FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PRUSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1995.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _______________.
Commission file number 0-8788.
DELTA NATURAL GAS COMPANY, INC.__________
(Exact name of registrant as specified in its charter)
________KENTUCKY_______ ___________61-0458329_____________
(State of Incorporation) (IRS Employer Identification Number)
3617 Lexington Road, Winchester, Kentucky
40391 (Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code 606-
7446171.
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
_______None________ __________None________
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $1 Par Value
(Title of class)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in
Part III of this Form 10K or any amendment to this Form 10-K [X]
As of August 17, 1995, Delta Natural Gas Company, Inc. had
outstanding 1,876,666 shares of common stock $1 Par Value, and the
aggregate market value of the voting stock held by non-affiliates was
approximately $31,903,322.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's definitive proxy statement to be filed with
the Commission not later than 120 days after June 30, 1995, is
incorporated by reference in Part III of this Report.
TABLE OF CONTENTS
Page Number
PART I
Item 1. Business 1
General 1
Gas Operations and Supply 1
Regulatory Matters 5
Capital Expenditures 6
Employees 6
Consolidated Statistics 7
Item 2. Properties 8
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of
Security Holders 9
PART II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters 9
Item 6. Selected Financial Data 10
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 11
Item 8. Financial Statements and Supplementary
Data 15
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosures 15
PART III
Item 10. Directors and Executive Officers of
the Registrant 15
Item 11. Executive Compensation 15
Item 12. Security Ownership of Certain
Beneficial Owners and Management 15
Item 13. Certain Relationships and Related
Transactions 16
Part IV
Item 14. Exhibits, Financial Statement
Schedules and Reports on Form 8-K 17
Signatures 20
PART I
Item 1. Business
General
Delta Natural Gas Company, Inc. (Delta or the Company) was
incorporated in 1949 in the State of Kentucky. The Company is
engaged in the distribution, transmission and production of natural gas
in its service area in 17 counties in central and southeastern
Kentucky. In addition to its corporate headquarters in Winchester,
Delta has warehouse facilities in Corbin and Winchester and branch
offices in Barbourville, Berea, Corbin, London, Manchester,
Middlesboro, Nicholasville, Owingsville, Stanton, and Williamsburg,
with which it serves approximately 34,000 residential, commercial,
industrial and transportation customers. The four largest branch offices
are Corbin, Nicholasville, Middlesboro and Berea, where Delta serves
approximately 6,000, 5,700, 3,700 and 3,500 customers, respectively.
The Company purchases and produces gas for distribution to its
retail customers. Additionally, Delta transports gas produced in
southeastern Kentucky to inter-connected pipelines and also transports gas
for others to industrial customers. Delta owns and operates storage
facilities and approximately 1,750 miles of natural gas gathering,
transmission, distribution and service lines.
Delta has four wholly-owned subsidiaries, Delta Resources,
Inc. (Resources), Delgasco, Inc. (Delgasco), Deltran, Inc. (Deltran) and
Enpro, Inc. (Enpro). Resources buys gas and resells it to industrial
customers on Delta's system and to Delta for system supply. Delgasco buys
gas and resells it to Resources and to customers not on Delta's system.
Deltran was formed to engage in potential pipeline and storage projects
under consideration. Enpro owns and operates existing production
properties. Delta and its subsidiaries are managed by the same
officers.
Gas Operations and Supply
The Company's revenues are affected by various factors, including
rates billed to customers, the cost of natural gas, economic conditions
in the areas that the Company serves, weather conditions and
competition. Delta competes for customers and sales with alternate
sources of energy, including electricity, coal, oil, propane and wood.
Gas costs, which the Company is generally able to pass through to
customers under its gas cost recovery clause, may affect Delta's
competitive position or may cause customers to conserve, or, in the case
of industrial customers, to use alternative energy sources. Also,
the potential bypass of Delta's system by industrial
customers and others is a competitive concern that Delta has and
will continue to address. In recent years, regulatory changes at the
federal level and changes in the participants in the natural gas industry
have led to a national spot market for natural gas. The Company's
marketing subsidiaries purchase gas and resell it to various industrial
customers and others in competition with producers and marketers.
Delta's retail sales are seasonal and temperature-sensitive as
the majority of the gas sold by Delta is used for heating. This
seasonality impacts Delta's liquidity position and its management of its
working capital requirements (see "Management's Discussion and
Analysis of Financial Condition and Results of Operations").
Currently, over 99% of Delta's customers are residential and
commercial. Delta's remaining light industrial customers purchased
approximately 6% of the total volume of gas sold by Delta at retail during
1995.
Retail gas sales in 1995 were approximately 3,724,000 thousand
cubic feet (Mcf), as compared to approximately 4,333,000 Mcf in 1994.
Heating degree days for 1995 were approximately 89.6% of the thirty year
average as compared with 106.2% in 1994. As a result of this warmer
weather, sales volumes decreased by 609,000 Mcf, or 14.1% in 1995. The
number of customers served increased by approximately 1,100, or 3.5%,
during 1995 as Delta continued to extend its system to new customers
and to convert customers to natural gas from other fuels. Delta's
service area continued to expand, resulting in growth opportunities
for the Company. Industrial parks have been developed in certain
areas and have resulted in new industrial customers, some of whom
are on-system transportation customers.
A total of $3,049,000 of transportation revenues was earned during
1995 as compared with $2,933,000 during 1994. Total volumes transported
were 3,842,000 Mcf in 1995 as compared to 4,183,000 Mcf in 1994. As of
June 30, 1995, Delta had 43 on-system transportation customers (customers
who purchase their gas from others) and 5 off-system transportation
customers (deliveries made by Delta to other pipelines).
Transportation revenues include $2,588,000 earned during 1995
and $2,310,000 earned during 1994 for transportation of 2,390,000 Mcf
and 2,186,000 Mcf, respectively, on behalf of on-system customers. Delta's
offsystem transportation includes deliveries for interconnected
interstate pipeline systems. During 1995 and 1994, 1,452,000 Mcf and
1,997,000 Mcf, respectively, were transported for off-system deliveries.
The decline in offsystem transportation in 1995 was primarily due to
reduced deliveries from some local production.
Some producers in Delta's service area can access certain
pipeline delivery systems other than Delta, which provides competition from
others for transportation of such gas. Delta will continue its efforts to
purchase or transport any natural gas available that is produced in
reasonable proximity to its facilities.
Recognizing competitive concerns, Delta will continue to maintain
an active gas supply management program that emphasizes long-term
reliability and the pursuit of cost effective sources of gas for its
customers. Delta purchases gas supplies from interstate pipelines,
intrastate suppliers and others. Delta has transportation and storage
capacity available on certain interstate pipelines for deliveries of gas
through those facilities. The Company anticipates an adequate gas supply
for service to existing customers and to provide for growth.
Delta receives a portion of its gas supply (including transportation
gas from others) from its interstate sources, Tennessee Gas Pipeline
Company (Tennessee) and Columbia Gas Transmission Corporation
(Columbia), and Columbia Gulf Transmission Company (Columbia Gulf)
which companies are subject to the Federal Energy Regulatory Commission
(FERC) jurisdiction. A significant portion of Delta's supply comes
from gas producers in southeastern Kentucky. Delta's subsidiary
companies obtain supply from Kentucky producers and others.
During the past few years, the Federal Energy Regulatory
Commission (FERC) has restructured interstate natural gas pipeline
operations, services and rates as a part of its Order 636 proceedings.
This restructuring resulted in Delta's involvement in proceedings with its
interstate pipeline suppliers. Delta contracted for transportation and
storage services with its three pipeline suppliers, with gas supplies
purchased from gas marketers. The FERC approved Tennessee's new rates and
services effective September 1, 1993, and Columbia's and Columbia Gulf's
new rates and services effective November 1, 1993.
Delta's agreements with Tennessee expire in the year 2000 and
thereafter will continue on a year-to-year basis until terminated by
either party. During 1994, Tennessee discontinued sales of gas to Delta and
other wholesale customers upon implementation of FERC Order 636. Delta's
entitlements under those agreements were converted to firm transportation
and storage rights on Tennessee, and Delta entered a three-year contract
with a gas marketer to supply gas for those portions of Delta's system
formerly served by Tennessee. The initial term of the contract extends
through April, 1996, and such purchases are included in Delta's gas cost
recovery filings (see "Regulatory Matters"). During 1995, Delta purchased
approximately 1,062,000 Mcf from the gas marketer.
Delta's entitlements under agreements with Columbia and Columbia
Gulf were also converted to firm transportation and firm storage services
upon implementation of Order 636 by Columbia and Columbia Gulf. The
agreements expire in the year 2008 and thereafter will continue on a year-
to-year basis until terminated by either party. Delta contracted with a
gas marketer to supply gas for those portions of Delta's system formerly
served by Columbia and Columbia Gulf. The initial term of the agreement
with the gas marketer extends through April, 1996, and such purchases are
included in Delta's gas cost recovery filings (see "Regulatory
Matters"). During 1995, Delta purchased approximately 664,000 Mcf from
the gas marketer.
Delta has a contract with The Wiser Oil Company (Wiser) to
purchase natural gas from Wiser through 1999. Delta and Wiser annually
determine the daily deliverability from Wiser and Wiser is committed
to deliver that volume. Under this agreement, Wiser is obligated to
deliver 11,000 Mcf per day to Delta. Delta purchased approximately
1,120,000 Mcf from Wiser during 1995.
Delta has four contracts with Enpro to purchase all the natural
gas produced from Enpro's wells on certain leases in Bell, Knox and
Whitley Counties. These agreements remain in force so long as gas is
produced in commercial quantities from the wells on the leases. Also,
Delta purchases gas from Enpro which is produced from the Flat Lick Field
in Knox County. Remaining proved, developed natural gas reserves
are estimated at approximately 4.7 million Mcf. Delta purchased a
total of approximately 222,000 Mcf from those properties during 1995.
Enpro also produces oil from certain of these leases, but oil production has
not been significant.
Delta receives gas under agreements with various other
marketers, brokers and local producers, most of which are priced as short-
term, or spotmarket, purchases. The combined volumes of gas purchased
from these sources in 1995 was approximately 750,000 Mcf.
Resources and Delgasco purchase gas under agreements with
various marketers, brokers and local producers, most of which are priced
as shortterm, or spot-market, purchases. The gas is resold to
industrial customers on Delta's system, to Delta for system supply and to
others. The combined volumes of gas purchased by Resources and Delgasco
from these sources in 1995 was approximately 1,636,000 Mcf.
Although there are competitors for the acquisition of supplies,
Delta continues to seek additional new gas supplies from all available
sources, including those in the proximity of its facilities in
southeastern Kentucky. Also, Resources and Delgasco continue to pursue
acquisitions of new gas supplies from local producers and others.
As an active participant in many areas of the natural gas
industry, Delta plans to continue its efforts to expand its gas
distribution system. Delta is considering acquisitions of other gas
systems, some of which are contiguous to its existing service areas,
as well as continued expansion within its existing service areas. The
Company also anticipates continuing activity in gas production and
transportation areas and plans to pursue and increase these activities
wherever practicable. The Company will continue to consider the
construction or acquisition of additional transmission, storage and
gathering facilities to provide for increased transportation and enhanced
supply and system flexibility.
Regulatory Matters
Delta is subject to the regulatory authority of the Public
Service Commission of Kentucky (PSC) with respect to various aspects of its
business, including rates and service to retail and transportation
customers. Delta's last rate case was filed in 1990 and settled in May,
1991. Delta currently has no general rate case filed.
On January 29, 1993, the PSC established an administrative proceeding
to investigate the reasonableness of current state regulatory
practices, in particular purchased gas cost recovery mechanisms, in light
of FERC Order 636. Delta is a party to this proceeding. Delta currently
has a Gas Cost Recovery (GCR) clause, which provides for a dollar-
tracker that matches revenues and gas costs and allows eventual full
recovery of gas costs. This clause requires Delta to make quarterly
filings with the PSC, but such procedure does not require a general
rate case. The GCR mechanism provides for any over or under-recovery of
purchased gas costs to be reflected in the rates charged to customers.
In an Order dated December 22, 1993, in its administrative
proceeding, the PSC provided for pipeline transition costs and certain
other components of gas supply costs to appropriately be recovered
through regulated utilities' purchased gas recovery mechanisms. Delta's
quarterly GCR filings include certain pipeline transition costs and
various components of gas supply costs as a result of the FERC Order
636 restructuring. The PSC has approved such filings and Delta has
implemented rates reflecting these increased costs. Other issues,
including those related to the FERC Order 636 restructuring, are currently
the subject of consideration in this continuing administrative proceeding.
In addition to PSC regulation, Delta may obtain non-exclusive
franchises from the cities and communities in which it operates
authorizing it to place its facilities in the streets and public grounds.
However, no utility may obtain a franchise until it has obtained from
the PSC a certificate of convenience and necessity authorizing it to
bid on the franchise. Delta holds franchises in four of the ten
cities in which it maintains a branch office and in six other
communities it serves. In the other cities or communities, either
Delta's franchises have expired, the communities do not have
governmental organizations authorized to grant franchises, or the local
governments have not required, or do not want to offer, a franchise.
Delta attempts to acquire or reacquire franchises whenever the communities
desire or require them.
Without a franchise, a local government could require Delta to cease
its occupation of the streets and public grounds or prohibit Delta from
extending its facilities into any new area of that city or community. To
date, the absence of a franchise has had no adverse effect on Delta's
operations.
Capital Expenditures
Capital expenditures during fiscal 1995 were approximately $8.1
million and for fiscal 1996 are estimated to be approximately $12.4
million. These include planned expenditures for development of
underground gas storage, system extensions, computer system upgrades
and the replacement and improvement of existing transmission,
distribution, gathering and general facilities.
Employees
Delta employed a total of 167 full-time employees on June 30,
1995. Delta considers its relationship with its employees to be
satisfactory.
Consolidated Statistics
For the Years Ended June 30, 1995 1994 1993 1992 1991
Retail Customers Served,
End of Period
Residential .............. 29,029 27,939 27,293 26,488 25,698
Commercial ............... 4,287 4,242 4,093 4,035 4,168
Industrial ............... 72 76 75 66 71
Total ................. 33,388 32,257 31,461 30,589 29,937
Operating Revenues ($000)
Residential sales ........ 14,772 16,597 14,578 13,945 12,453
Commercial sales ......... 8,673 9,663 8,269 7,651 6,294
Industrial sales ......... 1,248 1,671 1,383 1,188 1,299
On-system transportation . 2,588 2,310 2,451 2,348 2,351
Off-system transportation. 461 623 836 1,342 1,377
Subsidiary sales ......... 3,959 3,755 3,532 2,580 2,873
Other .................... 143 228 172 147 131
Total ................. 31,844 34,847 31,221 29,201 26,778
System Throughput
(Million Cu. Ft.)
