<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 21, 1996
REGISTRATION NO. 33- _________
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
DELTA NATURAL GAS COMPANY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
KENTUCKY 61-0458329
(STATE OR OTHER JURISDICTION (IRS EMPLOYER IDENTIFICATION NO.)
OF INCORPORATION OR ORGANIZATION)
3617 LEXINGTON ROAD, WINCHESTER, KENTUCKY 40391
(606) 744-6171
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------------------------
GLENN R. JENNINGS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
DELTA NATURAL GAS COMPANY, INC.
3617 LEXINGTON ROAD, WINCHESTER, KENTUCKY 40391
(606) 744-6171
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
RUTHEFORD B CAMPBELL, JR., ESQ. JOHN L. GILLIS, JR., ESQ.
STOLL, KEENON & PARK, LLP ARMSTRONG, TEASDALE, SCHLAFLY & DAVIS
201 E. MAIN STREET, SUITE 1000 ONE METROPOLITAN SQUARE
LEXINGTON, KY 40507 ST. LOUIS, MO 63102
(606) 231-3000 (314) 621-5070
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
--------------------------
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED ON
A DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES ACT OF
1933, CHECK THE FOLLOWING BOX. / /
IF THE REGISTRANT ELECTS TO DELIVER ITS LATEST ANNUAL REPORT TO SECURITY
HOLDERS, OR A COMPLETE AND LEGIBLE FACSIMILE THEREOF, PURSUANT TO ITEM 11(a)(1)
OF THIS FORM, CHECK THE FOLLOWING BOX. / /
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING
PURSUANT TO RULE 462(b) UNDER THE SECURITIES ACT, PLEASE CHECK THE FOLLOWING
BOX AND LIST THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER
EFFECTIVE REGISTRATION STATEMENT FOR THE SAME OFFERING. / /
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(c)
UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING. / /
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE 434,
PLEASE CHECK THE FOLLOWING BOX. / /
--------------------------
<TABLE>
CALCULATION OF REGISTRATION FEE
=======================================================================================================================
<CAPTION>
PROPOSED MAXIMUM
OFFERING PRICE PROPOSED MAXIMUM
AMOUNT PER SHARE OR AGGREGATE
TITLE OF EACH CLASS OF BEING PER OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED DEBENTURE<F1> PRICE<F1> REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $1.00 par value............... 400,000<F2> $15.75 $6,300,000 $2,173
% Debentures, due 2026.................. $15,000,000 100% $15,000,000 $5,172
=======================================================================================================================
<FN>
<F1>Estimated solely for the purpose of calculating the registration fee. The
per Share price is based on the average of the high and low prices of the
Company's Common Stock as reported on the NASDAQ National Market System on
June 17, 1996.
<F2>Includes 50,000 shares which may, at the option of the Underwriters, be
purchased to cover over-allotments.
</TABLE>
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
===============================================================================
<PAGE> 2
<TABLE>
CROSS REFERENCE SHEET PURSUANT TO ITEM 501(b) OF REGULATION S-K
<CAPTION>
FORM S-2 ITEM NO. AND CAPTION CAPTION IN PROSPECTUS
----------------------------- ---------------------
<S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus................... Facing Page of Registration Statement; Cover Page of
Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus....................................... Inside Front Cover Page and Outside Back Cover Page of
Prospectus
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges........................ Prospectus Summary; The Company; Selected Consolidated
Financial Information
4. Use of Proceeds.................................... Use of Proceeds and Capital Expenditures
5. Determination of Offering Price.................... Not Applicable
6. Dilution........................................... Not Applicable
7. Selling Security Holders........................... Not Applicable
8. Plan of Distribution............................... Outside Front Cover Page; Underwriting
9. Description of Securities to be Registered......... Outside Front Cover Page; Prospectus Summary; Description of
Common Stock; Description of Debentures
10. Interests of Named Experts and Counsel............. Legal Opinions
11. Information with Respect to the Registrant......... Outside Front Cover Page; Prospectus Summary;
The Company; System Map; Price Range
of Common Stock and Dividends; Consolidated
Capitalization; Selected Consolidated Financial
Information; Management's Discussion and Analysis of
Financial Condition and Results of Operations; Business;
Consolidated Financial Statements
12. Incorporation of Certain Information by
Reference......................................... Inside Front Cover Page
13. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities... Not Applicable
</TABLE>
<PAGE> 3
SUBJECT TO COMPLETION, DATED JUNE 21, 1996
********************************************************************************
*INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A *
*REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE *
*SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY *
*OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES*
*EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE *
*SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE *
*SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE *
*UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF *
*ANY SUCH STATE. *
********************************************************************************
PROSPECTUS
DELTA NATURAL GAS COMPANY, INC.
350,000 SHARES OF COMMON STOCK
DELTA $15,000,000 % DEBENTURES DUE 2026
The Common Stock of Delta Natural Gas Company, Inc. (``Delta'' or the
``Company'') is traded on the NASDAQ National Market System (``NASDAQ/NMS'')
under the trading symbol ``DGAS''. On June 17, 1996, the last reported sale
price of the Common Stock on the NASDAQ/NMS was $15.75 per share.
The % Debentures due 2026 (the ``Debentures'') will be issued in the
form of one global security (the ``Global Security'') registered in the name of
the nominee of The Depository Trust Company (the ``Depository''), and such
nominee will be the sole holder of the Debentures. An owner of an interest in
the Debentures (``Beneficial Owner'') will not be entitled to the delivery of a
definitive security except in limited circumstances. A Beneficial Owner's
interest in the Global Security will be recorded on and transfers will be
effected only through records maintained by the Depository and its
participants. See ``Description of Debentures''.
Interest on the Debentures is payable semi-annually on February 1 and
August 1 of each year, commencing on February 1, 1997. At the option of any
deceased Beneficial Owner's Representative (as defined below), interests in the
Debentures are redeemable at 100% of their principal amount, plus accrued
interest, at any time, subject to the maximum principal amounts of $25,000 per
deceased Beneficial Owner and $500,000 in the aggregate for all deceased
Beneficial Owners during the initial period ending August 1, 1997 and during
each twelve-month period thereafter, within 60 days after presentment to the
Depository of a satisfactory request for redemption by a deceased Beneficial
Owner's Representative. Otherwise, neither the Company nor a Beneficial Owner
can require redemption of the Debentures until August 1, 2001, although the
Company may, but is not required to, redeem interests in the Debentures
tendered in excess of the above limitations. On or after August 1, 2001,
however, interests in the Debentures will be redeemable, in whole or in part,
at the option of the Company at declining premiums. The Debentures will be
unsecured obligations of the Company payable out of the Company's general
operating funds, and no mandatory sinking fund will exist to provide for the
repayment of the indebtedness represented by the Debentures. See ``Description
of Debentures''.
There is no market for the Debentures, and no assurance can be given that
one will develop.
--------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
==================================================================================================================
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNT AND PROCEEDS TO
PUBLIC COMMISSIONS<F1> COMPANY<F2>
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share........................................... $ $ $
Total Common Stock<F3>............................ $ $ $
- ------------------------------------------------------------------------------------------------------------------
Per Debenture....................................... % % %
Total Debentures.................................. $ $ $
- ------------------------------------------------------------------------------------------------------------------
Total Offering.................................. $ $ $
==================================================================================================================
<FN>
<F1> The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See ``Underwriting''.
<F2> Before deduction of expenses payable by the Company estimated at $75,000.
<F3> The Company has granted to the Underwriters a 30-day option to purchase up
to an aggregate of 50,000 additional shares, on the same terms and
conditions, to cover over-allotments, if any. If such option is exercised
in full, the Total Common Stock Price to Public, Underwriting Discount and
Commissions and Proceeds to Company will be $ ---------------, $-----------
and $---------------, respectively, and the Total Offering Price to Public,
Underwriting Discount and Commissions and Proceeds to Company will be
$---------------, $--------------- and $---------------, respectively. See
``Underwriting''.
</TABLE>
----------------------------------
The shares of Common Stock and the Debentures are offered by the
Underwriters, subject to prior sale, when, as and if issued to and accepted by
the Underwriters, subject to their right to reject any order in whole or in
part and subject to certain other conditions. It is expected that the
certificates for the shares of Common Stock will be available for delivery on
or about -------------, 1996. The Debentures will bear interest from the date
of delivery of the Global Security to the Underwriters, which is expected to be
on or about -------------, 1996.
EDWARD D. JONES & CO.
J.J.B. HILLIARD, W.L. LYONS, INC.
THE OHIO COMPANY
THE DATE OF THIS PROSPECTUS IS -------------, 1996.
<PAGE> 4
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
``Commission'') a Registration Statement on Form S-2 with respect to the
securities offered hereby (herein, together with all amendments and exhibits,
referred to as the ``Registration Statement'') under the Securities Act of
1933, as amended (the ``Act''). This Prospectus does not contain all of the
information set forth in such Registration Statement, certain parts of which
are omitted in accordance with the Rules and Regulations of the Commission. For
further information pertaining to these securities and the Company, reference
is made to the Registration Statement.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the ``Exchange Act''), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Reports, proxy and information statements, and other information
filed by the Company can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the following Regional Offices of the Commission: New York
Regional Office, 75 Park Place, New York, New York 10007; and Chicago Regional
Office, 500 West Madison Street, Chicago, Illinois 60661. Copies of such
materials also can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have heretofore been filed by the Company
with the Commission pursuant to the Exchange Act, are incorporated by reference
into this Prospectus and shall be deemed to be a part hereof as of their
respective dates:
1. The annual report of the Company on Form 10-K for the fiscal year ended
June 30, 1995.
2. The quarterly reports of the Company on Form 10-Q for the fiscal
quarters ended September 30, 1995, December 31, 1995 and March 31, 1996.
Any statement contained in a document incorporated by reference herein or
deemed to be incorporated by reference shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently filed document which is deemed to be
incorporated herein modifies or supersedes such statement. Any such statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company will provide, without charge, to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon the written or
oral request of any such person, a copy of any or all documents incorporated by
reference into this Prospectus (without exhibits other than exhibits
specifically incorporated by reference into such documents). Requests should be
directed to: John F. Hall, Vice President - Finance, Secretary and Treasurer,
Delta Natural Gas Company, Inc., 3617 Lexington Road, Winchester, Kentucky
40391, telephone number (606) 744-6171, Fax number (606) 744-6552.
--------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OR THE DEBENTURES OF THE COMPANY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED
AT ANY TIME.
IN CONNECTION WITH THIS OFFERING THE UNDERWRITERS AND SELLING GROUP MEMBERS
(IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET MAKING
TRANSACTIONS IN THE COMPANY'S COMMON STOCK ON NASDAQ IN ACCORDANCE WITH RULE
10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE ``UNDERWRITING''.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements (and notes thereto) contained
elsewhere in this Prospectus and in the documents incorporated herein by
reference. Unless otherwise indicated, all information in this Prospectus
assumes that the over-allotment option granted to the Underwriters by the
Company is not exercised.
THE COMPANY
Delta Natural Gas Company, Inc. (``Delta'' or the ``Company''), a regulated
public utility organized in 1949, is engaged in the distribution and
transmission of natural gas to approximately 36,000 residential, commercial and
industrial customers in central and southeastern Kentucky. The Company also
owns and operates underground storage facilities and certain oil and gas
production properties and transports gas for others.
The Company plans to continue its efforts to increase its retail customer
base through continued expansion within its existing service areas and will
continue to consider acquisitions of other gas systems. The Company also
anticipates continuing activity in the gas storage, production and
transportation areas and plans to pursue and increase these activities whenever
practicable.
<TABLE>
THE OFFERING
<S> <C>
COMMON STOCK
Common Stock Offered................... 350,000 shares
Common Stock to be Outstanding
After Offering....................... 2,249,360<F1>
NASDAQ/NMS Symbol...................... DGAS
Latest 52-Week Range of Sales Prices
(through June 17, 1996).............. $18 1/4 to $15 1/2
Annualized Dividend Rate............... $1.12 per share<F2>
DEBENTURES
Debentures Offered..................... $15,000,000 in aggregate principal amount
Maturity............................... August 1, 2026
Interest............................... -----% payable, semi-annually on each February 1 and August 1,
commencing February 1, 1997
Beneficial Owner's Redemption
Privilege............................ At the option of any deceased Beneficial Owner's Representative,
interests in the Debentures are redeemable at 100% of their
principal amount, plus accrued interest, subject to the maximum
principal amounts of $25,000 per deceased Beneficial Owner and
$500,000 in the aggregate for all deceased Beneficial Owners
during the initial period ending August 1, 1997 and during each
twelve-month period thereafter. See ``Description of
Debentures--Limited Right of Redemption Upon Death of Beneficial
Owner''.
<FN>
- --------
<F1> Excludes shares issued after June 15, 1996 pursuant to the Company's
Dividend Reinvestment Plan and Stock Purchase Plan (the ``Reinvestment
Plan'') and the Company's Employee Stock Purchase Plan. Pursuant to the
Company's Reinvestment Plan, the Company registered 200,000 shares of its
common stock, and as of March 31, 1996, there were 162,420 shares still
available for issue.
<F2> Based on the quarterly dividend of $.28 per share. See ``Price Range of
Common Stock and Dividends''.
3
<PAGE> 6
<S> <C>
Company's Redemption Privilege......... In whole or in part, upon not less than 30 days notice, on or after
August 1, 2001, at a premium declining from 105%, plus accrued
interest. See ``Description of Debentures--Redemption at the
Option of the Company''.
USE OF PROCEEDS........................ To reduce short-term notes payable and for working capital and
general corporate purposes.
</TABLE>
<TABLE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
<CAPTION>
FOR THE TWELVE FOR THE FISCAL YEARS ENDED JUNE 30,
MONTHS ENDED --------------------------------------------
MARCH 31, 1996 1995 1994 1993
-------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCOME DATA:
Operating Revenues............................................. $ 34,380,315 $ 31,844,339 $ 34,846,941 $ 31,221,410
Operating Income............................................... 5,241,459 4,255,088 4,850,673 4,791,816
Net Income..................................................... 2,680,551 1,917,735 2,671,001 2,620,664
Earnings per Common Share...................................... 1.43 1.04 1.50 1.60
Dividends Declared per Common Share............................ 1.12 1.12 1.105 1.085
<CAPTION>
MARCH 31, 1996
-------------------------------------------------
ACTUAL AS ADJUSTED<F1>
---------------------- ----------------------
<S> <C> <C> <C> <C>
CAPITALIZATION:
Long-Term Debt (Including Current Portion).................. $ 26,039,850 52.1% $ 41,039,850 58.0%
Common Shareholders' Equity................................. 23,986,407 47.9 29,668,656 42.0
------------ ------ ------------ ------
Total Capitalization.................................... $ 50,026,257 100.0% $ 70,708,506 100.0%
============ ====== ============ ======
SHORT-TERM NOTES PAYABLE........................................ $ 15,460,000 $ --
============ ============
<CAPTION>
FOR THE TWELVE FOR THE FISCAL YEARS ENDED JUNE 30,
MONTHS ENDED MARCH -----------------------------------
31, 1996 1995 1994 1993
------------------- --------- --------- ---------
<S> <C> <C> <C> <C>
RATIO OF EARNINGS TO FIXED CHARGES<F2>:
Actual......................................................... 2.62x 2.24x 2.89x 2.88x
Pro Forma<F1>.................................................. 2.12x
<FN>
- --------
<F1>Adjusted to reflect the sale of the Common Stock (at an assumed price of
$17 per share) and the issuance of the Debentures (at an assumed interest
rate of 8%) offered hereby and the application of the estimated net
proceeds of $20,007,250 therefrom. The estimated issuance expenses and the
underwriting discounts on the Debentures, a total of approximately
$675,000, are not reflected in the As Adjusted columns. See ``Use of
Proceeds and Capital Expenditures''.
<F2>The ratio of earnings to fixed charges represents the number of times that
fixed charges are covered by earnings. Earnings for the calculation
consists of net income before income taxes and fixed charges. Fixed charges
consist of interest expense and amortization of debt expense.
</TABLE>
4
<PAGE> 7
THE COMPANY
Delta is engaged primarily in the distribution, transmission and storage of
natural gas with its facilities which are located in 17 counties in central and
southeastern Kentucky. Delta serves approximately 36,000 residential,
commercial, industrial and transportation customers and makes transportation
deliveries to several interconnected pipelines.
Unless the context requires otherwise, references to Delta include Delta's
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 operates an underground natural gas
storage field that it leases from Delta. Enpro owns and operates existing
production properties and undeveloped acreage. Delta and its subsidiaries are
under common executive management.
Delta was incorporated under Kentucky law in 1949. Its principal executive
offices are located at 3617 Lexington Road, Winchester, Kentucky 40391. Its
telephone number is (606) 744-6171, and its Fax number is (606) 744-6552.
SYSTEM MAP
[MAP]
APPEARING AT THIS POINT IS A MAP DISPLAYING DELTA'S SYSTEM. THE MAP IS AN
OUTLINE OF THE STATE OF KENTUCKY WITH SYMBOLS INDICATING THE LOCATION OF
DELTA'S CORPORATE OFFICE, BRANCH OFFICES, COMMUNITIES SERVED, STORAGE
FACILITIES AND TRANSMISSION LINES. THE MAP ALSO INDICATES THE LOCATION OF THE
MAJOR INTERSTATE SUPPLY LINES FROM WHICH DELTA RECEIVES A PORTION OF ITS
SUPPLY.
5
<PAGE> 8
SPECIAL FACTORS AFFECTING THE GAS UTILITY INDUSTRY
The natural gas industry is subject to numerous regulations and
uncertainties, many of which affect the Company in varying degrees. Industry
issues which have affected or may affect the Company from time to time include
the following: uncertainty in achieving an adequate return on invested capital
due to inflation; difficulty in obtaining rate increases from regulatory
authorities in adequate amounts and on a timely basis; attrition in earnings
produced by the combination of increasing expenses and the costs of new capital
which may exceed allowed rates of return; the availability of pipeline
transportation capacity necessary to secure supplies of gas; volatility in the
price of natural gas; competition with alternative sources of energy;
competition with other gas sources for industrial customers, including bypass
of the Company's facilities; increasing energy conservation by customers;
fluctuations in demand attributable to weather; new business and operational
requirements for gas supply resulting from changes in federal regulation of
interstate pipelines; increases in construction and operating costs;
environmental regulations; and uncertainty in the projected rate of growth of
customers' energy requirements.
