy materials are available on the Company's website at www.rgcresources.com.

If your shares are held in a stock brokerage account by a bank, broker, trustee, or other nominee, you are considered the enclosedbeneficial owner of shares held in "street name." You should have received a voting instruction form with these proxy materials from that organization rather than from the Company. As a beneficial owner, you still have the right to direct your broker or other nominee regarding how to vote the shares in your account by following these voting instructions. If you are a beneficial owner and do not instruct your broker or nominee how to vote your shares, this is properlyconsidered a "broker non-vote" except that brokers and nominees can use their discretion to vote “uninstructed” shares with respect to Proposal No. 2 regarding the ratification of our independent registered public accounting firm.

Abstentions and broker non-votes are counted as shares present and entitled to vote for the purpose of determining a quorum. Abstentions will be counted towards the vote total for each of Proposals No. 2 and 3 and will have the same effect as “Against” votes.

If you return a signed and returned,dated proxy card without marking voting selections or providing different instructions on the proxy card, your shares represented thereby will be voted at the meeting FOR the election of the three director nominees listed in Proposal No. 1, FOR the ratification of the appointment of our independent registered public accounting firm in Proposal No. 2, and FOR the advisory approval of executive compensation in Proposal No. 3. With respect to any other business that may properly come before the Annual Meeting and be submitted to a vote of shareholders, proxies will be voted in accordance with its terms. Any proxy given pursuant to this solicitation may be revoked at any time prior to the votebest judgment of the shareholders. An opportunitydesignated proxy holders. We do not know of any matters to be presented at the Annual Meeting other than those described in this proxy statement.


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The director nominees listed in Proposal No. 1 will be given to shareholders attending the meeting to withdraw their proxies and to vote their shares in person.

The Company’s Annual Report to Shareholders for the year ended September 30, 2013 is being sent to all shareholders concurrently with this Proxy Statement. The Annual Report is not to be consideredelected by a partplurality of the proxy solicitation material.

Voting Securities

The Company will appoint onevotes of the shares present or more inspectors to act as a Committee on Credentialsrepresented by proxy at the Annual Meeting and entitled to makevote on the election of directors. The three nominees receiving the most “For” votes will be elected.


The appointment of our independent registered public accounting firm listed in Proposal No. 2 will be ratified if a written report thereof. The inspectors will ascertain the numbermajority of shares outstanding and the voting power of each, determine the sharespresent or represented by proxy at the meetingAnnual Meeting and entitled to vote thereon vote “For” such proposal.

Proposal No. 3, advisory approval of the validitycompensation of proxiesthe Company’s named executive officers, will be considered to be approved if it receives “For” votes from the holders of a majority of shares either present or represented by proxy and ballots, count all votesentitled to vote.

Revoking a Proxy

A shareholder of record may revoke a proxy at any time before it is actually voted at the Annual Meeting either by signing and ballots, and perform certain other duties as requiredsubmitting a new proxy card with a later date or by law. As a matter of policy, proxies, ballotsattending the Annual Meeting and voting tabulations that identify individual shareholders are kept private byin person. A shareholder of record may also send timely written notice of revocation to Paul Nester, Corporate Secretary, RGC Resources, Inc., P.O. Box 13007, Roanoke, VA 24030. If you hold shares through a bank or brokerage firm, you should have received a proxy card and voting instructions with these proxy materials, and you must contact the Company. Such documents are available for examination only by the inspectorsbank or brokerage firm directly to revoke any prior voting instructions.







Remainder of election and certain personnel associated with processing proxy cards and tabulating votes. The vote of any shareholder is not disclosed except as may be necessary to meet legal requirements.

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PROPOSAL 1 –1:     ELECTION OF DIRECTORS OF RESOURCES


The Company’s Board of Directors consists of nine members and is divided into three classes (A, B, and C) with staggered three-year terms. The current term of office of the Class BA directors expires at the 2014 Annual Meeting. The terms of Class AB and Class C directors will expire in 20162017 and 2015,2018, respectively. Each of the Company’s current directors and nominees for election as director are independent except John B. Williamson, III,directors, as determined under the Company’s independence standards adopted in accordance with the applicable rules adopted byof the Securities and Exchange Commission (the “Commission”“SEC”) and the NASDAQ Stock Market Inc.

, except John S. D’Orazio and John B. Williamson, III.

There are three nominees for Class B director: Nancy Howell Agee, J. Allen Layman,A directors: Abney S. Boxley, III, S. Frank Smith, and Raymond D. Smoot, Jr.John B. Williamson, III. The Governance and Nominating Committee and the Board of Directors have selected and endorsed each of these candidates because they each bringbrings unique talents and business experience to the Board.

Nancy Howell Agee


Abney S. Boxley, III is President and CEO of Boxley Materials Company, a manufacturer and distributor of construction materials and aggregate, a position in which he has served for 27 years. He also serves on the board of directors of BNC Bancorp, a publicly held bank, and Carilion Clinic, a local health-care organization. Mr. Boxley has been serving RGC Resources asa director of the Company since 1994. He holds an active Board member since 2005MBA degree from the University of Virginia Darden School and has been nominated for reelection. The Governanceserves on the boards of numerous community organizations in the Company's service area.

We believe that Mr. Boxley's financial and Nominating Committee has renominated Mrs. Agee this year specifically due to her professional experience and demonstrated commitment to her responsibilities as a Resources Board member. Mrs. Agee has an excellent attendance record for full Board meetingsbusiness background, as well as all committee meetings. She devoteshis knowledge of local construction and economic development opportunities in the necessary timeCompany's service area, make him a valuable member of our Board.

S. Frank Smith is a consultant to reviewingAlpha Coal Sales Company, LLC, a division of the materials provided prior to each Board and committee meeting and comes preparedlargest coal producer in the mid-Atlantic area. Mr. Smith previously served as Vice President - Industrial Sales with appropriate questions and initiates discussions on issues she believes are of importance to the Board. Mrs. Agee challenges management to evaluate issues in new ways and is never satisfied with a response to questions until she feels the issueAlpha Coal Sales Company, LLC. He has been thoroughly vetted.

Mrs. Agee is the President & CEO of Carilion Clinic which is the largest employer in our utility service area. In this position, Mrs. Agee has extensive experience in the issues that affectcoal marketing and product acquisition business for 40 years. Mr. Smith has been a director of the regionCompany since 1990 and the economic and political challenges that impact Company operations. She brings to the Board her distinctive perspectiveholds a Masters of customer service, employee development, and fiscal responsibility. Mrs. Agee represents both Carilion Clinic and RGC Resources, Inc. in the communities we serve through her involvement in a variety of corporate and service Boards. She has extensiveArts from Hollins University.


We believe Mr. Smith's in-depth knowledge of financial reportsthe competitive and regulatory landscape of energy markets is consideredhelpful to be independent within the meaningour understanding of the rules governing companies listedrapidly changing energy industry and its implications on NASDAQ. Furthermore, Mrs. Agee is a natural gasour customer base. This, in addition to his leadership as are the hospitals and clinics she oversees in our service area. Mrs. Agee serves onchair of the Compensation and Governance and Nominating CommitteesCommittee, make him a valuable member of our Board.

John B. Williamson, III currently serves as Chairman of the Board. Her professional qualifications will benefitMr. Williamson formerly served as the Resources board.

J. Allen Layman has beenCompany's President and Chief Executive Officer and was involved in the executive management of the Company beginning in 1992. Mr. Williamson holds an MBA from the College of William and Mary. Mr. Williamson is a member of the RGC Resources, Inc. Boardboards of Directors for over 20 years and has been nominated for reelection. The Governance and Nominating Committee has renominated Mr. Layman this year specifically due to his long standing professional experience and demonstrated commitment as a Resources Board member. Mr. Layman has served in many capacities within the Board and the committee structure, including the Audit, Compensation, and Governance and Nominating Committees. He has an excellent attendance record for full Board meetings and committee meetings and comes to the meetings demonstrating his attention to details in the financial statements and pre-meeting materials. Mr. Layman has an in depth knowledge of regulated public utilities and brings an understandingdirectors of the regulatory environment inBank of Botetourt, Inc., a local bank, where he serves as chairman of its nominating and corporate governance committee, Optical Cable Corporation, a publicly held optical fiber manufacturer, where he serves as the Commonwealth of Virginia to the Board. His historical knowledge of utility regulation and legislation is very valuable to the other Board members and management of Resources and provides a perspective that only his experience can provide. Mr. Layman has also served on the Board of Directors through various management successions and provides long standing institutional knowledge.

Mr. Layman is currently a private investor, but was formerly the CEO of a regulated telecommunications company in the region. He has knowledge of utility accounting, ratemaking, and all aspects of public utility operations. Mr. Layman is focused on the financial performancechairman of the company while maintaining a balanced perspective with regard to customer serviceaudit committee and operational performance. He and his family have lived and worked in the Company’s service area for several generations providing him with a unique perspective on customer and marketing issues in our service area. Mr. Layman continues to demonstrate commitment to RGC Resources, Inc. and the economic enhancement of the region in which the company provides service. He is also considered to be independent within the meaning of the rules governing companies listed on NASDAQ. Mr. Layman’s professional qualifications and regulatory knowledge will benefit the Resources board.

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Raymond D. Smoot, Jr. has been a member of the RGC Resources, Inc. Boardnominating and corporate governance committee, Luna Innovations Incorporated, a publicly held technology company, where he serves as chairman of Directors since 2005the audit committee and has been nominated for reelection. The Governancea member of the of the nominating and Nominating Committee has renominated Dr. Smoot this year specifically due to his broad professionalgovernance committee, and Corning Natural Gas Holding Corporation, a publicly held natural gas distribution company located in the state of New York, where he serves as chairman of the audit committee and a member of the compensation committee.


We believe that Mr. Williamson's utility industry experience, understanding of the changing natural gas business and in-depth knowledge of the operational, financial experience as well as his demonstrated commitment as a Resources Board member. He has served on the Audit Committee since joining the Board and is currently serving as the Chair of that Committee. He is considered to be a financial expert under the rules adopted by the Securities and Exchange Commission and has served as Chairman of audit committees of other large companies. Dr. Smoot dedicates adequate time to preparing for each Board meeting and Audit Committee meeting and asks detailed and incisive questions about majorregulatory aspects of the financial reporting processCompany provide the management team valuable strategic and financial statements.

Dr. Smoot is currently employed by the Virginia Tech Foundation (the “Foundation”) which has significant real estateoperating expertise, and business operationsalong with his public company board experiences in our region. From 2003 through 2012, he was the CEO & Secretary-Treasurer for the Virginia Tech Foundationcorporate governance, strategic planning and is currentlycompliance, make him a Senior Fellow for the Foundation. Dr. Smoot has extensive financial and investment knowledge that has been developed by his long-standing career with Virginia Tech in a variety of senior management roles as well as in his capacity as a former Chairman of the Investment Committee for the Virginia Retirement System. He has demonstrated the ability for managing sensitive issues for large institutions that are frequently in the public eye. Dr. Smoot is also the Chairman of the Stellar-One Corporation, a major banking corporation in the region. In his role as bank director he has helped to lead two significant mergers. Dr. Smoot provides a specialized perspective on shareholder issues that complements the expertisevaluable member of our other Board members and maintains a keen focus on the importance of increasing shareholder value. Like our other nominees, Dr. Smoot is also considered to be independent within the meaning of the rules governing companies listed on NASDAQ. The Governance and Nominating Committee believes that Dr. Smoot brings valuable knowledge to the Resources Board.

Approval of Nominees

Approval of the nominees requires the affirmative vote of a plurality of the votes cast at the annual meeting. Unless authorization is withheld, the persons named as proxies will vote for the election of the nominees named above. Each nominee has agreed to serve if elected. In the event any nominee unexpectedly is unable to serve, the proxies will be voted for such other person as the Board may designate. If any of the nominees should become unable or unwilling to serve as a director, the persons named in the proxy intend to vote for the election of such substitute nominee for director as the Board may recommend. It is not anticipated that any of the nominees will be unable or unwilling to serve as a director. Proxies cannot be voted for a greater number of persons than the number of nominees.


Your Board of Directors recommends a vote “FOR” each of the nominees for Class BA Director.

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The present principal occupation and employment during the past five years and the office, if any, held with the Company are set forth opposite the name of each nominee and director:

Name and Age

Year In

Which First

Elected As

Director

Principal OccupationYear In Which Director
Assumed Principal
Occupation

NOMINEES FOR DIRECTOR

CLASS B DIRECTORS (Currently serving until 2014 Annual Meeting with a three year term)

Nancy Howell Agee

Age 61

  2005  

President & CEO, Carilion Clinic; President & COO, Carilion Clinic2010-2011; COO/ Executive Vice President, Carilion Clinic 2007-2010; Director, Hometown Bank.