Residential sales ........ 2,173 2,511 2,341 2,202 2,049
Commercial sales ......... 1,328 1,506 1,368 1,235 1,115
Industrial sales ......... 223 316 281 229 248
Total retail sales .... 3,724 4,333 3,990 3,666 3,412
On-system transportation.. 2,390 2,186 2,248 2,061 1,993
Off-system transportation. 1,452 1,997 2,668 4,580 4,903
Total ................. 7,566 8,516 8,906 10,307 10,308
Average Annual Consumption Per
End of Period Residential
Customer (Thousand Cu. Ft.). 75 90 86 83 80
Lexington, Kentucky Degree Days
Actual .................... 4,217 4,999 4,688 4,370 4,025
Percent of 30 year average
(4,706) ................. 89.6 106.2 99.6 92.9 85.5
Average Revenue Per Mcf Sold
at Retail ($) ............. 6.63 6.44 6.07 6.21 5.88
Average Gas Cost Per Mcf Sold
at Retail ($) ............. 3.37 3.34 2.90 3.01 3.42
Item 2. Properties
Delta owns the land and buildings containing its corporate
headquarters in Winchester. The buildings house executive, administrative
and technical staffs of Delta. In addition, Delta owns buildings
used for branch operations in Barbourville, Berea, Corbin, London,
Manchester, Middlesboro, Nicholasville, Stanton and Williamsburg and
rents an office building in Owingsville for branch operations. Also,
Delta owns a building in Laurel County used for training as well as
equipment and materials storage.
The Company owns approximately 1,750 miles of natural gas
gathering, transmission, distribution and service lines. These lines range
in size up to eight inches in diameter. There are no significant
encumbrances on this property.
Delta owns the rights to any oil and gas underlying approximately
3,500 acres in Bell County. Portions of these properties are used by Delta
for the storage of natural gas. The maximum capacity of the storage
facilities is approximately 550,000 Mcf. These properties otherwise are
currently nonproducing, and no reserve studies have been completed on the
properties.
Enpro owns interests in certain oil and gas leases relating
to approximately 11,000 acres located in Bell, Knox and Whitley Counties.
There presently are 56 gas wells and 7 oil wells producing from these
properties. Remaining proved, developed natural gas reserves are
estimated at approximately 4.7 million Mcf. The gas production from
these properties continues to be purchased by Delta for system supply,
and such purchases amounted to approximately 222,000 Mcf during 1995.
Oil production has not been significant.
Also, Enpro owns the oil and gas underlying approximately
11,500 additional acres in Bell, Clay and Knox Counties. These
properties are currently non-producing, and no reserve studies have been
completed on the properties. During 1994, Enpro entered an agreement
with a producer covering approximately 14,000 acres of Enpro's undeveloped
holdings. Under the terms of the agreement, the producer is conducting
exploration activities on the acreage. Enpro reserved the option to
participate in wells drilled. Enpro also retained certain working and
royalty interests in any production from wells to be drilled.
Item 3. Legal Proceedings
Delta and its subsidiaries are not parties to any legal
proceedings which are expected to have a materially adverse impact on
the financial condition or results of operations of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted during the fourth quarter of 1995.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
Delta has paid cash dividends on its common stock each year since
1964. While it is the intention of the Board of Directors to continue to
declare dividends on a quarterly basis, the frequency and amount of future
dividends will depend upon the Company's earnings, financial requirements
and other relevant factors.
The Company's common stock trades on the Nasdaq Stock Market under
the symbol DGAS. The accompanying table reflects the high and low sales
prices during each quarter as reported by Nasdaq and the quarterly
dividends declared per share.
Range of Stock Prices ($) Dividends
Quarter High Low Per Share
Fiscal 1995
First 20 17 1/2 .28
Second 18 15 3/4 .28
Third 18 3/4 16 .28
Fourth 18 1/2 16 3/4 .28
Fiscal 1994
First 22 1/4 18 3/4 .275
Second 23 1/2 21 .275
Third 21 3/4 19 .275
Fourth 20 1/2 17 1/4 .28
There were 2,091 record holders of Delta's common stock as of August 1, 1995.
<TABLE>
Item 6. Selected Financial Data
<CAPTION>
For the Years
Ended June 30, 1995 1994(a) 1993 1992 1991(b)
<S> <C> <C> <C> <C> <C>
Summary of Operations ($)
Operating
revenues ........ 31,844,339 34,846,941 31,221,410 29,200,834 26,778,255
Operating
income .......... 4,255,088 4,850,673 4,791,816 4,586,323 3,039,045
Net income ...... 1,917,735 2,671,001 2,620,664 2,453,813 1,162,582
Earnings per
common share .... 1.04 1.50 1.60 1.52 0.73
Dividends
declared per
common share .... 1.12 1.105 1.085 1.08 1.08
Average Number of
Common Shares
Outstanding ........ 1,850,986 1,775,068 1,635,945 1,612,437 1,586,235
Total Assets ($).... 65,948,716 61,932,480 55,129,912 50,478,014 47,816,330
Capitalization ($)..
Common share-
holders' equity . 22,511,513 22,164,791 17,501,045 16,227,158 15,147,551
Long-term debt .. 23,702,200 24,500,000 19,596,401 20,187,826 21,473,431
Total
capitalization .. 46,213,713 46,664,791 37,097,446 36,414,984 36,620,982
Short-Term
Debt ($) (c) ....... 6,732,700 3,205,000 7,729,000 4,029,000 2,616,000
Other Items ($)
Capital
expenditures .... 8,122,838 7,374,747 6,289,508 5,074,483 5,213,319
Total plant ..... 84,944,969 77,882,135 71,187,860 66,032,217 61,757,666
(a) During October 1993, $15 million of debentures and 170,000 shares of Common
Stock were sold, and the proceeds were used to repay short-term debt and to
refinance certain long-term debt.
(b) During May,1991, $10 million of debentures were sold, and the proceeds were used to
repay short-term debt.
(c) Includes current portion of long-term debt.
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
Capital expenditures for Delta for 1996 are expected to be
approximately $12.4 million. Delta generates internally only a
portion of the cash necessary for its capital expenditure requirements
and finances the balance of its capital expenditures on an interim
basis through the use of its borrowing capability under its short-
term line of credit. The current available line of credit is $15
million, of which approximately $5.7 million had been borrowed at June
30, 1995 at an interest rate of 6.9%. The maximum amount borrowed during
1995 was $8,430,000. Delta had an average interest rate of 6.5% for
1995. The current line of credit extends until November, 1995. Short-
term borrowings are periodically repaid with the proceeds from the
issuance of long-term debt and equity securities, as was done in October,
1993, when the net proceeds of approximately $17.8 million from the sale
of $15 million of debentures and 170,000 shares of common stock were
used to repay short-term debt and to refinance certain long-term debt.
The amounts and types of future long-term debt and equity financings will
depend upon the Company's capital needs and market conditions.
Delta's sales are seasonal in nature, and the largest proportion of cash
is received during the winter heating months when sales volumes
increase considerably. During non-heating months, cash needs for
operations and construction are partially met through short-term
borrowings. Additionally, most construction activity takes place during
the non-heating season because of more favorable weather conditions, thus
increasing seasonal cash needs.
The primary sources and uses of cash during the last three years
are summarized below:
Sources(Uses) 1995 1994 1993
Provided by operat-
ing activities $ 6,943,183 $ 6,172,019 $ 4,567,023
Capital expenditures $(8,122,838) $ (7,374,747) $(6,289,508)
Dividends on common
stock $(2,073,374) $ (1,972,368) $(1,775,411)
Issuance of common
stock, net $ 502,361 $ 3,965,113 $ 428,634
Issuance of deben-
tures, net $ -- $ 14,246,937 $ --
Repayment of long-
term debt $ (240,100) $(11,330,286) $ (591,425)
Increase (decrease)
in notes payable $ 2,970,000 $ (3,765,000) $ 3,700,000
Cash provided by operating activities consists of net income and
noncash items including depreciation, depletion, amortization and
deferred income taxes. Additionally, changes in working capital are also
included in cash provided by operating activities. The Company
expects that internally generated cash, coupled with seasonal short-term
borrowings, will continue to be sufficient to satisfy its operating,
capital expenditure and dividend requirements over the next year.
Results of Operations
Operating Revenues
The decrease in operating revenues for 1995 of approximately $3,003,000
was due primarily to a decrease in retail sales volumes of approximately
609,000 Mcf as a result of the warmer winter weather in 1995 (89.6% of
thirty year average weather compared to 106.2% for 1994) and an
approximate $162,000 (545,000 Mcf) decrease in off-system transportation
due to reduced deliveries from some local production. The decrease was
partially offset by an increase in on-system transportation of $278,000
due to a 204,000 Mcf increase in volumes transported and an increase
in customers served of approximately 1,100, or 3.5%.
The increase in operating revenues for 1994 of approximately $3,626,000
was due primarily to an increase in retail sales volumes of approximately
343,000 Mcf as a result of the colder winter weather in 1994 (106.2% of
thirty year average weather compared to 99.6% for 1993), and an increase
in customers served of 796, or 2.5%. The increase in operating revenues
was partially offset by an approximate $213,000 decrease in transportation
revenues for offsystem customers resulting from decreased volumes of
approximately 671,000 Mcf due primarily to reduced volumes shipped by
others on a leased pipeline that has been inactive since October, 1992, and
due to certain producers who shipped gas into markets that did not require
the use of Delta's system.
Operating Expenses
The decrease in purchased gas expense of approximately $1,753,000 for
1995 was due primarily to the decreased retail sales volumes.
The increase in purchased gas expense of approximately $3,016,000 for
1994 was due primarily to increases in the cost of gas purchased for retail
sales and to an increase in retail sales volumes.
The decrease in operation and maintenance expenses during 1995
of approximately $380,000 was due primarily to decreases in payroll and
related benefit costs.
The increases in depreciation expense during 1995 and 1994 of
approximately $206,000 and $145,000, respectively, were due primarily
to additional depreciable plant.
The increase in taxes other than income taxes during 1994 of
approximately $78,000 was primarily due to increased property taxes that
resulted from increased plant, and to increased payroll taxes that
resulted from increased wages and payroll tax rates.
Changes in income taxes during the periods of approximately $467,000
and $34,000 for 1995 and 1994, respectively, were primarily due to changes
in net income. The Omnibus Budget Reconciliation Act of 1993 did not
result in additional income taxes for Delta. The Company adopted
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes", effective on July 1, 1993, as required. SFAS No. 109
adopts the liability method of accounting for income taxes, requiring
deferred income tax assets and liabilities to be computed using tax rates
that will be in effect when the book and tax temporary differences
reverse. For regulated companies, the change in tax rates applied to
accumulated deferred income taxes may not be immediately recognized in
operating results because of ratemaking treatment. A regulatory liability
has been established to recognize the future revenue requirement impact
from these deferred taxes. As a result, the adoption of SFAS No. 109 did
not have a material impact on the results of operations or financial
position of the Company.
Interest Charges
The increase in other interest charges for 1995 of approximately $176,000
was due primarily to increased average short-term borrowings and
increased average interest rates for the period.
Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE PAGE
Management's Statement of Responsibility for
Financial Reporting and Accounting 22
Report of Independent Public Accountants 23
Consolidated Statements of Income for the years
ended June 30, 1995, 1994 and 1993 24
Consolidated Statements of Cash Flows for the years
ended June 30, 1995, 1994 and 1993 25
Consolidated Balance Sheets as of June 30, 1995 and 1994 27
Consolidated Statements of Changes in Shareholders'
Equity for the years ended June 30, 1995, 1994
and 1993 29
Consolidated Statements of Capitalization as of
June 30, 1995 and 1994 30
Notes to Consolidated Financial Statements 31
Schedule II - Valuation and Qualifying Accounts
for the years ended June 30, 1995,
1994 and 1993 40
Schedules other than those listed above are omitted because they are
not required, not applicable or the required information is shown
in the financial statements or notes thereto.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Item 13. Certain Relationships and Related Transactions
Registrant intends to file a definitive proxy statement with
the Commission pursuant to Regulation 14A (17 CFR 240.14a) not later
than 120 days after the close of the fiscal year. In accordance
with General Instruction G(3) to Form 10-K, the information called for by
Items 10, 11, 12 and 13 is incorporated herein by reference to the
definitive proxy statement. Neither the report on Executive
Compensation nor the performance graph included in the Company's
definitive proxy statement shall be deemed incorporated herein by
reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K
(a) - Financial Statements, Schedules and Exhibits
(1) - Financial Statements
See Index at Item 8
(2) - Financial Statement Schedules
See Index at Item 8
(3) - Exhibits
Exhibit No.
3(a) - Delta's Amended and Restated Articles of
Incorporation are incorporated herein by
reference to Exhibit 3(a) to Delta's Form
10-Q for the period ended March 31, 1990.
3(b) - Delta's By-Laws as amended August 17, 1995.
4(a) - The Indenture dated April 1, 1991 in
respect of 9% Debentures due April 30,
2011, is incorporated herein by reference
to Exhibit 4(e) to Delta's Form S-2 dated
April 23, 1991.
4(b) - The Indenture dated September 1, 1993 in
respect of 6 5/8% Debentures due October
1, 2023, is incorporated herein by
reference to Exhibit 4(e) to Delta's Form
S-2 dated September 2, 1993.
10(a) - Certain of Delta's material natural gas
supply contracts are incorporated herein
by reference to Exhibit 10 to Delta's Form
10 for the year ended June 30, 1978 and by
reference to Exhibits C and D to Delta's
Form 10-K for the year ended
June 30, 1980.
10(b) - Gas Purchase Contract between Delta and
Wiser is incorporated herein by reference
to Exhibit 2(C) to Delta's Form 8-K dated
February 9, 1981.
10(c) - Assignment to Delta by Wiser of its Columbia
Service Agreement, including a copy of
said Service Agreement, is incorporated herein by reference to
Exhibit 2(D) to Delta's Form 8-K dated February 9, 1981.
10(d) - Contract between Tennessee and Delta for the
sale of gas by Tennessee to Delta (amends
earlier contract for Nicholasville and
Wilmore Service Areas) is incorporated
herein by reference to Exhibit 10(d) to
Delta's Form 10-Q for the period ended
September 30, 1990.
10(e) - Contract between Tennessee and Delta for the
sale of gas by Tennessee to Delta (amends
earlier contract for Jeffersonville
Service Area) is incorporated herein by
reference to Exhibit 10(e) to Delta's
Form 10-Q for the period ended September
30, 1990.
10(f) - Contract between Tennessee and Delta for the
sale of gas by Tennessee to Delta (amends
earlier contract for Salt Lick Service
Area) is incorporated herein by reference
to Exhibit 10(f) to Delta's Form 10-Q for
the period ended September 30, 1990.
10(g) - Contract between Tennessee and Delta for the
sale of gas by Tennessee to Delta (amends
earlier contract for Berea Service Area)
is incorporated herein by reference to
Exhibit 10(g) to Delta's Form 10-Q for
the period ended September 30, 1990.
10(h) - Service Agreements between Columbia and Delta
for the sale of gas by Columbia to Delta
(amends earlier service agreements for
Cumberland, Stanton and Owingsville
service areas) are incorporated herein by
reference to Exhibit 10(h) to Delta's Form
10-Q for the period ended September 30,
1990.
10(i) - Amendment to Gas Purchase Contract between
Delta and Wiser is incorporated herein by
reference to Exhibit 10(c) to Delta's Form
10-Q for the period ended December 31,
1988.
10(j) - Second amendment to Gas Purchase Contract
between Delta and Wiser is incorporated
herein by reference to Exhibit 10(j) to
Delta's Form 10-K for the period ended June
30, 1994.