USE OF PROCEEDS AND CAPITAL EXPENDITURES
The net proceeds to Delta from the sale of the Common Stock and Debentures,
estimated at $20,007,250 ($20,819,000 if the Underwriters' over-allotment
option is exercised in full), will be used to reduce short-term notes payable,
which at June 17, 1996 were $16,275,000. Proceeds remaining, if any, after
eliminating short-term notes payable will be used for working capital and
general corporate purposes.
The short-term notes payable were incurred pursuant to Delta's bank credit
line under a $20,000,000 revolving credit loan agreement that expires November
15, 1996 and bears interest based, at the option of the Company, on either the
daily prime rate or certain certificate of deposit rates, which interest rate
as of June 17, 1996 was 6.285%.
Delta's short-term notes payable were incurred to provide funds for general
operating expenses and capital expenditures. The capital expenditures were made
primarily for replacement and upgrading of existing facilities, system
extensions, and acquisition and development of an underground storage field.
Delta's capital expenditures were approximately $8,123,000, $7,375,000 and
$6,290,000 in fiscal years 1995, 1994 and 1993, respectively. Delta estimates
capital expenditures for fiscal 1996 at approximately $12,400,000. Capital
expenditures for fiscal 1997 are estimated at approximately $16,400,000 and
will be primarily used for continued development of underground storage, system
extensions, and the replacement and improvement of existing facilities.
Capital expenditures are financed through internally generated funds and
short-term borrowings. Such borrowings are replaced from time to time with
long-term debt and equity financings, the amount and types of which depend upon
the Company's capital needs and market conditions.
6
<PAGE> 9
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
Delta has paid cash dividends on its Common Stock each year since 1964.
While it is the intention of the Board of Directors to continue to declare
dividends on a quarterly basis, the frequency and amount of future dividends
will depend upon the Company's earnings, financial requirements and other
relevant factors, including limitations imposed by the indenture for the
Debentures. See ``Description of Common Stock''. There were 2,283 record
holders of Delta's common stock as of June 1, 1996.
Delta's common stock is traded in the National Association of Securities
Dealers Automated Quotation (NASDAQ) National Market System. The accompanying
table reflects the high and low sales prices during each quarter as reported by
NASDAQ and the quarterly dividends declared per share.
<TABLE>
<CAPTION>
RANGE OF STOCK DIVIDENDS
PRICES ($) PER SHARE ($)
------------------------------ --------------
QUARTER HIGH LOW
- ------- -------------- --------------
<S> <C> <C> <C>
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
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 1996
First..................................................... 17 1/4 15 3/4 .28
Second.................................................... 18 1/4 15 1/2 .28
Third..................................................... 18 16 .28
Fourth (through June 17, 1996)............................ 17 1/4 15 3/4 .28
</TABLE>
7
<PAGE> 10
CONSOLIDATED CAPITALIZATION
The following table sets forth the consolidated capitalization and
short-term notes payable of the Company as of March 31, 1996 and as adjusted to
reflect the sale of the Common Stock and the issuance of the Debentures offered
hereby and the application of the estimated net proceeds of $20,007,250 as
described in ``Use of Proceeds and Capital Expenditures''. This table should be
read in conjunction with the Company's consolidated financial statements and
notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
ACTUAL AS ADJUSTED<F1><F2>
---------------------- ----------------------
<S> <C> <C> <C> <C>
LONG-TERM DEBT (INCLUDING CURRENT PORTION):
9% Debentures, due 2011................................... $10,000,000 $10,000,000
6 5/8% Debentures, due 2023............................... 14,092,000 14,092,000
------% Debentures, due 2026.............................. -- 15,000,000
Other Long-Term Debt...................................... 1,947,850 1,947,850
----------- -----------
Total Long-Term debt.................................... $26,039,850 52.1% $41,039,850 58.0%
----------- -----------
COMMON SHAREHOLDERS' EQUITY:
Common shares, par value $1 per share
Authorized--6,000,000 shares
outstanding--1,894,951 shares; and as adjusted
2,244,951 shares.................................... $ 1,894,951 $ 2,244,951
Premium on common shares.................................. 20,439,323 26,039,322
Capital stock expense..................................... (1,604,792) (1,872,542)
Retained earnings......................................... 3,256,925 3,256,925
----------- -----------
Total common shareholders' equity......................... $23,986,407 47.9% $29,668,656 42.0%
----------- ----- ----------- -----
Total capitalization...................................... $50,026,257 100.0% $70,708,506 100.0%
=========== ===== =========== =====
SHORT-TERM NOTES PAYABLE...................................... $15,460,000 $ --
=========== ===========
<FN>
- --------
<F1> Assumes the Underwriter's over-allotment option is not exercised.
<F2> The estimated issuance expenses and the underwriting discounts on the
Debentures, a total of approximately $675,000, are not reflected in the As
Adjusted columns.
</TABLE>
8
<PAGE> 11
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth certain selected consolidated financial
information of the Company and the ratio of earnings to fixed charges as of
March 31, 1996 and for the twelve months then ended and as of and for each of
the five years ended June 30, 1995. The selected consolidated financial
information is qualified by reference to the consolidated financial statements
and other information and data set forth elsewhere in the Prospectus.
<TABLE>
<CAPTION>
AS OF OR
FOR THE
TWELVE
MONTHS
ENDED AS OF OR FOR THE FISCAL YEARS ENDED JUNE 30,
MARCH 31, ----------------------------------------------------------------------
1996 1995 1994<Fa> 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS ($)
Operating revenues.................... 34,380,315 31,844,339 34,846,941 31,221,410 29,200,834 26,778,255
Operating income...................... 5,241,459 4,255,088 4,850,673 4,791,816 4,586,323 3,039,045
Net income............................ 2,680,551 1,917,735 2,671,001 2,620,664 2,453,813 1,162,582
Earnings per common
share............................... 1.43 1.04 1.50 1.60 1.52 0.73
Dividends declared per common share... 1.12 1.12 1.105 1.085 1.08 1.08
AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING............................. 1,877,207 1,850,986 1,775,068 1,635,945 1,612,437 1,586,235
TOTAL ASSETS ($).......................... 80,268,969 65,948,716 61,932,480 55,129,912 50,478,014 47,816,330
CAPITALIZATION ($)
Common shareholders' equity........... 23,986,407 22,511,513 22,164,791 17,501,045 16,227,158 15,147,551
Long-Term debt........................ 24,976,650 23,702,200 24,500,000 19,596,401 20,187,826 21,473,431
---------- ---------- ---------- ---------- ---------- ----------
Total capitalization.................. 48,963,057 46,213,713 46,664,791 37,097,446 36,414,984 36,620,982
========== ========== ========== ========== ========== ==========
SHORT-TERM DEBT ($)<Fb>................... 16,523,200 6,732,700 3,205,000 7,729,000 4,029,000 2,616,000
OTHER ITEMS ($)
Capital expenditures.................. 11,327,477 8,122,838 7,374,747 6,289,508 5,074,483 5,213,319
Gross plant........................... 95,017,635 84,944,969 77,882,135 71,187,860 66,032,217 61,757,666
RATIO OF EARNINGS TO FIXED CHARGES<Fc>
Actual................................ 2.62x 2.24x 2.89x 2.88x 2.80x 1.88x
Pro Forma<Fd>......................... 2.12x
<FN>
- --------
<Fa> During October 1993, $15,000,000 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.
<Fb> Includes current portion of long-term debt.
<Fc> The ratio of earnings to fixed charges represents the number of times that
fixed charges are covered by earnings. Earnings for the calculation
consist of net income before income taxes and fixed charges. Fixed charges
consist of interest expense and amortization of debt expense.
<Fd> As adjusted to reflect the sale of the Common Stock (at an assumed
offering price of $17 per share) and the issuance of the Debentures (at an
assumed interest rate of 8%) offered hereby and the application of the net
proceeds therefrom.
</TABLE>
9
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR COMPLETE CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY,
SEE PAGES F-1 THROUGH F-11.
OVERVIEW
The Company's utility operations are subject to regulation by the Public
Service Commission of Kentucky (``PSC''), which plays a significant role in
determining the Company's return on equity. The PSC approves rates that are
intended to permit a specified rate of return on investment. The Company's rate
tariffs allow the cost of gas to be passed through to customers. See
``Business--Regulatory Matters''.
The Company's business is temperature-sensitive. Accordingly, the Company's
operating results in any given period reflect, in addition to other factors,
the impact of weather, with colder temperatures resulting in increased sales by
the Company. The Company anticipates that this sensitivity to seasonal and
weather conditions will continue to be reflected in the Company's operating
results in future periods.
LIQUIDITY AND CAPITAL RESOURCES
Because of the seasonal nature of Delta's sales, the smallest proportion of
cash generated from operations is received during the warmer months when sales
volumes decrease considerably. Additionally, most construction activity takes
place during the non-heating season because of more favorable weather
conditions. During the warmer, non-heating months, therefore, cash needs for
operations and construction are partially met through short-term borrowings.
Capital expenditures for Delta for fiscal 1996 are expected to be
approximately $12,400,000, of which approximately $9,000,000 was expended
during the nine months ended March 31, 1996. 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 $20,000,000, of which approximately
$15,500,000 was borrowed at March 31, 1996. The line of credit, which is with
Bank One, Kentucky, NA, expires during November, 1996. These short-term
borrowings are periodically repaid with the net proceeds from the sale of
long-term debt and equity securities, as was done in October, 1993, when the
net proceeds of approximately $17,800,000 from the sale of $15,000,000 of
debentures and 170,000 shares of Common Stock were used to repay short-term
debt and to refinance certain long-term debt.
The primary sources and uses of cash for the twelve months ended March 31,
1996 and the fiscal years ended June 30, 1995, 1994 and 1993 are summarized
below:
<TABLE>
<CAPTION>
TWELVE
MONTHS FISCAL YEARS ENDED
ENDED -------------------------------------------
MARCH 31, JUNE 30, JUNE 30, JUNE 30,
SOURCES (USES) 1996 1995 1994 1993
-------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Provided by operating activities..................................... $ 2,476,619 $ 6,943,183 $ 6,172,019 $ 4,567,023
Used in investing activities......................................... (11,327,477) (8,122,838) (7,374,747) (6,289,508)
Provided by financing activities..................................... 8,781,920 1,158,887 1,144,396 1,761,798
----------- ----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents................. $ (68,938) $ (20,768) $ (58,332) $ 39,313
=========== =========== =========== ===========
</TABLE>
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, normal capital expenditure and dividend
requirements.
10
<PAGE> 13
RESULTS OF OPERATIONS
OPERATING REVENUES
The increase in operating revenues for the twelve months ended March 31,
1996 of approximately $2,536,000 was due primarily to an increase in retail
sales volumes of approximately 662,000 thousand cubic feet ( Mcf) as a result
of the colder winter weather in 1996. Billed degree days were approximately
105% of the normal (thirty-year average) degree days for the twelve months
ended March 31, 1996 as compared with approximately 89% for fiscal 1995. In
addition, on-system transportation volumes for the twelve months ended March
31, 1996 increased approximately 116,000 Mcf. These increases were partially
offset by decreases in the cost of gas purchased that were reflected in rates
billed to customers through Delta's gas cost recovery clause and by a decrease
in off-system transportation volumes of approximately 266,000 Mcf due primarily
to reduced deliveries from local producers.
The decrease in operating revenues for fiscal 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
(approximately 89% of thirty year average weather compared to approximately
106% 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
approximately $278,000 due to a 204,000 Mcf increase in volumes transported and
by 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 (approximately 106% of
thirty year average weather compared to approximately 99% for 1993) and an
increase in customers served of approximately 800, or 2.5%. The increase in
operating revenues was partially offset by an approximate $213,000 decrease in
transportation revenues for off-system customers resulting from decreased
volumes of approximately 671,000 Mcf due primarily to reduced volumes shipped
by others on a leased pipeline 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
fiscal 1995 was due primarily to the decreased retail sales volumes.
The increase in purchased gas expense of approximately $3,016,000 for
fiscal 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 fiscal 1995 of
approximately $380,000 was due primarily to decreases in payroll and related
benefit costs.
The increases in depreciation expense during the twelve months ended March
31, 1996, fiscal 1995 and fiscal 1994 of approximately $199,000, $206,000 and
$145,000, respectively, were due primarily to additional depreciable plant.
The increases in taxes other than income taxes during the twelve months
ended March 31, 1996 and fiscal 1994 of approximately $107,000 and $78,000,
respectively, were primarily due to increased property taxes that resulted from
increased plant and to increased payroll taxes that resulted from increased
wages.
Changes in income taxes of approximately $461,000 and $467,000 for the
twelve months ended March 31, 1996 and fiscal 1995, 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 increases in other interest charges for the twelve months ended March
31, 1996 and fiscal 1995 of approximately $219,000 and $176,000, respectively,
were due primarily to increased average short-term borrowings and increased
average interest rates.
11
<PAGE> 14
BUSINESS
SUMMARY OF BUSINESS DEVELOPMENT
In 1951, Delta established its first retail gas distribution system, which
provided service to approximately 300 customers in Owingsville and Frenchburg,
Kentucky. As a result of acquisitions, as well as expansions of its customer
base within its existing service areas, Delta currently provides retail gas
distribution service for approximately 36,000 customers in central and
southeastern Kentucky and, additionally, provides transportation service to
industrial customers and interconnected pipelines located in the area.
Recently, Delta acquired leases for the storage of natural gas under
approximately 8,000 acres in Bell County, Kentucky and is currently developing
the property as an underground natural gas storage facility. This storage field
should permit Delta to purchase and store gas when prices are less expensive
and withdraw and sell the gas during the peak usage winter months.
DISTRIBUTION AND TRANSMISSION OF NATURAL GAS
The Company purchases and produces gas for distribution to its retail
customers and also provides transportation service to industrial customers and
inter-connected pipelines with its facilities that are located in 17
predominantly rural counties in central and southeastern Kentucky. The economy
of Delta's service area is based principally on coal mining, farming and light
industry. The communities in Delta's service area typically contain populations
of less than 20,000. The four largest service areas are Corbin, Nicholasville,
Middlesboro and Berea, where Delta serves approximately 6,300, 6,200, 3,800 and
3,800 customers, respectively.
Several communities served by Delta continue 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. As a result of this growth, Delta's total customer
count increased by 2.5% for the twelve months ended March 31, 1996.
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 the twelve months ended
March 31, 1996.
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 alternative sources of energy, including electricity,
coal, oil, propane and wood. The Company's marketing subsidiaries, which
purchase gas and resell it to various industrial customers and others, also
compete for customers with producers and marketers of natural gas. Gas costs,
which the Company is generally able to pass through to customers, may cause
customers to conserve, or, in the case of industrial customers, to use
alternative energy sources. Also, the potential bypass of Delta's system by
industrial customers and others is a competitive concern that Delta has
addressed and will continue to address as the need arises.
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 during each twelve month period, and changes in the average
temperature during the winter months impacts its revenues year-to-year (see
``Management's Discussion and Analysis of Financial Condition and Results of
Operations").
Retail gas sales for the twelve months ended March 31, 1996 were
approximately 4,386,000 Mcf, generating approximately $26,027,000 in revenues,
as compared to approximately 3,724,000 Mcf and approximately $24,693,000 in
revenues for fiscal 1995. Heating degree days billed during the twelve months
ended March 31, 1996 were approximately 105% of the thirty year average as
compared with approximately 89% in fiscal 1995. Principally as a result of this
colder weather, sales volumes increased by 662,000 Mcf, or 17.8%, for the
twelve months ended March 31, 1996 as compared to fiscal 1995.
Delta's transportation of natural gas during the twelve months ended March
31, 1996 generated revenues of approximately $3,243,000 as compared with
approximately $3,049,000 during fiscal 1995. Of the total transportation for
the twelve months ended March 31, 1996, approximately $2,830,000 (2,506,000
Mcf) and $413,000 (1,186,000 Mcf)
12
<PAGE> 15
were earned for transportation for on-system and off-system customers,
respectively. Of the total transportation for fiscal 1995, approximately
$2,588,000 (2,390,000 Mcf) and $461,000 (1,452,000 Mcf) were earned for
transportation for on-system and off-system customers, respectively.
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
continues to consider acquisitions of other gas systems, some of which are
contiguous to its existing service areas, as well as expansion within its
existing service areas. The Company also anticipates continuing activity in gas
production and transportation 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, enhanced supply and system flexibility.
OPERATING STATISTICS
Set forth in the following table is information indicative of the general
development of Delta's business during the periods indicated.
<TABLE>
<CAPTION>
FOR THE
TWELVE
MONTHS
ENDED FOR THE FISCAL YEARS ENDED JUNE 30,
MARCH 31, ---------------------------------------------------
1996 1995 1994 1993 1992 1991
--------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
RETAIL CUSTOMERS SERVED, END OF PERIOD
Residential................................... 31,018 29,029 27,939 27,293 26,488 25,698
Commercial.................................... 4,885 4,287 4,242 4,093 4,035 4,168
Industrial.................................... 73 72 76 75 66 71
--------- ------- ------- ------- ------- -------
Total..................................... 35,976 33,388 32,257 31,461 30,589 29,937
--------- ------- ------- ------- ------- -------
OPERATING REVENUES ($000)
Residential sales............................. 15,532 14,772 16,597 14,578 13,945 12,453
Commercial sales.............................. 9,163 8,673 9,663 8,269 7,651 6,294
Industrial sales.............................. 1,332 1,248 1,671 1,383 1,188 1,299
On-system transportation...................... 2,830 2,588 2,310 2,451 2,348 2,351
Off-system transportation..................... 413 461 623 836 1,342 1,377
Subsidiary sales.............................. 4,972 3,959 3,755 3,532 2,580 2,873
Other......................................... 138 143 228 172 147 131
--------- ------- ------- ------- ------- -------
Total..................................... 34,380 31,844 34,847 31,221 29,201 26,778
--------- ------- ------- ------- ------- -------
SYSTEM THROUGHPUT (MILLION CU. FT.)