  2011

J. Allen Layman

Age 61

  1991  

Private Investor.

  2003

Raymond D. Smoot, Jr.

Age 66

  2005  

Senior Fellow, Virginia Tech Foundation, Inc.; CEO & Secretary-Treasurer, Virginia Tech Foundation, Inc. 2003-2012.; Chairman, StellarOne Corporation; Chairman StellarOne Bank; Director, Carilion Clinic.

  2012

DIRECTORS CONTINUING IN OFFICE

CLASS A DIRECTORS (Serving until 2016 Annual Meeting)

Abney S. Boxley, III

Age 55

  1994  

President & CEO, Boxley Materials Company (Construction materials); Chairman Valley Financial Corporation and Valley Bank; Director, Carilion Clinic.

  1988

S. Frank Smith

Age 65

  1990  

Vice President-Industrial Sales, Alpha Coal Sales Company, LLC; Vice President Eastern Sales, Market Analysis and Research, Alpha Coal Sales Company, LLC 2007-2009.

  2009

John B. Williamson, III

Age 59

  1998  

Chairman, President & CEO, RGC Resources, Inc.; Director, Botetourt Bankshares, Inc.; Director, Optical Cable Corporation; Director, Luna Innovations Corporation; Director, Corning Natural Gas Company.

  2003

CLASS C DIRECTORS (Serving until 2015 Annual Meeting)

Maryellen F. Goodlatte

Age 61

  2001  

Attorney and Principal, law firm of Glenn, Feldmann, Darby & Goodlatte.

  1983

George W. Logan

Age 68

  2002  

Principal, Pine Street Partners, LLC; Faculty, University of Virginia Darden Graduate School of Business; Director of Valley Financial Corporation.

  1993

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PROPOSAL 2 -2: RATIFICATION OF BROWN, EDWARDS & COMPANY, L.L.P.

AS THE

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Upon recommendation and selection by the Audit Committee, the Board of Directors accepted Brown, Edwards & Company, L.L.P. (“Brown Edwards”) as the independent registered public accounting firm to audit the financial statements of the Company for the year ending September 30, 2014.2016. Brown Edwards has served as our independent registered public accounting firm since 2006. The Audit Committee has reappointed Brown Edwards as the independent registered public accounting firm to audit our consolidated financial statements as of and for the fiscal year ending September 30, 2016 and to audit our internal control processes. A representative of Brown Edwards is expected to attend the meeting with the opportunity to make a statement and/or respond to appropriate questions from shareholders. Brown, Edwards has served as the independent registered accounting firm of the Company since 2006.

meeting.


The Company’s bylaws do not require that the shareholders ratify the appointment of Brown, Edwards asAudit Committee is solely responsible for selecting the Company’s independent registered public accounting firm. The Companyfirm for the fiscal year ending September 30, 2016. Although shareholder ratification of the appointment of Brown Edwards is asking its shareholdersnot required by the Company's bylaws, the Board of Directors believes that it is desirable to ratify this appointment because it believes such a proposal is a matter of good corporate practice.do so. If the shareholders do not ratify the appointment of Brown Edwards, the Audit Committee will reconsiderconsider whether or not to retain Brown, Edwards as the Company’sengage another independent registered public accounting firm, but may determine to do so. Even iffirm. If the appointment of Brown Edwards is ratified by the shareholders, the Audit Committee may change the appointment at any time if it determines that a change would be in the best interest of the Company and its shareholders.

Approval of Proposal 2

Approval of this proposal will require the affirmative vote of holders of a majority of the common shares present in person or represented by proxy and entitled to vote on such matter at the annual meeting.


Your Board of Directors recommends a vote “FOR” the ratification of Brown, Edwards & Company, L.L.P.




PROPOSAL 3 –3: NON-BINDING SHAREHOLDER ADVISORY VOTE ON EXECUTIVE COMPENSATION


At the 2011 annual meeting, theAnnual Meeting, our shareholders voted to have an annual review of executive compensation. We believe that our executive compensation program is competitive within ourthe 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 an orientationa philosophy of long-term value creation by aligning the interests of ourthe executive officers with those of our shareholders by linking a substantialmeaningful portion of their compensation to ourthe Company’s performance. It also balances short-term and longer-term compensation opportunities to ensure that our Company meets its short-term objectives while continuing to build value for our shareholders over an extended time horizon. The program is also designed to meet short-term objectives and to attract and to retain highly-talented executive officers who are critical to the successful implementationexecution of ourthe Company’s strategic business plan.


We also believe that both ourthe Company and shareholders benefit from responsive corporate governance policies and constructive and consistent dialogue. The proposal set forth above providing for a shareholder advisory vote on our executive compensation program (commonly referred to as the “Say on Pay” resolution) is intended to give you as a shareholder of our Company, the opportunity to endorse or not endorse the compensation we paid to our named executive officers for fiscal 2013 by voting to approve or not approve such compensation as described in this Proxy Statement.

2015.


The Compensation Committee of the Board of Directors has overseen the development of the executive compensation program, as described more fully in the “Report of the Compensation, Committee of the Board of Directors”Discussion and Analysis section of this Proxy Statement, including the “Compensation Philosophy and Objectives” and “Compensation Elements” sections and the related compensation tables, as well as the narrative descriptions that accompany these tables.

We encourage you to closely review this information before voting to approve or disapprove the compensation of our named executive officers. The Report of the Compensation Committee of the Board of Directors describes and explains our executive compensation policies and practices and the process that was used by the Compensation Committee of the Board of Directors to reach its decisions on the compensation of the named executive officers for fiscal 2013. It also contains a discussion and analysis of each of the primary components of our executive compensation program - the base salary and incentive awards.

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Generally, in this Proxy Statement we disclose information about the compensation of the CEO, CFO plus the top three most highly compensated executive officers for the end of the last completed fiscal year. Consequently, most of the information presented in the compensation tables is backward-looking. Also, we disclose in the compensation tables all elements of executive compensation separately. Because of this, we encourage you to read the footnotes and narrative descriptions which accompany each compensation table in order to understand any non-cash items.

In reviewing our executive compensation disclosure, we would like to call your attention to the following highlights:

•

Incentive-based compensation represented approximately 11% of our named executive officers’ total compensation for fiscal 2013, with approximately 22% tied to our Company’s relative shareholder return and the remaining 78% tied to achievement of challenging annual performance measures.

•

Base salary represented approximately 69% of our named executive officers’ total compensation opportunity for fiscal 2013.

The Board of Directors regularly reviews best practices in corporate governance and executive compensation and, in fiscal 2013, the Compensation Committee reviewed the executive compensation structure to ensure that Company practices are reasonable and appropriate for executive compensation.

Statement.


Please note that your vote is advisory and will not be binding upon ourthe Company or the Board of Directors. However, the Board of Directors and the 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 and those opinions when considering future executive compensation decisions for our executive officers.

Approval of Proposal 3

Approval of this proposal will require the affirmative vote of holders of a majority of the common shares present in person or represented by proxy and entitled to vote on such matter at the annual meeting.


Your Board of Directors recommends a vote “FOR” approval, on an advisory basis, of

executive compensation of the named executive officers as disclosed in this proxy statement pursuant

to the compensation disclosure rules of the Security and Exchange Commission.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of November 27, 2013, certain information regarding the beneficial ownership of the common shares of the Company by each director, named executive officer, and certain beneficial owners and by all directors, named executive officers, and certain beneficial owners as a group. Unless otherwise noted in the footnotes to the table, the named persons have sole voting and investment power with respect to all outstanding shares of common stock shown as beneficially owned by them.

Name of Beneficial Owner            

 Shares of Common Stock
Beneficially Owned as of 11/27/131		  Percent of Class       

 

 

Nancy Howell Agee

  9,3312                           < 1%                

Abney S. Boxley, III

  19,266                             < 1%                

John S. D’Orazio

  18,7533                           < 1%                

Maryellen F. Goodlatte

  12,687                             < 1%                

J. Allen Layman

  37,668                             <1%                

Dale P. Lee

  3,0593                             <1%                

George W. Logan

  53,774                             1.14%                

Paul W. Nester

  5,4693                           <1%                

S. Frank Smith

  36,523                             <1%                

Raymond D. Smoot, Jr.

  18,5084                           <1%                

8

statement.




4

Robert L. Wells, II

  5,0613                           <1%                

John B. Williamson, III

  84,748                           1.80%                

Anita G. Zucker

  247,458                           5.25%                

All Named Beneficial Owners
as a Group ( 13 persons)

  552,305                           11.72%                

1Includes restricted shares purchased by directors pursuant to Restricted Stock Plan for outside directors.
2Includes 776 shares owned by spouse.
3Includes stock options shown in the Summary Compensation Table on page 16.
4Includes 250 shares owned by spouse.


BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD OF DIRECTORS


The Company’s Board of Directors currently(the "Board") consists of eight directors.nine directors and is divided equally into three classes, with staggered three-year terms. The Board has separate persons serving as its Chair and as the President and Chief Executive Officer ("CEO") of Directors has a standing compensation committee, a standing audit committee, and a standing governance and nominating committee. the Company, which, as discussed below under "The Board's Role in Risk Oversight" section, we believe is the most appropriate leadership structure at this time for the Company.
The Board of Directors met eightnine times during the 20132015 fiscal year. All Board members of the Board attended at least 75 percent of the total number of Board meetings and at least 75 percent of the total number of committee meetings for committees on which each served in fiscal year 2013.

It is the Company’s policy that all directors should attend the annual meeting of the Company’s shareholders. All of the directors serving on the Board of Directors at the time attended the annual meeting of shareholders in 2013.

Director Independence:The Board of Directors has affirmatively determined that all of the current directors, other than John B. Williamson, III, are “independent” of the Company within the meaning of the rules governing companies listed on NASDAQ. For a director to be “independent” under the NASDAQ rules, the Board of Directors must affirmatively determine that the director has no material relationship with the Company, either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company.

The Board of Directors has adopted the following categorical standards of independence to assist it in determining whether a director has a material relationship with the Company. The following relationships between a director and the Company will not be considered material relationships that would preclude a finding by the Board of Directors that the director is independent under the NASDAQ rules:

•

employment of the director or the director’s immediate family member by another company that makes payments to, or receives payments from, the Company or any of its subsidiaries for property or services in an amount which, in any single fiscal year, does not exceed the greater of $1 million or 2% of such other company’s consolidated gross revenues; and

•

a relationship of the director or the director’s immediate family member with a charitable organization, as an executive officer, board member, trustee or otherwise, to which the Company or any of its subsidiaries has made charitable contributions of not more than $40,000 in any of the last three years.

2015. Consistent with the NASDAQ rules, a majority of the Company’s non-management directors meetmet at least once each quarter without management present. The role of presiding director for each such executive session of directors is filled by the ChairAll of the directors serving on the Board at the time attended the Annual Meeting of shareholders in 2015.


The present principal occupation and employment during the past five years, and the office held with the Company, if any, of each director:



Name and Age
Year In Which First Elected As Director


Business Experience
Year in Which Assumed Principal Occupation
CLASS A DIRECTORS (Currently serving until 2016 Annual Meeting)
Abney S. Boxley, III
Age 57
1994See disclosure in Proposal No. 1 above.1988
S. Frank Smith
Age 67
1990See disclosure in Proposal No. 1 above.2014
John B. Williamson, III
Age 61
1998See disclosure in Proposal No. 1 above.2014
CLASS B DIRECTORS (Serving until the 2017 Annual Meeting)
Nancy Howell Agee
Age 63
2005President, CEO & Director, Carilion Clinic; President & COO Carilion Clinic 2010-2011; COO & Executive Vice President, Carilion Clinic 2007-2010; Director, Hometown Bank; and Director, Virginia Tech Carilion School of Medicine. As the 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.2011
J. Allen Layman
Age 63

1991Private Investor and Director, Bank of Fincastle. A former CEO, Mr. Layman's utility and regulatory experience makes him a valuable Board member.2003
Raymond D. Smoot, Jr.
Age 68
2005Senior Fellow, Virginia Tech Foundation, Inc.; CEO & Secretary, Virginia Tech Foundation, Inc. 2003-2012; Chairman, Union Bankshares Corporation; and Director, Carilion Clinic. Dr. Smoot's professional experience and public company board experience make him a valuable Board member.2012
CLASS C DIRECTORS (Serving until the 2018 Annual Meeting)
John S. D'Orazio
Age 55
2014President, CEO & Director, RGC Resources, Inc. & Roanoke Gas Company. President and CEO, Roanoke Gas Company 2012-2014; Vice President & COO, Roanoke Gas Company 2003-2012. Mr. D'Orazio provides the Board with in-depth knowledge of the Company's operation, business strategy, risks and economic climate as well as extensive utility industry experience.2014
Maryellen F. Goodlatte
Age 63

2001Attorney and Principal, law firm of Glenn, Feldmann, Darby & Goodlatte. Mrs. Goodlatte's experiences as an attorney in the Company's service area, in addition to her leadership as chair of the Governance and Nominating Committee, make her a valuable member of the Board.1983
George W. Logan
Age 70
2002Principal, Pine Street Partners, LLC; Faculty, University of Virginia Darden Graduate School of Business. Mr. Logan's board governance and financial expertise as well as his professional business experiences make him a valuable Board member.1993

5


The Board has standing Compensation, Audit, Committee.and Governance and Nominating committees. The presiding director forBoard has affirmatively determined that each meeting is responsible for advisingof the chairmanCompany’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 the NASDAQ Stock Market, Inc. In addition, the Board of Directors on decisions reached and recommendations for action made at such meeting.