10(k) - Employment agreement between Delta and
Alan L. Heath, an officer, is incorporated
herein by reference to Exhibit 10(k) to
Delta's Form 10-Q for the period ended
December 31, 1985.
10(l) - Employment agreements between Delta and two
officers, those being John F. Hall and
Robert C. Hazelrigg, are incorporated herein
by reference to Exhibit 10(m) to Delta's Form
10-Q for the period ended December 31, 1988.
10(m) - Employment agreement dated May 31, 1995
between Delta and Glenn R. Jennings, an officer.
10(n) - Employment agreement dated June 19, 1995 between
Delta and Johnny L. Caudill, an officer.
12 - Computation of the Consolidated Ratio of
Earnings to Fixed Charges.
21 - Subsidiaries of the Registrant are incorporated
herein by reference to Exhibit 22 to Delta's
Form 10-K for the period ended June 30, 1986.
23 - Consent of Independent Public Accountants.
(b) Reports on 8-K.
No reports on Form 8-K were filed during the three months
ended June 30, 1995.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, on
the 6th day of September, 1995.
DELTA NATURAL GAS COMPANY, INC.
By __/s/Glenn R. Jennings_______
Glenn R. Jennings, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
(i) Principal Executive Officer:
/s/Glenn R. Jennings_______ President, Chief September 6, 1995
(Glenn R. Jennings) Executive Officer
and Director
(ii) Principal Financial Officer and Principal Accounting Officer:
/s/John F. Hall____________ Vice President - September 6, 1995
(John F. Hall) Finance, Secretary
and Treasurer
(iii) A Majority of the Board of Directors:
/s/H. D. Peet______________ Chairman of the September 6, 1995
(H. D. Peet) Board
/s/Donald R. Crowe_________ Director September 6, 1995
(Donald R. Crowe)
/s/Billy Joe Hall__________ Director September 6, 1995
(Billy Joe Hall)
/s/Jane W. Hylton__________ Director September 6, 1995
(Jane W. Hylton)
/s/Virgil E. Scott_________ Director September 6, 1995
(Virgil E. Scott)
/s/Henry C. Thompson_______ Director September 6, 1995
(Henry C. Thompson)
/s/Arthur E. Walker, Jr.___ Director September 6, 1995
Arthur E. Walker, Jr.)
/s/Robert M. Watt III______ Director September 6, 1995
(Robert M. Watt III)
Management's Statement of Responsibility for Financial Reporting
and Accounting
Management is responsible for the preparation, presentation
and integrity of the financial statements and other financial information
in this report. The statements, which were prepared in accordance with
generally accepted accounting principles, include some amounts which
are based on management's best estimates and judgments.
The Company maintains a system of accounting and internal controls
which management believes provides reasonable assurance that the accounting
records are reliable for purposes of preparing financial statements and
that the assets are properly accounted for and protected.
The Board of Directors pursues its oversight role for these
financial statements through its Audit Committee which consists of
three outside directors. The Audit Committee meets periodically with
management to review the work and monitor the discharge of their
responsibilities. The Audit Committee also meets periodically with the
Company's internal auditor as well as Arthur Andersen LLP, the
independent auditors, who have full and free access to the Audit
Committee, with or without management present, to discuss internal
accounting control, auditing and financial reporting matters. Report of
Independent Public Accountants
To the Board of Directors and Shareholders of Delta Natural Gas
Company, Inc.:
We have audited the accompanying consolidated balance sheets
and statements of capitalization of DELTA NATURAL GAS COMPANY, INC. (a
Kentucky corporation) and subsidiary companies as of June 30, 1995 and
1994, and the related consolidated statements of income, cash flows
and changes in shareholders' equity for each of the three years in the
period ended June 30, 1995.
These consolidated financial statements and the schedule referred to
below are the responsibility of the Company's management. Our
responsibility is to express an opinion of these consolidated financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of Delta
Natural Gas Company, Inc. and subsidiary companies as of June 30, 1995 and
1994, and the results of their operations and their cash flows for each of
the three years in the period ended June 30, 1995, in conformity with
generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial
statements, effective July 1, 1993, the Company changed its method of
accounting for income taxes.
Our audit was made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The schedule listed in the
Index to Consolidated Financial Statements and Schedule is presented for
purposes of complying with the Securities and Exchange Commission rules and
is not part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, fairly states in all material
respects the financial data required to be set forth therein in relation to
the basic financial statements taken as a whole.
Arthur Andersen LLP
Louisville, Kentucky
August 11, 1995
Delta Natural Gas Company, Inc.
and Subsidiary Companies
Consolidated Statements of Income
For the Years Ended June 30, 1995 1994 1993
Operating Revenues ............ $31,844,339 $34,846,941 $31,221,410
Operating Expenses
Purchased gas .............. 15,497,156 $17,250,556 $14,234,258
Operation and maintenance
(Note 1) ................. 8,002,797 8,382,767 8,020,622
Depreciation and depletion
(Note 1) ................. 2,183,558 1,977,868 1,833,072
Taxes other than income
taxes .................... 863,340 875,477 797,942
Income taxes (Note 1) ...... 1,042,400 1,509,600 1,543,700
Total operating expenses. $27,589,251 $29,996,268 $26,429,594
Operating Income .............. 4,255,088 $ 4,850,673 $ 4,791,816
Other Income and Deductions, Net 50,582 34,987 39,681
Income Before Interest Charges. $ 4,305,670 $ 4,885,660 $ 4,831,497
Interest Charges
Interest on long-term debt.. $ 1,879,442 $ 1,879,526 $ 1,875,901
Other interest ............. 419,693 243,729 258,405
Amortization of debt expense 88,800 91,404 76,527
Total interest charges .. $ 2,387,935 $ 2,214,659 $ 2,210,833
Net Income $ 1,917,735 $ 2,671,001 $ 2,620,664
Weighted Average Number of
Common Shares Outstanding ..... 1,850,986 1,775,068 1,635,945
Earnings Per Common Share ..... $ 1.04 $ 1.50 $ 1.60
Dividends Declared Per Common
Share ......................... $ 1.12 $ 1.105 $ 1.085
The accompanying notes to consolidated financial statements
are an integral part of these statements.
Delta Natural Gas Company, Inc. and
Subsidiary Companies
Consolidated Statements of Cash Flows
For the Years Ended June 30, 1995 1994 1993
Cash Flows From Operating Activities:
Net income ...................... $ 1,917,735 $ 2,671,001 $ 2,620,664
Adjustments to reconcile net
income to net cash from
operating activities:
Depreciation, depletion and
amortization ............... 2,272,358 2,069,013 1,922,102
Deferred income taxes and
investment tax credits ..... (77,000) 874,800 839,100
Other - net .................. 602,180 446,969 493,848
(Increase) decrease in assets:
Accounts receivable .......... (118,237) 802,197 (707,605)
Materials and supplies ....... 173,319 (229,275) 155,358
Prepayments .................. (105,903) 25,701 8,096
Other assets ................. (209,225) (780) (95,564)
Increase (decrease) in other
liabilities:
Accounts payable ............. (178,609) 513,265 438,897
Refunds due customers ........ 83,572 358,270 37,226
Accrued taxes ................ (72,210) (34,543) (162,982)
Other current liabilities .... 69,742 38,675 16,435
Advance (deferred) recovery
of gas cost ................ 2,583,128 (1,372,030) (993,136)
Advances for construction and
other ...................... 2,333 8,756 (5,416)
Net cash provided by
operating activities .... $ 6,943,183 $ 6,172,019 $4,567,023
Cash Flows From Investing Activities:
Capital expenditures ............ $(8,122,838) $(7,374,747) $(6,289,508)
Net cash used in investing
activities .............. $(8,122,838) $(7,374,747)$(6,289,508)
Delta Natural Gas Company, Inc. and Subsidiary Companies
Consolidated Statements of Cash Flows
(continued)
For the Years Ended June 30, 1995 1994 1993
Cash Flows From Financing Activities:
Dividends on common stock ....... $(2,073,374) $(1,972,368) $(1,775,411)
Issuance of common stock, net.... 502,361 3,965,113 428,634
Issuance of debentures, net...... - 14,246,937
Repayment of long-term debt ..... (240,100) (11,330,286) (591,425)
Increase (decrease) in notes
payable ....................... 2,970,000 (3,765,000) 3,700,000
Net cash provided by
financing activities $ 1,158,887 $ 1,144,396 $1,761,798
Net Increase (Decrease) in Cash and
Cash Equivalents ................... $ (20,768) $ (58,332) $39,313
Cash and Cash Equivalents,
Beginning of Year .................. 156,547 214,879 175,566
Cash and Cash Equivalents,
End of Year ........................ $ 135,779 $ 156,547 $214,879
Supplemental Disclosures of Cash
Flow Information:
Cash paid during the year for:
Interest $ 2,253,472 $ 2,141,705 $2,107,168
Income taxes $ 1,264,956 $ 715,000 $ 952,851
The accompanying notes to consolidated financial statements are an integral
part of these statements.
Delta Natural Gas Company, Inc. and Subsidiary Companies
Consolidated Balance Sheets
As of June 30, 1995 1994
Assets
Gas Utility Plant, at cost .............. $84,944,969 $77,882,135
Less - Accumulated provision for
depreciation .......................... (24,588,203) (22,862,469)
Net gas plant $60,356,766 $55,019,666
Current Assets
Cash and cash equivalents ............ $ 135,779 $ 156,547
Accounts receivable, less accumulated
provisions for doubtful accounts of
$81,608 and $131,324 in 1995 and
1994, respectively ................. 1,236,199 1,117,962
Gas in storage, at average cost ...... 490,710 352,572
Deferred gas costs (Note 1) .......... - 1,471,342
Materials and supplies, at first-in,
first-out cost ..................... 527,442 700,761
Prepayments .......................... 423,246 317,343
Total current assets $ 2,813,376 $ 4,116,527
Other Assets
Cash surrender value of officers' life
insurance (face amount of $1,044,355
and $1,031,000 in 1995 and 1994,
respectively) ...................... $ 293,116 $ 269,029
Note receivable from officer ......... 130,000 83,000
Unamortized debt expense and other
(Note 5) ........................... 2,355,458 2,444,258
Total other assets $ 2,778,574 $ 2,796,287
Total assets $65,948,716 $61,932,480
Delta Natural Gas Company, Inc. and Subsidiary Companies
Consolidated Balance Sheets (continued)
As of June 30, 1995 1994
Liabilities and Shareholders' Equity
Capitalization (See Consolidated Statements
of Capitalization)
Common shareholders' equity .......... $22,511,513 $22,164,791
Long-term debt (Note 5) .............. 23,702,200 24,500,000
Total capitalization .............. $46,213,713 $46,664,791
Current Liabilities
Notes payable (Note 4) ............... $ 5,675,000 $2,705,000
Current portion of long-term debt
(Note 5) ........................... 1,057,700 500,000
Accounts payable ..................... 1,955,231 2,133,840
Accrued taxes ........................ 363,948 436,158
Refunds due customers ................ 479,637 396,065
Advance recovery of gas cost.......... 1,111,786 -
Customers' deposits .................. 331,708 342,979
Accrued interest on debt ............. 473,001 427,338
Accrued vacation ..................... 454,728 454,362
Other accrued liabilities ............ 349,872 314,888
Total current liabilities $12,252,611 $7,710,630
Deferred Credits and Other
Deferred income taxes ................ $ 5,510,400 $5,116,400
Investment tax credits ............... 850,400 921,800
Regulatory liability (Note 1) ........ 912,900 1,312,500
Advances for construction and other .. 208,692 206,359
Total deferred credits and other $7,482,392 $7,557,059
Commitments and Contingencies (Note 6) ..
Total liabilities and
shareholders' equity ........... $65,948,716 $61,932,480
The accompanying notes to consolidated financialstatements are an
integral part of these statements.
<TABLE>
Delta Natural Gas Company, Inc. and Subsidiary Companies
Consolidated Statements of Changes in
Shareholders' Equity
<CAPTION>
For the Years Ended June 30, 1995 1994 1993
<S> <C> <C> <C>
Common Shares
Balance, beginning of year ............ $ 1,839,340 $ 1,648,485 $ 1,624,878
$1.00 par value of 29,394, 190,855
and 23,607 shares issued in 1995,
1994 and 1993, respectively -
Public issuance of common shares .. - 170,000 -
Dividend reinvestment and stock
purchase plan ................... 25,802 15,355 16,265
Employee stock purchase plan and
other ........................... 3,592 5,500 7,342
Balance, end of year .................. $ 1,868,734 $ 1,839,340 $ 1,648,485
Premium on Common Shares
Balance, beginning of year ............ $19,532,909 $15,562,427 $15,157,400
Premium on issuance of common shares-
Public issuance of common shares .. - 3,570,000 -
Dividend reinvestment and stock
purchase plan ................... 425,357 293,782 281,074
Employee stock purchase plan and
other ........................... 64,377 106,700 123,953
Balance, end of year .................. $20,022,643 $19,532,909 $15,562,427
Capital Stock Expense
Balance, beginning of year ............ $(1,588,025) $(1,391,801) $(1,391,801)
Issuance of common shares (16,767) (196,224) -
Balance, end of year .................. $(1,604,792) $(1,588,025) $(1,391,801)
Retained Earnings
Balance, beginning of year ............ 2,380,567 $ 1,681,934 $ 836,681
Net income .......................... 1,917,735 2,671,001 2,620,664
Cash dividends declared on common
shares - (See Consolidated
Statements of Income for rates) ... (2,073,374) (1,972,368) (1,775,411)
Balance, end of year .................. $ 2,224,928 $ 2,380,567 $ 1,681,934
The accompanying notes to consolidated financial statements are an integral part
of these statements.
</TABLE>
Delta Natural Gas Company, Inc. and Subsidiary Companies
Consolidated Statements of Capitalization
As of June 30, 1995 1994
Common Shareholders' Equity
Common shares, par value $1.00 per share
(Notes 2 and 3)
Authorized - 6,000,000 shares
Issued and outstanding -
1,868,734 and 1,839,340 shares in
1995 and 1994, respectively ......... $ 1,868,734 $1,839,340
Premium on common shares ................ 20,022,643 19,532,909
Capital stock expense ................... (1,604,792) (1,588,025)
Retained earnings (Note 5) .............. 2,224,928 2,380,567
Total common shareholders' equity .... $22,511,513 $22,164,791
Long-Term Debt (Note 5)
Debentures, 6 5/8%, due 2023............. $14,561,000 $15,000,000
Debentures, 9%, due 2011 ................ 10,000,000 10,000,000
Capital lease, due 1998 ................. 198,900 -
Total long-term debt ................. $24,759,900 $25,000,000
Less - Amounts due within one year,
included in current liabilities ....... (1,057,700) (500,000)
Net long-term debt ................... $23,702,200 $24,500,000
Total capitalization .............. $46,213,713 $46,664,791
The accompanying notes to consolidated financial statements are an
integral part of these statements.
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies:
(a) Principles of Consolidation -- Delta Natural Gas Company, Inc. (Delta
or the Company) has four wholly-owned subsidiaries. Delta Resources,
Inc. (Resources) buys gas and resells it to industrial customers on Delta's
system and to Delta for system supply. Delgasco, Inc. buys gas and
resells it to Resources and to customers not on Delta's system.