Residential sales............................. 2,560 2,173 2,511 2,341 2,202 2,049
Commercial sales.............................. 1,564 1,328 1,506 1,368 1,235 1,115
Industrial sales.............................. 262 223 316 281 229 248
--------- ------- ------- ------- ------- -------
Total retail sales........................ 4,386 3,724 4,333 3,990 3,666 3,412
On-system transportation...................... 2,506 2,390 2,186 2,248 2,061 1,993
Off-system transportation..................... 1,186 1,452 1,997 2,668 4,580 4,903
--------- ------- ------- ------- ------- -------
Total..................................... 8,078 7,566 8,516 8,906 10,307 10,308
--------- ------- ------- ------- ------- -------
AVERAGE ANNUAL CONSUMPTION PER END OF PERIOD
RESIDENTIAL CUSTOMER (THOUSAND CU. FT.)......... 83 75 90 86 83 80
LEXINGTON, KENTUCKY DEGREE DAYS
Actual........................................ 4,949 4,215 4,999 4,688 4,370 4,025
Percent of 30 year average (4,715)............ 105.0 89.4 106.0 99.4 92.7 85.4
AVERAGE REVENUE PER MCF SOLD AT RETAIL ($)........ 5.93 6.63 6.44 6.07 6.21 5.88
AVERAGE GAS COST PER MCF SOLD AT RETAIL ($)....... 2.78 3.37 3.34 2.90 3.01 3.42
</TABLE>
13
<PAGE> 16
GAS SUPPLY
Delta receives its gas supply from a combination of interstate and Kentucky
sources.
Delta's interstate gas supply is transported and stored by Tennessee Gas
Pipeline Company (``Tennessee'') and Columbia Gas Transmission Corporation
(``Columbia'') and is transported by Columbia Gulf Transmission Company
(``Columbia Gulf''). Delta acquires its interstate gas supply from gas
marketers.
Delta's agreements with Tennessee extend until 2000 and thereafter continue
on a year-to-year basis until terminated by either party. Tennessee is
obligated under the agreements to transport up to approximately 17,600 Mcf per
day for Delta. Delta acquires its gas for transportation by Tennessee under an
agreement with a gas marketer, which agreement extends through April, 1997.
During the twelve months ended March 31, 1996, Delta purchased approximately
1,644,000 Mcf from the gas marketer, which natural gas was transported by
Tennessee.
Delta's agreements with Columbia and Columbia Gulf extend until 2008 and
thereafter continue on a year-to-year basis until terminated by one of the
parties to the particular agreement. Columbia and Columbia Gulf are obligated
under the agreements to transport up to approximately 12,000 Mcf per day. Delta
acquires its gas for transportation by Columbia and Columbia Gulf under an
agreement with a gas marketer, which agreement extends through April, 1997.
During the twelve months ended March 31, 1996, Delta purchased a total of
approximately 1,035,000 Mcf from the gas marketer, which natural gas was
transported by Columbia and Columbia Gulf.
Delta has an agreement 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.
Wiser currently is obligated to deliver 11,000 Mcf per day to Delta. Delta
purchased approximately 1,440,000 Mcf from Wiser during the twelve months ended
March 31, 1996.
Delta has agreements with Enpro to purchase all the natural gas produced
from Enpro's wells on certain leases in Bell, Knox and Whitley Counties,
Kentucky. These agreements remain in force so long as gas is produced in
commercial quantities from the wells on the leases. Remaining proved, developed
natural gas reserves are estimated at approximately 4,700,000 Mcf. Delta
purchased a total of approximately 206,000 Mcf from those properties during the
twelve months ended March 31, 1996. 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 Kentucky producers, most of which are priced as short-term, or spot-market,
purchases. The combined volumes of gas purchased from these sources during the
twelve months ended March 31, 1996 were approximately 461,000 Mcf.
Resources and Delgasco purchase gas under agreements with various
marketers, brokers and Kentucky producers, most of which is priced as
short-term, 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
during the twelve months ended March 31, 1996 were approximately 2,036,000 Mcf.
Delta is presently developing an underground natural gas storage field with
an approximate 4,000,000 Mcf capacity. See ``Business--Properties''. The
estimated completion date for these facilities is by the end of 1997, and it is
anticipated that this storage capability will permit Delta to purchase and
store gas when prices are less expensive and to withdraw and sell the gas
during the peak usage winter months.
Although there are competitors for the acquisition of gas 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 Kentucky producers and others.
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. 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.
14
<PAGE> 17
REGULATORY MATTERS
Delta is subject to the regulatory authority of the Public Service
Commission of Kentucky (``PSC'') with respect to various aspects of Delta's
business, including rates and service to retail and transportation customers.
The Company monitors the need to file a general rate case as a way to adjust
its sales prices and has not yet determined whether it will file a general rate
case during 1996. Delta currently has no general rate cases filed with the PSC.
The history of Delta's general rate cases since 1985 is as follows:
<TABLE>
<CAPTION>
ANNUAL AUTHORIZED
REVENUE ANNUAL REVENUE INCREASE APPROVED TEST YEAR RETURN ON
DATE OF INCREASE --------------------------------- (12 MONTHS COMMON
APPLICATION REQUESTED DATE EFFECTIVE AMOUNT ENDED) EQUITY
------------------ ----------- ------------------ ----------- --------------- -----------
<S> <C> <C> <C> <C> <C>
May 31, 1985 $ 1,600,000 November 15, 1985 $ 452,000 March 31, 1985 15.0%
December 30, 1985 $ 77,000
January 28, 1986 $ 154,000
December 14, 1990 $ 2,937,000 May 23, 1991 $ 2,050,000 June 30, 1990 <Fa>
<FN>
- --------
<Fa> Delta requested a 14% return on common equity. The rate case was settled
with all intervenors and approved by the PSC. No specific return on common
equity was stated in the settlement.
</TABLE>
Delta currently has a Gas Cost Recovery (``GCR'') clause, which permits
changes in Delta's gas costs to be reflected in the rates charged to customers.
The GCR requires Delta to make quarterly filings with the PSC, but such
procedure does not require a general rate case. The PSC historically has
allowed Delta to recover storage costs in rates through the GCR mechanism or
general rate cases.
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 branch offices 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 feasible.
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.
PROPERTIES
Delta owns its corporate headquarters in Winchester. In addition, Delta
owns buildings used for branch operations in nine of the cities it serves and
rents an office building in one other city. 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.
Delta holds leases for the storage of natural gas under approximately 8,000
acres located in Bell County, Kentucky. This property is being developed for
the underground storage of natural gas and when complete is expected to have an
estimated working capacity of approximately 4,000,000 Mcf of gas.
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 are currently non-producing, and no
reserve studies have been undertaken 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.
Enpro's remaining proved, developed natural gas reserves are estimated at
approximately 4,700,000 Mcf. Oil production from
15
<PAGE> 18
the property 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 performed on the properties.
During 1994, Enpro entered an agreement with a producer relating to
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 future
wells.
There are no significant encumbrances on the Company's assets.
EMPLOYEES
On March 31, 1996, Delta had 171 full-time employees. Delta considers its
relationship with its employees to be satisfactory. Delta's employees are not
represented by unions or subject to any collective bargaining agreements.
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.
DESCRIPTION OF COMMON STOCK
Delta's Articles of Incorporation presently authorize the issuance of
6,000,000 shares of Common Stock, par value $1 per share. Common shareholders
are entitled to such dividends as may be declared from time to time by the
Board of Directors. The Indenture under which the Debentures offered hereby are
to be issued includes, among other things, a covenant whereby Delta agrees not
to pay dividends on its Common Stock unless Consolidated Tangible Net Worth
(consolidated shareholders' equity less intangible assets) of the Company
exceeds $18,000,000. See ``Description of Debentures--Restrictive Covenants''.
As of March 31, 1996, Delta's Consolidated Tangible Net Worth was $23,986,406.
All voting power resides in the Common Stock except (a) as otherwise
required by law and (b) subject to the power of the Board of Directors to grant
voting rights to any series of Preferred Stock, of which 312,500 shares are
authorized but none is issued and outstanding. Cumulative voting applies to the
election of the Board of Directors. The Board of Directors of the Company is
divided into three classes, with the classes serving staggered three-year terms
and with one class being elected at each annual meeting of the Company's
shareholders. Except with regard to the right to vote cumulatively for
Directors, the holders of Common Stock are entitled to cast one vote per share
on each matter presented to shareholders for vote.
The Company's Articles of Incorporation require an affirmative shareholder
vote of at least 80% of the outstanding shares entitled to vote to effect
certain mergers, consolidations, sales of assets, liquidations or issuances of
voting stock involving a holder of 10% or more of the Company's voting stock,
unless such transaction is approved by the Board of Directors before the other
party to the transaction becomes a 10% holder. Also, the Articles of
Incorporation provide that the number of Directors as fixed by the By-laws can
only be changed by at least such an 80% affirmative shareholder vote or an
affirmative vote of a majority of the Board of Directors. Additionally, a
Director can be removed without cause only with an affirmative shareholder vote
of 80% of the outstanding shares entitled to vote.
In the event of liquidation, the owners of the Common Stock are entitled to
share pro-rata in any distribution, after payment of all debts and obligations
of the Company. There are no pre-emptive rights, conversion rights, redemption
provisions or sinking fund provisions applicable to the Common Stock. The
issued and outstanding shares of Common Stock, including those offered hereby,
are and will be fully paid and nonassessable.
The Registrar and Transfer Agent for Delta's Common Stock is Fifth Third
Bank, 38 Fountain Square Plaza, Cincinnati, Ohio 45263.
16
<PAGE> 19
DESCRIPTION OF DEBENTURES
GENERAL
The Debentures are to be issued under an Indenture dated as of July 1, 1996
(the ``Indenture''), by and between the Company and Fifth Third Bank,
Cincinnati, Ohio, as Trustee. A copy of the Indenture has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part. The
terms of the Debentures include those stated in the Indenture and those made a
part of the Indenture by reference to the Trust Indenture Act of 1939 (the
``Trust Indenture Act'') as in effect on the date of the Indenture. Potential
investors are referred to the Indenture and the Trust Indenture Act for a
statement of such terms. The following statements relating to the Debentures
and certain provisions of the Indenture are summaries, do not purport to be
complete, and are subject to and are qualified in their entirety by reference
to the provisions of the Indenture. Unless otherwise stated, capitalized terms
defined in the Indenture have the same meanings when used herein.
The Company does not intend to list the Debentures on a national securities
exchange. There is presently no trading market for the Debentures, and there
can be no assurance that such a market will develop or, if developed, that it
will be maintained.
BOOK-ENTRY ONLY SYSTEM
The Debentures will be issued in the aggregate initial principal amount of
$15,000,000 and will be represented by one certificate (the ``Global
Security'') to be registered in the name of the nominee of The Depository Trust
Company (``DTC'') or any successor depository (the ``Depository''). The
Depository will maintain the Debentures in denominations of $1,000 and integral
multiples thereof through its book-entry facilities. In accordance with its
normal procedures, the Depository will record the interests of each Depository
participating firm (e.g., brokerage firm) (``Participant'') in the Debentures,
whether held for its own account or as a nominee for another person.
So long as the nominee of the Depository is the registered owner of the
Debentures, such nominee will be considered the sole owner or holder of the
Debentures for all purposes under the Indenture and any applicable laws, except
as noted below. A Beneficial Owner, as hereinafter defined, of interests in the
Debentures will not be entitled to receive a physical certificate representing
such ownership interest and will not be considered an owner or holder of the
Debentures under the Indenture, except as otherwise provided below. A
Beneficial Owner is the person who has the right to sell, transfer or otherwise
dispose of an interest in the Debentures and the right to receive the proceeds
therefrom, as well as interest, principal and premium (if any) payable in
respect thereof. A Beneficial Owner's interest in the Debentures will be
recorded, in integral multiples of $1,000, on the records of the Participant
that maintains such Beneficial Owner's account for such purpose. In turn, the
Participant's interest in such Debentures will be recorded, in integral
multiples of $1,000, on the records of the Depository. Therefore, the
Beneficial Owner must rely on the foregoing arrangements to evidence its
interest in the Debentures. Beneficial ownership of the Debentures may be
transferred only by compliance with the procedures of a Beneficial Owner's
Participant (e.g., brokerage firm) and the Depository.
All rights of ownership must be exercised through the Depository and the
book-entry system, except that a Beneficial Owner is entitled to exercise
directly its rights under Section 316(b) of the Trust Indenture Act with
respect to the payment of interest and principal on the Debentures. Notices
that are to be given to registered owners by the Company or the Trustee will be
given only to the Depository. It is expected that the Depository will forward
the notices to the Participants by its usual procedures, so that such
Participants may forward such notices to the Beneficial Owners. Neither the
Company nor the Trustee will have any responsibility or obligation to assure
that any notices are forwarded by the Depository to the Participants or by any
Participants to the Beneficial Owners.
DTC has advised the Company and the Underwriters as follows: DTC is a
limited-purpose trust company organized under the Banking Law of the State of
New York, a member of the Federal Reserve System, and a ``clearing agency''
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities of Participants and facilitates the clearance and settlement
of securities transactions among Participants in such securities transactions
through electronic book-entry changes in accounts of Participants, thereby
eliminating the need for physical movement of securities certificates.
Participants include securities brokers and dealers (including the
Underwriters), banks, trust companies, clearing corporations and certain other
organizations, some of whom (and/or their representatives) own DTC. Access to
DTC's book-entry system is also available to others, such as banks,
17
<PAGE> 20
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly. Persons who are
not Participants may beneficially own securities held by DTC only through
Participants.
INTEREST AND PAYMENT
The Debentures will mature on August 1, 2026. The Debentures will bear
interest from the date of issuance at the rate per annum stated on the cover
page hereof, calculated on the basis of a 360-day year of twelve 30-day months,
payable semi-annually on February 1 and August 1 of each year, commencing
February 1, 1997 to the Persons in whose names the Debentures are registered at
the close of business on the 15th day of the month prior to such Interest
Payment Date. If any payment date would otherwise be a day that is a Legal
Holiday, the payment will be postponed to the next day that is not a Legal
Holiday, and no interest on such payment shall accrue for the period from and
after such otherwise scheduled payment date for the purposes of the payment to
be made on such next succeeding day.
So long as the nominee of the Depository is the registered owner of the
Debentures, payments of interest, principal and premium (if any) in respect of
the Debentures will be made to the Depository. The Depository will be
responsible for crediting the amount of such distributions to the accounts of
the Participants entitled thereto, in accordance with the Depository's normal
procedures. Each Participant will be responsible for disbursing such
distributions to the Beneficial Owners of the interests in Debentures that it
represents. Neither the Company nor the Trustee will have any responsibility or
liability for any aspect of the records relating to, notices to, or payments
made on account of, beneficial ownership interests in the Debentures;
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests; the selection of any Beneficial Owner to receive payment
in the event of a partial redemption of the Global Security; or consents given
or other action taken on behalf of any Beneficial Owner.
REDEMPTION AT THE OPTION OF THE COMPANY
The Debentures will be redeemable at any time on or after August 1, 2001,
as a whole or in part, at the election of the Company, at a Redemption Price
equal to the percentage of the principal amount set forth below if redeemed
during the twelve-month period beginning August 1 of the year indicated:
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
YEAR PRICE % YEAR PRICE %
- ---- ----------- ---- -----------
<S> <C> <C> <C>
2001.................................... 105% 2004.................................... 102%
2002.................................... 104% 2005.................................... 101%
2003.................................... 103% 2006 to maturity........................ 100%
</TABLE>
In each case, interest accrued to the Redemption Date shall also be paid.
If less than all the Debentures are redeemed, the particular Debentures to be
redeemed will be selected by the Trustee by lot.
Notice of redemption will be mailed at least 30 days before the Redemption
Date to each holder of Debentures to be redeemed at the holder's registered
address. The Company has the right to rescind any notice of redemption at any
time at least five days prior to the Redemption Date.
On and after the Redemption Date, interest will cease to accrue on
Debentures or portions thereof called for redemption, unless the Company shall
default in the payment of the Redemption Price.
LIMITED RIGHT OF REDEMPTION UPON DEATH OF BENEFICIAL OWNER
Unless the Debentures have been declared due and payable prior to their
maturity by reason of an Event of Default, the Representative (as hereinafter
defined) of a deceased Beneficial Owner has the right to request redemption of
all or part of his interest at par, expressed in integral multiples of $1,000
principal amount, in the Debentures for payment prior to maturity, and the
Company will redeem the same subject to the limitations that the Company will
not be obligated to redeem during the period from the original issuance of the
Debentures through and including August 1, 1997 (the ``Initial Period''), and
during any twelve-month period which ends on and includes each August 1
thereafter (each such twelve-month period being hereinafter referred to as a
``Subsequent Period''), (i) any interest in the Debentures which exceeds an
aggregate principal amount of $25,000 or (ii) interests in the Debentures
18
<PAGE> 21
in an aggregate principal amount exceeding $500,000. A request for redemption
may be presented to the Trustee by the Representative of a deceased Beneficial
Owner at any time and in any principal amount. Representatives of deceased
Beneficial Owners must make arrangements with the Participant through whom such
interest is owned in order that timely presentation of redemption requests can
be made by the Participant and, in turn, by the Depository to the Trustee. If
the Company, although not obligated to do so, chooses to redeem interests of a
deceased Beneficial Owner in the Debentures in the Initial Period or in any
Subsequent Period in excess of the $25,000 limitation, such redemption, to the
extent that it exceeds the $25,000 limitation for any deceased Beneficial
Owner, shall not be included in the computation of the $500,000 aggregate
limitation for such Initial Period or such Subsequent Period, as the case may
be, or for any succeeding Subsequent Period.
Subject to the $25,000 and the $500,000 limitations, the Company will upon
the death of any Beneficial Owner redeem the interest of the Beneficial Owner
in the Debentures within 60 days following receipt by the Trustee of a
Redemption Request, as hereinafter defined, from such Beneficial Owner's
personal representative, or surviving joint tenant(s), tenant(s) by the
entirety or tenant(s) in common, or other persons entitled to effect such a
Redemption Request (each, a ``Representative''). If Redemption Requests exceed
the aggregate principal amount of interests in Debentures required to be
redeemed during the Initial Period or any Subsequent Period, then such excess
Redemption Requests will be applied to successive Subsequent Periods,
regardless of the number of Subsequent Periods required to redeem such
interests.
A request for redemption of an interest in the Debentures may be made by
delivering a request to the Depository, in the case of a Participant which is
the Beneficial Owner of such interest, or to the Participant through whom the
Beneficial Owner owns such interest, in form satisfactory to the Participant,
together with evidence of the death of the Beneficial Owner and evidence of the
authority of the Representative satisfactory to the Participant and Trustee. A
Representative of a deceased Beneficial Owner may make the request for
redemption and shall submit such other evidence of the right to such redemption
as the Participant or Trustee shall require. The request shall specify the
principal amount of interest in the Debentures to be redeemed. A request for
redemption in form satisfactory to the Participant and accompanied by the
documents relevant to the request as above provided, together with a
certification by the Participant that it holds the interest on behalf of the
deceased Beneficial Owner with respect to whom the request for redemption is
being made (a ``Redemption Request''), shall be provided to the Depository by a
Participant, and the Depository will forward the request to the Trustee.