COMBINED CHIEF EXECUTIVE OFFICER AND CHAIRMAN ROLE

The Board leadership structure is currently composed of a combined Chairman of the Board of Directors and Chief Executive Officer, an independent Audit Committee Chairman, an independent Governance and Nominating Committee Chairman, and an independent Compensation Committee Chairman. Mr. Williamson is the Company’s President, Chief Executive Officer and Chairman of the Board, and he was appointed by the Company as President and Chief Executive Officer in 1999. After careful consideration of Mr. Williamson’s strong leadership since he joined the Company, the Board determined it appropriate for the Chairman and the CEO to be the same individual. In making this determination, the Board also considered the relative size of the Company, the size of the Board and the fact that all remaining members of the Board are independent. The Board

9

has historically believed that having the roles combined enhanced the ability to provide insight and direction on important strategic initiatives to both management and the Board and increases the likelihood that the Company acts with a common purpose. Mr. Williamson and the Board announced a senior officer succession plan in October 2012 and Mr. Williamson is expected to step down from the CEO role in 2014, resulting in a separation of the CEO and Chairman roles in future years. The Company’s overall corporate governance policies and practices have adequately addressed any governance concerns raised by the dual CEO and Chairman role in the past. In addition, the Board determined that thereGeorge W. Logan and Raymond D. Smoot, Jr. are other members of the executive management team that are well versedaudit committee financial experts under applicable SEC rules. The following table summarizes each committee.

CommitteeMembersResponsibilitiesIndependence
CompensationS. Frank Smith, ChairAssists the Board in fulfilling its oversight responsibilities relating to the compensation of the Company's directors and executive officers.Each Member is Independent
Nancy Howell Agee
Abney S. Boxley, III
J. Allen Layman
AuditRaymond D. Smoot, Jr., ChairReviews and assesses the Company’s processes to manage financial reporting risk and to manage investment, tax, and other financial risks. It also reviews the Company’s policies for risk assessment and steps management has taken to control significant risks, except those delegated by the Board to other committees.Each Member is Independent
Abney S. Boxley, III
George W. Logan
S. Frank Smith
Governance andMaryellen F. Goodlatte, ChairResponsible 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 to the Board governance principles. 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.Each Member is Independent
NominatingNancy Howell Agee
George W. Logan
J. Allen Layman


The Board's Role in all aspects of the Company and who are familiar with the roles and responsibilities of the Chairman and CEO in the event that the Chairman or CEO is unavailable.

THE BOARD’S ROLE IN RISK OVERSIGHT

Risk Oversight


The Board and management each have distinct roles in the identification, assessment, oversight and management of potential risks that could affect the Company’s abilityCompany. The Board exercises its responsibility for risk directly and through its three standing committees. In each Board or committee meeting, management provides periodic reports to achieve its strategicprovide guidance on risk assessment and financial objectives. Our corporate governance policies provide thatmitigation. Each committee charged with risk oversight reports up to the Board shall assess major risk factors relating to the Company and its performance, and review measures to mitigate and address such risks. To facilitate effective oversight, the Audit Committee meets on at least a quarterly basis and reports to the full Board regarding potential risks to the Company, as well as the Company’s strategy for managing those risks to an appropriate level. In addition, the Board annually reviews management’s insurance programs and gas pipeline renewal program. We believe that this structure ensures that the Board is fully aware of, and appropriately oversees, the Company’s significant risks.

The Board recognizes the importance of effective risk oversight in running a successful business and in fulfilling its fiduciary responsibilities to the Company and its shareholders. While the Chairman and Chief Executive Officer and other members of the senior leadership team are responsible for the day-to-day management of risk, the Board is responsible for ensuring that an appropriate culture of risk management exists within the Company and for setting the right “tone at the top,” overseeing the aggregate risk profile, and assisting management in addressing specific risks, such as strategic and competitive risks, financial risks, brand and reputation risks, legal risks, regulatory risks, and operational risks. matters.

The Board believes that its current leadership structure has historically best facilitatedfacilitates its oversight of risk by combining independent leadership, through independent board committees and majority independent board composition, with an experienced Chairman President and Chief Executive Officera CEO who hashave intimate knowledge of the business, history, and the complex challenges the Company faces. The Chairman President and Chief Executive Officer’sCEO both have in-depth understanding of these matters, and the CEO has direct involvement in the day-to-day management of the Company, uniquely positionspositioning him to promptly identify and raise key business risks to the Board, call special meetings of the Board when necessary to address critical issues, and focus the Board’s attention on areas of concern. The incumbent Chairman, President and Chief Executive Officer is expected to step down from the President and CEO roles in 2014, effectively separating the CEO and Chairman roles in future years.

The Board exercises its oversight responsibility for risk both directly and through its three standing committees. Throughout the year, the Board and each committee spend a portion of their time reviewing and discussing specific risk topics. The full Board is kept informed of each committee’s risk oversight and related activities through regular oral reports from the committee chairs, and committee meeting minutes are available for review by all directors. Strategic, operational and competitive risks also are presented and discussed at the Board’s quarterly meetings, and more often as needed. On at least an annual basis, the Board conducts a review of our long-term strategic plans and members of senior management report on our top risks and the steps management has taken or will take to mitigate these risks. In addition, at each quarterly meeting, or more often as necessary, the Board is updated on material legal and regulatory matters. On a regular basis between Board meetings, our Chairman, President and Chief Executive Officer provides written reports to the Board on the critical issues we face and recent developments in each of our principal operating areas. These reports include a discussion of business risks as well as a discussion regarding enterprise risk.

The Audit Committee is responsible for reviewing the framework by which management discusses our risk profile and risk exposures with the full Board and its committees. The Audit Committee meets regularly with our Chief Financial Officer, independent auditor, and other members of senior management to discuss our major financial risk exposures, financial reporting, internal controls, credit and liquidity risk, compliance risk, and key operational risks. The Audit Committee meets regularly in separate executive sessions with the Chief Executive Officer, independent auditors, as well as with committee members only, to facilitate a full and candid discussion of risk and other issues.

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The Compensation Committee is responsible for overseeing human capital and compensation risks, including evaluating and assessing risks arising from our compensation policies and practices for all employees and ensuring executive compensation is aligned with performance. The Compensation Committee also is charged with monitoring our incentive and equity-based compensation plans, including employee pension and benefit plans. No member of the Compensation Committee was an officer or employee of the Company or any subsidiary of the Company during the previous fiscal year. There are no interlock relationships as defined in the applicable SEC rules.

Board.

Director Nominations
The Governance and Nominating Committee oversees risks related to our overall corporate governance, including Board and committee composition, Board size and structure, director independence, and our corporate governance profile and ratings. The Committee also is actively engaged in overseeing risks associated with succession planning for the Board and management.

Director Nominations

The Governance and Nominating Committee sets forthestablishes the process by which candidates are selected for possible inclusion in the recommended slate of director nominees are selected.nominees. The Board does not currently prescribe any minimum qualifications for director candidates. Consistent withGovernance and Nominating Committee has a charter, which is available on the criteria for the selection of directors approved by the Board, theCompany's website at www.rgcresources.com. The Governance and Nominating Committee will take into account the Company’s current needs and the qualities needed for Board service, including experience and achievement in business, finance, technology or other areas relevant to the Company’s activities; reputation, ethical character and maturity of judgment; diversity of viewpoints, backgrounds and experiences; absence of conflicts of interest that might impede the proper performance of the responsibilities of a director;director responsibilities; independence under SEC and NASDAQ rules; service on other boards of directors; sufficient time to devote to Board matters; and the ability to work effectively and collegially with other Board members; and diversity. In considering the diversity of candidates, the Committee considers an individual’s background, professional experience, education and skill, race, gender and/or national origin.members. In the case of incumbent directors whose terms of office are set to expire, the Governance and Nominating Committee will review such directors’ overall service to the Company during their term,


6

including the number of meetings attended, level of participation and quality of performance and any transactions of such directors with the Company during their term.performance. For those potential new director candidates who appear upon first consideration to meet the Board’s selection criteria, the Governance and Nominating Committee will conduct appropriate inquiries into their background and qualifications and, depending on the result of such inquiries, arrange for in-person meetings with the potential candidates.

The Governance and Nominating Committee may use multiple sources for identifying director candidates, including its own contacts and referrals from other directors, members of management, the Company’s advisers, and executive search firms. The Committee will consider director candidates recommended by shareholders and will evaluate such director candidates in the same manner in which it evaluates candidates recommended by other sources. In the future, the Governance and Nominating Committee may use the services of an executive search firm to help identify candidates for directors who meet the qualifications outlined above. The search firm may screen the candidates, conduct reference checks, prepare a biography of each candidate for committee review, and assist in arranging interviews. In making recommendations for director nominees for the annual meeting of shareholders, the Governance and Nominating Committee will consider any written recommendations of Any director candidates to be recommended by shareholders received by theshould described in writing to Paul Nester, Corporate Secretary, of the CompanyRGC Resources, Inc., P.O. Box 13007, Roanoke, VA 24030. This recommendation must be sent no later than 120 days beforeprior to the anniversary of the previous year’sexpected mailing date of this proxy statement, in order to be considered for inclusion in the proxy statement for the 2017 annual meeting of shareholders. Recommendations must include

Transactions with Related Persons

The Board follows certain policies and procedures for the candidate’s nameapproval of transactions with related persons that are required to be reported under applicable SEC rules. The policy generally requires Audit Committee approval or ratification of transactions that involve more than $120,000 in which the Company is a participant and contact information andin which a statementCompany director, nominee for director, executive officer, greater than 5% shareholder, or an immediate family member of any of the candidate’s background andforegoing persons has a direct or indirect material interest, with various other qualifications and must be mailedexclusions for reportable related party transactions set forth in applicable SEC rules, such as a transaction where the tariff gas service is at a rate approved by the Virginia State Corporation Commission or certain banking transactions. In reviewing a reportable related party transaction, the Audit Committee will, after reviewing all material information regarding the transaction, take into account, among other factors it deems appropriate, whether the transaction is on terms no less favorable than terms generally available to 519 Kimball Avenue, N.E., Roanoke, Virginia 24016, Attention: Secretary.

The nominations policy is intended to provide a flexible set of guidelines foran unaffiliated third party under the effective functioningsame or similar circumstances and the extent of the Company’srelated person’s interest in the transaction.


There are no transactions with related persons to report for fiscal 2015.

Compensation of Directors

Directors' 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. D’Orazio is not compensated for attendance at Board and Committee meetings and does not receive the annual retainer for service as a Board member. The 2015 schedule of fees paid to directors is as follows:
Annual Director Retainer$17,000
Additional Annual Retainer - Board Chair12,000
Additional Annual Retainer - Audit Committee Chair8,000
Additional Annual Retainer - Other Committee Chair3,000
Attendance - each Board of Directors Meeting1,500
Attendance - each Committee Meeting1,500
Attendance - Board or Committee Meeting by telephone800
Committee meeting held on the same day as Board meeting800

7

Restricted Stock Plan for Outside Directors. Under the Company's Amended and Restated Restricted Stock Plan for Outside Directors (the "Restricted Plan"), originally adopted effective January 27, 1997, and amended and restated effective July 1, 1999, a minimum of 40% of the annual retainer fee paid to each non-employee director nominations process. The Governance and Nominating Committee intends to review the nominations policy as it considers advisable and anticipates that modifications may be necessary from time to time as the Company’s needs and circumstances evolve, and as applicable legal or listing standards change. The Governance and Nominating Committee may amend the nominations policy at any time.