Deltran, Inc. was formed to engage in potential pipeline and storage
projects under consideration. Enpro,
Inc. owns and operates existing production properties.
All subsidiaries of Delta are included in the consolidated financial
statements. Intercompany balances and transactions have been eliminated.
(b) Cash Equivalents -- For the purposes of the Consolidated Statements
of Cash Flows, all temporary cash investments with a maturity of three months
or less at the date of purchase are considered cash equivalents.
(c) Depreciation -- The Company determines its provision for
depreciation using the straight-line method and by the application of rates to
various classes of utility plant. The rates are based upon the
estimated service lives of the properties and were equivalent to composite
rates of 2.8%, 2.7% and 2.7% of average depreciable plant for 1995, 1994 and
1993, respectively.
(d) Maintenance -- All expenditures for maintenance and repairs of units
of property are charged to the appropriate maintenance expense
accounts. A betterment or replacement of a unit of property is
accounted for as an addition and retirement of utility plant. At the
time of such a retirement, the accumulated provision for depreciation is
charged with the original cost of the property retired and also for the net
cost of removal.
(e) Gas Cost Recovery -- Delta has a Gas Cost Recovery (GCR) clause
which provides for a dollar-tracker that matches revenues and gas costs
and provides eventual dollar-for-dollar recovery of all gas costs incurred.
The Company expenses gas costs based on the amount of gas costs recovered
through revenue. Any differences between actual gas costs and those
estimated costs billed are deferred and reflected in the computation of
future billings to customers using the GCR mechanism.
(f) Revenue Recognition -- The Company records revenues as billed to
its customers on a monthly meter reading cycle. At the end of each month,
gas service which has been rendered from the latest date of each cycle
meter reading to the month-end is unbilled.
(g) Revenues and Customer Receivables -- The Company supplies natural gas
to approximately 34,000 customers in central and southeastern
Kentucky. Revenues and customer receivables arise primarily from sales of
natural gas to customers and from transportation services for others.
Provisions for doubtful accounts are recorded to reflect the expected net
realizable value of accounts receivable.
(h) Income Taxes -- The Company provides for income taxes on
temporary differences resulting from the use of alternative methods of income
and expense recognition for financial and tax reporting purposes. The
differences result primarily from the use of accelerated tax
depreciation methods for certain properties versus the straight-line
depreciation method for financial purposes, differences in recognition
of purchased gas cost recoveries and certain other accruals which are
not currently deductible for income tax purposes. Investment tax
credits were deferred for certain periods prior to fiscal 1987 and
are being amortized to income over the estimated useful lives of the
applicable properties.
The Company adopted Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes", effective on July 1,
1993, as required. SFAS No. 109, adopts the liability method of
accounting for income taxes, requiring deferred income tax assets and
liabilities to be computed using tax rates that will be in effect
when the book and tax temporary differences reverse. For regulated
companies, the change in tax rates applied
to accumulated deferred income taxes may not be immediately
recognized in operating results because of ratemaking treatment.
A regulatory liability has been established to recognize the future
revenue requirement impact from these deferred taxes. As a result, the
adoption of SFAS No. 109 did not have a material impact on the results of
operations or financial position of the Company. The temporary
differences which gave rise to the net accumulated deferred income tax
liabilities at June 30 are as follows:
1995 1994
Deferred Tax Liabilities
Accelerated depreciation $7,186,700 $6,257,200
Deferred gas cost - 580,400
Debt expense 413,500 29,400
Other 178,900 200,000
Total $7,779,100 $7,067,000
Deferred Tax Assets
Unamortized investment tax
credit $ 335,400 $ 363,600
Regulatory liabilities 360,100 517,700
Alternative minimum tax credits 724,300 667,200
Deferred gas cost 438,500 -
Other 410,400 402,100
Total $2,268,700 $1,950,600
Net accumulated deferred
income tax liability $5,510,400 $5,116,400
The components of the income tax provision are comprised of the following
for the years ended June 30:
1995 1994 1993
Components of income tax expense:
Payable currently:
Federal $ 453,900 $ 306,300 $432,300
State 194,500 100,800 121,900
Total $ 648,400 $ 407,100 $554,200
Deferred to future years from:
Use of accelerated depreciation $ 929,500 $ 675,000 $660,300
Deferred (advance) recovery of (1,018,900) 541,200 418,000
gas cost
Other deferred tax effects, net 483,400 (113,700) (88,800)
Income tax expense $1,042,400 $1,509,600 $1,543,700
Reconciliation of the statutory federal income tax rate to the
effective income tax rate is shown in the table below:
1995 1994 1993
Statutory federal income tax rate 34.0% 34.0% 34.0%
State income taxes net of federal
benefit 5.2 5.2 5.2
Amortization of investment tax
credit (2.4) (1.8) (1.7)
Other differences - net (.9) (.9) -
Effective income tax rate 35.9% 36.5% 37.5%
(2) Employee Benefit Plans:
(a) Defined Benefit Retirement Plan - Delta has a trusteed,
noncontributory, defined benefit pension plan covering all eligible
employees. Retirement income is based on the number of years of
service and annual rates of compensation. The Company makes annual
contributions equal to the amounts necessary to adequately fund the plan.
The funded status of the pension plan and the amounts recognized in the
Company's consolidated balance sheets at June 30 were as follows:
1995 1994 1993
Plan assets at fair value $5,358,108 $5,251,296 $4,931,658
Actuarial present value of benefit
obligation:
Vested benefits $3,605,363 $4,114,517 $4,042,029
Non-vested benefits 21,742 30,562 37,777
Accumulated benefit obligation $3,627,105 $4,145,079 $4,079,806
Additional amounts related
to projected salary increases 1,638,014 1,734,413 1,881,303
Total projected benefit obligation $5,265,119 $5,879,492 $5,961,109
Plan assets in excess of (less than)
projected benefit obligation $ 92,989 $(628,196) $(1,029,451)
Unrecognized net assets at date of
initial application being
amortized over 15 years (296,759) (339,153) (381,547)
Unrecognized net loss 286,557 950,735 1,407,072
Accrued pension asset (liability) $ 82,787 $ (16,614) $ (3,926)
The assets of the plan consist primarily of common stock, bonds and
certificates of deposit. Net pension costs for the years ended
June 30 include the following:
1995 1994 1993
Benefits earned during the year -
service cost $ 432,546 $ 455,097 $401,054
Interest cost on projected benefit
obligation 382,167 357,372 317,897
Actual return on plan assets (623,972) (45,100) (356,971)
Net amortization and deferral 185,660 (353,530) (24,856)
Net periodic pension cost $ 376,401 $ 413,839 $337,124
The weighted average discount rates and the assumed rates of increase
in future compensation levels used in determining the actuarial present
values of the projected benefit obligation at June 30, 1995, 1994 and
1993 were 7.0%, 6.5% and 6.0%, respectively (discount rates), and 4%
(rates of increase). The expected long-term rates of return on plan assets
were 8%.
SFAS No. 106, "Employers' Accounting for Post-Retirement Benefits", and
SFAS No. 112, "Employers' Accounting for Post-Employment Benefits", did not
affect the Company as Delta does not provide benefits for post-retirement
or postemployment other than the pension plan for retired employees.
(b) Employee Savings Plan - The Company has an Employee Savings
Plan (Savings Plan) under which eligible employees may elect to
contribute any whole percentage between 2% and 15% of their annual
compensation. The
Company will match 50% of the employee's contribution up to a maximum
Company contribution of 2% of the employee's annual compensation. For
the years ended June 30, 1995, 1994 and 1993, Delta's Savings Plan
expense was $112,379, $106,863 and $93,749, respectively.
(c) Employee Stock Purchase Plan - The Company has an Employee
Stock Purchase Plan (Stock Plan) under which qualified permanent
employees are eligible to participate. Under the terms of the Stock Plan,
such employees can contribute on a monthly basis 1% of their annual salary
level (as of July 1 of each year) to be used to purchase Delta's common
stock. The Company issues Delta common stock, based upon the fiscal year
contributions, using an average of the last sale price of Delta's stock as
quoted in NASDAQ's national market system at the close of business for the
last five business days in June and matches those shares so purchased.
Therefore, stock equivalent to approximately $99,400 was issued in
July, 1995. The continuation and terms of the Stock Plan are subject to
approval by Delta's Board of Directors on an annual basis.
(3) Dividend Reinvestment and Stock Purchase Plan:
The Company's Dividend Reinvestment and Stock Purchase Plan
(Reinvestment Plan) provides that shareholders of record can reinvest
dividends and also make limited additional investments of up to $50,000
per year in shares of common stock of the Company. Shares purchased
under the Reinvestment Plan are authorized but unissued shares of common
stock of the Company, and 25,802 shares were issued in 1995. Delta
reserved 200,000 shares under the Reinvestment Plan in December, 1994,
and, as of June 30, 1995 there were 182,815 shares still available for
issuance.
(4) Notes Payable and Line of Credit:
Substantially all of the cash balances of Delta are maintained to
compensate the respective banks for banking services and to obtain lines
of credit; however, no specific amounts have been designated as
compensating balances, and Delta has the right of withdrawal of such
funds. At June 30, 1995 and 1994, the available line of credit was
$15,000,000, of which $5,675,000 and $2,705,000 had been borrowed at an
interest rate of 6.935% and 5.5%, respectively. The maximum amount
borrowed during 1995 was $8,430,000. The
interest on this line is either at the daily prime rate or is based
upon certificate of deposit rates. The current line of credit expires on
November 15, 1995.
(5) Long-Term Debt:
On October 18, 1993, Delta issued $15,000,000 of 6 5/8% Debentures
that mature in October, 2023. Commencing in October, 1995, each
holder may require redemption of up to $25,000 of the 6 5/8%
Debentures annually, subject to an annual aggregate limitation of
$500,000. Such redemption will also be made on behalf of deceased
holders within sixty days of notice, subject to the annual aggregate
$500,000 limitation. The 6 5/8% Debentures can be redeemed by the
Company beginning in October, 1998 at a 5% premium, such premium
declining ratably until it ceases in October, 2003. Restrictions
under the indenture agreement covering the 6 5/8% Debentures include,
among other things, a restriction whereby dividend payments cannot be
made unless consolidated shareholders' equity of the company exceeds $12
million. As of June 30, 1995, no retained earnings were restricted under
the provisions of the indenture.
On May 1, 1991, Delta issued $10,000,000 of 9% Debentures that mature
in April, 2011. Each holder may require redemption of up to $25,000 of
the 9% Debentures annually, subject to an annual aggregate limitation of
$500,000. Such redemption will also be made on behalf of deceased holders
within sixty days of notice, subject to the annual aggregate $500,000
limitation. The 9% Debentures can be redeemed by the Company beginning in
April, 1996 at a 5% premium, such premium declining ratably until it
ceases in April, 2001. The Company may not assume any additional mortgage
indebtedness in excess of $1 million without effectively securing the
9% Debentures equally to such additional indebtedness.
Debt issuance expenses are deferred and amortized over the terms of
the related debt. Call premium in 1994 of approximately $475,000 was
deferred and is being amortized over the term of the related debt
consistent with regulatory treatment. A capital lease of computer
equipment, entered into during June, 1995, requires principal payments
of approximately $57,700 in 1996, $66,000 in 1997 and $75,200 in 1998.
(6) Commitments and Contingencies:
The Company has entered into individual employment agreements with its
five officers. The agreements expire or may be terminated at various
times. The agreements provide for continuing monthly payments or lump
sum payments and continuation of certain benefits over varying periods in
the event employment is altered or terminated following certain changes
in ownership of the Company.
(7) Rates:
Reference is made to "Regulatory Matters" herein with respect to
rate matters.
(8) Quarterly Financial Data (Unaudited):
Earnings
Net (Loss) per
Operating Operating Income Common
Quarter Ended Revenues Income (Loss) Share(a)
Fiscal 1995
September 30 $ 3,634,262 $ (45,141) $ (633,058) $ (.34)
December 31 7,131,698 822,241 228,119 .12
March 31 14,903,281 2,842,418 2,255,994 1.22
June 30 6,175,098 635,570 66,680 .04
Fiscal 1994
September 30 $ 3,585,499 $ 11,056 $ (542,285) $ (.33)
December 31 7,814,638 1,117,871 578,448 .32
March 31 16,494,674 3,270,274 2,713,563 1.48
June 30 6,952,130 451,472 (78,725) (.04)
______________________________________________________________
(a) Quarterly earnings per share may not equal annual earnings per share
due to changes in shares outstanding.
<TABLE>
SCHEDULE II
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY
COMPANIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JUNE 30, 1995, 1994 AND 1993
<CAPTION>
Column A Column B Column C Column D Column E
Additions
Balance Charged to Deductions
at Charged to Other Amounts Balance
Beginning Costs and Accounts- Charged Off at End
Description of Period Expenses Recoveries or Paid of Period
<S> <C> <C> <C> <C> <C>
Deducted From the Asset to
Which it Applies - Allowance
for doubtful accounts for
the years ended:
June 30, 1995 $ 131,324 $ 140,800 $ 24,449 $ 214,965 $ 81,608
June 30, 1994 $ 208,182 $ 100,800 $ 25,906 $ 203,564 $ 131,324
June 30, 1993 $ 208,212 $ 100,800 $ 20,018 $ 120,848 $ 208,182
</TABLE>
AMENDED AND RESTATED
BY-LAWS
OF
DELTA NATURAL GAS COMPANY, INC.
ARTICLE I
Offices and Registered Agent
1.1 Principal Office. The principal office of the Corporation shall be
located at 3617 Lexington Road, Winchester, Kentucky 40391. The Corporation
may have such other offices, either within or without the Commonwealth of
Kentucky, as the business of the Corporation may require from time to time.
1.2 Registered Office. The registered office of the Corporation shall
be at 3617 Lexington Road, Winchester, Kentucky 40391. The address of the
registered office may be changed from time to time by the Board of Directors.
1.3. Registered Agent. The registered agent for the Corporation shall
be the Secretary of the Corporation.
ARTICLE II
Shareholders
2.1 Annual Meetings. The annual meeting of the shareholders shall be
held at the principal office of the Corporation on the third Thursday in
November of each year, at such time as the President may designate. The
Board of Directors of the Corporation, by resolution, may for any year change
the place, date and time for any annual meeting from that established by the
first sentence of this Section 2.1 of ARTICLE II. The purpose of such annual
meetings shall be the election of directors and such other business as may
properly come before it. If the election of directors shall not be held on
the day designated for the annual meeting, or at any adjournment thereof, the
Board of Directors shall cause the election to be held at a special meeting
of the shareholders as soon thereafter as may be practicable.
2.2 Special Meetings. Special meetings of the shareholders may be
called by the President, a majority of the members of the Board of Directors
or the holders of at least thirty-three and one-third percent (33 1/3%) of
all the votes entitled to be cast on any issue proposed to be considered at
the proposed special meeting, provided, however, that such call by such
holders shall be subject to all requirements of Kentucky law.
2.3 Place of Special Meetings. The President or the Board of Directors
may designate any place within or without the Commonwealth of Kentucky as the
place for any special meeting. If no designation is properly made, or if a
special meeting be otherwise called, the place of meeting shall be at the
registered office of the Corporation in the Commonwealth of Kentucky.