Redemption Requests shall be in form satisfactory to the Trustee.
The price to be paid by the Company for an interest in the Debentures to be
redeemed pursuant to a request on behalf of a deceased Beneficial Owner is one
hundred percent (100%) of the principal amount thereof plus accrued but unpaid
interest to the date of payment. Subject to arrangements with the Depository,
payment for interests in the Debentures which are to be redeemed shall be made
to the Depository upon presentation of Debentures to the Trustee for redemption
in the aggregate principal amount specified in the Redemption Requests
submitted to the Trustee by the Depository which are to be fulfilled in
connection with such payment. Any acquisition of Debentures by the Company or
its Subsidiaries other than by redemption at the option of any Representative
of a deceased Beneficial Owner shall not be included in the computation of
either the $25,000 or the $500,000 limitation for the Initial Period or for any
Subsequent Period.
Interests in the Debentures held in tenancy by the entirety, joint tenancy
or by tenants in common will be deemed to be held by a single Beneficial Owner
and the death of a tenant in common, tenant by the entirety or joint tenant
will be deemed the death of a Beneficial Owner. The death of a person who,
during such person's lifetime, was entitled to substantially all of the rights
of a Beneficial Owner of an interest in the Debentures will be deemed the death
of the Beneficial Owner, regardless of the recordation of such interest on the
records of the Participant, if such rights can be established to the
satisfaction of the Participant and the Trustee. Such interest shall be deemed
to exist in typical cases of nominee ownership, ownership under the Uniform
Gifts to Minors Act or the Uniform Transfers to Minors Act, community property
or other joint ownership arrangements between a husband and wife (including
individual retirement accounts or Keogh plans maintained solely by or for the
decedent or by or for the decedent and any spouse), and trust and certain other
arrangements where one person has substantially all of the rights of a
Beneficial Owner during such person's lifetime.
In the case of a Redemption Request which is presented on behalf of a
deceased Beneficial Owner and which has not been fulfilled at the time the
Company gives notice of its election to redeem the Debentures, the interests in
the
19
<PAGE> 22
Debentures which are the subject of such Redemption Request shall not be
eligible for redemption pursuant to the Company's option to redeem but shall
remain subject to fulfillment pursuant to such Redemption Request.
Subject to the provisions of the immediately preceding paragraph, any
Redemption Request may be withdrawn upon delivery of a written request for such
withdrawal given to the Trustee by the Depository prior to payment for
redemption of the interest in the Debentures by reason of the death of a
Beneficial Owner.
The Company is legally obligated to redeem Debentures and interests of
Beneficial Owners therein properly presented for redemption pursuant to a
Redemption Request in accordance with and subject to the terms, conditions and
limitations of the Indenture, as summarized above. The Company's redemption
obligation is not cumulative. Nothing in the Indenture prohibits the Company
from redeeming, in fulfillment of Redemption Requests made pursuant to the
Indenture, Debentures or interests therein of Beneficial Owners in excess of
the principal amount the Company is obligated to redeem, nor does anything in
the Indenture prohibit the Company from purchasing any Debentures or interests
therein in the open market. However, the Company may not use any Debentures
redeemed or purchased as described in the immediately preceding sentence as a
credit against its redemption obligation.
Because of the limitations of the Company's requirement to redeem, no
Beneficial Owner can have any assurance that its interest in the Debentures
will be paid prior to maturity.
SINKING FUND; NON-CONVERTIBILITY
The Debentures are not subject to a sinking fund and are not convertible.
DEBENTURES UNSECURED
The Debentures will be unsecured obligations and will rank on a parity with
all of the other unsecured and unsubordinated Indebtedness of the Company
outstanding from time to time. Subject only to the restrictive covenants
described below (see ``Restrictive Covenants''), the Indenture does not limit
the amount of Indebtedness which the Company or its Subsidiaries may incur.
RESTRICTIVE COVENANTS
The Company covenants in the Indenture that neither the Company nor any of
its Subsidiaries will create, issue, incur, guarantee or assume any Funded
Indebtedness which ranks prior to or on a parity with the Debentures in right
of payment, unless immediately thereafter, and after giving effect thereto and
to the application of the proceeds thereof, Consolidated Net Utility Fixed
Assets are at least equal to total outstanding Consolidated Funded
Indebtedness. Consolidated Net Utility Fixed Assets is defined in the Indenture
to include the net book value (determined in accordance with generally accepted
accounting principles) of all physical property of the Company and any
Subsidiary used or useful to the Company or such Subsidiary in the business of
furnishing or distributing, as a public utility, gas service. Funded
Indebtedness is defined in the Indenture as all Indebtedness other than Current
Indebtedness and would include the Debentures. Consolidated Funded Indebtedness
is defined to include Funded Indebtedness of the Company and Funded
Indebtedness of Consolidated Subsidiaries. At March 31, 1996, after giving
effect to the issuance of the Debentures and the Common Stock offered hereby,
and the application of the proceeds therefrom, Consolidated Net Utility Fixed
Assets would have exceeded Consolidated Funded Indebtedness by approximately
$27,900,000.
The Company also covenants that it will not declare or pay any dividends or
make any other distribution upon its Common Stock (other than dividends and
distributions payable only in shares of Common Stock) and will not directly or
indirectly apply any of the assets of the Company to the redemption,
retirement, purchase or other acquisition of any stock of the Company of any
class, except purchases or redemptions in compliance with any mandatory sinking
fund or purchase fund or redemption requirement in respect of any preferred
stock of the Company, whether now or hereafter authorized or issued, unless
after giving effect to such declaration, payment, distribution or application
of assets the Consolidated Tangible Net Worth of the Company shall be at least
equal to $18,000,000 as reflected on the Company's latest available balance
sheet. Consolidated Tangible Net Worth is defined in the Indenture as the
shareholders' equity of the Company, less intangible assets. At March 31, 1996,
after giving effect to the issuance of the Common Stock and the Debentures,
Consolidated Tangible Net Worth of the Company would have been approximately
$29,668,656.
20
<PAGE> 23
Subject to certain exceptions described in the Indenture (including Liens
to secure Indebtedness having an outstanding principal balance aggregating not
more than $3,000,000), the Company also covenants that it will not issue,
assume or guarantee any Indebtedness secured by a Lien (as defined in the
Indenture) on any property or asset at any time owned by it, without
effectively securing, prior to or concurrently with the issuance, assumption or
guarantee of any such Indebtedness, the Debentures equally and ratably (or, at
the Company's option, prior to) such Indebtedness.
Except as described in the preceding three paragraphs, the Indenture does
not afford any protection to holders of Debentures solely on account of the
Company's involvement in highly leveraged transactions.
SUCCESSOR CORPORATION
The Company covenants in the Indenture that it will not consolidate with,
merge into or transfer or lease all or substantially all of its assets to
another corporation, unless immediately after such transaction no default will
exist, such corporation assumes all the obligations of the Company under the
Debentures and the Indenture, and certain other requirements are met.
EVENTS OF DEFAULT; NOTICE AND WAIVER
The following constitute events of default under the Indenture: (a) default
in the payment of principal (or premium, if any) of the Debentures when due;
(b) default in the payment of any interest on the Debentures when due,
continued for 30 days; (c) default in the performance of any other agreement of
the Company in the Debentures or the Indenture, continued for 60 days after
written notice; (d) acceleration of certain indebtedness of the Company or its
Subsidiaries for borrowed money under the terms of any instrument under which
indebtedness of $100,000 or more is issued or secured; and (e) certain events
in bankruptcy, insolvency or reorganization.
The Indenture provides that the Trustee will, within 90 days after the
occurrence of a default, give the holders of Debentures notice of all
continuing defaults (as defined) known to it; but, except in the case of a
default in the payment of the principal or premium, if any, or interest in
respect of any of the Debentures, the Trustee shall be protected in withholding
such notice if it in good faith determines that the withholding of such notice
is in the interest of such holders.
If any event of default shall occur and be continuing, the Trustee or the
holders of at least 25% in principal amount of outstanding Debentures may
declare the Debentures immediately due and payable. Any such acceleration may
be rescinded by the holders of a majority in principal amount of the Debentures
then outstanding, upon the conditions provided in the Indenture.
An existing default and its consequences may be waived by the holders of a
majority in principal amount of the Debentures, upon the conditions provided in
the Indenture, other than an uncured default in payment of principal, premium,
if any, or interest in respect of the Debentures, an uncured failure to make
any redemption payment or an uncured default with respect to a provision which
cannot be modified under the terms of the Indenture without the consent of each
holder affected.
The Indenture includes a covenant that the Company will file annually with
the Trustee, within 120 days after the end of each fiscal year, a statement
regarding compliance by the Company with the terms thereof and specifying any
defaults by the Company of which the signers may have knowledge.
MODIFICATION OF THE INDENTURE
Modifications and amendments of the Indenture which materially affect the
rights of the holders of the Debentures may be made by the Company and the
Trustee only with the consent of the holders of not less than a majority in
principal amount of the Debentures then outstanding; provided that no such
modification or amendment may change the stated maturity of any Debenture, or
reduce the principal amount of or redemption premium, if any, or interest rate
on any Debenture or change the interest payment date or otherwise modify the
terms of payment of the principal of or redemption premium, if any, or interest
on the Debentures, or reduce the percentage required for any consent, waiver or
modification, or modify certain other provisions of the Indenture, without the
consent of each holder of any Debenture affected thereby.
21
<PAGE> 24
DISCHARGE OF THE INDENTURE
The Indenture will be discharged and canceled upon payment of all the
Debentures or upon deposit with the Trustee, within no more than one year prior
to the maturity or the redemption of all the Debentures, of funds or U.S.
Government Obligations sufficient to pay the principal of and premium, if any,
and interest on the Debentures.
TRUSTEE
The Indenture contains a provision entitling the Trustee, subject to the
duty of the Trustee during default to act with the required standard of care,
to be indemnified by the holders of Debentures before proceeding to exercise
any right or power under the Indenture at the request of the holders of
Debentures. The Indenture provides that the holders of a majority in principal
amount of the outstanding Debentures may direct the time, method and place of
conducting any proceeding and any remedy available to the Trustee or exercising
any trust or power conferred upon the Trustee.
Fifth Third Bank (``Fifth Third''), the Trustee and Debenture Registrar
under the Indenture, has its corporate trust office in Cincinnati, Ohio. Fifth
Third serves as Registrar, Transfer Agent and Dividend Disbursement Agent for
Delta's Common Stock as well as Agent for Delta's Dividend Reinvestment and
Stock Purchase Plan.
UNDERWRITING
The Underwriters named below (the ``Underwriters'') have severally agreed,
subject to the terms and conditions of the Underwriting Agreement, the form of
which is filed as an exhibit to the Registration Statement, to purchase from
the Company the number of shares of Common Stock and the principal amounts of
Debentures set forth opposite their respective names.
<TABLE>
<CAPTION>
NUMBER OF
SHARES PRINCIPAL AMOUNT
UNDERWRITER OF COMMON STOCK OF DEBENTURES
----------- --------------- ----------------
<S> <C> <C>
Edward D. Jones & Co....................................... $
J.J.B. Hilliard, W.L. Lyons, Inc...........................
The Ohio Company........................................... ------- ------------
Total.................................................. 350,000 $ 15,000,000
======= ============
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Common Stock and Debentures
are subject to the approval of certain legal matters by counsel and to certain
other conditions. The Underwriters are obligated to take and pay for all of the
shares of Common Stock and Debentures offered hereby if any are taken (other
than shares of Common Stock covered by the over-allotment option described
below).
The Underwriters have advised the Company that they propose to offer the
Common Stock and Debentures being purchased by them directly to the public at
the initial public offering prices set forth on the cover page of this
Prospectus and in part to certain securities dealers, which are members of
the National Association of Securities Dealers, Inc., at such prices less a
concession of $______ per share. The Underwriters may allow, and such dealers
may reallow, a discount not in excess of $_____ per share to other dealers.
After the initial public offering, the public offering prices and concessions
may be changed by the Underwriters.
The offering of the Common Stock and Debentures is made for delivery when,
as and if accepted by the Underwriters and subject to prior sale and to
withdrawal, cancellation or modification of the offer without notice. The
Underwriters reserve the right to reject any order for the purchase of Common
Stock or Debentures in whole or in part.
The Company has granted to the Underwriters an option for 30 days to
purchase (at the Common Stock Price to Public less the Underwriting Discount
and Commissions shown on the cover page of this Prospectus) up to 50,000
additional shares of Common Stock. The Underwriters may exercise such option
only to cover over-allotments of shares of Common Stock made in connection with
the sale of the shares offered hereby.
22
<PAGE> 25
In connection with the offering made hereby, certain Underwriters and
selling group members (if any), or their respective affiliates who are
qualifying registered market makers on the NASDAQ system, may engage in passive
market making transactions in the Common Stock on the NASDAQ system in
accordance with Rule 10b-6A under the Securities Exchange Act of 1934 during
the two business day period before commencement of offers or sales of
Common Stock. The passive market making transactions must comply with
applicable volume and price limits and be identified as such. In general, a
passive market maker may display its bid at a price not in excess of the
highest independent bid for the security; if all independent bids are lowered
below the passive market maker's bid, however, such bid must then be lowered
when certain purchase limits are exceeded.
The Company has agreed to indemnify the Underwriters and persons who
control the Underwriters against certain liabilities that may be incurred in
connection with the offering contemplated hereby, including liabilities under
the Securities Act of 1933, as amended, or to contribute to payments the
Underwriters may be required to make in respect thereof.
EXPERTS
The audited consolidated financial statements and schedules of the Company
included or incorporated by reference in this Prospectus and elsewhere in the
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
giving said reports. Reference is made to said reports, which include an
explanatory paragraph with respect to the change in method of accounting for
income taxes in 1993 as discussed in Note 1 to the consolidated financial
statements.
LEGAL OPINIONS
The validity of the Debentures and the Common Stock will be passed upon for
the Company by its special counsel, Stoll, Keenon & Park, LLP, Lexington,
Kentucky, and certain matters will be passed upon for the Underwriters by
Armstrong, Teasdale, Schlafly & Davis, St. Louis, Missouri.
Attorneys in the firm of Stoll, Keenon & Park, LLP who have participated in
the firm's representation of Delta and members of such attorneys' immediate
families own collectively 5,698 shares of Delta's Common Stock.