11

Any shareholder wishing to nominate persons for election as directors at an annual meeting must deliver to the Secretary of the Company at the Company’s principal officeon a monthly basis is paid in Roanoke, Virginia a written noticeshares of common stock of the shareholder’s intention to make such a nomination. The shareholder generally is required to furnishCompany restricted under the notice at least 120 days before the first anniversaryterms of the preceding year’s annual meeting.Restricted Plan ("Restricted Stock"). The notice must include the following information: (1) such information regarding each proposed nominee as would be required to be disclosed under SEC rules and regulations in solicitations of proxies for the election of directors in an election contest or otherwise; (2) the written consent of each proposed nominee to serve as a director of the Company; and (3) as to the shareholder giving the notice and the beneficial owner, if any, of common shares on whose behalf the nomination is made, (a) the name and address of record of such shareholder and the name and address of such beneficial owner, (b) the class and number of shares of Restricted Stock is calculated each month based on the Company’s capital stock that are owned beneficially and of record by such shareholder and such beneficial owner, (c) a representation thatclosing sales price on the shareholder is a holder of recordfirst business day of the Company’s capital stock entitledmonth of Resources’ common shares on the NASDAQ Global Market. A participant can, subject to vote at such meeting and intends to appear, in person or by proxy, at the meeting to propose such nomination and (d) a representation whether the shareholder or the beneficial owner, if any, intends or is part of a group that intends to (i) deliver a proxy statement or form of proxy to holders of at least the percentage of the Company’s outstanding capital stock required to elect the nominee or (ii) otherwise solicit proxies for shareholders in support of such nomination. The Company may require any proposed nominee to furnish such other information as the Company may reasonably require to determine the eligibility of such proposed nominee to serve as a director of the Company.

COMMITTEE REPORTS

Reportapproval of the Compensation Committee, elect to receive up to 100% of the retainer fee for the fiscal year in Restricted Stock. Such election cannot be revoked or amended during the fiscal year.


The shares of Restricted Stock will vest only in the case of a participant’s death, disability, retirement (including not standing for reelection to the Board), or in the event of a change in control of Resources. There is no option to take cash in lieu of stock upon vesting of shares under this Plan. The 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 Restricted Stock will be forfeited to Resources by a participant’s voluntary resignation during his term on the Board or removal for cause as a director.


Fiscal Year 2015 Director Fees
NameFees paid in cash
Fees paid in Restricted
Stock2
Total
Nancy Howell Agee$ 15,100$ 16,667$ 31,767
Abney S. Boxley, III28,633
8,333
36,966
Maryellen F. Goodlatte23,967
9,667
33,634
J. Allen Layman25,800
6,667
32,467
George W. Logan18,200
16,667
34,867
S. Frank Smith29,967
9,667
39,634
Raymond D. Smoot, Jr.33,200
9,600
42,800
John B. Williamson, III1
22,900
7,733
30,633
Note 1: Mr. Williamson began receiving Director fees February 1, 2015.
Note 2: Under the Restricted Plan, 40% of Directors

the annual retainer fees paid to

non-employee directors must be paid in the form of Restricted Stock.
This column also includes any addition portion of fees paid to directors
in the form of Restricted Stock pursuant to the election of the director.
The following table shows directors who elected to receive a higher
percentage of their fees as Restricted Stock:
NamePercent if Greater than 40%
Nancy Howell Agee100%
Abney S. Boxley, III50%
Maryellen F. Goodlatte50%
George W. Logan100%
S. Frank Smith50%

As of September 30, 2015, our non-employee directors held the following aggregate amounts of Restricted Stock:
NameShares of Restricted Stock
Nancy Howell Agee10,660
Abney S. Boxley, III10,618
Maryellen F. Goodlatte9,027
J. Allen Layman22,593
George W. Logan16,229
S. Frank Smith12,780
Raymond D. Smoot, Jr.12,361
John B. Williamson, III375


8

Section 16 Compliance

Based on the Company's review of the copies of forms related to Section 16(a) of the Securities Exchange Act of 1934 regarding beneficial ownership reporting and representations from certain reporting persons, no other reports are required and no forms were filed lated.


EXECUTIVE OFFICERS
Name and AgePeriod Position HeldPosition and Experience
John S. D'Orazio, 55February 2014 to presentPresident & CEO - Resources, Roanoke Gas
October 2012 to February 2014President & CEO - Roanoke Gas
January 2003 to September 2012Vice President & COO - Roanoke Gas
Paul W. Nester, 41February 2015 to presentVice President, Treasurer, Secretary & CFO
May 2012 to January 2015Vice President, Treasurer & CFO
March 2010 to April 2012CFO, UXB International
Carl J. Shockley, Jr., 50October 2012 to presentVice President, Operations - Roanoke Gas
May 2012 to September 2012Director, Operations - Roanoke Gas
August 2009 to April 2012Director, Human Resources
Robert L. Wells, II, 51February 2005 to presentVice President, Information Technology


SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT

The following table sets forth, as of November 25, 2015, certain information regarding the beneficial ownership of the common shares of the Company by all directors, named executive officers, any holders of more than 5% of common shares and certain beneficial owners as a group. Unless otherwise noted in the footnotes to the table, the named persons have sole voting and investment power with respect to all outstanding common shares shown as beneficially owned by them. Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o RGC Resources, Inc. P.O. Box 13007 Roanoke, Virginia 24030.

Name of Beneficial Owner
Common Shares
Beneficially Owned as of 11/25/151  

Percent of Class
   Nancy Howell Agee2
12,737<1%
   Abney S. Boxley, III20,812<1%
   John S. D’Orazio3
31,024<1%
   Maryellen F. Goodlatte14,615<1%
   J. Allen Layman39,914<1%
   George W. Logan56,5091.2%
   Paul W. Nester3
15,239<1%
   Dale L. Parris3   
8,000<1%
   Carl J. Shockley, Jr.3
10,761<1%
   S. Frank Smith53,0271.1%
   Raymond D. Smoot, Jr.4
21,269<1%
   Robert L. Wells, II3
11,735<1%
   John B. Williamson, III86,3321.8%
   Anita G. Zucker297,6926.3%
        c/o The Inter Tech Group, 4838 Jenkins Ave.  
        North Charleston, SC 29405  
  All current directors and executive officers (as a Group - 12 Persons)373,9747.9%
Note 1: Includes Restricted Stock Plan shares issued to outside directors still subject to vesting.
Note 2: Includes 1,845 shares owned by spouse.
Note 3: Includes stock options shown in the Outstanding Equity Awards at Fiscal Year End section on page 14. All are exercisable and included as shares beneficially owned.
Note 4: Includes 250 shares owned by spouse.


9


COMPENSATION DISCUSSION AND ANALYSIS


This section describes the Company’s compensation program for its Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”) in fiscal year 2013 as well as each of the three most highly compensated executive officers employed at the end of the fiscal year 2013, all of whom the Company refers to collectively as its “named executive officers”. For fiscal 2013, the Company’s named executive officers are John B. Williamson, III, John S. D’Orazio (Roanoke Gas Company), Paul W. Nester, Dale P. Lee, and Robert L. Wells, II.

Executive Summary

This Compensation Discussion and Analysis focuses on the material elements of our executive compensation program in effect for the 2013 fiscal year. It also provides an overview of our executive compensation philosophy and why we believe the program is appropriate for the Company and its shareholders. Finally, weWe 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.

Our executive compensation program is intended to align our named executive officers’ interests with those of our shareholders by rewarding performance that meets or exceeds

Compensation Philosophy and Objectives

Who are the goals the Compensation Committee established with the objectives of increasing shareholder value. In line with our pay for performance philosophy, the total compensation received by our named executive officers will vary based on individual and corporate performance measured against annual performance goals. Ourfor fiscal year 2015?

The named executive officers’ total compensation is comprised of a mix of base salaryofficers for fiscal year 2015 are John S. D’Orazio, Paul W. Nester, Carl J. Shockley, Jr., and annual incentive compensation. In addition, the named officers have participated in the Company’s Key Employee Stock Option Plan to provide a long-term incentive for alignment ofRobert L. Wells, II, as well as retired officer, interest with those of shareholders.

Compensation Philosophy and Objectives

Dale L. Parris.


What person or group is responsible for determining the compensation levels of named executive officers?

The Role of the Committee:


The Compensation Committee has a charter, pursuant to its charter,which it reviews and approvesrecommends to the Board the compensation, including base salary and annual incentive compensation, of the Company’s CEO and the other named executive officers.


The Role of Consultants:The Compensation Committee has the authority to retain and terminate any third-party compensation consultant and to obtain advice and assistance from internal and external legal, accounting and other advisors. The Compensation Committee has the authority to compensate its outside advisors without obtaining approval of the Board. The Compensation Committee did not utilize an outside consultant in the fiscal year 2013.

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The Role of Executives:The Company’s CEO is actively involved in the executive compensation process. Historically, theThe CEO reviews the performance of each of the named executive officers, (otherother than his own, performance) 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 develops the recommended base salary and proposed incentive awards for each of the named executives, exclusive of his own. He works with the Compensation Committee to determine if the proposed compensation package is sufficient to attract, retain, and motivate the Company’s executive team and potential new executive team hires. The CEO attends the meetings of the Compensation Committee but does not participate in the Committee executive sessions.


The Compensation Committee did not utilize an outside consultant in fiscal year 2015.

What are the Company’s executive compensation principles and objectives?

The Compensation Committee believes that the goals of the total compensation program for named executive officers should be designed to attract, motivate and retain key talent, to promote the long-term success of the Company, and to balance these objectives with a strong link to shareholder return and other measures of performance that drive total shareholder return.


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 competitive levels necessary to attract and retain exceptional leadership talent. An individual’s performance and importance to the Company can result in that individual’s total compensation being higher or lower than the Company’s 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 financial performance, with the goal of fostering shareholder value creation in the short and long-term.

•

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. Half of all incentive compensation awarded to executive officers is required to be taken in the Company’s common shares until a level of common share ownership valued at 50% of annual base salary is obtained. In addition, the Committee oversees a modest stock option plan intended to encourage stock ownership and to enhance alignment of executive officers and shareholder interests.

•

Utilize a total compensation perspective:The Compensation Committee considers all of the compensation components such as base salary, incentive payments, and benefits as a total package.

•

Improved performance:The Company has been pursuing strategies intended to improve its financial and operating performance. The Compensation Committee believes in utilizing a compensation program that appropriately rewards executives for the achievement of the Company’s objectives.


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 grants of stock options and payment of some bonuses in stock.

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. Half of all incentive compensation awarded to executive officers is required to be taken in the Company’s common shares until a level of common share ownership valued at 50% of annual base salary is obtained. In addition, the Committee oversees a modest stock option plan intended to encourage stock ownership.


10

The CEO and the Compensation Committee regularlyperiodically review the executive compensation program and philosophy to assess whether the program promotes the objectives of enabling the Company to attract and retain exceptionally talented executives and to link total compensation to the Company’s ability to meet its annual financial and non-financial goals and, in the longer term, to produce enhanced levels of total shareholder return. Such a review is undertaken in the fall of each year. Although, following these reviews, nophilosophy. No changes have recently been made to the compensation philosophy, which the Compensation Committee believes is based on appropriate principles,philosophy; however, programmatic changes have been implemented at various times to enhance consistencythe effectiveness of the various compensation elements with the program’s philosophy. In addition, the issuance of options under the Key Employee Stock Option Plan was reactivated in 2013 following shareholder approval of additional shares in February 2013. The Committee believes the use of stock options is in the furtherance of the Committee’s ownership culture.

13

elements.


How do we determine executive pay?

Benchmarking:


The Compensation Committee benchmarks elements of total compensation, which consists of base salary, annual incentive bonus, and any other forms of incentive compensation that may be used as incentivesand the Company's financial performance to the competitive marketplace because thea comparison group consisting of publicly traded gas utilities and local companies. The Compensation Committee believes this is the best way to determine whether such compensation is competitive with the Company’s labor market for executive talent.

competitive. The Company compares both its levels of executive compensation and its financial performance, for executive compensation purposes, to a comparison group consisting of two sets of companies – one set for other gas companies and one set of local companies. The companies that make up the Company’s peer group wereis selected based on six primary criteria:


1.companiesCompanies that an outsider, with no knowledge of the Company’s internal deliberations on the topic, would agree offer reasonable comparisons for pay and performance purposes;

2.companiesCompanies that generallymay overlap within the labor market for talent, but may not be identical to Resources;talent;

3.companiesCompanies with revenue and market capitalization withincapitalizations reasonable limits for comparison purposes;comparison;

4.companiesCompanies whose business models, characteristics, growth potential, and human capital are similar but not necessarily identical to those of the Company;

5.publicPublic companies based in the United States where compensation and firm financial data are available in proxy statements and Form 10-K filings; and

6.companies that areCompanies large enough to have similar executive positions to ensure statistical significance.