2.4 Notice of Annual or Special Meeting. Written or printed notice
stating the place, day and hour of the annual or special meeting and, in case
of a special meeting, the purpose or purposes for which the meeting is
called, shall be delivered not less than ten (10) days nor more than sixty
(60) days before the date of the meeting, either personally or by mail, by or
at the direction of the President, the Secretary or the officer or persons
calling the meeting, to each shareholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail in a sealed envelope addressed to the
shareholder at his or her address as it appears on the stock transfer books
of the Corporation, with postage thereon prepaid.
2.5 Fixing of a Record Date. The Board of Directors may fix a record
date in order to determine the shareholders entitled to receive dividends or
distributions, to notice of a shareholders' meeting, to demand a special
meeting, to vote or to take any other action or receive any allotment of
rights. A record date fixed by the Board of Directors shall not be more than
seventy (70) days before the meeting or action requiring a determination of
shareholders. In the event no record date is fixed by the Board of
Directors, the record date shall be determined pursuant to Kentucky law.
2.6 Quorum and Voting Requirements. Unless the Corporation's Articles
of Incorporation or Kentucky law requires otherwise, a majority of the votes
entitled to be cast on the matter by the voting group shall constitute a
quorum for action on any matter. If a quorum exists, action on a matter
(other than the election of directors) by a voting group shall be approved if
the votes cast within the voting group favoring the action exceed the votes
cast opposing the action, unless the Corporation's Articles of Incorporation
or Kentucky law requires a greater number of affirmative votes.
2.7 Proxies.
(a) A shareholder may vote his or her shares in person or by
proxy.
(b) A shareholder may appoint a proxy to vote or otherwise act for
him or her by signing an appointment form, either personally or by his or her
attorney in fact. A telegram or cablegram appearing to have been transmitted
by the proper person, or a photographic, photostatic or equivalent
reproduction of a writing appointing a proxy shall be deemed to be a
sufficient signed appointment form.
(c) An appointment of a proxy shall be effective when the
appointment form is received by the secretary or other officer or agent
authorized to tabulate votes. An appointment shall be valid for eleven (11)
months unless a longer period is expressly provided in the appointment form.
(d) An appointment of a proxy shall be revocable by the
shareholder unless the appointment form conspicuously stated that it is
irrevocable and the appointment is coupled with an interest.
2.8 Voting of Shares. Subject to the provisions of Section 2.9 hereof,
each outstanding share of common stock authorized by the Corporation's
Articles of Incorporation to have voting power shall be entitled to one vote
upon each matter submitted to a vote at a meeting of shareholders. The
voting rights, if any, of classes of shares other than voting common stock
shall be as set forth in the Corporation's Articles of Incorporation or by
appropriate legal action of the Board of Directors.
2.9 Cumulative Voting. At each election for directors, each
shareholder entitled to vote at such election shall have the right to cast,
in person or by proxy, as many votes in the aggregate as he or she shall be
entitled to vote under the Corporation's Articles of Incorporation,
multiplied by the number of directors to be elected at such election, and
each shareholder may cast the whole number of votes for one candidate or
distribute such votes among two or more candidates. Directors shall not be
elected in any other manner.
2.10 Informal Action by Shareholders. Any action required to be taken,
or which may be taken, at a meeting of the shareholders may be taken without
a meeting if a consent in writing setting forth the action so taken shall be
signed by all of the shareholders entitled to vote with respect to the
subject matter thereof.
ARTICLE III
Directors
3.1 General Powers. All corporate powers shall be exercised by or
under the authority of and the business affairs of the Corporation managed
under the direction of the Board of Directors.
3.2 Number, Tenure and Qualifications. The number of directors of the
Corporation shall be eight (8). The Board of Directors shall be divided into
three (3) classes, with each class as nearly equal as possible. Each
director shall hold office for the term for which he or she is elected or
until his or her successor has been elected and qualified, whichever period
is longer.
3.3 Removal and Resignations. At a meeting of shareholders called
expressly for that purpose, any director may be removed for cause by a vote
of the holders of a majority of the shares then entitled to vote at an
election of directors. Removal without cause may occur only as set forth in
the Articles of Incorporation. Notwithstanding the provisions of this
Section, no director may be removed, with or without cause, if the number of
votes sufficient to elect him or her under cumulative voting is voted against
his or her removal. Any member of the Board of Directors may resign from the
Board of Directors at any time by giving written notice to the President or
Secretary of the Corporation, or to any other person or entity specified by
Kentucky law, and unless otherwise specified in such notice, resignation
shall be effective upon delivery of such notice and shall not require,
acceptance to make it effective.
3.4 Regular Meetings. A regular, annual meeting of the Board of
Directors shall be held immediately after, and at the same place as, the
annual meeting of shareholders. The Board of Directors may provide by
resolution the time and place, either within or without the Commonwealth of
Kentucky, for the holding of up to 12 additional regular meetings in the
following twelve (12) month period without other notice than such resolution.
3.5 Special Meetings. Special meetings of the Board of Directors may
be called by or at the request of the President or any two directors. All
special meetings of the Board of Directors shall be held at the principal
office of the Corporation or such other place as may be specified in the
notice of the meeting.
3.6 Notice. Notice of any special meeting shall be given at least
twelve (12) hours prior thereto by written notice delivered personally or
mailed to each director at his or her business address or by telephone to
each director personally. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail in a sealed envelope so
addressed, postage prepaid. Any director may waive in writing notice of any
meeting. The attendance of a director at any meeting shall constitute a
waiver of notice of such meeting, unless the director at the beginning of the
meeting (or promptly upon his or her arrival) objects to holding the meeting
or transacting business at the meeting and does not thereafter vote for or
assent to action taken at the meeting. Neither the business to be transacted
at, nor the purpose of, any regular or special meeting of the Board of
Directors need be specified in the notice or waiver of notice of such
meeting.
3.7. Quorum. A majority of the number of directors fixed by, or
determined in accordance with, Section 3.2 hereof shall constitute a quorum
for the transaction of business at any meeting of the Board of Directors.
3.8 Manner of Acting. The act of the majority of the directors present
at a meeting at which a quorum is present shall be the act of the Board of
Directors, unless otherwise required by the Articles of Incorporation.
3.9 Vacancies. Any vacancy occurring in the Board of Directors may be
filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the Board of Directors. A director elected to
fill a vacancy shall be elected for the unexpired term of his or her
predecessor in office. Any directorship to be filled by reason of an
increase in the number of directors may be filled by the Board of Directors
for a term of office continuing until the next election of directors by the
shareholders.
3.10 Compensation. Each director shall be compensated in accordance
with compensation guidelines established by the Board of Directors. No such
payment shall preclude any director from serving the Corporation in any other
capacity and receiving compensation there for.
3.11 Action by Written Consent. Any action required or permitted to he
or she taken by the Board of Directors at a meeting may be taken without a
meeting, if a consent in writing setting forth the action so taken shall be
signed by all of the directors.
3.12 Chairman and Vice-Chairman of the Board. The Board of Directors
may appoint one of its members Chairman of the Board of Directors. The Board
of Directors may also appoint one of its members as Vice-Chairman of the
Board of Directors, and such individual shall serve in the absence of the
Chairman and perform such additional duties as may be assigned to him or her
by the Board of Directors.
ARTICLE IV
Officers
4.1 Classes. The officers of the Corporation shall be a President, one
or more Vice-Presidents, a Secretary, a Treasurer, each of whom shall be
elected by the Board of Directors. Such other officers and assistant
officers as may be deemed necessary may be elected or appointed by the Board
of Directors.
4.2 Election and Term of Office. The officers of the Corporation shall
be elected by the Board of Directors at each regular, annual meeting of the
Board of Directors. If the election of officers shall not be held at any
such meeting, such election shall be held as soon thereafter as is
convenient. Vacancies may be filled or new offices created and filled at any
meeting of the Board of Directors. Each officer shall hold office until his
or her successor shall have been duly elected and shall have qualified or
until his or her death or until he or she shall resign or shall have been
removed in the manner hereinafter provided.
4.3 Removal and Resignations. Any officer or agent elected or
appointed by the Board of Directors may be removed by the Board of Directors,
with or without cause, whenever, in its judgment, the best interests of the
Corporation would be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed. Election
or appointment of an officer or agent shall not of itself create contract
rights. Any officer of the corporation may resign at any time by delivering
notice to the President or Secretary of the Corporation, and unless otherwise
specified therein, the acceptance of such resignation shall not be necessary
to make it effective. An officer's resignation shall not affect the
Corporation's contract rights, if any, with the officer.
4.4 Vacancies. A vacancy in any office because of death, resignation,
removal, disqualification or otherwise may be filled by the Board of
Directors for the unexpired portion of the term.
4.5 President. The President shall be the chief executive officer of
the corporation. If no chairman or vice-chairman has been appointed or, in
the absence of both, he or she shall preside at all meetings of the
shareholders and of the Board of Directors. He or she may sign certificates
for shares of the Corporation, any deeds, mortgages, bonds, contracts or
other instruments which the Board of Directors has authorized to be executed,
except in cases where the signing and execution thereof shall be expressly
delegated by the Board of Directors or by these By-Laws to some other officer
or agent of the Corporation, or shall be required by law to be otherwise
signed or executed. The President, in general, shall perform all duties
incident to the office of President and chief executive officer and such
other duties as may be prescribed by the Board of Directors from time to
time. Unless otherwise ordered by the Board of Directors, the President
shall have full power and authority on behalf of the Corporation to attend,
act and vote at any meetings of shareholders of any corporation in which the
Corporation may hold stock, and at any such meeting, shall hold and may
exercise all rights incident to the ownership of such stock which the
Corporation, as owner, might have had and exercised if present. The Board of
Directors may confer like powers on any other person or persons.
4.6 Vice-President. In the absence of the President, or in the event
of his or her inability or refusal to act, the Vice Presidents in order
designated at the time of their election or otherwise by the Board of
Directors shall perform the duties of the President, and when so acting,
shall have all the powers of and be subject to the restrictions upon the
President. Any Vice-President may sign, with the Secretary or an assistant
secretary, certificates for shares of the corporation and shall perform such
other duties as from time to time may be assigned by the President or by the
Board of Directors.
4.7 Treasurer. The Treasurer shall be the chief financial officer of
the Corporation. He or she shall have charge and custody of and be
responsible for all funds and securities of the Corporation, receive and give
receipts for monies due and payable to the Corporation from any source
whatsoever, deposit all such monies in the name of the Corporation in such
banks, trust companies and other depositories as shall be selected in accord
ance with the Provisions of Article V of these By-Laws and, in general,
perform all the duties incident to the office of Treasurer and such other
duties as from time to time may be assigned to him or her by the President or
the Board of Directors. If required by the Board of Directors, the Treasurer
shall give a bond for the faithful discharge of his or her duties in such sum
and with such surety or sureties as the Board of Directors shall determine.
4.8 Secretary. The Secretary shall (a) prepare and keep the minutes of
the shareholders' meetings and of the Board of Directors' meetings in one or
more books provided for that purpose; (b) see that all notices are duly given
in accordance with the provisions of these By-Laws or as required by law; (c)
be custodian of the corporate records and of the seal, if any, of the
Corporation; (d) keep a register of the Post Office address of each
shareholder; (e) sign with the President or Vice-President certificates for
shares of stock of the Corporation; (f) have general charge of the stock
transfer books of the Corporation; (g) have responsibility for authenticating
records of the Corporation; and, (h) in general, perform all duties incident
to the office of Secretary and such other duties as from time to time may be
assigned to him or her by the President or by the Board of Directors.
4.9 Compensation. The compensation of the officers of the Corporation
shall be fixed from time to time by the Board of Directors, and no officer
shall be prevented from receiving such compensation by reason of the fact
that he or she is also a director of the Corporation.
ARTICLE V
Contracts, Loans, Checks
and Deposits
5.1 Contracts. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract and execute and deliver
any instruments in the name of and on behalf of the Corporation. Such
authority may be general or confined to specific instances.
5.2 Loans. No loans shall be contracted or evidence of indebtedness
issued on behalf of the Corporation unless authorized by the President or by
a resolution of the Board of Directors. Such authority may be general or
confined to specific instances.
5.3 Deposits, Checks, Drafts, Etc. All funds of the Corporation not
otherwise employed shall be deposited, from time to time, to the credit of
the Corporation in such banks, trust companies and other depositories
selected by the Board of Directors or any two of the President, a Vice
President or Treasurer. All checks, drafts, electronic fund transfers, wire
transfers or other orders for the payment of money, notes or other evidences
of indebtedness issued in the name of the Corporation shall be signed or
otherwise authorized by such officer or officers, employee or employees, or
agent or agents of the Corporation and in such manner as shall, from time to
time, be determined by resolution of the Board of Directors or any two of the
President, a Vice President or Treasurer.
ARTICLE VI
Certificates for Shares and
Their Transfer
6.1 Certificates for Shares. Certificates representing shares of the
Corporation shall be in such form as may be determined by the Board of
Directors and by the laws of the Commonwealth of Kentucky. Such certificates
shall be signed by the President or a Vice-President and by the Secretary or
an assistant secretary, and may be sealed with the seal of the Corporation,
or a facsimile thereof. The signature of such officers upon such
certificates may be facsimiles if the certificate is manually signed on
behalf of a transfer agent or registrar for the Corporation. All
certificates for shares shall be consecutively numbered. The name of the
person owning the shares represented thereby, with the number of shares and
date of issue, shall be entered on the books of the Corporation. All
certificates surrendered to the Corporation for transfer shall be cancelled,
and no new certificates shall be issued until the former certificates for a
like number of shares shall have been surrendered and cancelled, except that,
in case of a lost, destroyed or mutilated certificate, a new one may be
issued therefor upon such terms and indemnity to the Corporation as the
Secretary may prescribe.
6.2 Transfer of Shares. Transfer of shares of the Corporation shall be
made only on the books of the Corporation by the registered holder thereof,
or by his or her legal representative who shall furnish proper evidence of
authority to transfer, or by his or her attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary of the
Corporation, and on surrender for cancellation of the certificate for such
shares. The person in whose name shares stand on the books of the
Corporation shall be deemed the owner thereof for all purposes as regards the
Corporation.
ARTICLE VII
INDEMNIFICATION
7.1 Definitions. As used in this Article VII:
(a) "Proceeding" means any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, and whether formal or informal;
(b) "Party" includes a person who was, is or is threatened to be
made a named defendant or respondent in a Proceeding;
(c) "Expenses" include attorneys fees;
(d) "Officer" means any person serving as Chairman of the Board of
Directors, President, Vice-President, Treasurer, Secretary or Assistant
Secretary of the Corporation;
(e) "Director" means an individual who is or was a director of the
Corporation or an individual who, while a director of the Corporation, is or
was serving at the request of the Corporation as a Director, Officer,
Partner, Trustee, Employee or Agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise. A Director shall be considered serving an employee benefit
plan at the request of the Corporation if his or her duties to the
Corporation also impose duties on, or otherwise involve services by, him or
her to the plan or to participants in or beneficiaries of the plan.
"Director" includes, unless the context requires otherwise, the estate or
personal representative of a director.