23
<PAGE> 26
<TABLE>
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.............................................. F-2
Consolidated Statements of Income for the Twelve Months Ended March 31, 1996
(unaudited) and the Fiscal Years Ended June 30, 1995, 1994 and 1993 (audited)....... F-3
Consolidated Statements of Cash Flows for the Twelve Months Ended March 31, 1996
(unaudited) and the Fiscal Years Ended June 30, 1995, 1994 and 1993 (audited)....... F-4
Consolidated Balance Sheets as of March 31, 1996 (unaudited) and June 30, 1995 and
1994 (audited)...................................................................... F-5
Consolidated Statements of Changes in Shareholders' Equity for the Twelve Months Ended
March 31, 1996 (unaudited) and the Fiscal Years Ended June 30, 1995, 1994 and 1993
(audited)........................................................................... F-6
Consolidated Statements of Capitalization as of March 31, 1996 (unaudited) and June
30, 1995 and 1994 (audited)......................................................... F-7
Notes to Consolidated Financial Statements............................................ F-8
</TABLE>
F-1
<PAGE> 27
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 are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Louisville, Kentucky
August 11, 1995
F-2
<PAGE> 28
<TABLE>
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
FOR THE
TWELVE MONTHS
ENDED FOR THE FISCAL YEARS ENDED JUNE 30,
MARCH 31, --------------------------------------------
1996 1995 1994 1993
------------- ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING REVENUES.............................................. $ 34,380,315 $ 31,844,339 $ 34,846,941 $ 31,221,410
------------ ------------ ------------ ------------
OPERATING EXPENSES
Purchased gas............................................... $ 16,071,147 $ 15,497,156 $ 17,250,556 $ 14,234,258
Operation and maintenance (Note 1).......................... 8,212,164 8,002,797 8,382,767 8,020,622
Depreciation and depletion (Note 1)......................... 2,382,070 2,183,558 1,977,868 1,833,072
Taxes other than income taxes............................... 970,275 863,340 875,477 797,942
Income taxes (Note 1)....................................... 1,503,200 1,042,400 1,509,600 1,543,700
------------ ------------ ------------ ------------
Total operating expenses................................ $ 29,138,856 $ 27,589,251 $ 29,996,268 $ 26,429,594
------------ ------------ ------------ ------------
OPERATING INCOME................................................ $ 5,241,459 $ 4,255,088 $ 4,850,673 $ 4,791,816
OTHER INCOME AND DEDUCTIONS, NET................................ 28,243 50,582 34,987 39,681
------------ ------------ ------------ ------------
INCOME BEFORE INTEREST CHARGES.................................. $ 5,269,702 $ 4,305,670 $ 4,885,660 $ 4,831,497
------------ ------------ ------------ ------------
INTEREST CHARGES
Interest on long-term debt.................................. $ 1,861,577 $ 1,879,442 $ 1,879,526 $ 1,875,901
Other interest.............................................. 638,774 419,693 243,729 258,405
Amortization of debt expense................................ 88,800 88,800 91,404 76,527
------------ ------------ ------------ ------------
Total interest charges.................................. $ 2,589,151 $ 2,387,935 $ 2,214,659 $ 2,210,833
------------ ------------ ------------ ------------
NET INCOME...................................................... $ 2,680,551 $ 1,917,735 $ 2,671,001 $ 2,620,664
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING............ 1,877,207 1,850,986 1,775,068 1,635,945
EARNINGS PER COMMON SHARE....................................... $ 1.43 $ 1.04 $ 1.50 $ 1.60
DIVIDENDS DECLARED PER COMMON SHARE............................. $ 1.12 $ 1.12 $ 1.105 $ 1.085
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
F-3
<PAGE> 29
<TABLE>
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
FOR THE
TWELVE FOR THE FISCAL YEARS ENDED JUNE 30,
MONTHS ENDED -----------------------------------------
MARCH 31,
1996 1995 1994 1993
------------ ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income...................................................... $ 2,680,551 $ 1,917,735 $ 2,671,001 $ 2,620,664
Adjustments to reconcile net income to net cash from operating
activities:
Depreciation, depletion and amortization.................... 2,470,872 2,272,358 2,069,013 1,922,102
Deferred income taxes and investment tax credits............ (82,200) (77,000) 874,800 839,100
Other--net.................................................. 527,730 602,180 446,969 493,848
(Increase) decrease in assets:
Accounts receivable......................................... (853,484) (118,237) 802,197 (707,605)
Materials and supplies...................................... (111,028) 173,319 (229,275) 155,358
Prepayments................................................. 36,701 (105,903) 25,701 8,096
Other assets................................................ 15,751 (209,225) (780) (95,564)
Increase (decrease) in liabilities:
Accounts payable............................................ 1,851,837 (178,609) 513,265 438,897
Refunds due customers....................................... (427,258) 83,572 358,270 37,226
Accrued taxes............................................... 375,838 (72,210) (34,543) (162,982)
Other current liabilities................................... (73,995) 69,742 38,675 16,435
Advance (deferred) recovery of gas cost..................... (3,942,280) 2,583,128 (1,372,030) (993,136)
Advances for construction and other......................... 7,584 2,333 8,756 (5,416)
------------ ----------- ----------- -----------
Net cash provided by operating activities............... $ 2,476,619 $ 6,943,183 $ 6,172,019 $ 4,567,023
------------ ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................................ $(11,327,477) $(8,122,838) $(7,374,747) $(6,289,508)
------------ ----------- ----------- -----------
Net cash used in investing activities................... $(11,327,477) $(8,122,838) $(7,374,747) $(6,289,508)
------------ ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends on common stock....................................... $ (2,103,594) $(2,073,374) $(1,972,368) $(1,775,411)
Issuance of common stock, net................................... 671,664 502,361 3,965,113 428,634
Issuance of debentures, net..................................... -- -- 14,246,937 --
Decrease in long-term debt...................................... (351,150) (240,100) (11,330,286) (591,425)
Issuance of short-term debt..................................... 23,905,000 19,495,000 20,180,000 17,615,000
Repayment of short-term debt.................................... (13,340,000) (16,525,000) (23,945,000) (13,915,000)
------------ ----------- ----------- -----------
Net cash provided by financing activities............... $ 8,781,920 $ 1,158,887 $ 1,144,396 $ 1,761,798
------------ ----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS................ $ (68,938) $ (20,768) $ (58,332) $ 39,313
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR........................ 270,239 156,547 214,879 175,566
------------ ----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR.............................. $ 201,301 $ 135,779 $ 156,547 $ 214,879
============ =========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest.................................................... $ 2,393,397 $ 2,253,472 $ 2,141,705 $ 2,107,168
Income taxes................................................ $ 1,000,586 $ 1,264,956 $ 715,000 $ 952,851
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
F-4
<PAGE> 30
<TABLE>
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
AS OF AS OF JUNE 30,
MARCH 31, ----------------------------
1996 1995 1994
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
GAS UTILITY PLANT, at cost..................................................... $ 95,017,635 $ 84,944,969 $ 77,882,135
Less--Accumulated provision for depreciation............................... (26,086,634) (24,588,203) (22,862,469)
------------ ------------ ------------
Net gas plant.......................................................... $ 68,931,001 $ 60,356,766 $ 55,019,666
------------ ------------ ------------
CURRENT ASSETS
Cash and cash equivalents.................................................. $ 201,301 $ 135,779 $ 156,547
Accounts receivable, less accumulated provisions for doubtful accounts of
$103,749, $81,608 and $131,324 as of March 31, 1996, and June 30, 1995
and 1994, respectively................................................... 3,532,467 1,236,199 1,117,962
Gas in storage, at average cost............................................ 349,909 490,710 352,572
Deferred gas costs (Note 1)................................................ 3,506,175 -- 1,471,342
Materials and supplies, at first-in, first-out cost........................ 526,717 527,442 700,761
Prepayments................................................................ 525,405 423,246 317,343
------------ ------------ ------------
Total current assets................................................... $ 8,641,974 $ 2,813,376 $ 4,116,527
------------ ------------ ------------
OTHER ASSETS
Cash surrender value of officers' life insurance (face amount of $1,044,355,
$1,044,355 and $1,031,000 as of March 31, 1996 and June 30, 1995 and 1994,
respectively)................................................................ $ 295,137 $ 293,116 $ 269,029
Note receivable from officer................................................... 112,000 130,000 83,000
Unamortized debt expense and other (Note 5).................................... 2,288,857 2,355,458 2,444,258
------------ ------------ ------------
Total other assets......................................................... $ 2,695,994 $ 2,778,574 $ 2,796,287
------------ ------------ ------------
Total assets........................................................... $ 80,268,969 $ 65,948,716 $ 61,932,480
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CAPITALIZATION (SEE CONSOLIDATED STATEMENTS OF CAPITALIZATION)
Common shareholders' equity................................................ $ 23,986,407 $ 22,511,513 $ 22,164,791
Long-term debt (Note 5).................................................... 24,976,650 23,702,200 24,500,000
------------ ------------ ------------
Total capitalization................................................... $ 48,963,057 $ 46,213,713 $ 46,664,791
------------ ------------ ------------
CURRENT LIABILITIES
Notes payable (Note 4)..................................................... $ 15,460,000 $ 5,675,000 $ 2,705,000
Current portion of long-term debt (Note 5)................................. 1,063,200 1,057,700 500,000
Accounts payable........................................................... 3,494,601 1,955,231 2,133,840
Accrued taxes.............................................................. 1,793,307 363,948 436,158
Refunds due customers...................................................... 101,967 479,637 396,065
Advance recovery of gas cost............................................... -- 1,111,786 --
Customers' deposits........................................................ 374,842 331,708 342,979
Accrued interest on debt................................................... 585,926 473,001 427,338
Accrued vacation........................................................... 445,335 454,728 454,362
Other accrued liabilities.................................................. 113,017 349,872 314,888
------------ ------------ ------------
Total current liabilities.............................................. $ 23,432,195 $ 12,252,611 $ 7,710,630
------------ ------------ ------------
DEFERRED CREDITS AND OTHER
Deferred income taxes...................................................... $ 5,952,100 $ 5,510,400 $ 5,116,400
Investment tax credits..................................................... 814,900 850,400 921,800
Regulatory liability (Note 1).............................................. 889,800 912,900 1,312,500
Advances for construction and other........................................ 216,917 208,692 206,359
------------ ------------ ------------
Total deferred credits and other....................................... $ 7,873,717 $ 7,482,392 $ 7,557,059
------------ ------------ ------------
COMMITMENTS AND CONTINGENCIES (NOTE 6).........................................
Total liabilities and shareholders' equity......................... $ 80,268,969 $ 65,948,716 $ 61,932,480
============ ============ ============
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
F-5
<PAGE> 31
<TABLE>
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<CAPTION>
FOR THE
TWELVE
MONTHS
ENDED FOR THE FISCAL YEARS ENDED JUNE 30,
MARCH 31, -----------------------------------------
1996 1995 1994 1993
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
COMMON SHARES
Balance, beginning of year...................................... $ 1,855,760 $ 1,839,340 $ 1,648,485 $ 1,624,878
$1.00 par value of 39,191, 29,394, 190,855 and 23,607
shares issued during the twelve months ended March 31,
1996 and fiscal years 1995, 1994 and 1993, respectively--
Public issuance of common shares........................ -- -- 170,000 --
Dividend reinvestment and stock purchase plan........... 32,269 25,802 15,355 16,265
Employee stock purchase plan and other.................. 6,922 3,592 5,500 7,342
----------- ----------- ----------- -----------
Balance, end of year............................................ $ 1,894,951 $ 1,868,734 $ 1,839,340 $ 1,648,485
=========== =========== =========== ===========
PREMIUM ON COMMON SHARES
Balance, beginning of year...................................... $19,806,849 $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........... 520,431 425,357 293,782 281,074
Employee stock purchase plan and other.................. 112,043 64,377 106,700 123,953
----------- ----------- ----------- -----------
Balance, end of year............................................ $20,439,323 $20,022,643 $19,532,909 $15,562,427
=========== =========== =========== ===========
CAPITAL STOCK EXPENSE
Balance, beginning of year...................................... (1,604,792) $(1,588,025) $(1,391,801) $(1,391,801)
Issuance of common shares................................... -- (16,767) (196,224) --
----------- ----------- ----------- -----------
Balance, end of year............................................ $(1,604,792) $(1,604,792) $(1,588,025) $(1,391,801)
=========== =========== =========== ===========
RETAINED EARNINGS
Balance, beginning of year...................................... $ 2,679,969 $ 2,380,567 $ 1,681,934 $ 836,681
Net income.................................................. 2,680,551 1,917,735 2,671,001 2,620,664
Cash dividends declared on common shares--(See Consolidated
Statements of Income for rates)........................... (2,103,595) (2,073,374) (1,972,368) (1,775,411)
----------- ----------- ----------- -----------
Balance, end of year............................................ $ 3,256,925 $ 2,224,928 $ 2,380,567 $ 1,681,934
=========== =========== =========== ===========
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
F-6
<PAGE> 32
<TABLE>
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CAPITALIZATION
<CAPTION>
AS OF AS OF JUNE 30,
MARCH 31, ---------------------------
1996 1995 1994
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
COMMON SHAREHOLDERS' EQUITY
Common shares, par value $1.00 per share (Notes 2 and 3)
Authorized--6,000,000 shares
Issued and outstanding--1,894,951, 1,868,734 and 1,839,340 shares as of
March 31, 1996 and June 30, 1995 and 1994, respectively................. $ 1,894,951 $ 1,868,734 $ 1,839,340
Premium on common shares...................................................... 20,439,323 20,022,643 19,532,909
Capital stock expense......................................................... (1,604,792) (1,604,792) (1,588,025)
Retained earnings (Note 5).................................................... 3,256,925 2,224,928 2,380,567
----------- ----------- -----------
Total common shareholders' equity......................................... $23,986,407 $22,511,513 $22,164,791
----------- ----------- -----------
LONG-TERM DEBT (NOTE 5)
Debentures, 6 5/8%, due 2023.................................................. $14,092,000 $14,561,000 $15,000,000
Debentures, 9%, due 2011...................................................... 10,000,000 10,000,000 10,000,000
Promissory note payable, due through 2001..................................... 1,800,000 -- --
Capital lease, due 1998....................................................... 147,850 198,900 --
----------- ----------- -----------
Total long-term debt...................................................... $26,039,850 $24,759,900 $25,000,000
Less--Amounts due within one year, included in current liabilities............ (1,063,200) (1,057,700) (500,000)
----------- ----------- -----------
Net long-term debt........................................................ $24,976,650 $23,702,200 $24,500,000
----------- ----------- -----------
Total capitalization.................................................. $48,963,057 $46,213,713 $46,664,791
=========== =========== ===========
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
F-7
<PAGE> 33
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INCLUDING NOTES APPLICABLE TO UNAUDITED PERIODS)
(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. operates
underground natural gas storage facilities that it leases from Delta. Enpro,
Inc. owns and operates 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%, 2.8%, 2.7%
and 2.7% of average depreciable plant for the twelve months ended March 31,
1996 and fiscal 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 36,000 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
F-8
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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
liability for the periods are as follows:
<TABLE>
<CAPTION>
AS OF JUNE 30,
---------------------------
1995 1994
---------- ----------
<S> <C> <C>
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
---------- ----------
$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
---------- ----------
$2,268,700 $1,950,600
---------- ----------
Net accumulated deferred income tax liability............................................... $5,510,400 $5,116,400
========== ==========
</TABLE>
The components of the income tax provision are comprised of the following:
<TABLE>
<CAPTION>
AS OF JUNE 30,
--------------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
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 gas cost................................. (1,018,900) 541,200 418,000
Other deferred tax effects, net......................................... 483,400 (113,700) (88,800)
---------- ---------- ----------
Income tax expense.................................................. $1,042,400 $1,509,600 $1,543,700
========== ========== ==========
</TABLE>
Reconciliation of the statutory federal income tax rate to the effective
income tax rate is shown in the table below:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30,
------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
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%
==== ==== ====
</TABLE>
(2) EMPLOYEE BENEFITS 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
F-9
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
compensation. The Company makes annual contributions equal to the amounts
necessary to fund the plan adequately. The funded status of the pension plan
and the amounts recognized in the Company's consolidated balance sheets at June
30 were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ---------- -----------
<S> <C> <C> <C>
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)
=========== ========== ===========
</TABLE>
The assets of the plan consist primarily of common stock, bonds and
certificates of deposit. Pension expense for the twelve months ended March 31,
1996 was $336,554. Net pension costs for the years ended June 30 include the
following:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
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
========= ========= =========
</TABLE>
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
post-employment 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 through June 30, 1996. The maximum
Company contribution has been increased to 2 1/2% effective July 1, 1996. For
the twelve months ended March 31, 1996 and the fiscal years ended June 30,
1995, 1994 and 1993, Delta's Savings Plan expense was $110,928, $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.
Delta's Board has continued the Stock Plan through June 30, 1997.
F-10
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(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
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 32,269 shares were issued
during the twelve months ended March 31, 1996. Delta registered with the
Securities and Exchange Commission 200,000 shares under the Reinvestment Plan
in December, 1994, and, as of March 31, 1996 there were 162,420 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 March 31,
1996, the available line of credit was $20,000,000, ($15,000,000 at June 30,
1995 and 1994) of which 15,460,000, $5,675,000 and $2,705,000 had been borrowed
at an interest rate of 6.585%, 6.935% and 5.5%, respectively. The maximum
amount borrowed during the twelve months ended March 31, 1996 and the year
ended June 30, 1995 was $15,460,000 and $8,430,000, respectively. The interest
on this line is, at the option of Delta, either at the daily prime rate or is
based upon certificate of deposit rates. The current line of credit expires on
November 15, 1996.
(5) LONG-TERM DEBT:
On October 18, 1993, Delta issued $15,000,000 of 6 5/8% Debentures that
mature in October, 2023. 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 60 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
$12,000,000. As of March 31, 1996, 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 60 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 promissory note was issued by Delta on November 10, 1995 in the amount of
$1,800,000, payable in three installments of $400,000 in 1997, $700,000 in 1999
and $700,000 in 2001. The note was issued when Delta purchased leases and
depleted gas wells to develop them for the underground storage of natural gas.
Delta secured the promissory note by escrow of 102,858 shares of Delta's common
stock, which would be issued to the holder of the note in the event of default
in payment by Delta.
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
F-11
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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):
The quarterly data reflects, in the opinion of management, all normal
recurring adjustments necessary to present fairly the results for the interim
periods.
<TABLE>
<CAPTION>
EARNINGS
OPERATING NET (LOSS) PER
OPERATING INCOME INCOME COMMON
QUARTER ENDED REVENUES (LOSS) (LOSS) SHARE<Fa>
- ------------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
FISCAL 1996
September 30............................................. $ 3,774,849 $ (147,522) $ (760,662) $ (.41)
December 31.............................................. 8,406,787 1,381,803 649,089 .34
March 31................................................. 16,023,581 3,421,608 2,729,444 1.44
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)
<FN>
- --------
<Fa> Quarterly earnings per share may not equal annual earnings per share due to changes in shares
outstanding.
</TABLE>
(9) UNDERGROUND STORAGE ACQUISITION (UNAUDITED)
On November 10, 1995, Delta acquired interests, primarily consisting of
leases and depleted gas wells, in certain property located in Bell County,
Kentucky to be developed for the underground storage of natural gas. This
acquisition continues Delta's effort to provide for enhanced supply security
and system flexibility. The storage field includes approximately 8,000 acres
and is expected to have an estimated working capacity of approximately 4
million Mcf of gas, which will be utilized to provide supply to the Company's
customers during the winter heating months. The purchase price of $2,800,000
consists of $1,000,000 cash and a $1,800,000 promissory note payable in three
installments through 2001. Delta secured the promissory note by escrow of
102,858 shares of Delta's common stock, which would be issued to the holder of
the note in the event of default in payment by Delta.
F-12
<PAGE> 38
===============================================================================
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND IF GIVEN OR MADE SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY STATE OR JURISDICTION
TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH STATE OR
JURISDICTION. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME OR ANY SALES MADE
HEREUNDER SHALL NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
--------------------------
<TABLE>
TABLE OF CONTENTS
PAGE
----
<S> <C>
Available Information.................................. 2
Incorporation of Certain Documents by Reference........ 2
Prospectus Summary..................................... 3
The Company............................................ 5
System Map............................................. 5
Special Factors Affecting the Gas Utility Industry..... 6
Use of Proceeds and Capital Expenditures............... 6
Price Range of Common Stock and Dividends.............. 7
Consolidated Capitalization............................ 8
Selected Consolidated Financial Information............ 9
Management's Discussion and Analysis of Financial
Condition and Results of Operations.................. 10
Business............................................... 12
Description of Common Stock............................ 16
Description of Debentures.............................. 17
Underwriting........................................... 22
Experts................................................ 23
Legal Opinions......................................... 23
Index to Consolidated Financial Statements............. F-1
Report of Independent Public Accountants............... F-2
Consolidated Financial Statements...................... F-3
</TABLE>
===============================================================================
===============================================================================
DELTA NATURAL GAS
COMPANY, INC.
DELTA
350,000 SHARES OF COMMON STOCK
$15,000,000
----% DEBENTURES DUE 2026
-------------------
PROSPECTUS
-------------------
EDWARD D. JONES & CO.
J.J.B. HILLIARD, W.L. LYONS, INC.
THE OHIO COMPANY
, 1996
===============================================================================
<PAGE> 39
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses in connection with the issuance
and distribution of the securities being registered. Except for the
registration fee, NASD filing fee and initial Trustee fee, all the amounts
shown are estimates.
<TABLE>
<S> <C>
Registration Fee................................................... $ 7,345
NASD Filing Fee.................................................... 2,630
Blue Sky Fees and Expenses......................................... 3,000
Accounting Fees.................................................... 10,000
Legal Fees......................................................... 25,000
Printing........................................................... 20,000
Initial Trustee Fee................................................ 5,000
Miscellaneous Expenses............................................. 2,025
--------
Total.......................................................... $ 75,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Kentucky law permits a corporation to provide insurance for directors and
officers against claims arising out of their services in those capacities and
permits a corporation to provide indemnification in certain instances for
claims arising out of actions undertaken by directors and officers. Under
agreements with its Officers, Delta has agreed to indemnify the Officers
against liability for actions taken by them in good faith while performing
services for Delta and has agreed to pay legal expenses arising from any such
proceedings. Delta's By-Laws provide for such indemnification by Delta for all
Directors and Officers. Delta also provides Directors and Officers with
indemnification insurance coverage with limits up to $10,000,000.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
-------
<C> <S>
1(a) Form of Underwriting Agreement.