Based on these criteria, the comparison group of companies selected by the Compensation Committee, which will be referred to as the “comparison group”, is:

consists of:


Chesapeake Utilities Corporation

        Optical Cable Corporation

Corning Natural Gas Holding Corporation

    Unitil Corporation

Delta Natural Gas Company, Inc.

        Valley Financial Corporation

The Laclede Group, Inc.

Optical Cable Corporation

Valley Financial Corporation


In addition to the comparison group, of companies, the Compensation Committee utilizes market compensation data from Salary.com for Business, Job Valuation Reportsand Mercer, a benefits and compensation consulting firm, for each of its executive positions. The Job Valuation Reports provideThis data provides benchmark information for both base pay and total compensation for energy and utility companies in the $50 million to $200$500 million size range. While the Compensation Committee has not established a specific target for each executive officer position, the Committee uses the comparison companygroup and salary benchmark data and Job Valuation Report to help ensure compensation is reasonably competitive in the industry while reflective ofand local job market conditions and compensation constraints of state utility regulators.market. In no case does executive officer base pay exceed the 50th50th percentile benchmark of Salary.com Job Valuation Reports for the $50 million to $200 million Energy and Utilities segment.

Compensation Elements

The Company believes that it is necessary to provide short-term compensation incentives because these provide immediate benefit, paid in cash on the achievement of immediate results, thereby promoting the achievement of the established short-term goals. The Company providesbenchmark data.

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. While this short-termvote is not binding, the Board does review and consider the voting results. In 2015, 95% of votes cast were in favor of the proposal. Since a substantial majority of our shareholders voted in favor of our executive compensation through base salaryphilosophy and incentive compensation based on performance.

program, we determined that we did not need to consider changing our overall approach to executive compensation.


Compensation Elements

Base Salary:Salary. Base salary is fixed compensation and is a standard element of compensation necessary to attract and retain talent. Base salaries are the only non-variable element of the Company’s total compensation program. Base salaries are set to reflect each named executive officer’s responsibilities, the impact of each named executive officer’s position, and the contribution each named executive officer delivers to the Company. Salaries are determined after analyzing competitive levels in the market, using the Company’s comparison group and the results of Salary.com and Mercer compensation data for executives with comparable responsibilities and job scope. The Compensation Committee also considers internal equities among employees within the Company. Salary increases, if any, are based on individual performance, Company performance and market conditions and company performance.conditions. To gauge market conditions, the Compensation Committee evaluated the comparison group and market data and established recommended salary levels based on the named executive’s experience, tenure, performance and potential.

14

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 named executive officer’sofficers’ base salaries for 2013. The base salaries for the named executives for 2012 and 2013 are as follows:

Executive Officer              2012 Base Salary   2013 Base Salary                 

 

 

John B. Williamson, III

 

   349,577         255,920                

Paul W. Nester

 

   52,500 (partial year)         146,350                

John S. D’Orazio

 

   174,856         223,248                

Dale P. Lee

 

   144,668         148,344                

Robert L. Wells, II

   135,866         138,548                

2015.


11


Annual Bonus Incentive Plan Compensation:Compensation. The annual cash bonus plan providesrewards named executive officers with the opportunity to gain financially from the results they help to generate annually. The annual cash bonusfor delivering outstanding results. This plan provides for a cash bonus based on the achievement of annual corporate goals and objectives. A performance-based incentive plan motivates management to achieve the stated goals and objectives set for the Company. The specific targeted objectives for 20132015 were variable for each named executive based on their primary area of responsibility.


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. There were 17,000 shares granted in 2015 to the named officers based on the Compensation Committee’s assessment of the appropriate allocation of options among the officer group.

RGC Resources, Inc. Stock Bonus Plan. The Stock Bonus Plan contains a policy that executive officers are encouraged to own a position in the Company’s common shares equal to at least 50% of the value of their annual salary. To promote this policy, the Plan provides that all officers with stock ownership positions below 50% of the value of their annual salaries must, unless approved by the Committee, use no less than 50% of the amount of any performance incentive bonus to acquire common shares from the Company under the plan.


Summary Compensation Table


Name


Year


Salary

Options
Award1
Bonus
Change in Pension Value2

All Other Compensation


Total
John S. D'Orazio2015$ 325,353$ 24,600$ 76,900$ 106,405$ 36,418$ 569,676
President & CEO2014272,557
22,150
38,000
140,043
41,087
513,837
 2013223,248
28,280
26,500
10,662
35,215
323,905
        
Paul W. Nester2015184,867
19,680
30,000
17,370
28,862
280,779
VP, Treasurer,2014166,229
17,720
23,000
19,390
26,403
252,742
Secretary & CFO2013146,350
20,200
6,500
9,984
18,843
201,877
        
Robert L. Wells, II2015161,957
12,300
27,000
77,973
33,766
312,996
VP,2014149,320
11,075
22,000
88,103
31,337
301,835
Information Technology2013138,548
12,120
20,000
(15,149)28,154
183,673
        
Carl J. Shockley, Jr.3
2015148,743
14,760
27,800
74,310
29,887
295,500
VP - Operations,2014—
—
—
—
—
—
Roanoke Gas Co.2013—
—
—
—
—
—
        
Dale L. Parris2015109,751
12,300
25,200
67,570
65,736
280,557
Vice President,2014155,816
11,075
19,000
99,895
19,942
305,728
Retired2013148,344
12,120
19,400
10,627
23,829
214,320

Note 1: The 2015 Options Award values are based on 5,000 shares for Mr. D’Orazio, 4,000 shares for Mr. Nester, 3,000 shares for Mr. Shockley and 2,500 shares for Mr. Wells and Ms. Parris. The 2014 Options Award values are based on 5,000 shares for Mr. D’Orazio, 4,000 shares for Mr. Nester and 2,500 shares for Mr. Wells and Ms. Parris. The 2013 Options Award values are based on 7,000 shares for Mr. D’Orazio, 5,000 shares for Mr. Nester, and 3,000 shares for Mr. Wells and Ms. Parris.    
Note 2: The Change in Pension Value is an actuarial calculation and was not realized as compensation.
Note 3: Mr. Shockley became a named executive officer in 2015.







12

Bonus Table
NameTargetMaximum
Paid1
John S. D’Orazio$ 74,000$ 174,000$ 76,900
Paul W. Nester32,500
55,000
30,000
Robert L. Wells, II25,500
46,000
27,000
Carl J. Shockley28,500
49,000
27,800
Dale L. Parris25,500
46,000
25,200
Note 1: The Board approved the above bonus in 2015 for fiscal year
2014 performance.



Other Compensation Table


Name


Year
401(K) matching contribution

Insurance Premiums

Medical Benefits
Post Retirement Medical & Life Insurance Benefits


Other


Total
John S. D'Orazio2015$ 13,541$ 1,299$ 16,584$ 690$ 4,304$36,418
President & CEO201415,528
1,285
16,638
7,636
—
41,087
 201312,350
1,391
14,854
6,620
—
35,215
        
Paul W. Nester201510,743
1,393
16,726
—
—
28,862
VP, Treasurer20148,312
1,303
16,788
—
—
26,403
Secretary & CFO20137,318
1,351
10,174
—
—
18,843
        
Robert L. Wells, II20159,514
1,098
16,546
5,288
1,320
33,766
Vice President,20148,566
1,045
16,878
4,848
—
31,337
Information Technology20137,927
1,094
15,034
4,099
—
28,154
        
Carl J. Shockley, Jr.20157,437
1,034
16,726
4,690
—
29,887
VP - Operations2014—
—
—
—
—
—
 2013—
—
—
—
—
—
        
Dale L. Parris1
20155,429
647
10,161
—
49,499
65,736
Vice President,20147,791
1,075
11,076
—
—
19,942
Retired20137,417
1,144
15,094
174
—
23,829
Note 1: Other is composed of payments arising from a post employment agreement.









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13

Outstanding Equity Awards at Fiscal Year End

The outstanding equity awards for the named executives at the end of the fiscal year had an intrinsic value of $43,086. The following table shows all outstanding unexercised stock options held by our named executive officers as of September 30, 2015. All stock options are vested and exercisable.

Name
Number of Unexercised OptionsOption Exercise PriceOption Expiration Date
John S. D‘Orazio5,000$ 21.60Dec 4, 2024
 5,00018.95
Dec 6, 2023
 5,40019.01
Apr 1, 2023
    
Paul W. Nester4,00021.60
Dec 4, 2024
 4,00018.95
Dec 6, 2023
 5,00019.01
Apr 1, 2023
    
Robert L. Wells, II2,50021.60
Dec 4, 2024
 1,50018.95
Dec 6, 2023
 3,00019.01
Apr 1, 2023
    
Carl J. Shockley, Jr.3,00021.60
Dec 4, 2024
 3,00018.95
Dec 6, 2023
 3,00019.01
Apr 1, 2023
    
Dale L. Parris2,50021.60
Dec 4, 2024
 2,50018.95
Dec 6, 2023
 3,00019.01
Apr 1, 2023


Option Exercises

Name
Number of Shares Acquired on ExerciseValue Realized Upon Exercise
John S. D‘Orazio1,600$ 4,304
Robert L. Wells, II1,0001,320


Pension Benefits

The following table shows the accumulated benefits related to the RGC Resources, Inc. Employee Pension Plan (the "Plan") for the named executive officers as of September 30, 2015:
Name
Years of Credited Service1
Present Value of Accumulated Benefit2
Payment During Last Fiscal Year
John S. D’Orazio23$ 755,217$—
Paul W. Nester446,744—
Robert L. Wells, II30549,329—
Carl J. Shockley, Jr.30386,398—
Dale L. Parris17503,3042,430
Note 1: The Years of Credited Service represent the years that each named executive officer has been a participant in the Plan as of September 30, 2015, up to a maximum of 30 years.
Note 2: The Present Value of the Accumulated Benefit presented in the table above is based on a 4.22% discount rate; 4% annual compensation increase; and retirement at 65 years of age.

The cost of benefits under the Plan, which are borne by Resources, are computed actuarially and defrayed by earnings from the Plan's investments and/or Resources’ annual contributions. The Plan generally provides for the monthly payment, at normal retirement age 65, of the greater of (a) the participant's accrued benefit as of December 31, 1988 under the formula then in effect or (b) the sum of one‑twelfth of (1) plus (2) minus (3) as follows:

(1)1.2% of the participant's average compensation for the highest consecutive sixty months of service multiplied by years of credited service up to thirty years,


14

(2)0.65% of the participant's average compensation for the highest consecutive sixty months of service in excess of covered compensation (generally defined as the average of Social Security wage bases over a participant's assumed working lifetime) multiplied by years of credited service up to thirty years, and

(3)the participant's balance, if any, from the Company's former profit sharing plan.

Early retirement with reduced monthly benefits is available at age 55 after ten years of service. Provisions also are made for vesting of benefits after five years of service and for disability and death benefits. All employees who have completed one year of service to the Company and are credited with at least 1,000 hours of service in a Plan year are eligible to participate in the Plan. At age 65, for Plan purposes, Mr. D’Orazio, Mr. Shockley, and Mr. Wells will have the maximum 30 credited years of service while Mr. Nester will have 27.

The compensation covered by the Plan includes the total of all amounts paid to a participant by the Company for personal services reported on the participant's federal income tax withholding statement (Form W-2), up to certain statutory limits. For plan years beginning January 1, 2016 and 2015 these earnings are limited to $265,000.

Severance or Change-in-Control Agreements

Each of the named executives


The Company has a change-in-control provisions entitling themagreement, dated April 1, 2011 and containing a five-year term, with John S. D'Orazio. The agreement entitles him to certain benefits in the event theirhis employment is terminated without cause and within a specific period of time following a change in control of the Company. For purposes of this agreement, a “Changechange in Control”control occurs when (i) any person or entity becomes the beneficial owner of at least 50% of the combined voting power of the Company’s voting securities; (ii) any person or entity becomes the beneficial owner of at least 50% of the voting securities of the surviving entity following a merger, recapitalization, reorganization, consolidation or sale of assets by the Company; or (iii) the Company is liquidated or sells substantially all of its assets. In the event that Mr. Williamson’shis employment with the Company is terminated within two years of the date of a Changechange in Control,control, unless the termination is (a) because of his death or disability, (b) for Causecause (as defined in the agreement) or (c) by him other than for Good Reasongood reason (as defined in the agreement), then he will receive a severance payment (the “Severance Payment”) equal to 1.5 times the Executive’shis annualized includable compensation for the base period, within the meaning of Section 280G(d) of the Internal Revenue Code of 1986. The Severance Payment will be reduced to the extent necessary to avoid certain federal excise taxes. Also in such event, the Company will continue his life insurance, medical, health and accident and disability plans, programs or arrangements until the earlier of two years after the date of the Changechange in Control,control, his death, or his full-time employment. The agreement does not require Mr. Williamsonhim to seek employment to mitigate any payments or benefits provided thereunder. TheEffective May 1, 2015, the Company also entered into identical Change in Control Agreements with Carl J. Shockley Jr., Paul W. Nester on May 1, 2012, John S. D’Orazio on April 1, 2011, Dale P. Lee, and Robert L. Wells, II. on May 1, 2010.