7.2 Indemnification by Corporation.
(a) The Corporation shall indemnify any Officer or Director who is made
a Party to any Proceeding by reason of the fact that such person is or was an
Officer or Director if:
(1) Such Officer or Director conducted himself or herself in
good faith; and
(2) Such Officer or Director reasonably believed:
(i) In the case of conduct in his or her
official capacity with the Corporation, that his or her
conduct was in the best interest of the Corporation; and
(ii) In all other cases, that his or her
conduct was at least not opposed to the best interest of
the Corporation; and
(3) In the case of any criminal Proceeding, he or she had no
reasonable cause to believe his or her conduct was unlawful.
(b) A Director's conduct with respect to an employee benefit plan for a
purpose he or she reasonably believes to be in the interest of the
participants in and beneficiaries of the plan shall be conduct that satisfies
the requirement of Section 7.2 (a)(2)(ii) of these By-Laws.
(c) Indemnification shall be made against judgments, penalties, fines,
settlements and reasonable expenses, including legal expenses, actually
incurred by such Officer or Director in connection with a Proceeding, except
that if the Proceeding was by or in the right of the Corporation,
indemnification shall be made only against such reasonable expenses and shall
not be made in respect of any Proceeding in which the Officer or Director
shall have been adjudged to be liable to the Corporation. The termination of
any Proceeding by judgment, order, settlement, conviction or upon a plea of
nolo contendere or its equivalent, shall not, by itself, be determinative
that the Officer or Director did not meet the requisite standard of conduct
set forth in this Section 7.2.
(d) (1) Reasonable expenses incurred by an Officer or Director as
a Party to a Proceeding with respect to which indemnity is to be
provided under this Section 7.2 shall be paid or reimbursed by the
Corporation in advance of the final disposition of such Proceeding
provided:
(i) The Corporation receives (I) a written
affirmation by the Officer or Director of his or her good
faith belief that he or she has met the requisite
standard of conduct set forth in this Section 7.2, and
(II) the Corporation receives a written undertaking by or
on behalf of the Officer or Director to repay such amount
if it shall ultimately be determined that he or she has
not met such standard of conduct; and
(ii) The Corporation's Board of Directors (or
other appropriate decisionmaker for the Corporation)
determines that the facts then known to the Board of
Directors (or decisionmaker) would not preclude
indemnification under Kentucky law.
(2) The undertaking required herein shall be an unlimited
general obligation of the Officer or Director but shall not require
any security and shall be accepted without reference to the
financial ability of the Officer or Director to make repayment.
(3) Determinations and authorizations of payments under this
Section 7.2(d) shall be made in the manner specified in Section
7.2(e) of these By-Laws.
(e) (1) The Corporation shall not indemnify an Officer or
Director under this Section 7.2 unless authorized in the specific
case after a determination has been made that indemnification of
the Officer or Director is permissible in the circumstances because
he or she has met the standard of conduct set forth in this Section
7.2.
(2) Such determination shall be made:
(i) By the Corporation's Board of Directors by
majority vote of a quorum consisting of directors not at
the time Parties to the Proceeding;
(ii) If a quorum cannot be obtained under
Section 7.2(e)(2)(i), by majority vote of a committee
duly designated by the Corporation's Board of Directors
(in which designation directors who are Parties may
participate), consisting solely of two (2) or more
directors not at the time Parties to the Proceeding; or
(iii) By special legal counsel:
(I) Selected by Corporation's Board of
Directors or its committee in the manner prescribed in
Sections 7.2(e)(2)(i) and (ii); or
(II) If a quorum of the Board of Directors
cannot be obtained under Section 7.2(e)(2)(i) and a
committee cannot be designated under Section
7.2(e)(2)(ii), selected by a majority vote of the full
Board of Directors (in which selection directors who are
Parties may participate); or
(3) Authorization of indemnification and evaluation as to
reasonableness of expenses shall be made in the same manner as the
determination that indemnification is permissible, except that if
the determination is made by special legal counsel, authorization
of indemnification and evaluation as to reasonableness of expenses
shall be made by those entitled under Section 7.2(e)(2)(iii) to
select counsel.
7.3 Further Indemnification. Notwithstanding any limitation imposed by
Section 7.2 or elsewhere and in addition to the indemnification set forth in
Section 7.2, the Corporation, to the full extent permitted by law, may agree
by contract or otherwise to indemnify any Officer or Director and hold him or
her harmless against any judgments, penalties, fines, settlements and reason
able expenses actually incurred or reasonably anticipated in connection with
any Proceeding in which any Officer or Director is a Party, provided the
Officer or Director was made a Party to such Proceeding by reason of the fact
that he or she is or was an Officer or Director of the Corporation or by
reason of any inaction, nondisclosure, action or statement made, taken or
omitted by or on behalf of the Officer or Director with respect to the
Corporation or by or on behalf of the Officer or Director in his or her
capacity as an Officer or Director.
7.4 Insurance. The Corporation may, in the discretion of the Board of
Directors, purchase and maintain or cause to be purchased and maintained
insurance on behalf of all Officers and Directors against any liability
asserted against them or incurred by them in their capacity or arising out of
their status as an Officer or Director, to the extent such insurance is
reasonably available. Such insurance shall provide such coverage for the
Officers and Directors as the Board of Directors may deem appropriate.
ARTICLE VIII
Miscellaneous
8.1 Amendments. The Board of Directors shall have the power and
authority to alter, amend or repeal By-Laws of the Corporation, subject
always to the power of the shareholders under Kentucky law to change or
repeal such By-Laws.
8.2 Fiscal Year. The Board of Directors shall have the power to fix,
and from time to time change, the fiscal year of the Corporation. The fiscal
year of the Corporation shall begin on the first day of July and end on the
thirtieth day of June of each year.
8.3 Dividends. The Board of Directors may, from time to time, make
distributions to shareholders in the manner and upon the terms and conditions
provided by Kentucky law and its Articles of Incorporation.
8.4 Seal. The Board of Directors may adopt a corporate seal.
8.5 Waiver of Notice. Whenever any notice is required to be given or
delivered under the provisions of these By-Laws, or under the provisions of
the Corporation's Articles of Incorporation, or under the provisions of the
corporation laws of the Commonwealth of Kentucky, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether
before or after the time state, therein, shall be equivalent to the delivery
or giving of such notice.
8.6 Construction. Unless the context specifically requires otherwise,
any reference in these By-Laws to any gender shall include all other genders;
any reference to the singular shall include the plural; and any reference to
the plural shall include the singular.
THE ABOVE
AMENDED AND RESTATED BY-LAWS OF THIS
CORPORATION WERE ADOPTED BY THE BOARD OF
DIRECTORS AT A MEETING HELD
AUGUST 17, 1995
/s/John F. Hall_______________
JOHN F. HALL, SECRETARY
Exhibit 10(m)
OFFICER AGREEMENT
THIS AGREEMENT (the "Agreement"), made and entered as of the 31st day of
May, 1995, by and between DELTA NATURAL GAS COMPANY, INC., a Kentucky
corporation ("Delta"), and GLENN R. JENNINGS ("Officer");
W I T N E S S E T H:
THAT, WHEREAS, Officer has been employed by Delta in positions Of great
responsibility; and
WHEREAS, Officer has contributed, and, if he remains an executive
officer of Delta, it is anticipated that he will continue to contribute, to
the welfare of Delta, its shareholders and customers; and
WHEREAS, Delta desires to employ Officer and Officer desires to be so
employed; and
WHEREAS, Delta desires to retain the services of Officer and provide
continuity of management of Delta in the event of a Change of Control (as
hereinafter defined) of Delta; and
WHEREAS, Officer is willing to remain in the employ of Delta following a
Change of Control thereof on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter set forth, the parties hereto do hereby agree as follows:
1. Employment.
(a) Delta agrees to continue to employ Officer and Officer agrees
to be so employed in the capacity of President and Chief Executive Officer
from the date hereof until November 30, 2000, and from year to year
thereafter unless, at least thirty days preceding November 30, 2000, or
November 30th of any succeeding year, written Notice of Termination (as
hereinafter defined) is given by Delta to Officer or by Officer to Delta, as
the case may be.
(b) Officer shall have such responsibilities and authority as may
from time to time be assigned to him by Delta's Board of Directors, provided
that such authority shall be reasonably similar to the duties traditionally
associated with the positions of president and chief executive officer in
companies similar-in size and operations to Delta.
2. Compensation and Related Matters.
(a) Salary. During the period of Officer's employment hereunder,
Delta shall pay to Officer salary at a rate of not less than $136,000.00 per
annum in equal semi-monthly installments. This salary may be increased from
time to time in accordance with normal business practices of Delta and, if so
increased, shall not thereafter during the term of this Agreement be
decreased. Compensation of Officer by salary payments shall not be deemed
exclusive and shall not prevent Officer from participating in any other
compensation or benefit plans of Delta. The salary payments (including any
increased salary payments) hereunder shall not in any way limit or reduce any
other obligation of Delta hereunder, and no other compensation, benefit or
payment hereunder shall in any way limit or reduce the obligation of Delta to
pay Officer's salary hereunder.
(b) Expenses. During the term of the Officer's employment
hereunder, Officer shall be entitled to receive prompt reimbursement for all
reasonable expenses incurred by Officer in performing services hereunder,
including all expenses of travel and living expenses while away from home on
business or at the request of and in the service of Delta, provided that such
expenses are incurred and accounted for in accordance with the policies and
procedures established by Delta.
(c) Other Benefits. Delta shall maintain in full force and
effect, and Officer shall be entitled to continue to participate in, all of
its employee benefit plans and arrangements in effect on the date hereof in
which Officer participates or plans or arrangements providing Officer with at
least equivalent benefits thereunder (including without limitation each
pension and retirement plan and arrangement, stock option plan, life
insurance and health-and-accident plan and arrangement, medical insurance
plan, disability plan and vacation plan). Delta shall not make any changes
in such plans or arrangements which would adversely affect Officer's rights
or benefits thereunder, unless such change occurs pursuant to a program
applicable to all executives of Delta and does not result in a
proportionately greater reduction in the rights of or benefits to Officer as
compared with any other executive of Delta. Officer shall be entitled to
participate in or receive benefits under any employee benefit plan or
arrangement made available by Delta in the future to its executives and key
management employees, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans and arrangements.
Nothing paid to Officer under any plan or arrangement presently in effect or
made available in the future shall be deemed to be in lieu of the salary
payable to Officer pursuant to Paragraph 2(a). Any payments or benefits
payable to Officer hereunder in respect of any calendar year during which
Officer is employed by Delta for less than the entire such year
shall, unless otherwise provided in the applicable plan or arrangement, be
prorated in accordance with the number of days in such calendar year during
which he is so employed.
(d) Vacations. Officer shall be entitled to the number of
vacation days in each calendar year, and to compensation in respect of earned
but unused vacation days, determined in accordance with Delta's vacation
policy. Officer shall also be entitled to all paid holidays given by Delta
to its executives.
(e) Services Furnished. Delta shall furnish Officer with office
space, stenographic assistance and such other facilities and services as
shall be suitable to Officer's position and adequate for the performance of
his duties as set forth herein.
(f) Loan. It is acknowledged and agreed that, as of the date of
this Agreement, Officer is indebted to Delta in the amount of $132,000.00
(the "Loan"), which amount is comprised of the outstanding balance of
$63,000.00 on a previous loan by Delta to Officer plus the additional sum of
$69,000.00 loaned by Delta to Officer on the date of this Agreement. The
Loan shall be repaid by Officer to Delta in accordance with the following
terms and conditions:
(i) So long as Officer shall remain an employee of Delta in
any capacity, Delta shall forgive $2,000.00 of the outstanding principal
amount of the Loan for each month of service completed by Officer after the
date of this Agreement. With the express approval of Delta's Board of
Directors, Delta may forgive additional amounts of the Loan at any time.
(ii) In the event of termination of Officer's employment
hereunder either (A) by Delta other than as permitted by and provided in
Paragraph 1(a), due to Officer's death as provided in Paragraph 3(a), due to
Officer's disability as provided in Paragraph 3(b) or for Cause (as
hereinafter defined) as provided in Paragraph 3(c), or (B) by Officer
following a Change in Control pursuant to Paragraph 3(d) hereof, then Delta
shall forgive and Officer shall be relieved of liability for repayment of the
entire unpaid principal balance of and all accrued interest on the Loan then
outstanding.
(iii) In the event Officer ceases to be an employee of Delta
for any reason or under any circumstances whatsoever other than a reason or
circumstance that would obligate Delta to forgive and entitle Officer to be
relieved of liability for repayment of the Loan as provided above in
Paragraph 2(f)(ii) (a "Cessation of Employment"):
(A) Delta's forgiveness of the Loan as provided above in
Paragraph 2(f)(i) shall cease as of the month during which the Cessation of
Employment occurs and there shall be no further forgiveness of any remaining
principal amount of the Loan following such month.
(B) The entire unpaid principal amount of the Loan shall
become due and payable and shall be paid by Officer on a date (the "Payment
Date") selected by Officer; provided, however, that in no event shall such
Payment Date selected by Officer be later than six months after the date on
which the Cessation of Employment occurred. The Officer shall select and
give Delta written notice of the Payment Date within thirty days following
the date the Cessation of Employment occurred.
(C) During the time period between the Cessation of
Employment and the Payment Date, the Officer shall make no payment with
respect to the unpaid principal amount of the Loan but shall continue to pay
interest thereon at the rate and on the terms hereinafter set forth.
(iv) Officer shall pay interest on the outstanding principal
balance of the Loan at a rate of 8% per annum. Such interest shall be paid
on or about the last day of each month during which such Loan or any part
thereof is outstanding (the "Due Date"), beginning on June 30, 1995. Such
payments of interest shall continue until the Loan is entirely forgiven or
entirely paid in accordance with the terms and provisions of this Paragraph
2(f). Notwithstanding the foregoing, in the event a Condition of Default (as
hereinafter defined) occurs, interest shall thereafter accrue and be paid at
a rate of 8% per annum on any due and unpaid interest until such time as the
entire amount of principal of and interest on the Loan is paid to Delta as
hereinafter provided.
(v) (A) In the event that Officer has not paid the full
amount of any monthly interest by the Due Date, as provided above, Delta may
at any time following such Due Date provide notice to Officer (the "Notice of
Non-payment") stating that such interest is due and unpaid. Such Notice of
Non-payment shall also state that the failure to pay such due and unpaid
interest within fifteen days of the date of such Notice of Non-payment shall
constitute a Condition of Default.
(B) Failure by Officer to pay such due and unpaid
interest within the fifteen days following such Notice of Non-payment, or
failure by Officer to perform any other obligation to which he is subject
pursuant to the provisions of this Paragraph 2(f) within fifteen days
following written notice from Delta to Officer specifying the nature of such
nonperformance and demanding that Officer perform same, shall constitute a
"Condition of Default". Upon the occurrence of a Condition of Default, the
entire unpaid principal amount of and all unpaid interest on the Loan
automatically shall be accelerated and become immediately due and payable in
full by Officer to Delta, without the requirement of any further notice from
Delta.