4(a) The Indenture dated April 1, 1991 in respect of 9% Debentures, due 2011, is incorporated herein by reference to Exhibit
4(d) to Delta's Form S-2 dated April 24, 1991.
4(b) The Indenture dated September 1, 1993, in respect of 6 5/8% Debentures, due 2023, is incorporated herein by reference to
Exhibit 4(d) to Delta's Form S-2 dated September 2, 1993.
4(c) Form of Indenture between Delta and Fifth Third Bank, as Trustee (including the Form of Debenture).
5 Opinion of Stoll, Keenon & Park, LLP concerning legality.
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 the Service Agreement, is
incorporated herein by reference to Exhibit 2(D) to Delta's Form 8-K dated February 9, 1981.
II-1
<PAGE> 40
<CAPTION>
EXHIBIT
-------
<C> <S>
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 year ended June 30, 1993.
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, is incorporated herein by
reference to Exhibit 10(m) to Delta's Form 10-K for the year ended June 30, 1995.
10(n) Employment agreement dated June 19, 1995 between Delta and Johnny L. Caudill, an officer, is incorporated herein by
reference to Exhibit 10(n) to Delta's Form 10K for the year ended June 30, 1995.
12 Computation of the consolidated ratio of earnings to fixed charges.
13(a) Delta's Form 10-K for the period ended June 30, 1995, is incorporated herein by reference.
13(b) Delta's Form 10-Q for the period ended September 30, 1995, is incorporated herein by reference.
13(c) Delta's Form 10-Q for the period ended December 31, 1995, is incorporated herein by reference.
13(d) Delta's Form 10-Q for the period ended March 31, 1996, is incorporated herein by reference.
23(a) Consent of Arthur Andersen LLP.
23(b) Consent of Stoll, Keenon & Park, LLP is contained in its opinion letter filed as Exhibit 5.
24 Power of Attorney is included with the signature page in Part II of this filing.
25 Statement of eligibility of Trustee.
</TABLE>
II-2
<PAGE> 41
ITEM 17. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to Directors, Officers and controlling persons of
the registrant pursuant to the provisions referred to in Item 15, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a Director, Officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted against the registrant by such Director, Officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(b) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 42
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Winchester, State of Kentucky, on the 17th day of
June, 1996.
DELTA NATURAL GAS COMPANY, INC.
By: /s/ GLENN R. JENNINGS
-----------------------------------
Glenn R. Jennings
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Glenn R. Jennings, John F. Hall, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, and to make any and all state
securities law or blue sky filings, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<C> <S> <C>
/s/ H. D. PEET Chairman of the Board June 17, 1996
- --------------------------------------------------
H. D. Peet
/s/ GLENN R. JENNINGS President and Chief Executive Officer June 17, 1996
- -------------------------------------------------- and Director
Glenn R. Jennings
/s/ JOHN F. HALL Vice President-Finance, Secretary and June 17, 1996
- -------------------------------------------------- Treasurer
John F. Hall
/s/ DONALD R. CROWE Director June 17, 1996
- --------------------------------------------------
Donald R. Crowe
/s/ BILLY JOE HALL Director June 17, 1996
- --------------------------------------------------
Billy Joe Hall
/s/ JANE W. HYLTON Director June 17, 1996
- --------------------------------------------------
Jane W. Hylton
/s/ VIRGIL E. SCOTT Director June 17, 1996
- --------------------------------------------------
Virgil E. Scott
/s/ HENRY C. THOMPSON Director June 17, 1996
- --------------------------------------------------
Henry C. Thompson
/s/ ARTHUR E. WALKER, JR. Director June 17, 1996
- --------------------------------------------------
Arthur E. Walker, Jr.
</TABLE>
II-4
<PAGE> 43
<TABLE>
EXHIBIT INDEX
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
1(a) Form of Underwriting Agreement.
4(a) The Indenture dated April 1, 1991 in respect of 9% Debentures, due 2011, is
incorporated herein by reference to Exhibit 4(d) to Delta's Form S-2 dated
April 24, 1991.
4(b) The Indenture dated September 1, 1993, in respect of 6 5/8% Debentures, due
2023, is incorporated herein by reference to Exhibit 4(d) to Delta's Form S-2
dated September 2, 1993.
4(c) Form of Indenture between Delta and Fifth Third Bank, as Trustee (including the
Form of Debenture).
5 Opinion of Stoll, Keenon & Park, LLP concerning legality.
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 the 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
year ended June 30, 1993.
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.
II-5
<PAGE> 44
EXHIBIT INDEX (CONTINUED)
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
10(m) Employment agreement dated May 31, 1995 between Delta and Glenn R. Jennings, an
officer, is incorporated herein by reference to Exhibit 10(m) to Delta's Form
10-K for the year ended June 30, 1995.
10(n) Employment agreement dated June 19, 1995 between Delta and Johnny L. Caudill, an
officer, is incorporated herein by reference to Exhibit 10(n) to Delta's Form
10K for the year ended June 30, 1995.
12 Computation of the consolidated ratio of earnings to fixed charges.
13(a) Delta's Form 10-K for the period ended June 30, 1995, is incorporated herein by
reference.
13(b) Delta's Form 10-Q for the period ended September 30, 1995, is incorporated
herein by reference.
13(c) Delta's Form 10-Q for the period ended December 31, 1995, is incorporated herein
by reference.
13(d) Delta's Form 10-Q for the period ended March 31, 1996, is incorporated herein by
reference.
23(a) Consent of Arthur Andersen LLP.
23(b) Consent of Stoll, Keenon & Park, LLP is contained in its opinion letter filed as
Exhibit 5.
24 Power of Attorney is included with the signature page in Part II of this filing.
25 Statement of eligibility of Trustee.
</TABLE>
II-6
<PAGE> 1
$15,000,000 Principal Amount of
-----% Debentures due 2026 and
350,000 Shares of Common Stock
of
DELTA NATURAL GAS COMPANY, INC.
UNDERWRITING AGREEMENT
----------------------
July ---, 1996
Edward D. Jones & Co.
201 Progress Parkway
Maryland Heights, Missouri 63043
J.J.B. Hilliard, W.L. Lyons, Inc.
501 South Fourth Avenue
Louisville, Kentucky 40202
The Ohio Company
155 East Broad Street, 20th Floor
Columbus, Ohio 43215
Dear Sirs:
Delta Natural Gas Company, Inc., a Kentucky corporation (the
"Company") confirms its agreement with the Underwriters, acting
severally and not jointly, listed in SCHEDULE I hereto (the
"Underwriters") as follows:
1. DESCRIPTION OF DEBENTURES AND SHARES. The Company
proposes to issue and sell to the Underwriters $15,000,000
principal amount of ---% Debentures due 2026 (the "Debentures")
described in the Indenture (as defined below) and 350,000 shares
of the common stock, par value $1.00 per share ("Common Stock")
of the Company (such 350,000 shares are hereinafter sometimes
referred to as the "Firm Shares") in the aggregate principal
amount and aggregate number of shares specified in SCHEDULE I.
In addition, solely for the purpose of covering over-allotments,
the Company proposes to grant the Underwriters the option to
purchase up to an additional 50,000 shares of Common Stock (the
"Option Shares"). The Firm Shares and the Option Shares are
hereinafter sometimes referred to collectively as the "Shares."
The Debentures and Shares are more fully described in the
Registration Statement and Prospectus hereinafter defined. The
Debentures will be issued by
-1-
<PAGE> 2
the Company under its Trust Indenture dated July 1, 1996 (the
"Indenture") between the Company and The Fifth Third Bank, as trustee
(the "Trustee"). No amendments to the Indenture will be made prior to
the Closing Date hereinafter referred to without your prior approval.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents, warrants and agrees that:
(a) The Company meets the requirements for use of Form
S-2 under the Securities Act of 1933 (the "Act") and has
prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement on
Form S-2 (Registration Statement No. 33------) relating to
$15,000,000 aggregate principal amount of its Debentures and
400,000 of its Shares, and the offering thereof in
accordance with the Act as amended and the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act") and has
filed such amendments thereto as may have been required to
the date hereof. The registration statement has been
prepared in conformity with the requirements of the Act and
the rules and regulations thereunder (the "Rules and
Regulations") and the Trust Indenture Act and the rules and
regulations thereunder. Copies of that registration
statement as amended to date have been delivered by the
Company to you as the Underwriters. As used in this
Agreement, "Preliminary Prospectus" means each prospectus
included in that registration statement, or amendments of
such registration statement or prospectus, before that
registration statement, as so amended, became effective
under the Act and any prospectus filed by the Company with
the consent of the Underwriters pursuant to Rule 424(a) of
the Rules and Regulations and the documents incorporated by
reference in such preliminary prospectus. "Registration
Statement" means that registration statement including the
prospectus, exhibits and financial statements, and all
documents incorporated by reference therein, including any
information deemed by virtue of Rule 430A(a)(3) of the Rules
and Regulations to be part of such Registration Statement,
as of the time such registration statement or post-effective
amendment became effective under the Act and the Trust
Indenture Act; and "Prospectus" means the prospectus filed
with the Commission by the Company with the consent of the
Underwriters pursuant to Rule 424(b) of the Rules and
Regulations, unless no such Rule 424(b) Prospectus is filed,
in which case it shall mean the Prospectus filed as part of
the last Registration Statement filed on or before the
effective date thereof. The Commission has not issued any
order preventing or suspending the use of any Preliminary
Prospectus.
(b) Each Preliminary Prospectus, at the time of the
filing thereof, did not contain any untrue statement of a
material fact or omit to state any material fact required to
be stated therein or necessary to make the statements
therein, in light of the circumstances in which made, not
misleading; provided that no representation or warranty is
made as to information contained in or omitted from any
Preliminary Prospectus in reliance upon and in conformity
with written information furnished to the Company by or on
behalf of the Underwriters specifically for inclusion
therein. The Registration Statement has been declared
effective by the Commission.
-2-
<PAGE> 3
(c) The Registration Statement and the Prospectus, at
the time the Registration Statement became effective,
complied, as of the date hereof comply and as of the Closing
Date, as hereinafter defined, will comply, in all material
respects with the requirements of the Act, the Exchange Act
and the Trust Indenture Act and the rules and regulations
of the Commission under such Acts; the Registration
Statement and any amendment thereof, at the time it became
effective, did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading; and the Prospectus, at the time the Registration
Statement became effective did not, as of the date hereof
does not and as of the Closing Date will not, contain an
untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements
therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that the
representations and warranties in this Paragraph 2.(c) shall
not apply to (A) that part of the Registration Statement
which constitutes the Statement of Eligibility and
Qualification (Form T-1) of the Trustee under the Trust
Indenture Act or (B) statements in or omissions from the
Registration Statement or the Prospectus made in reliance
upon and in conformity with information furnished to the
Company in writing by the Underwriters expressly for use in
the Registration Statement or the Prospectus.
(d) The documents incorporated by reference into the
Prospectus pursuant to Item 12 of Form S-2 under the Act,
at the time they were filed with the Commission, complied
in all material respects with the requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act") and the rules and regulations of the Commission
thereunder (the "Exchange Act Rules and Regulations"),
comply in all materials respects with the requirements of
the Exchange Act and the Exchange Act Rules and Regulations
and will not contain any untrue statement of a material fact
or omit to state a material fact required to be stated
therein, or necessary to make the statements therein, in the
light of the circumstances under which they are made, not
misleading.
(e) Arthur Andersen LLP, the accountants whose report
appears in the Prospectus, are independent public
accountants as required by the Act and the Rules and
Regulations.
(f) The consolidated financial statements of the
Company and its subsidiaries filed as part of the
Registration Statement or included in any Preliminary
Prospectus or the Prospectus present fairly, and the
financial statements included in any amendment or supplement
to the Prospectus will present fairly, the financial
condition and results of operations of the Company and its
subsidiaries, at the dates and for the periods indicated,
and have been, and in the case of financial statements
included in any amendment or supplement to the Prospectus
will be, prepared in conformity with generally accepted
accounting principles applied on a consistent basis
throughout the periods involved. No other financial
statements are required to be set forth in the Registration
Statement or the Prospectus under the Act or the Rules and
Regulations thereunder.
-3-
<PAGE> 4
(g) Except as described in or contemplated by the
Registration Statement and the Prospectus, subsequent to the
respective dates as of which information is given in the
Registration Statement and the Prospectus, neither the
Company nor any of its subsidiaries (as defined in Paragraph
13) has incurred any material liability or obligation,
direct or contingent, or entered into any material
transaction, whether or not in the ordinary course of
business, and there has not been any material change on a
consolidated basis in the Company's capital stock, or any
material increase in the long-term debt of the Company or
any of its subsidiaries, or any issuance of options,
warrants, convertible securities or other rights to purchase
capital stock of such entity, or any material adverse change
in, or any adverse development which materially affects, the
business, properties, financial condition, results of
operations, or prospects of the Company and its subsidiaries
taken as a whole.
(h) Each of the Company and its subsidiaries has been
duly incorporated, is validly existing and in good standing
under the laws of its jurisdiction of incorporation, and the
Company and each of its subsidiaries are duly qualified to
do business and in good standing as foreign corporations in
each jurisdiction in which their respective ownership of
property or the conduct of their respective businesses
requires such qualification and wherein the failure to be so
qualified would have a material adverse effect on the
business of the Company and each of its subsidiaries, and
have all power and authority necessary to own or hold its
properties and to conduct the business in which it is
engaged. All outstanding shares of capital stock of the
subsidiaries of the Company are owned directly or indirectly
by the Company and are validly authorized, issued and
outstanding, fully paid and non-assessable with no personal
liability attaching to the ownership thereof, and all of
such shares are owned free and clear of any lien, pledge or
encumbrance or any claim of any third party.
(i) The authorized and outstanding capitalization of
the Company as of March 31, 1996 was as set forth in the
Registration Statement and the Prospectus, and there have
been no changes in the authorized or outstanding
capitalization of the Company since March 31, 1996 except as
contemplated by the Registration Statement and the
Prospectus. All corporate action required to have been
taken by the Company for the due and proper authorization,
execution and delivery of the Indenture and the due and
proper authorization, issuance, sale and delivery of the
Debentures and the Shares have been validly and sufficiently
taken. When the Debentures and the Shares have been
executed, issued, delivered and paid for in the manner
herein described, the Debentures will be duly issued and
will constitute valid and legally binding obligations of the
Company entitled to the benefits provided by the Indenture,
and the Debentures will be enforceable in accordance with
their terms (except insofar as enforcement may be limited by
applicable bankruptcy, reorganization, insolvency or other
laws affecting creditors' rights and remedies generally, as
may from time to time be in effect, and by the availability
of specific performance or of other equitable relief which
is subject to the discretion of the court before which any
proceeding may be brought) and the Shares will be fully
paid, duly issued and non-assessable; the Debentures and the
Shares conform to all statements relating thereto in the
-4-
<PAGE> 5
Registration Statement, and holders of neither the
Debentures nor the Shares will be entitled to preemptive
rights.
(j) The Indenture is in due and proper form, has been
duly and validly executed and delivered and is a valid and
enforceable instrument in accordance with its terms, except
to the extent that enforceability may be limited by
applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights
generally and to the extent that general equitable
principles may limit the right to obtain the remedy of
specific performance of certain of the obligations
thereunder.
(k) The filing of the Registration Statement and the
execution and delivery by the Company of this Agreement, and
the consummation of the transactions contemplated hereby and
thereby, have been duly authorized by the board of directors
of the Company, and all necessary corporate action to
authorize and approve the same has been taken. This
Agreement has been duly executed and delivered by the
Company and is a valid and legally binding obligation of the
Company.
(l) The Company, and its subsidiaries have good and
marketable title to, or valid and enforceable leasehold
interests in, all items of real and personal property which
are material to the business of the Company and its
subsidiaries taken as a whole, free and clear of all liens,
encumbrances and claims (other than the liens disclosed in
the Prospectus) which might materially interfere with the
conduct of the business of the Company and its subsidiaries
taken as a whole.
(m) Except to the extent disclosed in the Prospectus,
neither the Company, nor any of its subsidiaries, is in
violation of its corporate charter or bylaws or in default
under any obligation, agreement, covenant or condition
contained in any mortgage or other material contract, lease,
note, indenture or instrument to which it is a party or by
which it may be bound, the effect of which violation or
default would be material to the Company and its
subsidiaries taken as a whole, or is in violation in any
material respect of any law, ordinance, governmental rule,
regulation or court decree to which it or its property may
be subject the effect of which violation would be material
to the Company and its subsidiaries taken as a whole, or has
failed to obtain any material license, permit, certificate,
franchise or other governmental authorization or permit
necessary to the ownership of its property or to the conduct
of its business; and the execution, delivery and performance
of this Agreement by the Company, the sale of the Debentures
and the Shares, compliance by the Company with the
provisions of the Debentures and the Indenture, and the
consummation of the transactions contemplated by this
Agreement will not conflict with, result in the creation or
imposition of any lien, charge or encumbrance upon any of
the properties or assets of the Company pursuant to the
terms of, or constitute a breach of or default under, any
agreement, indenture or instrument to which the Company is a
party, or by which the Company is bound, or result in a
violation of the corporate charter or bylaws of the Company
or, except to the extent disclosed in the Prospectus, any
law or ordinance to which the Company or its properties may
be subject or of any order, rule or regulation of any court
or governmental agency having jurisdiction over the
-5-
<PAGE> 6
Company or its properties, except for conflicts, breaches,
violations or defaults which would be immaterial to the
business and operations of the Company and its subsidiaries
taken as a whole and which would not affect the validity or
enforceability of the Debentures, the Indenture or this
Agreement or otherwise adversely affect the rights, duties
or obligations of the Trustee, the Underwriters or the
holders of the Debentures or the Shares.
(n) No approval or consent of any governmental body
other than (i) as may be required under the Act or the Trust
Indenture Act or in connection or compliance with the
provisions of the securities or "blue sky" laws of any
jurisdiction, and (ii) approval by the Kentucky Public
Service Commission which has been obtained, is legally
required for the carrying out by the Company of the
provisions of this Agreement.