II, except that their agreements have three-year terms.


The Compensation Committee reviews all of the components of each executive’s compensation and awards a level of each component based on what they believe is reasonable when all elements of the compensation are considered. The Company currently does not structure compensation so as to be fully deductible under Section 162(m) of the Internal Revenue Code, but the Committee does not anticipate the Company paying compensation at a level where any amounts would not be fully deductible under such Section 162(m).

The Company also provides Mr. Williamson a membership in the Shenandoah Club which is used for Company functions and provides a convenient location in the downtown Roanoke area to meet with other local business and civic leaders.

15

Summary Compensation Table

Name  Year   Salary
($)		   Bonus   

Stock

Award

   

Options

Award

   

Non-equity

Incentive

Compensation

($)

   

Change in

Pension

Value

($)

   

All Other

Compensation

($)

   

Total   

($)     

 

 

 

John B. Williamson, III

   2013     255,920     —      —      —      67,000         48,579       29,165         400,664   

Chairman, President

   2012     349,577     —      —      —      120,000         183,140       68,384         721,101   

& CEO

   2011     337,577     —      —      —      94,000         89,095       133,764         654,436   

John S. D’Orazio

   2013     223,248     —      —      28,280      26,500         10,662       35,215         323,905   

President & CEO

   2012     174,856     —      —      —      36,000         157,131       67,798         435,785   

Roanoke Gas Co.

   2011     163,121     —      —      —      28,000         64,148       26,782         282,051   

Paul W. Nester

   2013     146,350     —      —      20,200      6,500         9,984       18,889         201,923   

Vice President,

   2012     52,500     —      —      —      —         —       2,813         55,313   

Treasurer & CFO

   2011     —     —      —      —      —         —       —         —   

Dale P. Lee

   2013     148,344     —      —      12,120      19,400         10,627       23,829         214,320   

Vice President &

   2012     144,668     —      —      —      29,000         99,781       22,561         296,010   

Secretary

   2011     139,667     —      —      —      22,000         46,221       21,171         229,059   

Robert L. Wells, II

   2013     138,548     —      —      12,120      20,000         (15,149)       28,154         183,673   

Vice President, Infor-

   2012     135,866     —      —      —      25,000         126,848       27,128         314,842   

mation Technology

   2011     127,588     —      —      —      18,000         48,569       24,348         218,505   

Note:The Change in Pension Value is an actuarial calculation and was not realized as compensation to any of the named executives during the year. In 2012, Mr. Nester was only employed for a partial year. The Options Award values are based on 7,000 shares for Mr. D’Orazio, 5,000 shares for Mr. Nester, and 3,000 shares for Mr. Wells and Ms. Lee.

Other Compensation Table

Name  Year   

401(K) Matching

Contribution

($)

   

Insurance

Premiums

($)

   

Medical

Benefits

($)

   

Post Retirement

Medical Benefits

($)

   

Other

($)

   

Total    

($)      

 

 

 

John B. Williamson, III

   2013     12,751          1,391       14,914     109            —      29,165     

Chairman, President &

   2012     12,683          1,426       13,845     130            40,300      68,384     

CEO

   2011     12,149          1,371       12,773     136            107,335      133,764     

John S. D’Orazio

   2013     12,350          1,391       14,854     6,620            —      35,215     

President & CEO

   2012     12,228          1,342       13,605     6,926            33,697      67,798     

Roanoke Gas Co.

   2011     7,565          1,220       12,533     5,464            —      26,782     

16

Name  Year   

401(K) Matching

Contribution

($)

   

Insurance

Premiums

($)

   

Medical

Benefits

($)

   

Post Retirement

Medical Benefits

($)

   

Other

($)

  

Total    

($)      

 

 

 

Paul W. Nester

   2013     7,318               1,351         10,174      46              —   18,889     

Vice President,

   2012     1,458               —         1,355      —              —   2,813     

Treasurer & CFO

   2011     —               —         —      —              —   —     

Dale P. Lee

   2013     7,417               1,144         15,094      174              —   23,829     

Vice President &

   2012     7,234               1,275         13,845      207              —   22,561     

Secretary

   2011     6,978               1,208         12,773      212              —   21,171     

Robert L. Wells, II

   2013     7,927               1,094         15,034      4,099              —   28,154     

Vice President, Infor-

   2012     8,043               1,119         13,665      4,301              —   27,128     

mation Technology

   2011     7,271               1,041         12,773      3,263              —   24,348     

Grants of Plan-Based Awards

Name  Grant Date  Threshold ($)  Target ($)   Maximum ($)   Paid ($)       

 

 

John B. Williamson, III

 

  2/4/13

 

  0

 

   

 

97,000  

 

  

 

   

 

224,000      

 

  

 

   

 

67,000      

 

  

 

John S. D’Orazio

 

  2/4/13

 

  0

 

   

 

35,000  

 

  

 

   

 

65,000      

 

  

 

   

 

26,500      

 

  

 

Paul W. Nester

 

  2/4/13

 

  0

 

   

 

NA  

 

  

 

   

 

NA      

 

  

 

   

 

6,500      

 

  

 

Dale P. Lee

 

  2/4/13

 

  0

 

   

 

22,000  

 

  

 

   

 

42,000      

 

  

 

   

 

19,400      

 

  

 

Robert L. Wells, II

  2/4/13  0   22,000       42,000           20,000        

Note:

There are no other Plan-based awards provided to the named employees and no other incentive plan awards. The Board approved the payout on 2/4/13 for performance in fiscal year 2012. The plans were developed by the Compensation Committee on December 6, 2011.

Outstanding Equity Awards Table at Fiscal Year End

There are no outstanding equity awards for any of the named executives at the end of the fiscal year.

Option Exercises and Stock Vested

Name

Number of Shares

Acquired on Exercise

Value Realized Upon

Exercise ($)

Number of

Shares Acquired

Value of        

Shares ($)       

John B. Williamson, III

—          

—            

—          

—            

John S. D’Orazio

—          

—            

—          

—            

Paul W. Nester

—          

—            

—          

—            

Dale P. Lee

—          

—            

—          

—            

Robert L. Wells, II

—          —            —          —            

17

Pension


Estimated Benefits

The following table shows the accumulated benefits related to the Retirement Plan for the named executives as of September 30, 2013:

Name

 

 Plan Name  

Number of Years of

Credited Service

 

  

Present Value of

Accumulated

Benefit ($)

 

   

Payment During

Last Fiscal Year

($)

 

 

John B. Williamson, III

 

 Employee Retirement Plan

 

  22

 

   

 

813,231     

 

  

 

  —

 

John S. D’Orazio

 

 Employee Retirement Plan

 

  21

 

   

 

508,769     

 

  

 

  —

 

Paul W. Nester

 

 Employee Retirement Plan

 

    1

 

   

 

—     

 

  

 

  —

 

Dale P. Lee

 

 Employee Retirement Plan

 

  16

 

   

 

335,839     

 

  

 

  —

 

Robert L. Wells, II

 Employee Retirement Plan  30   383,253         —

Note:

The number of Years of Credited Service represent the number of years that each named executive officer has been a participant in the Employee Retirement Plan as of September 30, 2013. The Present Value of the Accumulated Benefit presented in the table above is based on a 4.82 % discount rate; 4% annual compensation increase; and retirement at 65 years of age. An employee must have a minimum of five years of service to be vested in the plan.

Estimated Potential Payment Upon upon a Change in Control

As discussed above, all

NameSeverance Payment
Benefit Plans1
John S. D’Orazio$ 389,438$ 42,343
Paul W. Nester219,338
34,968
Robert L. Wells, II239,000
34,378
Carl J. Shockley, Jr.188,282
34,250
Note 1: Benefit Plans includes amounts for life insurance, medical, health and accident and disability plans, calculated based on 2015 amounts.



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COMMITTEE REPORTS
Report of the named executives have change-in-control provisions with the estimated potential payments as of September 30, 2013, which would be due to each of them upon a change in control, and a termination without cause after the change in control:

NameChange in Control Payment for Termination Without Cause ($)                     

John B. Williamson, III

668,761                                                             

Paul W. Nester

61,605                                                             

John S. D’Orazio

314,791                                                             

Dale P. Lee

248,460                                                             

Robert L. Wells, II

227,563                                                             

Note: Mr. Nester’s calculation is based on less than five years of data.

Compensation of Directors

Committee


The Company reviews director compensation on a periodic basis. As part of the review, the Company used the same comparison group for director compensation that was used for executive compensation. The comparison group companies were used for benchmarking and reasonableness testing.

Directors’ fees are set by the Compensation Committee has reviewed and approved bydiscussed with management the section entitled "Compensation, Discussion and Analysis" in this Proxy Statement. The Compensation Committee recommended to 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 companiesthat said section be included in the geographic area. Directors of the Company received an annual retainer for their service as directors of $16,000 in fiscal 2013. In addition, Directors receive fees for attending meetings of the Resources’ Board of Directors and of Committees of the Board. The chair of the Audit Committee receives an additional $6,000 annually, and the chairs of the other committees receive an additional $2,000 annually. Mr. Williamson is not compensated for attendance at Board and Committee meetings and does not receive the annual retainer for his service as a Board member. The schedule of fees paid to directors for each meeting attended is as follows:

Board of Directors Meeting

    $1,400  

Board of Directors Meeting – by telephone

    $700  

Governance & Nominating Committee

    $1,400  

Audit Committee

    $1,400  

Compensation Committee

    $1,400  

Attendance at any committee meeting by telephone

    $700  

However, the fee for any committee meeting held the same day as a Board meeting is $700.

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Director Compensation

Name  Fees Earned
or Paid in
Cash		   Stock
Awards		   Option
Awards		  Non-equity
Incentive Plan
Compensation		  Change in Pension
Value and Non-
qualified Deferred
Compensation
Earnings		  All Other
Compensation		  Total   

 

 

Nancy Howell Agee

 

   

 

14,400    

 

  

 

   

 

16,000 

 

  

 

  —

 

  —

 

  —

 

  —

 

   

 

30,400  

 

  

 

Abney S. Boxley, III

 

   

 

25,100    

 

  

 

   

 

8,000 

 

  

 

  —

 

  —

 

  —

 

  —

 

   

 

33,100  

 

  

 

Maryellen F. Goodlatte

 

   

 

20,700    

 

  

 

   

 

9,000 

 

  

 

  —

 

  —

 

  —

 

  —

 

   

 

29,700  

 

  

 

J. Allen Layman

 

   

 

13,700    

 

  

 

   

 

16,000 

 

  

 

  —

 

  —

 

  —

 

  —

 

   

 

29,700  

 

  

 

George W. Logan

 

   

 

13,700    

 

  

 

   

 

16,000 

 

  

 

  —

 

  —

 

  —

 

  —

 

   

 

29,700  

 

  

 

S. Frank Smith

 

   

 

26,100    

 

  

 

   

 

9,000 

 

  

 

  —

 

  —

 

  —

 

  —

 

   

 

35,100  

 

  

 

Raymond D. Smoot, Jr.

 

   

 

15,100    

 

  

 

   

 

21,667 

 

  

 

  —

 

  —

 

  —

 

  —

 

   

 

36,767  

 

  

 

John B. Williamson, III

   ��         —     —  —  —  —   —    

Employee Retirement Plan

Resources has in effect a noncontributory Employee Retirement Plan. The costs of benefits under the Plan, which are borne by Resources, are computed actuarially and defrayed by earnings from the Plan’s investments and/or Resources’ annual contributions. The Plan generally provides for the monthly payment, at normal retirement age 65, of the greater of (a) the participant’s accrued benefit as of December 31, 1988 under the formula then in effect or (b) the sum of one twelfth of (1) plus (2) minus (3) as follows:

(1)1.2% of the participant’s average compensation for his highest consecutive sixty months of service multiplied by years of credited service up to thirty years,

(2)0.65% of the participant’s average compensation for his highest consecutive sixty months of service in excess of covered compensation (generally defined as the average of Social Security wage bases over a participant’s assumed working lifetime) multiplied by years of credited service up to thirty years, and

(3)the participant’s balance, if any, from the Company’s former profit sharing plan.