(vi) (A) Simultaneously with the execution of this Agreement,
Officer shall grant Delta a first and prior mortgage on that certain real
property located at 9 Fairway Drive, Berea, Kentucky (the "Property"), to
secure payment of the Loan. Said mortgage shall be in form and substance
satisfactory to Delta in its sole discretion. Officer agrees to provide
Delta, no later than thirty days after the date of this Agreement, with an
opinion of title from an attorney chosen by Officer, but acceptable to Delta
in its sole discretion, certifying that the Property is owned in fee simple
by Officer, subject only to Delta's mortgage lien hereinabove described and
the prior mortgage to Delta dated June 1, 1992, of record in Mortgage Book
394, Page 166, in the Office of the Madison County Court Clerk. Such prior
mortgage to Delta shall be released provided that the mortgage lien granted
to Delta simultaneously herewith will constitute a first and prior lien on
the Property upon the recording of such release.
(B) In the event that Officer sells, transfers or
assigns the Property or any part thereof, Delta agrees to release its
mortgage lien on the Property provided that Officer grants Delta a first and
prior mortgage on other real property (the "Substitute Property") with an
appraised value at least equal to the principal amount of the Loan then
outstanding. It shall be the obligation of Officer to provide an appraisal
of the Substitute Property reasonably satisfactory to Delta. The form and
substance of any such appraisal of the Substitute Property and the appraiser
selected by Officer to make such appraisal shall all be subject to the
approval of Delta in its reasonable discretion. Officer shall also be
obligated to provide Delta with an opinion of title from an attorney chosen
by Officer, but acceptable to Delta in its sole discretion, certifying that
the Substitute Property is owned in fee simple by Officer, subject only to
Delta's mortgage lien hereinabove described.
(C) The Officer shall be responsible for paying all
fees, costs and expenses of preparing, recording and releasing any such
mortgage(s) and of obtaining such title opinion(s) and any such appraisal(s).
3. Termination.
Except as otherwise provided above in Paragraph 1(a) hereof, Officer's
employment hereunder may be terminated without any breach of this Agreement
only under the following circumstances:
(a) Death. Officer's employment hereunder shall terminate upon
his death.
(b) Disability. If, as a result of Officer's incapacity due to
physical or mental illness, Officer shall have been absent from his duties
hereunder on a full-time basis for the entire period of six consecutive
months, and within thirty days after Delta gives Officer written notice of
Delta's intention to terminate Officer's employment pursuant to this
Paragraph 3(b) (which notice may be given before or after the end of such six
month period) Officer shall not have returned to the performance of his
duties hereunder on a full-time basis, Delta may terminate Officer's
employment hereunder.
(c) Cause. Delta may terminate Officer's employment hereunder for
Cause. For purposes of this Paragraph 3(c):
(i) Delta shall have "Cause" to terminate Officer's
employment hereunder only upon (A) the willful and continued failure by
Officer to substantially perform his duties hereunder, after written demand
for substantial performance is delivered by Delta that specifically
identifies the manner in which Delta believes Officer has not substantially
performed his duties, or (B) the willful engaging by Officer in misconduct
which is materially injurious to Delta, monetarily or otherwise.
(ii) No act or failure to act on Officer's part shall be
considered "willful" unless done, or omitted to be done, by him not in good
faith and without reasonable belief that his action or omission was in the
best interest of Delta.
(iii) Notwithstanding the foregoing, Officer shall not be
deemed to have been terminated for Cause without (A) reasonable notice to
Officer setting forth the reasons for Delta's intention to terminate for
Cause, (B) an opportunity for Officer, together with counsel, to be heard
before the Board of Directors of Delta, and (C) delivery to Officer of a
Notice of Termination as defined in Paragraph 3(e) hereof.
(d) Termination by Officer. Following a Change of Control,
Officer may terminate his employment hereunder if Officer determines in good
faith, but otherwise in his sole and absolute discretion, that, as a result
of the Change in Control, either (i) his continued employment with Delta is
not in the best interests of Delta or (ii) he is unable effectively to carry
out his duties and responsibilities as contemplated hereby. As used herein,
"Change of Control" means a change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934, as
amended and in effect on the date hereof (the "Exchange Act"), provided that,
without limitation, such a Change of Control shall be deemed to have occurred
if and when any "person" (as that term is used in Sections 13(d) and 14(d) of
the Exchange Act) becomes a beneficial owner directly or indirectly of
securities of Delta representing 20% or more of the combined voting power of
Delta's then outstanding securities.
(e) Notice of Termination. Any termination by Delta or by Officer
of Officer's employment (other than termination pursuant to Paragraph 3(a)
above) shall be communicated by written Notice of Termination to the other
party hereto. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision
in this Agreement relied upon and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of
Officer's employment under the provision so indicated.
(f) Date of Termination. "Date of Termination" shall mean: (i) if
Officer's employment is terminated pursuant to Paragraph 1(a) above, the date
such termination of Officer's employment becomes effective in accordance with
the provisions of said Paragraph 1(a); (ii) if Officer's employment is
terminated by his death, the date of his death; (iii) if Officer's employment
is terminated pursuant to Paragraph 3(b) above, the later of the date on
which the six-month period referred to in Paragraph 3(b) expires or the date
that is thirty days after the notice of intention to terminate provided for
in Paragraph 3(b) is given (provided that Officer shall not have returned to
the performance of his duties on a full-time basis prior to such date); (iv)
if Officer's employment is terminated pursuant to Paragraph 3(c) above, the
date specified in the Notice of Termination; or (v) if Officer's employment
is terminated for any other reason, the date on which a Notice of Termination
is given. Notwithstanding the foregoing provisions of this Paragraph 3(f),
if, within thirty days after any Notice of Termination is given, the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date
on which the dispute is finally determined, by mutual written agreement of
the parties, by a binding and final arbitration award or by a final judgment,
order or decree of a court of competent jurisdiction (the time for appeal
therefrom having expired and no appeal having been perfected).
4. Compensation Upon Termination.
(a) In the event of termination of Officer's employment hereunder
as permitted by and provided in Paragraph 1(a), due to Officer's death as
provided in Paragraph 3(a), due to Officer's disability as provided in
Paragraph 3(b) or for Cause as provided in Paragraph 3(c), then:
(i) Such termination shall be effective at the Date of
Termination;
(ii) All compensation to Officer provided herein shall cease
as of the Date of Termination; and
(iii) Delta's forgiveness of the Loan shall cease and Officer
shall be obligated to pay the Loan as provided above in Paragraph 2(f).
(b) In the event Delta shall terminate Officer's employment
hereunder other than pursuant to any of Paragraphs 1(a), 3(a), 3(b) or 3(c),
or in the event Officer shall terminate his employment hereunder pursuant to
Paragraph 3(d), then:
(i) Delta shall pay Officer his full salary through the Date
of Termination at the rate in effect at the time Notice of Termination is
given;
(ii) In lieu of any further salary payments to Officer for
periods subsequent to the Date of Termination, Delta shall pay as severance
pay to Officer an amount equal to the product of (A) Officer's annual salary
rate in effect as of the Date of Termination, multiplied by (B) the greater
of the number of years (including partial years) remaining in the term of
employment hereunder or the number three, such payment to be made (X) if
pursuant to Paragraph 3(d) herein, in a lump sum on or before the fifth day
following the Date of Termination, or (Y) if resulting from any other cause,
in substantially equal semi-monthly installments on the fifteenth and last
days of each month commencing with the month in which the Date of Termination
occurs and continuing for the number of consecutive semi-monthly payment
dates (including the first such date as aforesaid) equal to the product
obtained by multiplying the number of years (including partial years)
applicable under Paragraph 4(b)(ii) above by twenty-four;
(iii) If termination of Officer's employment arises out of a
breach by Delta of this Agreement, Delta shall pay all other damages to which
Officer may be entitled as a result of such breach, including damages for any
and all loss of benefits to Officer under Delta's employee benefit plans
which Officer would have received if Delta had not breached this Agreement
and if Officer's employment had continued for the full term provided in
Paragraph 1(a) hereof (including specifically, but without limitation, the
benefits which Officer would have been entitled to receive pursuant to
Delta's retirement plan, and any other supplemental retirement income plan or
arrangement had his employment continued for the full term provided in
Paragraph 1(a) hereof at the rate of compensation specified herein), and
including all legal fees and expenses incurred by him as a result of such
termination;
(iv) Delta shall forgive the entire unpaid principal amount
and accrued interest, if any, then outstanding on the Loan, as provided above
in Paragraph 2(f);
(v) Delta shall maintain in full force and effect, for the
continued benefit of Officer for the greater of the number of years
(including partial years) remaining in the term of employment hereunder or
the number three, all employee benefit plans and programs in which Officer
was entitled to participate immediately prior to the Date of Termination,
provided that Officer's continued participation is possible under the general
terms and provisions of such plans and programs. In the event that Officer's
participation in any such plan or program is barred, Delta shall arrange to
provide Officer with benefits substantially similar to those which Officer
would otherwise have been entitled to receive under such plans and programs
from which his continued participation is barred; and
(vi) Officer shall not be required to mitigate the amount of
any payment provided for in this Paragraph 4(b) by seeking other employment
or otherwise.
5. Cessation of Payments.
If, at any time while Officer is receiving payments hereunder, he
directly or indirectly owns, manages, operates, joins, controls, is employed
by or participates in the ownership, management, operation or control of, or
is connected in any manner with, any retail natural gas distribution business
(other than Delta) located, operating or conducting business or operations
within any county in which Delta's pipeline facilities are located on the
date of execution of this Agreement, then such payments shall forthwith
cease.
6. Indemnification.
(a) As used in this Paragraph 6:
(i) "Proceeding" means any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, and whether formal or informal;
(ii) "Party" includes a person who was, is or is threatened to
be made a named defendant or respondent in a Proceeding;
(iii) "expenses" include attorneys fees;
(iv) "officer" means any person serving as Chief
Executive Officer, Chairman of the Board of Directors, President,
Vice-President, Treasurer, Secretary or Controller of Delta or Subsidiary (as
hereinafter defined);
(v) "Director" means an individual who is or was a director
of Delta or Subsidiary or an individual who, while a director of Delta or
Subsidiary, is or was serving at the request of Delta or Subsidiary as a
Director, officer, partner, trustee, employee or agent of another foreign or
domestic corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise. A Director shall be considered serving an employee
benefit plan at Delta's or Subsidiary's request if his duties to Delta or
Subsidiary also impose duties on, or otherwise involve services by, him to
the plan or to participants in or beneficiaries of the plan. "Director"
includes, unless the context requires otherwise, the estate or personal
representatives of a Director.
(vi) "Subsidiary" means any company in which Delta is
beneficial owner of 100% of all classes of voting stock.
(b) (i) Delta shall indemnify Officer if he is made a Party to
any Proceeding by reason of the fact that he is or was an officer or Director
and if:
(A) Officer conducted himself in good faith; and
(B) Officer reasonably believed:
(I) In the case of conduct in his official capacity
with Delta or Subsidiary, that his conduct was in Delta's or Subsidiary's
best interest; or
(II) In all other cases, that his conduct was at
least not opposed to Delta's or Subsidiary best interest; and
(C) In the case of any criminal Proceeding, he had no
reasonable cause to believe his conduct was unlawful.
(ii) Officer's conduct with respect to an employee benefit
plan for a purpose he reasonably believes to be in the best interest of the
participants in and beneficiaries of the plan shall be conduct that satisfies
the requirement of Paragraph 6(b)(i)(B)(II) hereof.
(iii) Indemnification shall be made against judgments,
penalties, fines, settlements and reasonable expenses, including legal
expenses, actually incurred by Officer in connection with the Proceedings,
except that if the Proceeding was by or in the right of Delta or Subsidiary,
indemnification shall be made only against such reasonable expenses and shall
not be made in respect of any Proceeding in which Officer shall have been
adjudged to be liable to Delta or a Subsidiary. The termination of any
Proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall not, by itself, be determinative that
Officer did not meet the requisite standard of conduct set forth in this
Paragraph 6(b).
(iv) (A) Reasonable expenses incurred by Officer as a Party
to a Proceeding with respect to which indemnity is to be provided under this
Paragraph 6(b) shall be paid or reimbursed by Delta in advance of the final
disposition of such Proceeding provided:
(I) Delta receives (1) a written affirmation by
Officer of his good faith belief that he has met the requisite standard of
conduct set forth in this Paragraph 6(b), and (2) Delta receives a written
undertaking by or on behalf of Officer to repay such amount if it shall
ultimately be determined that he has not met such standard of conduct; and
(II) Delta's Board of Directors (or other
appropriate decision maker for Delta) determines that the facts then known to
the Board of Directors (or decisionmaker) would not preclude indemnification
under Kentucky law.
(B) The undertaking required herein shall be an
unlimited general obligation of Officer but shall not require any security
and shall be accepted without reference to the financial ability of Officer
to make repayment.
(C) Determinations and authorizations of payments under
this Paragraph 6(b)(iv) shall be made in the manner specified in Paragraph
6(b)(v) hereof.
(v) (A) Delta shall not indemnify Officer under this
Paragraph 6(b) unless authorized in the specific case after a determination
has been made that indemnification of Officer is permissible in the
circumstances because he has met the requisite standard-of conduct set forth
in this Paragraph 6(b).
(B) The determination shall be made:
(I) By Delta's Board of Directors by majority vote
of a quorum consisting of directors not at the time Parties to the
Proceeding;
(II) If a quorum cannot be obtained under Paragraph
6(b)(v)(B)(I), by majority vote of a committee duly designated by Delta's
Board of Directors (in which designation Officer may participate), consisting
solely of two or more members of the- Board of Directors not at the time
Parties to the Proceeding;
(III) By special legal counsel:
(1) Selected by Delta's Board of Directors or
its committee in the manner prescribed in Paragraph 6(b)(v)(B)(I) or (II); or
(2) If a quorum of the Board of Directors
cannot be obtained under Paragraph 6(b)(v)(B)(I) and a committee cannot be
designated under Paragraph 6(b)(v)(B)(II), selected by a majority vote of the
full Board of Directors (in which selection Officer may participate); or
(IV) By Delta's shareholders, but shares owned by or
voted under the control of members of Delta's Board of Directors who are at
the time Parties to the Proceeding shall not be voted on the determination.
(C) Authorization of indemnification and evaluation as
to reasonableness of expenses shall be made in the same manner as the
determination that indemnification is permissible, except that if the
determination is made by special legal counsel, authorization of
indemnification and evaluation as to reasonableness of expenses shall be made
by those entitled under Paragraph 6(b)(v)(B)(III) to select counsel.
(c) Notwithstanding any limitation imposed by Paragraph 6(b) or
elsewhere and in addition to the indemnification set forth in Paragraph 6(b),
Delta, to the full extent permitted by law, may or may agree by contract or
otherwise to indemnify Officer and hold him harmless against any judgments,
penalties, fines, settlements and reasonable expenses actually incurred or
reasonably anticipated in connection with any Proceeding in which Officer is
a Party, provided Officer was made a Party to such Proceeding by reason of
the fact the he is or was an officer or Director of Delta or Subsidiary or by
reason of any inaction, nondisclosure, action or statement made, taken or
omitted by or on behalf of Officer with respect to Delta or Subsidiary or by
or on behalf of Officer in his capacity as an officer or Director.
(d) Delta shall purchase and maintain or cause to be purchased and
maintained insurance on behalf of Officer against any liability asserted
against him or incurred by him in his capacity or arising out of his status
as an officer or Director. Such insurance shall provide complete coverage
for Officer to the extent reasonably available.