(o) Except as described in the Registration Statement
and the Prospectus, there is no litigation or governmental
proceeding pending or, to the knowledge of the Company
threatened against the Company or any of its subsidiaries
which, if adversely resolved, could reasonably be expected
to result in any material adverse change in the business,
properties, financial condition, results of operations or
prospects of the Company and its subsidiaries taken as a
whole or which is required to be disclosed in the
Registration Statement or the Prospectus.
(p) There are no contracts or other documents which
are required to be filed as exhibits to the Registration
Statement by the Act or by the Rules and Regulations which
have not been filed as exhibits to the Registration
Statement.
(q) Except as disclosed in the Prospectus, the Company
and each of its subsidiaries have sufficient authority under
statutory provisions or by grant of franchises or permits by
municipalities or counties to conduct their respective
businesses as presently conducted and as described in the
Registration Statement and Prospectus.
(r) Except as set forth in the Registration Statement
and the Prospectus, the Company and its subsidiaries are in
compliance with all applicable existing federal, state and
local laws and regulations relating to protection of human
health or the environment or imposing liability or standards
of conduct concerning any Hazardous Material ("Environmental
Laws"), except for such instances of noncompliance which,
either singly or in the aggregate, would not have a material
adverse effect on the condition (financial or otherwise),
results of operations or properties of the Company and its
subsidiaries, taken as a whole. The term "Hazardous
Material" means (i) any "hazardous substance" as defined by
the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, (ii) any "hazardous
waste" as defined by the Resource Conservation and Recovery
Act, as amended, (iii) any petroleum or petroleum product,
(iv) any polychlorinated biphenyl and (v) any pollutant or
contaminant or hazardous, dangerous or toxic chemical,
material, waste or substance regulated under or within the
meaning of any other law relating to
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<PAGE> 7
protection of human health or the environment or imposing
liability or standards of conduct concerning any such chemical,
material, waste or substance.
(s) No labor dispute with the employees of the Company
or any of its subsidiaries exists or, to the knowledge of
the Company, is imminent; and the Company knows of no
existing or imminent labor disturbance by the employees of
any of its principal suppliers, manufacturers or contractors
which might reasonably be expected to result in any material
adverse change in the condition, financial or otherwise, or
in the earnings, business affairs or business prospects of
the Company and its subsidiaries taken as a whole.
(t) Each of the Company and its subsidiaries owns,
possesses or has the right to use all licenses, trademarks,
patents, patent rights, inventions, copyrights, service
marks and trade names presently employed by it in connection
with the businesses now operated by it, and neither the
Company nor any of its subsidiaries has received any notice
of infringement of or conflict with asserted rights of
others with respect to any of the foregoing.
(u) The Company and its subsidiaries maintain
insurance covering their properties, operations, personnel
and businesses which insures against such losses and risks
as are adequate in accordance with its reasonable business
judgment to protect the Company and its subsidiaries and
their businesses. Neither the Company nor any of its
subsidiaries has received notice from any insurer or agent
of such insurer that substantial capital improvements or
other expenditures will have to be made in order to continue
such insurance. All such insurance is outstanding and duly
in force on the date hereof and will be outstanding and duly
in force on the Closing Date.
(v) Neither the Company nor any of its subsidiaries is
an "investment company" or an entity "controlled" by an
"investment company," as such terms are defined in the
Investment Company Act of 1940, as amended.
(w) The Company and each of its subsidiaries have
complied with all applicable provisions (if any) of Florida
Statutes, Section 517.075, relating to issuers doing
business with Cuba.
(x) Except as otherwise disclosed in the Prospectus,
the Company and each of its subsidiaries have all necessary
consents, authorizations, approvals, orders, certificates
and permits of and from, and have made all declarations and
filings with, all federal, state, local and other
governmental authorities, all self-regulatory organizations
and all courts and other tribunals, to own, lease, license
and use their respective properties and assets and to
conduct their respective businesses in the manner described
in the Prospectus, except to the extent that the failure to
obtain or file would not have a material adverse effect on
the Company and its subsidiaries, taken as a whole.
-7-
<PAGE> 8
Any certificate signed by any officer of the Company and
delivered to you or to counsel for the Underwriters shall be
deemed a representation and warranty by the Company to the
Underwriters as to the matters covered thereby.
3. PURCHASE, SALE AND DELIVERY OF DEBENTURES AND SHARES.
On the basis of the representations and warranties contained in,
and subject to the terms and conditions of, this Agreement, the
Company agrees to sell to the Underwriters, and the Underwriters
agree to purchase the Firm Shares and the Debentures from the
Company. The purchase price for the Debentures will be ----% of
the principal amount thereof, and the purchase price for the Firm
Shares will be an amount equal to the initial public offering
price for the Shares as set forth in the Prospectus, (the "Share
Public Offering Price"), less ---% of the Share Public Offering
Price.
Delivery of the Debentures and the Firm Shares, in
definitive form, and payment therefor, shall be made at 10:00
A.M., St. Louis time, on the third business day after the
Registration Statement shall have been declared effective by the
Commission, or on such later date and time as may be agreed upon
in writing between the Underwriters and the Company, such day and
time of delivery and payment being herein called the "Closing
Date." On the Closing Date, the Debentures and the Firm Shares
shall be delivered by the Company to the Underwriters at The
Depository Trust Company in New York, New York, against payment
of the purchase price therefor in funds immediately available to
the order of the Company. The Company agrees to make available
to the Underwriters for inspection and packaging in New York, New
York, at least one full business day prior to the Closing Date,
certificates for the Debentures and the Shares so to be delivered
in good delivery form and in such denominations and registered in
such names as the Underwriters shall have requested, all such
requests to have been made in writing at least one full business
day prior to the Closing Date.
In addition, on the basis of the representations and
warranties herein contained, but subject to the terms and
conditions herein set forth, the Company hereby grants to the
Underwriters the option to purchase all or a portion of the
Option Shares as may be necessary to cover over-allotments, at
the Share Public Offering Price. This option may be exercised
only to cover over-allotments in the sale of Firm Shares by the
Underwriters. This option may be exercised at any time (but not
more than once) on or before the thirtieth day following the
effective date of the Registration Statement by written notice by
you to the Company. Such notice shall set forth the number of
Option Shares as to which the option is being exercised, and the
date and time, as reasonably determined by the Underwriters, when
the Option Shares are to be delivered (such date and time being
herein sometimes referred to as the "Additional Closing Date");
provided, however, that the Additional Closing Date shall not be
earlier than the Closing Date nor earlier than the third business
day after the date on which the option shall have been exercised
nor later than the eighth business day after the day on which the
option shall have been exercised, unless otherwise agreed by the
parties.
Payment for the Option Shares shall be made in immediately
available funds, payable to the order of the Company, at the
offices of the Company, or such other place as shall be
-8-
<PAGE> 9
agreed upon between us, against delivery of the Option Shares to the
Underwriters through the facilities of The Depository Trust Company
for the account of the Underwriters.
Certificates for the Option Shares shall be in such
denominations and registered in such names as requested in
writing by the Underwriters at least two business days prior to
the Additional Closing Date.
4. COVENANTS. The Company covenants and agrees with the
Underwriters:
(a) To furnish promptly to each of the Underwriters
and counsel for the Underwriters one signed copy of the
Registration Statement as originally filed, and of each
amendment thereto filed with the Commission, including all
consents and exhibits filed therewith.
(b) To deliver promptly to the Underwriters
such number of conformed copies of the Registration
Statement as originally filed and each amendment thereto
(excluding exhibits other than this Agreement) and of each
Preliminary Prospectus, the Prospectus and any amended or
supplemented Prospectus as the Underwriters may reasonably
request.
(c) To file promptly with the Commission the
Prospectus pursuant to Rule 424(b) of the Rules and
Regulations and to file with the Commission any amendment to
the Registration Statement or the Prospectus or any
supplement to the Prospectus that may, in the reasonable
judgment of the Company or the Underwriters, be required by
the Act or requested by the Commission and approved by the
Underwriters (which approval will not be unreasonably
withheld).
(d) Prior to filing with the Commission any amendment
to the Registration Statement or amendment or supplement to
the Prospectus, or to filing any Prospectus pursuant to Rule
424 of the Rules and Regulations, to furnish a copy thereof
to each of the Underwriters and counsel for the Underwriters
and obtain the consent of the Underwriters to the filing
(which consent will not be unreasonably withheld).
(e) To use its best efforts to cause any
post-effective amendment to the Registration Statement to
become effective and to advise the Underwriters promptly (i)
when any post-effective amendment to the Registration
Statement becomes effective, (ii) of any request or proposed
request by the Commission for an amendment to the
Registration Statement, an amendment or a supplement to the
Prospectus or for any additional information, (iii) of the
issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the
initiation or threat of any stop order proceeding, (iv) of
receipt by the Company of any notification with respect to
the suspension of the qualification of the Debentures or the
Shares for sale in any jurisdiction or the initiation or
threat of any proceeding for that purpose, and (v) of the
happening of any event which makes untrue any statement of a
material fact made in the Registration Statement or the
Prospectus, or
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<PAGE> 10
which requires the making of a change in the Registration
Statement or the Prospectus in order to make any material
statement therein not misleading.
(f) If, at any time when a prospectus relating to the
Debentures or the Shares is required to be delivered under
the Act, any event occurs as a result of which the
Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in
the light of the circumstances under which they were made,
not misleading, or if it shall be necessary to amend or
supplement the Registration Statement or the Prospectus to
comply with the Act or the Exchange Act or the rules and
regulations of the Commission under such Acts, the Company
promptly will prepare and file with the Commission, subject
to Paragraph 4.(d), an amendment or supplement which will
correct such statement or omission or an amendment which
will effect such compliance.
(g) If the Commission shall issue a stop order
suspending the effectiveness of the Registration Statement,
to make every reasonable effort to obtain the lifting of
that order at the earliest possible time.
(h) As soon as practicable after the effective date of
the Registration Statement, to make generally available to
its security holders and to deliver to the Underwriters an
earnings statement, conforming with the requirements of
Section 11(a) of the Act, covering a period of at least
twelve months beginning after the effective date of the
Registration Statement, provided that the Company may comply
with this Paragraph 4.(h) by complying with the safe harbor
provisions of Rule 158 of the Rules and Regulations.
(i) For a period of three years from the effective
date of the Registration Statement, to furnish to the
Underwriters copies of all reports to shareholders and all
reports, filings and financial statements furnished by the
Company to any securities exchange pursuant to requirements
of or agreements with such exchange or to the Commission
pursuant to the Exchange Act or any rule or regulation of
the Commission thereunder.
(j) To endeavor to qualify the Debentures and the
Shares for offer and sale under the securities laws of such
jurisdictions as the Underwriters may reasonably request,
provided that no such qualification shall be required if as
a result thereof the Company would be required to qualify as
a foreign corporation, subject itself to general taxation or
would be made subject to service of general process, in each
case in any jurisdiction in which it is not so qualified or
subject; and to maintain such qualifications in effect so
long as required for the distribution of the Debentures and
the Shares and to arrange for the determination of the
legality of the Debentures and the Shares for purchase by
institutional investors.
(k) Whether or not the transactions contemplated by
this Agreement are consummated or this Agreement is
terminated, the Company will pay (i) the costs
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<PAGE> 11
incident to the sale and delivery of the Debentures and the
Shares and any taxes payable in that connection; (ii) the costs
incident to the preparation, printing and filing under the
Act of the Registration Statement, any Preliminary
Prospectus, the Prospectus and any amendments, supplements
and exhibits thereto; (iii) the costs of distributing the
Registration Statement as originally filed and each
amendment thereto and any post-effective amendments thereof
(including exhibits), any Preliminary Prospectus, the
Prospectus, and any amendment or supplement to the
Prospectus; (iv) the costs, if any, of printing and
distributing this Agreement; (v) the costs of filings
incident to securing any required review by the National
Association of Securities Dealers, Inc.; (vi) the fees and
expenses of qualifying the Debentures and the Shares under
the securities laws of the several jurisdictions as provided
in this Paragraph 4 and of preparing and printing a Blue Sky
Memorandum (including related fees and expenses of counsel
to the Underwriters); (vii) the cost of printing the
Indenture, the Debentures, the certificates for the Shares
and the fees of the Trustee; (viii) the fees and expenses of
the Company's accountants and counsel; and (ix) all other
costs and expenses incident to the performance of the
obligations of the Company under this Agreement; provided,
however, that except as provided in sub-parts (v) and (vi)
of this Paragraph 4.(k) and in Paragraph 10, the
Underwriters shall pay their own costs and expenses,
including the fees and expenses of its counsel, any transfer
taxes on the Debentures and the Shares which they may sell
and the expenses of advertising any offering of the
Debentures and the Shares made by the Underwriters.
(l) Until the termination of the offering of the
Debentures and the Shares, to timely file all documents, and
any amendments to previously filed documents, required to be
filed by it pursuant to the Exchange Act.
(m) To apply the net proceeds of the Debentures and
the Shares as set forth in the Prospectus.
5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The
obligations of the Underwriters hereunder are subject to the
accuracy, when made and on the Closing Date, of the
representations and warranties of the Company contained herein,
to the performance by the Company of its obligations hereunder,
and to each of the following additional terms and conditions:
(a) The Prospectus shall have been timely filed to the
extent required; at or before the Closing Date or the
Additional Closing Date, no stop order suspending the
effectiveness of the Registration Statement shall have been
issued, and prior to that time no stop order proceeding nor
any order directed at any document incorporated by reference
in the Prospectus shall have been initiated or, to the
knowledge of the Company, threatened by the Commission and
no challenge shall have been made to any document
incorporated by reference in the Prospectus; any request of
the Commission for inclusion of additional information in
the Registration Statement or the Prospectus or otherwise
shall have been complied with; and the Company shall not
have filed with the Commission the Prospectus or any
amendment or supplement to the Registration Statement or the
Prospectus without the consent of the Underwriters.
-11-
<PAGE> 12
(b) The Underwriters shall not have discovered and
disclosed to the Company on or prior to the Closing Date
that the Registration Statement or the Prospectus or any
amendment or supplement thereto contains an untrue statement
of a fact which, in the reasonable opinion of the
Underwriters or Armstrong, Teasdale, Schlafly, & Davis,
counsel for the Underwriters, is material or omits to state
a fact that, in the reasonable opinion of the Underwriters
or such counsel, is material and is required to be stated
therein or is necessary to make the statements therein not
misleading.
(c) All corporate proceedings and other legal matters
incident to the authorization, form and validity of this
Agreement, the Debentures, the Shares, the form of the
Registration Statement and the Prospectus, other than
financial statements and other financial data, and all other
legal matters relating to this Agreement and the
transactions contemplated hereby shall be satisfactory in
all reasonable respects to Armstrong, Teasdale, Schlafly, &
Davis, counsel for the Underwriters; and the Company shall
have furnished to such counsel all documents and information
that such counsel may reasonably request to enable them to
pass upon such matters.
(d) Stoll, Keenon & Park, as counsel to the Company,
shall have furnished to the Underwriters their opinion,
addressed to the Underwriters and dated the Closing Date and
the Additional Closing Date, if any, to the effect that:
(i) The Company and each of its subsidiaries has
been duly incorporated and is validly existing and in
good standing under the laws of its jurisdiction of
incorporation, is duly qualified to do business and in
good standing as a foreign corporation in each
jurisdiction in which its ownership of property or
conduct of business requires such qualification and
wherein the failure to be so qualified would have a
material adverse effect on the business of the Company
or such subsidiary, and has all corporate power and
authority necessary to own or hold its properties and
conduct the business in which it is engaged as
described in the Prospectus.
(ii) The Indenture has been duly authorized,
qualified under the Trust Indenture Act, executed and
delivered; the Debentures have been duly authorized,
executed, authenticated, issued and delivered; and the
Indenture and the Debentures constitute valid and
legally binding obligations of the Company, enforceable
in accordance with their terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization
and other laws of general applicability relating to or
affecting creditors' rights and to general equity
principles;
(iii) All of the outstanding shares of Common
Stock of the Company (including the Shares) issued
after January 1, 1981 have been duly authorized and
validly issued, are fully paid and non-assessable and
conform to the description thereof in the Prospectus;
and the shareholders of the Company have no preemptive
rights with respect to the Shares being issued and sold
by
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<PAGE> 13
the Company hereunder; and, based on a review of the
Company's records for the period prior to January 1,
1981, such counsel is not aware of any fact that leads
it to conclude (a) that any shares of Common Stock
issued prior to January 1, 1981, were not duly
authorized, validly issued, fully paid or non-
assessable, or (b) that any such shares of Common Stock
do not conform to the description thereof in the
Prospectus, or (c) that any shareholder of such shares
of Common Stock has any preemptive rights with respect
to the Shares being issued and sold by the Company
hereunder.
(iv) All corporate action required to have been
taken by the Company for the due and proper
authorization, issuance, sale and delivery of the
Debentures and the Shares, has been validly and
sufficiently taken, and the Debentures constitute valid
and binding obligations of the Company and the Shares
have been duly authorized, validly issued and are non-
assessable.
(v) The Indenture, the Debentures and the Shares
conform in all material respects to the statements
concerning them in the Prospectus.
(vi) To the knowledge of such counsel based upon
communications with representatives of the Commission,
the Registration Statement is effective under the Act,
and the Prospectus was timely filed with the Commission
as required, and to the knowledge of such counsel no
stop order suspending the effectiveness of the
Registration Statement has been issued, and no
proceeding for that purpose is pending or threatened by
the Commission.
(vii) To the knowledge of such counsel, no order
directed to any document incorporated by reference in
the Prospectus has been issued, and no challenge has
been made to the accuracy or adequacy of any such
document.
(viii) The Registration Statement and the
Prospectus and each amendment or supplement, if any,
thereto comply as to form in all material respects with
the requirements of the Act and the Rules and
Regulations thereunder and the Trust Indenture Act and
the rules and regulations of the Commission under such
act (except that no opinion need be expressed as to the
Trustee's statement of Qualification and as to the
financial statements or financial data contained
therein).
(ix) The statements made in the Prospectus,
insofar as they purport to summarize the provisions of
statutes, legal and governmental proceedings, contracts
or other documents specifically referred to therein are
accurate and fairly present the information called for
with respect thereto by Form S-2 under the Act (except
that no opinion need be expressed as to financial
statements or financial date continued therein).