Early retirement with reduced monthly benefits is available at age 55 after ten years’ service. Provisions also are made for vesting of benefits after five years of service and for disability and death benefits. All employees who have completed one year of service to the Company and are credited with at least 1,000 hours of service in a Plan year are eligible to participate in the Plan. At age 65, for Plan purposes, Mr. Williamson would have 28 credited years of service while Mr. D’Orazio and Mr. Wells will have the maximum of 30 credited years of service. Ms. Lee and Mr. Nester will have 23 and 27 years of credited service, respectively.

The compensation covered by the Plan includes the total of all amounts paid to a participant by the Company for personal services reported on the participant’s federal income tax withholding statement (Form W-2), up to certain statutory limits. For plan years beginning January 1, 2013 and 2014 these earnings are limited to $255,000 and $260,000, respectively.

Securities Authorized for Issuance Under Equity Compensation Plans

The Company has three equity compensation plans.

Restricted Stock Plan for Outside Directors

The Board of Directors of the Company implemented the Restricted Stock Plan for Outside Directors effective January 27, 1997. This Plan is applicable to not more than 200,000 shares of Resources’ common shares unless additional shares are authorized by shareholders.

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Under this Plan, a minimum of 40 percent of the monthly retainer fee paid to each non-employee director of Resources is paid in common shares (“Restricted Stock”). The number of shares of Restricted Stock is calculated each month based on the closing sales price of Resources’ common shares on the NASDAQ Global Market on the first business day of the month. Beginning in fiscal 1998, a participant can, subject to approval of the Board, elect to receive up to 100% of the retainer fee for the fiscal year in Restricted Stock. Such election cannot be revoked or amended during the fiscal year.

The shares of Restricted Stock of Resources issued under this Plan will vest only in the case of a participant’s death, disability, retirement (including not standing for reelection to the Board), or in the event of a change in control of Resources. There is no option to take cash in lieu of stock upon vesting of shares under this Plan. The Restricted Stock may not be sold, transferred, assigned or pledged by the participant until the shares have vested under the terms of this Plan. At the time the Restricted Stock vests, a certificate for vested shares will be delivered to the participant or the participant’s beneficiary.

The shares of Restricted Stock will be forfeited to Resources by a participant’s voluntary resignation during his term on the Board or removal for cause as a director.

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. There were 18,000 shares granted in 2013 to the named officers, excluding Mr. Williamson, based on the Committee’s assessment of the appropriate allocation of options among the officer group and implementation of the Board’s management succession plan.

RGC Resources, Inc. Stock Bonus Plan

Under the Stock Bonus Plan, executive officers are encouraged to own a position in the Company’s common shares equal to at least 50% of the value of their annual salary. To promote this policy, this Plan provides that all officers with stock ownership positions below 50% of the value of their annual salaries must, unless approved by the Committee, receive no less than 50% of any performance incentive in the form of Company common shares. Incentive amounts, if any, for a fiscal year will generally be determined in the January following that fiscal year end. The Company is authorized to grant up to 50,000 shares of its common shares under the Stock Bonus Plan.

Proxy Statement.


The Compensation Committee met two timesone time during fiscal year 20132015 and the meeting was attended by all members.

Submitted by the Compensation Committee of the

Board of Directors of Resources:

Committee:


S. Frank Smith (Chair), Nancy Howell Agee, Abney S. Boxley, III and J. Allen Layman



Report of the Audit Committee

Consistent with the terms of the Board of Directors

The Audit Committee of the Board of Directors (the “Audit Committee”) meets a minimum of four times annually with Resources’ Chief Financial Officer, the Company’s independent registered accounting firm, Brown, Edwards, & Company, L.L.P. (“Brown, Edwards”), and certain appropriate officers of Resources. The basic functions ofits charter, the Audit Committee include reviewingmet four times in fiscal 2015 with the Company's management and Brown Edwards to review significant financial information, reviewingand accounting procedures andmatters, internal controls and the appointment of independent auditors. The Board of Directors has determined that George W. Logan and Raymond D. Smoot, Jr. areBrown Edwards' audit committee financial experts and are independent, as determined under applicable rules adopted by the Securities and Exchange Commission.

The Audit Committee is composed of independent directors and operates under a written charter adopted by the Board of Directors. Each member of the Audit Committee is “independent” under the applicable rules of the NASDAQ Stock Market.

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results.


Management is responsible for the Company’s internal controls and the accounting and financial reporting process.functions. Brown Edwards is responsible for performing an independent integrated audit of the Company’s consolidated financial statements and internal controls over financial reportingexpressing an opinion in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB") on both the Company’s consolidated financial statements and to issue their reports thereon. The Committee’s responsibility is to monitor and oversee these processes.

the effectiveness of the Company's internal controls over financial reporting. In this context, the Audit Committee has met and held discussions with management and Brown Edwards. Management representedEdwards to review and discuss the Audit Committee that the Company’sSeptember 30, 2015 consolidated financial statements were prepared in accordance with generally acceptedincluding a discussion of the acceptability and quality of the accounting principles, and the Audit Committee has reviewed and discussedreasonableness of critical accounting policies, the consolidated auditedclarity of the disclosures in the financial statements with management and Brown, Edwards. The Audit Committee discussed with Brown, Edwardssuch other matters as are required to be discussed by AU Section 380, (Communication with Audit Committees), which includes, among other things:

•

methods used to account for significant unusual transactions;

•

the effect of significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus;

•

the process used by management in formulating particularly sensitive accounting estimates and the basis for the auditors’ conclusions regarding the reasonableness of these estimates; and

•

disagreements, if any, with management over the application of accounting principles, the basis for management’s accounting estimates, and the disclosures in the financial statements.

Brown, Edwards also provided to the Audit Committee the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board Rule 3526 regarding the independent accountant’s communications with the Audit Committee concerning independenceunder standards established by the SEC and the PCAOB.

The Audit Committee discussed with Brown Edwards their firm’s independence from RGC Resources, Inc.the Company and its management. As part of its communication with the Audit Committee,management and received written representation from Brown Edwards, indicated that there were no disagreementsin accordance with management or difficulties encountered in dealing with management when performing the audit.

Based on the Audit Committee’s discussion with management andPCAOB requirements, regarding Brown Edwards, the Audit Committee’s review of the representation of management regarding the audited financial statements, and the report of the independent registered accounting firm to the Audit Committee, the Audit Committee recommended to the Board of Directors, and the Board has approved, that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2013, for filing with the Securities and Exchange Commission.

Edwards' independence. The Audit Committee has also reviewed the non-audit services provided by Brown Edwards and determined that such services did not impact independence.


    The Audit Committee considers annually and approves the provision of audit services, including audit review and attest services and pre-approves the nature, extent, and cost of all non-audit services which includes testing of internal controls and audits of the Company’s employee benefit plans, and determined that Brown, Edwards’ performance of these services are compatible withprovided by the independent registered accounting firm’s independence from RGC Resources Inc.

The Audit Committee met four times in fiscal year 2013 and each meeting included an executive session with the independent auditors. A copy of the Audit Committee Amended and Restated Charter can be found at Resources’ website www.rgcresources.com.

Principal Accountant Fees and Services

auditor. The following table sets forth the aggregate fees billed or expected to be billed by Brown Edwards for the years ended September 30, 20132015 and 2012:

   2013         2012    

 

 

Audit Fees

  $153,749      $150,466   

All Other Fees

   78,936       72,786   

 

 

Total Fees

  $    232,685      $    223,252   

 

 

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2014:

 2015 2014
Audit Fees$148,600
 $152,302
All Other Fees99,813
 90,326
    
Total Fees$248,413
 $242,628

Audit Fees:Audit feesFees include services performed by Brown Edwards to comply with generally accepted auditing standards related to the integrated audit of the financial statements and internal controls over financial reporting and quarterly reviews for the years ended September 30, 20132015 and September 30, 2012. The audit fees shown above for the 2013 and 2012 fiscal years were incurred principally for services rendered in connection with the audits and reviews of quarterly and annual filings with the Securities and Exchange Commission.

Audit-Related Services:None.

2014.All Other Fees:Other fees includeFeesincludes services rendered in conjunction with the testing of internal controls, and audits of the Company’s employee benefit plans.plans and other general purposes. All such feesservices provided by Brown Edwards in 20132015 and 20122014 were pre-approved by the Audit Committee.

The


16


Based on the Audit Committee’s review of Brown Edwards' report to the Audit Committee will consider annually and if appropriate, approvediscussions with management and Brown Edwards, the provisionAudit Committee recommended to the Board of audit services (including audit reviewDirectors, and attest services) by its independent auditor and pre-approve the nature, extent, and costBoard approved, the inclusion of all non-audit services provided by the independent auditoraudited financial statements in accordancethe Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2015, for filing with relevant law and appropriate listing rules.

the SEC.


Submitted by the Audit Committee of the

Board of Directors of Resources:

Committee:


Raymond D. Smoot, Jr. (Chair), Chair, Abney S. Boxley, III, George W. Logan, and S. Frank Smith



Report of the Governance & Nominating Committee of the Board of Directors

The Governance and Nominating Committee (the “Governance Committee”)


Consistent with the terms of the Board of Directors, is composed of independent directors as determined by the Board of Directors under current standards, and has as its primary purposecharter, the oversight of a broad range of issues surrounding the composition and operation of the Board of Directors, including identifying individuals qualified to become Board members, recommending nominees for Board election, and recommending to the Board governance principles applicable to Resources. The Governance Committee also provides assistance to the Board and the Chairman 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 Governance and Nominating Committee operates under a written charter adopted by the Board of Directors. A copy of the Committee charter can be found at Resources’ website www.rgcresources.com.

The Governance Committee met once during fiscal year 2013 and2015 with all members in attendance.


The Governance Committee made the recommendation that Nancy Howell Agee, J. Allen Layman,Abney S. Boxley III, S. Frank Smith, and Raymond D. Smoot, Jr.John B. Williamson, III be nominated for shareholder approval for re-election to the Board of Directors and to serve a three-year term beginning with the 2016 Annual Meeting in 2014 and continuing until 2017.2019. The Governance Committee’s recommendation wasBoard approved by the Board at its meeting on July 29, 2013.

The Governance Committee, in consultation with the CEO, is responsible for identifying individuals qualified to become board members and recommending to the Board individuals for nomination as members of the Board. The Governance Committee is also charged with making recommendations to the Board regarding the optimum size of the Board and the committee composition.

In evaluating current members and new candidates, the Governance Committee considers the needs of the Board and the Company in light of the current mix of skills and attributes of Directors. In addition to requiring that Directors possess integrity and character, the Governance Committee’s evaluation includes an assessment of various factors including, education, business experience, financial and accounting expertise, age, diversity, reputation, civic involvement, judgement, and knowledge of matters impacting public utilities. The Governance Committee also takes into consideration the ability of an individual to devote adequate time to board and committee matters and whether the individual will satisfy the NASDAQ requirements for director independence. When considering current board members for nomination for re-election, the Governance Committee also considers board contributions and performance as well as meeting attendance.

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The Governance Committee, in addition to consulting with the Chairman of the Board and CEO, may seek the input of others, including members of the Board and management, to identify director candidates. In addition, the Governance Committee may use the services of consultants or a search firm, although it has not done so in the past. The Governance Committee will consider recommendations by shareholders of qualified director candidates for possible nomination. Shareholders who wish to recommend qualified director candidates should write to the Company’s Corporate Secretary at P.O. Box 13007, Roanoke, VA 24030. Recommendations should include information regarding a candidate’s background, qualifications, experience, and willingness to serve as a director. In addition, the recommendation must identify the recommending shareholder as a shareholder of the Company, and indicate the number of shares owned and whether the shares are held of record or through a bank, broker, or other nominee. If the shares are held by a bank, broker, or other nominee, the recommendation must also be accompanied by an account statement or other acceptable identifying documentation dated within 30 days of the date of thethis recommendation.


Submitted by the Governance &and Nominating Committee of the

Board of Directors of Resources:

Committee:


Maryellen F. Goodlatte (Chair), Nancy Howell Agee, J. Allen Layman, and George W. Logan

SHAREHOLDER COMMUNICATIONS WITH THE BOARD

Shareholders may communicate with Directors individually



SHAREHOLDERS PROPOSALS

For a shareholder proposal or the nomination of a person for election as a group. Any shareholder that desiresdirector to communicate with one or more Directors may send a letter tobe considered for inclusion in the Boardproxy statement for the 2017 annual meeting of Directors, c/o Dale P. Lee,shareholders, the proposal must be submitted in writing and received by Paul Nester, Corporate Secretary, RGC Resources, Inc., P.O. Box 13007, Roanoke, VA 24030. All communications will be forwarded24030 no later than 120 days prior to the appropriate Director or Directors specified inanniversary of the communication as soon as practicable. Communications addressedexpected mailing date of this proxy statement. You are also advised to review our bylaws, which contain additional requirements regarding business to be transacted at meetings of shareholders. A copy of the bylaws may be obtained without charge upon written request to the Board generally will be considered to have been addressed to all Directors.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Based on its reviewCorporate Secretary.