7. Due Authorization.
Delta hereby warrants and represents to Officer that this Agreement has
been duly authorized by all necessary corporate
action on the part of Delta and has been duly executed by a duly authorized
officer of Delta.
8. Binding Effect: Assignability.
This Agreement shall inure to the benefit of and be binding upon Delta,
its successors and assigns, including, without limitation, any person, group
of persons, partnership or corporation which may acquire substantially all of
Delta's assets or business or with which or into which Delta may be
liquidated, consolidated, merged or otherwise combined, and shall inure to
the benefit of and be binding upon Officer, his heirs and personal
representatives. Officer may assign his right to payment under this
Agreement, but not his obligations under this Agreement. This Agreement
shall not be assigned by Delta without the prior written consent of Officer.
9. Severability.
If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated.
10. Amendments.
This Agreement may not be modified, amended, altered or supplemented
except upon the execution and delivery of a written agreement by the parties
hereto.
11. Entire Agreement.
This Agreement, together with any other document or agreement
specifically referred to herein, constitutes the entire agreement between the
parties with respect to the terms and conditions of Officer's employment with
Delta and with respect to the Loan, superseding and replacing any and all
prior understandings, contracts, agreements, representations or undertakings,
whether oral or written, with respect thereto.
12. Notices.
All notices, requests, claims, demands and other communications
hereunder shall be in writing, shall be given and shall be deemed to have
been duly given if so given, if delivered in person, sent by telegram or
facsimile transmission, or sent by registered or certified mail, postage
pre-paid, return receipt requested, to the respective parties as follows:
If to Delta:
Delta Natural Gas Company, Inc.
3617 Lexington Road
Winchester, Kentucky 40391
Attention: Corporate Secretary
If to Officer:
Glenn R. Jennings
Delta Natural Gas Company, Inc.
3617 Lexington Road
Winchester, Kentucky 40391
or to such other address as either party may have furnished to the other in
writing in accordance herewith. Any such notice shall be deemed to have been
given and shall be effective (a) as of the date delivered to the intended
recipient, if personally delivered or if sent by telegram or facsimile as
provided above, or (b) three business days following the date deposited in a
regularly maintained receptacle for the deposit of U.S. mail, if mailed in
the manner provided above.
13. Governing Law.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Kentucky.
14. Effect of Headings.
The paragraph headings herein are for convenience only and shall not
affect the construction hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first above written.
DELTA NATURAL GAS COMPANY, INC.
By: ___/s/H.D. Peet____________________
Chairman of the Board
_____/s/Glenn R. Jennings______________
GLENN R. JENNINGS
Exhibit 10(n)
OFFICER AGREEMENT
THIS AGREEMENT, made and entered into this 19th day of June, 1995, by
and between DELTA NATURAL GAS COMPANY, INC., a Kentucky corporation
(hereinafter referred to as "Delta") and JOHNNY L. CAUDILL (hereinafter
referred to as "Officer"):
W I T N E S S E T H:
THAT, WHEREAS, Officer has been employed by Delta in positions of great
responsibility; and
WHEREAS, Officer has contributed, and if he remains an executive officer
of Delta, it is anticipated will continue to contribute, to the welfare of
Delta, its shareholders and customers; and
WHEREAS, Delta desires to retain the services of Officer and provide for
continuity of management of Delta in the event of a change in control of
Delta; and
WHEREAS, Officer is willing to remain in the employee of Delta following
a change in control thereof on the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter set forth and to induce Officer to remain in the employee of
Delta, the parties hereto do hereby agree as follows:
1. Effective Date. This Agreement shall become effective simultaneous
with a Change in Control (as hereinafter defined) of Delta that occurs while
Officer is a full-time employee of Delta ("Effective Date").
2. Change in Control. As used in this Agreement, a Change in Control
shall be deemed to have occurred upon the happening of any of the following
events:
(a) The acquisition, directly or indirectly, by any person, group
of persons, partnership or corporation of the beneficial ownership of 10% of
Delta's issued and outstanding voting common stock, followed by:
(i) A change in the majority of the Board of Directors of
Delta as it existed on the date of execution of this Agreement as the
consequence of a shareholders' meeting involving a contest for the election
of directors; or
(ii) The termination without cause (as hereinafter defined) of
Harrison D. Peet as Chairman of the Board of Delta; or
(b) The election at any time of two or more directors whose
election is opposed by persons constituting a majority of the Board of
Directors of Delta on the date of execution of this Agreement.
3. Term. Delta agrees that Officer may, at his option, remain in the
employee of Delta in a principal executive and managerial capacity at least
equal to the position held by Officer on the day before the Effective Date
for a period of three years immediately following the Effective Date.
4. Compensation and Benefits. Each year during the three year period
immediately following the Effective Date, Officer shall receive compensation
consisting of:
(a) A base salary payable semi-monthly which is not less than the
normal rate in effect on the day before the Effective Date, with such
increases as may thereafter be awarded in accordance with Delta's regular
compensation policies; and
(b) Incentive awards, bonuses, and the like which are not less
than the annualized amount of any such awards paid to Officer for the twelve
months ending on the Effective Date.
In addition to the foregoing compensation, Officer shall continue to
participate, at not less than levels existing on the day before the Effective
Date, in Delta's employee benefit plans and practices (or equivalents),
including, but not limited to, the retirement plan, employee savings plan,
stock purchase plan, life and accidental death and dismemberment insurance,
company furnished automobile and office, and medical, dental and health
plans.
5. Termination. In the event Officer's employment is terminated
without cause during said three year period immediately following the
Effective Date, Officer shall nevertheless receive all compensation and
benefits described in paragraph 4 hereinabove during said full three year
period immediately following the Effective Date, but in no event for less
than two years following termination of employment, plus credit for vacation
and annual days earned but not taken.
As used herein "termination without cause" shall mean any termination of
Officer's employment at the request or demand of Delta except termination for
one of the following reasons:
(a) Death of the Officer; or
(b) Retirement of the Officer in accordance with Delta's
retirement policy in effect on the day before the Effective Date; or
(c) Conduct or job performance by Officer which, according to an
affirmative vote of a majority of the directors still in office who were
directors of Delta on the date of execution of this Agreement, adversely
affects the administration of his office.
It is expressly agreed between Delta and Officer that termination of
employment at the request of Officer during said three year period following
the Effective Date shall be deemed "termination without cause" if Officer
determines in good faith that, as a result of the Change in Control, he
cannot continue to fulfill the responsibilities for which he is employed.
6. Cessation of Payments. If, at any time while Officer is receiving
payments hereunder, he, within any county in which Delta's pipeline
facilities are located on the date of execution of this Agreement, directly
or indirectly owns, manages, operates, joins, controls, is employed by or
participates in the ownership, management, operation or control of, or is
connected in any manner with any retail natural gas distribution business,
then such payments shall forthwith cease.
7. Enforcement; Legal Expense. In the event Officer institutes
litigation against Delta after the Effective Date to enforce his rights to
payment under paragraphs 4 and/or 5 hereof, then Delta agrees to pay to
Officer an amount equal to legal fees and expenses incurred by Officer in
connection with such litigation, including appeals and retrials, whether or
not officer is successful therein.
8. Due Authorization. Delta hereby warrants and represents to Officer
that this Agreement has been duly authorized by all necessary corporate
action on the part of Delta and has been duly executed by a duly authorized
officer of Delta.
9. Indemnity.
(a) (1) As used herein "Proceeding" means any threatened, pending
or completed action, suit or Proceeding, whether civil, criminal,
administrative or investigative.
(2) As used herein, "Party" includes a person who was is or
is threatened to be made a named defendant or respondent in a Proceeding.
(3) As used herein, "expenses" includes attorneys fees.
(4) As used herein, "Subsidiary" means any company in which
Delta is beneficial owner of 100% of all classes of voting stock.
(b) Delta shall indemnify Officer if he is made a Party to any
Proceeding by reason of the fact that he is or was an officer of Delta or
Subsidiary if:
(1) He conducted himself in good faith; and
(2) He reasonably believed:
(i) In the case of conduct in his capacity as an officer
of Delta or Subsidiary, that his conduct was in Delta's or Subsidiary's best
interest; and
(ii) In all other cases, that his conduct was at least
not opposed to Delta's or Subsidiary's best interest; and
(iii) In the case of any criminal Proceeding, he had
no reasonable cause to believe his conduct was unlawful.
Indemnification shall be made against judgments, penalties, fines,
settlements and reasonable expenses actually incurred by Officer in
connection with the Proceeding, except that if the Proceeding was by or in
the right of Delta or Subsidiary, indemnification shall be made only against
such reasonable expenses and shall not be made in respect of any Proceeding
which Officer shall have been adjudged to be liable to Delta or Subsidiary.
The termination of any Proceeding by judgment, order, settlement, conviction
or upon a plea of nolo contendere or its equivalent, shall not, by itself, be
determinative that Officer did not meet the requisite standard of conduct set
forth in this provision.
(c) In addition to the foregoing Delta or Subsidiary shall, to the
full extent permitted by law, indemnify Officer and hold him harmless against
any judgments, penalties, fines, settlements and reasonable expenses actually
incurred in connection with any Proceeding in which Officer is a Party,
provided Officer was made a Party to such Proceeding by reason of the fact
that he is or was an officer of Delta or Subsidiary or by reason of any
inaction, nondisclosure, action or statement made, taken or omitted by or on
behalf of Officer with respect to Delta or Subsidiary or by or on behalf of
Officer in his capacity as an officer of Delta or Subsidiary.
(d) Reasonable expenses incurred by Officer as a Party to a
Proceeding with respect to which indemnity is to be provided shall be paid or
reimbursed by Delta in advance of the final disposition of such Proceeding
provided:
(1) Delta receives (i) a written affirmation by Officer of
his good faith belief that he has met the standard of conduct necessary for
indemnification by Delta, as provided in this Agreement, and (ii) Delta
receives a written undertaking by or on behalf of Officer to repay such
amount if it shall ultimately be determined that he has not met such standard
of conduct; and
(2) Delta's Board of Directors (or other appropriate decision
maker for Delta) determines that the facts then known to the Board (or
decision maker) would not preclude indemnification under this provision.
The undertaking required herein shall be an unlimited general obligation
of Officer but shall not require any security and shall be accepted without
reference to the financial ability of Officer to make repayment.
(e) Notwithstanding anything herein to the contrary, Officer shall
not be indemnified with respect to any Proceeding charging improper personal
benefit to him, whether or not involving action in his official capacity, in
which he shall have been adjudged to be liable on the basis that personal
benefit was improperly received by him.
(f) Delta shall purchase and maintain insurance on behalf of
Officer against any liability asserted against him and incurred by him in his
capacity or arising out of his status as an officer of Delta or Subsidiary.
Such insurance shall provide complete coverage for Officer to the extent
reasonably available.
10. Binding Effect; Assignability. This Agreement shall inure to the
benefit of and be binding upon Delta, its successors and assigns, including,
without limitation, any person, group of persons, partnership or corporation
which may acquire substantially all of Delta's assets or business or with
which or into which Delta may be liquidated, consolidated, merged or
otherwise combined, and shall inure to the benefit of and be binding upon
Officer, his heirs and personal representatives. Officer may assign his
right to payment under this Agreement, but not his obligations under this
Agreement. This Agreement shall not be assigned by Delta without the prior
written consent of Officer.
11. Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated.
12. Amendments. This Agreement may not be modified, amended, altered
or supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
13. Previous Agreements. This Agreement supersedes and replaces any
and all previous or existing understandings, contracts, agreements,
representations or undertakings, whether oral or written, between Officer
and Delta.
14. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given if so given) if delivered in person, by
telegram or telex, or by mail (registered or certified mail, postage pre-
paid, return receipt requested) to the respective parties as follows:
If to Delta:
Delta Natural Gas Company, Inc.
3617 Lexington Road
Winchester, KY 40391
Attn: President
If to Officer:
Johnny L. Caudill
Delta Natural Gas Company, Inc.
3617 Lexington Road
Winchester, KY 40391
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address
shall only be effective upon receipt.
15. Governing Law. This Agreement shall be construed in accordance
with the law of the Commonwealth of Kentucky.
16. Effect of Headings. The paragraph headings herein are for
convenience only and shall not affect the construction hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first above written.
DELTA NATURAL GAS COMPANY, INC.
By_/s/Glenn R. Jennings_________________
President
_/s/Johnny L. Caudill_____________
Officer
<TABLE>
EXHIBIT 12
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
COMPUTATION OF THE CONSOLIDATED RATIO OF EARNINGS
TO FIXED CHARGES
<CAPTION>
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Earnings:
Net income ............ $1,917,735 $2,671,001 $2,620,664 $2,453,813 $1,162,582
Provisions for income
taxes ............... 1,042,400 1,509,600 1,543,700 1,441,600 560,500
Fixed charges ......... 2,387,935 2,214,659 2,210,833 2,166,597 1,968,390
Total $5,348,070 $6,395,260 $6,375,197 $6,062,010 $3,691,472
Fixed Charges:
Interest on debt ...... $2,299,135 $2,123,255 $2,134,306 $2,091,117 $1,914,894
Amortization of debt
expense ............. 88,800 91,404 76,527 75,480 53,496
Total $2,387,935 $2,214,659 $2,210,833 $2,166,597 $1,968,390
Ratio of Earnings to
Fixed Charges: 2.24x 2.89x 2.88x 2.80x 1.88x
</TABLE>
EXHIBIT 23
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation of
our report dated August 11, 1995, included in this Form 10-K, into the
Company's previously filed Registration Statement No. 33-56689, relating to
the Dividend Reinvestment and Stock Purchase Plan of the Company.
Arthur Andersen LLP
Louisville, Kentucky
September 6, 1995
<TABLE> <S> <C>
<ARTICLE> OPUR1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 60,356,766
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 2,813,376
<TOTAL-DEFERRED-CHARGES> 2,355,458
<OTHER-ASSETS> 423,116
<TOTAL-ASSETS> 65,948,716
<COMMON> 1,868,734
<CAPITAL-SURPLUS-PAID-IN> 18,417,851
<RETAINED-EARNINGS> 2,224,928
<TOTAL-COMMON-STOCKHOLDERS-EQ> 22,511,513
0
0
<LONG-TERM-DEBT-NET> 23,702,200
<SHORT-TERM-NOTES> 5,675,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 1,057,700
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 13,002,303
<TOT-CAPITALIZATION-AND-LIAB> 65,948,716
<GROSS-OPERATING-REVENUE> 31,844,339
<INCOME-TAX-EXPENSE> 1,042,400
<OTHER-OPERATING-EXPENSES> 26,546,851
<TOTAL-OPERATING-EXPENSES> 27,589,251
<OPERATING-INCOME-LOSS> 4,255,088
<OTHER-INCOME-NET> 50,582
<INCOME-BEFORE-INTEREST-EXPEN> 4,305,670
<TOTAL-INTEREST-EXPENSE> 2,387,935
<NET-INCOME> 1,917,735
0
<EARNINGS-AVAILABLE-FOR-COMM> 1,917,735
<COMMON-STOCK-DIVIDENDS> 2,073,374
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 6,943,183
<EPS-PRIMARY> 1.04
<EPS-DILUTED> 1.04
</TABLE>