Notice of the copies of such forms furnished to it and written representations from certain reporting personsproposals that no other reports are required, the Company believes that in fiscal 2013 one report for J. Allen Layman and one report for Raymond D. Smoot, Jr. were filed late.

OTHER MATTERS

Management does not know of any matters to be presented at the Annual Meeting of Shareholders other than the election of directors, the ratification of Brown, Edwards, and the advisory vote on executive compensation. However, if any other matters properly come before the meeting, proxies received pursuant to this solicitation will be voted thereon in the discretion of the proxy holders.

TRANSACTIONS WITH RELATED PERSONS

The Company’s Board has adopted a written policy for the approval of transactions with related persons. The policy requires Audit Committee approval or ratification of transactions which involve more than $120,000 in which the Company is a participant and in which a Company director, nominee for director, executive officer, greater than 5% shareholder, or an immediate family member of any of the foregoing persons has a direct or indirect material interest. In reviewing the related party transaction, the Audit Committee will, after reviewing all material information regarding the transaction, take into account, among other factors it deems appropriate, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related person’s interest in the transaction. The policy includes standing pre-approval for the following related person transactions:

•

any transaction with another company at which a related person’s only relationship is as an employee (other than an executive officer), director or beneficial owner of less than 10% of that company’s equity securities, if the aggregate amount involved does not exceed the greater of $1,000,000, or 2% of that company’s total annual revenues;

23

•

any charitable contribution, grant or endowment by the Company to a charitable organization, foundation or university at which a related person’s only relationship is as an employee (other than an executive officer) or a director, if the aggregate amount involved does not exceed the lesser of $1,000,000, or 2% of the charitable organization’s total annual receipts;

•

any transaction, such as dividends paid on the common shares, in which the related person’s interest arises solely from the ownership of the Company’s common shares and all holders of the Company’s common shares received the same benefit on a pro rata basis; and

•

any transaction with a related party involving services as a bank depositary of funds, transfer agent, registrar, trustee under a trust indenture, or similar services.

There are no transactions with related persons to report for fiscal 2013.

SHAREHOLDER PROPOSALS

Pursuant to Rule 14a-8 under the Securities Exchange Act, shareholder proposals to be included in the proxy statement for the Company’sbut brought before an annual meeting of shareholders in 2015 must be received by the Secretary of the Company at the Company’s offices at 519 Kimball Avenue, N.E., Roanoke, Virginia 24016 no later than August 22, 2014. The submission by a shareholder of a proposal for inclusion in the proxy statement is subject to regulation by the SEC.

Notice of proposals by shareholders to be brought before any annual or special meeting generally must be delivered to the Corporate Secretary of the Company notno less than sixty (60)60 days norand no more than ninety (90)90 days prior to the meeting; provided, however, in the event that less than seventy (70) days’ notice or prior public disclosure of the date of the meeting is given or made to shareholders, notice by the shareholder 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. The noticeannual meeting. Such notices under the bylaws must include the following information: (1)(a) a brief description of the business desired to be brought before the meeting the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the Company’s bylaws, the language of the proposed amendment), the reasons for conductingbringing such business atbefore the meetingmeeting; and any material interest in such business of such shareholder and the beneficial owner, if any, on whose behalf the proposal is made, and (2)(b) as to the shareholder giving the notice, and the beneficial owner, if any, of common shares on whose behalf the proposal is made, (a)(i) the name and address, of recordas they appear on the Company’s books, of such shareholder, and(ii) the name and address of such beneficial owner, (b) the class and number of shares of the Company’s capital stock whichCompany that are owned beneficiallyof record and of recordbeneficially by such shareholder, and (iii) any material interest of such beneficial owner, (c)shareholder in such business other than the shareholder's interest as a representation that the shareholder is a holder of record of the Company’s capital stock entitled to vote at such meetingCompany.



EXPENSES OF SOLICITATION

Directors, officers and intends to appear,employees may solicit proxies in person or by telephone, e-mail or other online methods. We will pay all of the expenses of this solicitation of proxies, including reimbursing brokers, dealers, banks and other persons holding our common stock in their names, or in the names of nominees, for their expenses in providing proxy at the meetingmaterials to propose such business and (d) a representation whether the shareholder or the beneficial owner, if any, intends or is partowners.

HOUSEHOLDING OF ANNUAL MEETING MATERIALS

To reduce costs and reduce the environmental impact of our Annual Meeting, a group that intends to (A) deliver asingle proxy statement or form ofand annual report, along with separate individual proxy cards will be delivered in one envelope to holders of at leastcertain shareholders having the percentage of the Company’s outstanding capital stock required to adopt the proposal or (B) otherwise solicit proxies from shareholders in support of such proposal.

Resources’ Bylaws limit the business that may be transacted at a meeting of shareholders to that specified in the notice of the meeting, those otherwise properly presented by the Board of Directors and those presented by a shareholder of record of Resources who provided notice in writing to the President not less than sixty days nor more than ninety days prior to the meeting. Proposals not meeting the requirements of the Bylaws will not be entertained at the shareholders’ meeting.

Any shareholder wishing to nominate persons for election as directors at an annual meeting must deliver to the Secretary of the Company at the Company’s principal office in Roanoke, Virginia a written notice of the shareholder’s intention to make such a nomination. The shareholder generally is required to furnish the notice at least 120 days before the first anniversary of the preceding year’s annual meeting. The notice must include the following information: (1) such information regarding each proposed nominee as would be required to be disclosed under SEC rules and regulations in solicitations of proxies for the election of directors in an election contest or otherwise; (2) the written consent of each proposed nominee to serve as a director of the Company; and (3) as to the shareholder giving the notice and the beneficial owner, if any, of common shares on whose behalf the nomination is made, (a) thesame last name and address and to individuals with more than one account registered at our transfer agent with the same address, unless contrary instructions have been received.


17

We will promptly deliver separate copies of record of such shareholderthe proxy statement and theannual report if a request is sent to Paul Nester, Corporate Secretary, RGC Resources, Inc., P.O. Box 13007, Roanoke, Virginia 24030, including your name and, address of such beneficial owner, (b) the class and number of shares of the Company’s capital stock that are owned beneficially and of record by such shareholder and such beneficial owner, (c) a representation that the shareholder is a holder of record of the Company’s capital stock entitled to vote at such meeting and intends to appear, in person or by proxy, at the meeting to propose

24

such nomination and (d) a representation whether the shareholder or the beneficial owner, if any, intends or is part of a group that intends to (A) deliver a proxy statement or form of proxy to holders of at least the percentage of the Company’s outstanding capital stock required to elect the nominee or (B) otherwise solicit proxies for shareholders in support of such nomination. The Company may require any proposed nominee to furnish such other information as the Company may reasonably require determining the eligibility of such proposed nominee to serve as a director of the Company.

DELIVERY OF DOCUMENTS TO SHAREHOLDERS SHARING AN ADDRESS

If you and other residents at your mailing address own common shares through a broker or bank in “street name,” your broker or bank may have sent you a notice that your household will receive only one annual report to shareholders and proxy statement for each company in which you hold shares through that broker or bank. The practice of sending only one copy of an annual report to shareholders and proxy statement or a Notice of Internet Availability is known as “householding.” If you did not respond that you did not want to participate in householding, you were deemed to have consented to the process. If the foregoing procedures apply to you, you may revoke your consent to householding at any time by sending your name,applicable, the name of your brokerage firm and your account number to the Company at P.O. Box 13007, Roanoke, VA 24030. In any event, if you did not receive an individual copy of the Company’s annual report to shareholders or this proxy statement, and wish to do so, the Company will send a copy to you if you address your written request to the Company at P.O. Box 13007, Roanoke, VA 24016, Attention: Secretary. If you are receiving multiple copies of the annual report to shareholders and proxy statement, you can request householding by contacting the Company in the same manner. The Company encourages you to participate in this program. It will reduce the volume of duplicate information received at your household, as well as reduce the Company’s expense.

EXPENSES OF SOLICITATION

The entire expense of preparing, assembling, printing and mailing the form of proxy and Proxy Statement will be paid by Resources. Resources hired Laurel Hill Advisory Group, L.L.C., a proxy solicitation firm, to assist in soliciting proxies for a fee of $6,000 plus reasonable expenses. Resources will request banks and brokers to solicit their customers who beneficially own common shares of Resources listed in the names of nominees and will reimburse said banks and brokers for the reasonable out of pocket expense of such solicitation. In addition to the use of the mail, solicitation may be made by employees of Resources by any and all means available.

number.
      By Order of the Board of Directors.
LOGO
      JOHN B. WILLIAMSON, III
      Chairman, President & CEO
      December 23, 2013

Resources’


FURTHER INFORMATION
Resources' 2015 Annual Report, onincluding our Form 10-K includingand financial statements for the year ended September 30, 20132015, is available without charge to any shareholder requesting the same. Written requests should be addressed to the attention of Ms. Dale P. Lee,Paul W. Nester, Corporate Secretary, RGC Resources, Inc., P.O. Box 13007, Roanoke, Virginia 24030.


The Annual Report, theincluding our Form 10-K and financial statements, this proxy andstatement, proxy card, and the charters of the Audit Committee, Compensation Committee, and the Governance and Nominating Committee of the Board of Directors of Company are on the Company’s website at www.rgcresources.com.

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Dear Shareholder,

The RGC Resources, Inc. Annual Meeting of Shareholders will be held at 9:00 a.m. on Monday, February 3, 2014 at the Hotel Roanoke, 110 Shenandoah Avenue, Roanoke, Virginia 24016.

As in prior years, I want to extend to you an invitation to attend a light breakfast beginning at 8:15 a.m. on the morning of the Annual Meeting. The breakfast will be followed by the formal shareholder meeting at 9:00 a.m. If you plan to attend, please call Sherry Shaw at (540) 777-3991 with your confirmation by Friday, January 24, 2014.

We thank you for your interest in Company operations and activities, and encourage you to complete and return the enclosed proxy card and to review our annual report in detail.

Sincerely,

John B. Williamson, III

Chairman, President, and CEO

0                    ¢

RGC RESOURCES, INC.

519 Kimball Avenue, N.E.

Roanoke, Virginia 24016

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Frank T. Ellett and Roger L. Baumgardner, or either of them, with full power of substitution, to vote all common stock of RGC Resources, Inc. held of record by the undersigned as of November 27, 2013 at the Annual Meeting of Shareholders of RGC Resources, Inc. to be held on February 3, 2014, and at any adjournment thereof, as follows:

(Continued and to be signed on the reverse side.)

¢14475  ¢

ANNUAL MEETING OF SHAREHOLDERS OF

RGC RESOURCES, INC.

February 3, 2014

NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL:

The Notice



By Order of Meeting, proxy statement the Board of Directors
PAUL W. NESTER
Vice-President, Treasurer, Secretary
and proxy card

are available at http://www.rgcresources.com/proxy/index.html

Please sign, date and mail

your proxy card in the

envelope provided as soon

as possible.

i Please detach along perforated line and mail in the envelope provided.i

n

   20303300000000000000  6

020314

The Board of Directors recommends a vote “FOR” items 1 through 3.

PLEASESIGN,DATEANDRETURNPROMPTLYINTHEENCLOSEDENVELOPE.PLEASEMARKYOURVOTEINBLUEORBLACKINKASSHOWNHEREx

1.  ELECTION OF CLASS B DIRECTORS (Serving until 2017 Annual Meeting) - The Board of Directors recommends that you vote “FOR” all nominees below:

The Board of Directors recommends that you vote “FOR” the following proposals:

NOMINEES:

O  Nancy Howell Agee

O  J. Allen Layman

O  Raymond D, Smoot, Jr.

FORAGAINSTABSTAIN

¨

¨

¨

FORALLNOMINEES

WITHHOLDAUTHORITY

FORALLNOMINEES

FORALLEXCEPT

(See instructions below)

2.  To ratify the selection of Brown Edwards & Company L.L.P. as the independent accountants.

¨¨¨

3.  A non-binding shareholder advisory vote on executive compensation.

¨¨¨

The shares represented by this Proxy will be voted as specified. If no choice is specified, the Proxy will be voted FOR all proposals. The undersigned hereby acknowledges receipt of the Proxy Statement dated December 23, 2013.

INSTRUCTIONS:To withhold authority to vote for any individual nominee(s), mark“FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold, as shown here:l

To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method.

 ¨

Signature of Shareholder 

Date: Signature of Shareholder Date: 

Note:  Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.

¢¢

Chief Financial Officer

December 16, 2015









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