(x) To the of such counsel's knowledge, there is
no litigation or any governmental proceeding pending or
threatened against the Company or any of
-13-
<PAGE> 14
its subsidiaries which could have a material adverse effect
on the Company and its subsidiaries taken as a whole, or is
required to be disclosed in the Registration Statement or
the Prospectus.
(xi) To the of such counsel's knowledge, there are
no contracts or other documents which are required to
be filed as exhibits to the Registration Statement by
the Act or by the Rules and Regulations which have not
been filed as exhibits to the Registration Statement as
permitted by the Rules and Regulations.
(xii) To the of such counsel's knowledge,
neither the Company nor any of its subsidiaries is in
violation of its corporate charter or bylaws, or in
default under any agreement, indenture or instrument,
the effect of which violation or default would be
material to the Company and its subsidiaries taken as a
whole or is in violation in any material respect of any
law, ordinance, governmental rule, regulation or court
decree to which it or its property may be subject or,
except as disclosed in the Prospectus, has failed to
obtain any material license, permit, certificate,
franchise or other governmental authorization or permit
necessary to the ownership of its property or to the
conduct of its business.
(xiii) This Agreement has been duly authorized,
executed and delivered by the Company; and the
execution, delivery and performance of this Agreement
by the Company and the consummation of the transactions
contemplated by this Agreement will not conflict with,
or result in the creation or imposition of any material
lien, charge or encumbrance upon any of the property or
assets of the Company pursuant to the terms of, or
constitute a default under, any agreement, indenture,
mortgage, deed of trust, loan agreement or other
similar agreement or instrument known to such counsel,
or result in a violation of the corporate charter or
bylaws of the Company or any of its subsidiaries or any
law or ordinance to which the Company, or any of its
subsidiaries or their respective properties may be
subject or of any order, rule or regulation of any
court or governmental agency having jurisdiction
over the Company, any of its subsidiaries or their
respective properties which breach or default could
have a material effect on the Company and its
subsidiaries taken as a whole or which would cause a
current or prospective material adverse change in or
affecting the financial position, shareholders' equity
or results of operations of the Company or affecting
the validity of the Debentures or the Shares or the
legal authority of the Company to comply with the
Debentures, the Indenture or this Agreement.
(xiv) No approval or consent of any governmental
body, other than (i) as may be required under the Act
or the Trust Indenture Act of 1939 or in connection or
compliance with the provisions of the securities or
"blue sky" laws of any jurisdiction, and (ii) approval
by the Public Service Commission of Kentucky ("PSC"),
which approval by the PSC has been obtained, is legally
-14-
<PAGE> 15
required for the issue and sale of the Debentures and
the Shares by the Company or for the carrying out by
the Company of the provisions of this Agreement.
Such counsel also shall confirm that during the preparation
of the Registration Statement and Prospectus, such counsel has
participated in conferences with your representatives and
counsel for the Underwriters, and with officers and
representatives of the Company, at which conferences the contents
of the Registration Statement and Prospectus were discussed,
reviewed and revised. On the basis of the information which was
developed in the course thereof, considered in light of such
counsel's understanding of applicable law and the experience
gained by such counsel thereunder, such counsel shall confirm
that nothing came to such counsel's attention that would lead
such counsel to believe that either the Registration Statement or
Prospectus or any amendment or supplement thereto (other than the
financial statements and notes thereto, or any related schedules
therein, as to which such counsel need express no opinion)
contains any untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(e) On the Closing Date and on the Additional Closing
Date, if any, there shall have been furnished to you a
certificate, dated such date, from the Company, signed on
behalf of the Company by the President and Chief Executive
Officer and the Treasurer, stating that to the best
knowledge of the officers signing such certificate:
(i) The representations, warranties and
agreements of the Company in Paragraph 2 are true and
correct as of such date; the Company has complied with
all its agreements contained herein; and the
conditions set forth in Paragraph 5.(a) have been
fulfilled;
(ii) Neither the Registration Statement, as of its
effective date, nor the Prospectus, as of its date,
included any untrue statement of a material fact or
omitted to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading, and since the effective date of the
Registration Statement, no event has occurred which
should have been set forth in a supplement to or
amendment of the Prospectus which has not been set
forth in such a supplement or amendment; and
(iii) No stop order suspending the effectiveness
of the Registration Statement has been issued, and no
proceedings for that purpose have been instituted or
are pending or threatened, under the Act.
(f) On the date of this Agreement and on the Closing
Date, and on the Additional Closing Date, if any, Arthur
Andersen LLP, shall have furnished to you a letters dated
such dates substantially in the form of a draft of such
letter previously delivered to you.
-15-
<PAGE> 16
(g) Subsequent to the respective dates as of which
information is given in the Registration Statement and the
Prospectus, there shall not have been any change specified
in the letter referred to in Paragraph 5.(f) which makes it
impractical or inadvisable in the reasonable judgment of the
Underwriters to proceed with the public offering or delivery
of the Debentures and the Shares as contemplated by the
Prospectus.
(h) The Underwriters shall have received from
Armstrong, Teasdale, Schlafly & Davis, counsel for
the Underwriters, such opinion or opinions, dated the
Closing Date and the Additional Closing Date, if any, with
respect to the issuance and sale of the Debentures and the
Shares, the Indenture, the Registration Statement, the
Prospectus, and other related matters as the Underwriters
may reasonably require, and the Company shall have furnished
to such counsel such documents as they reasonably request
for the purpose of enabling them to pass upon such matters.
All opinions, letters, evidence and certificates mentioned
above or elsewhere in this Agreement shall be deemed to be in
compliance with the provisions hereof only if they are in form
and substance reasonably satisfactory to the Underwriters and
Armstrong, Teasdale, Schlafly & Davis, counsel for the
Underwriters.
If any of the conditions specified in this Paragraph 5 shall
not have been fulfilled when and as provided in this Agreement,
or if any of the opinions or certificates mentioned above or
elsewhere in this Agreement shall not be in all material respects
reasonably satisfactory in form and substance to the Underwriters
and its counsel, this Agreement and all obligations of the
Underwriters hereunder may be canceled at, or at any time prior
to, the Closing Date by the Underwriters.
6. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company shall indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter
within the meaning of the Act from and against any loss, claim,
damage or liability, joint or several, and any action in respect
thereof, to which any Underwriter or any such controlling person
may become subject, under the Act or otherwise, insofar as such
loss, claim, damage, liability or action arises out of, or is
based upon, any untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the
Registration Statement, the Prospectus, or the Registration
Statement or Prospectus as amended or supplemented, or arises out
of, or is based upon, the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and
shall reimburse each Underwriter and each such controlling person
for any legal and other expenses reasonably incurred by such
Underwriter or such controlling person for any legal and other
expenses reasonably incurred by such Underwriter or
such controlling person in investigating or defending or
preparing to defend against any such loss, claim, damage,
liability or action; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss,
claim, damage, liability or action arises out of, or is based
upon, any untrue statement or alleged untrue statement or
omission or alleged omission made in any
-16-
<PAGE> 17
Preliminary Prospectus or in the Registration Statement or the
Prospectus or any amendment or supplement thereto in reliance upon and
in conformity with written information furnished to the Company by
the Underwriters specifically for inclusion therein; and provided
further that as to any Preliminary Prospectus this indemnity
agreement shall not inure to the benefit of any Underwriter or
any person controlling an Underwriter on account of any loss,
claim, damage, liability or action arising from the sale of
Debentures or the Shares to any person by any Underwriter if such
Underwriter failed to send or give a copy of any Prospectus, as
the same may be amended or supplemented, to that person within
the time required by the Act, and the untrue statement or alleged
untrue statement of a material fact or omission or alleged
omission to state a material fact in such Preliminary Prospectus
was corrected in such Prospectus, unless such failure resulted
from non-compliance by the Company with Paragraph 4.(b) hereof.
The foregoing indemnity is in addition to any liability which the
Company may otherwise have to the Underwriters or any controlling
person of any of the Underwriters.
(b) Each Underwriter, severally and not jointly,
agrees to indemnify and hold harmless the Company, its directors
and officers who signed the Registration Statement and any person
who controls the Company within the meaning of the Act from and
against any loss, claim, damage or liability, joint or several,
or any action in respect thereof, to which the Company or any
such director, officer or controlling person may become subject,
under the Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, any untrue
statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration
Statement, the Prospectus or the Registration Statement or
Prospectus as amended or supplemented, or arises out of, or is
based upon, the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading, but in each case only
to the extent that the untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the
Company by such Underwriter specifically for inclusion therein,
and shall reimburse the Company for any legal and other expenses
reasonably incurred by the Company or any such director, officer
or controlling person in investigating or defending or preparing
to defend against any such loss, claim, damage, liability or
action. The foregoing indemnity agreement is in addition to any
liability which the Underwriters may otherwise have to the
Company.
(c) Promptly after receipt by an indemnified party
under this Paragraph 6 of notice of any claim or the commencement
of any action, the indemnified party shall, if a claim in respect
thereof is to be made against the indemnifying party under this
Paragraph 6, notify the indemnifying party in writing of the
claim or the commencement of that action, provided that the
failure to notify the indemnifying party shall not relieve it
from any liability which it may have to an indemnified party
otherwise than under this Paragraph 6. If any such claim
or action shall be brought against an indemnified party, and it
shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein, and, to the
extent that it wishes, jointly with any other similarly notified
indemnifying party, to assume the defense thereof with counsel
reasonably satisfactory to the indemnified party; provided,
however, if the defendants in any such action include both the
indemnified party
-17-
<PAGE> 18
and the indemnifying party and the indemnified party shall have
reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or
additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate
counsel to assume such legal defenses and to otherwise participate in
the defense of such action on behalf of such indemnified party or
parties. After notice from the indemnifying party to the indemnified
party of its election to assume the defense of such claim or action,
the indemnifying party shall not be liable to the indemnified party
under this Paragraph 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with
the defense other than reasonable costs of investigation, unless
(i) the indemnified party shall have employed such counsel in
connection with the assumption of legal defenses in accordance
with the proviso to the next preceding sentence, (ii) the
indemnified party shall have reasonably concluded that there may
be a conflict of interest between the indemnifying party and the
indemnified party in the conduct of the defense of such action
(in which case the indemnifying party shall not have the right to
direct the defense of such action on behalf of the indemnified
party), (iii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after
notice of commencement of the action or (iv) the indemnifying
party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party.
(d) If the indemnification provided for in this
Paragraph 6 shall for any reason be unavailable to an indemnified
party under Paragraph 6.(a) or 6.(b) in respect of any loss,
claim, damage or liability, or any action in respect thereof,
referred to therein, then each indemnifying party shall, in lieu
of indemnifying such indemnified party, contribute to the amount
paid or payable by such indemnified party as a result of such
loss, claim, damage or liability, or action in respect thereof,
(i) in such proportion as shall be appropriate to reflect the
relative benefits received by the Company on the one hand and the
Underwriters on the other from the offering of the Debentures and
the Shares or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company
on the one hand and the Underwriters on the other with respect to
the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any
other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on
the other hand with respect to such offering shall be deemed to
be in the same proportion as the total net proceeds from the
offering of the Debentures and the Shares (before deducting
expenses) received by the Company bears to the total underwriting
discounts and commissions received by the Underwriters with
respect to such offering, in each case as set forth in the table
on the cover page of the Prospectus. The relative fault shall be
determined by reference to whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by the
Company or the Underwriters, the intent of the parties and their
relative knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and
the Underwriters agree that it would not be just and equitable if
contributions pursuant to this Paragraph 6.(d) were to be
determined by pro rata allocation or by any other method of
allocation which does not take into account the equitable
considerations referred to herein.
-18-
<PAGE> 19
The amount paid or payable by an indemnified party as a result of the
loss, claim, damage or liability, or action in respect thereof,
referred to above in this Paragraph 6.(d) shall be deemed to include,
for purposes of this Paragraph 6.(d), any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim.
Notwithstanding the provisions of this Paragraph 6.(d), no
Underwriter shall be required to contribute any amount in excess
of the amount by which the total price at which the Debentures
and the Shares underwritten by it and distributed to the public
was offered to the public exceeds the amount of any damages which
such Underwriter has otherwise paid or become liable to pay by
reason of any untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
(e) The Underwriters confirm that the statements with
respect to the public offering of the Debentures and the Shares
set forth on the cover page of, and under the caption
"Underwriting" in, the Prospectus are correct and were furnished
in writing to the Company by the Underwriters for inclusion in
the Registration Statement and the Prospectus.
(f) The agreements contained in this Paragraph 6 and
the representations, warranties and agreements of the Company
contained in Paragraphs 2 and 4 shall survive the delivery of the
Debentures and the Shares and shall remain in full force and
effect, regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of any
indemnified party.
7. TERMINATION BY THE UNDERWRITERS. The obligations of
the Underwriters hereunder may be terminated by the Underwriters,
in their absolute discretion, by notice given to and received by
the Company prior to delivery of and payment for the Debentures
and the Shares, if prior to that time (a)(i) the Company shall
have failed, refused or been unable to perform any agreement on
its part to be performed hereunder, (ii) any other condition to
the Underwriters' obligations hereunder is not fulfilled, (iii)
the Company sustains a loss, whether or not insured, by reason of
fire, flood, accident or other calamity, which, in the reasonable
opinion of the Underwriters, substantially affects the value of
the properties of the Company or which materially interferes with
the operation of the business of the Company, (iv) trading
generally shall have been suspended or materially limited on or
by the New York Stock Exchange or American Stock Exchange or the
National Association of Securities Dealer or trading in any
securities of the Company shall have been suspended by any
securities exchange or in the over the counter market, (v) a
banking moratorium is declared by the United States, or by New
York, Missouri or Kentucky state authorities, (vi) an outbreak of
major hostilities or other national or international calamity
occurs, (vii) any action is taken by any government in respect of
its monetary affairs which, in the reasonable opinion of the
Underwriters, has a material adverse effect on the United States
securities markets, or (viii) there is a pending or threatened
material legal or governmental proceeding against the Company,
other than proceedings described in the Registration Statement or
amendments or supplements thereto delivered to the Underwriters
prior to the execution of this Agreement, which in the reasonable
opinion of the Underwriters has a material adverse effect upon
the Company, and (b) with respect to the events specified in
clauses (a)(i)
-19-
<PAGE> 20
through (a)(iii) hereof, such event singly or together with other such
events makes it, in your reasonable judgment, impractical to market
the Shares and Debentures on the terms and in the manner contemplated
in the Prospectus.
8. SUBSTITUTION OF UNDERWRITERS. If one or more of the
Underwriters shall fail on the Closing Date to purchase and pay
for the Debentures and Firm Shares agreed to be purchases by such
Underwriter hereunder (the "Defaulted Debentures" or the
"Defaulted Shares", respectively) and such failure to purchase
shall constitute a default in the performance of its obligations
under this Agreement, the remaining Underwriters shall have the
right, within 48 hours thereafter, to make arrangements for one
or more of the non-defaulting Underwriters, or any other persons,
to purchase all, but not less than all, of the Defaulted
Debentures or the Defaulted Shares, as the case may be, in such
amounts as may be agreed upon and upon the terms herein set
forth; if, however, the Underwriters shall not have completed
such arrangements within such 48 hour period, then:
(a) with respect to the Defaulted Bonds:
(i) if the amount of Defaulted Debentures does
not exceed 10% of the aggregate principal amount of the
Debentures, the non-defaulting Underwriters shall be
obligated to purchase the full amount thereof in the
proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all non-
defaulting Underwriters; or
(ii) if the amount of Defaulted Debentures exceeds
10% of the aggregate principal amount of the Debentures, the
non-defaulting Underwriters shall have the right to purchase
all, but shall not be under any obligation to purchase any,
of the Defaulted Debentures and if such non-defaulting
Underwriters do not purchase all the Defaulted Debentures,
this Agreement will terminate without liability to any non-
defaulting Underwriter; and
(b) with respect to the Defaulted Shares:
(i) if the amount of Defaulted Shares, based on
the Share Public Offering Price, does not exceed 10% of the
aggregate amount of the Firm Shares, the non-defaulting
Underwriters shall be obligated to purchase the full amount
thereof in the proportions that their respective
underwriting obligations hereunder bear to the underwriting
obligations of all non-defaulting Underwriters; or
(ii) if the amount of Defaulted Shares, based on
the Share Public Offering Price, exceeds 10% of the
aggregate amount of the Firm Shares, the non-defaulting
Underwriters shall have the right to purchase all, but shall
not be under any obligation to purchase any, of the
Defaulted Shares and if such non-defaulting Underwriters do
not purchase all the Defaulted Shares, this Agreement will
terminate without liability to any non-defaulting
Underwriter.
-20-
<PAGE> 21
In the event of a default by any Underwriter as set forth in
this Paragraph 8 the Underwriters or the Company shall have the
right to postpone the Closing Date for such period not exceeding
five business days in order that the required changes in the
Registration Statement and the Prospectus or in any other
documents or arrangement may be effected, and the Company agrees
promptly to file any amendments to the Registration Statement or
supplements to the Prospectus which may thereby be made
necessary. Nothing contained in this Agreement shall relieve any
defaulting Underwriter of its liability to the Company and any
non-defaulting Underwriters for damages occasioned by its default
hereunder.
9. TERMINATION BY THE COMPANY. The obligation of the
Company to deliver the Debentures and the Shares upon payment
therefor shall be subject to the following conditions:
On the Closing Date the orders of the Kentucky Public
Service Commission referred to in Paragraph 2.(n) and Paragraph
5.(d)(xv) hereof shall be in full force and effect substantially
in the form in which originally entered; the Indenture shall be
qualified under the Trust Indenture Act as and to the extent
required by such Act; and no stop order suspending the
effectiveness of the Registration Statement shall be in effect
and no proceedings for that purpose shall then be pending before,
or threatened by, the Commission.
In case any of the conditions specified above in this
Paragraph 9 shall not have been fulfilled, this Agreement may be
terminated by the Company by delivering written notice of
termination to the Underwriters. Any such termination shall be
without liability of any party to any other party except to the
extent provided in Paragraph 4.(k) and Paragraph 10 hereof.
10. EXPENSES FOLLOWING TERMINATION. If the sale of Shares
and Debentures provided for herein are not consummated because of
any refusal, inability or failure on the part of the Company to
comply with any of the terms or to fulfill any of the conditions
of this Agreement, or if for any reason the Company shall be
unable to perform all its obligations under this Agreement, the
Company shall not be liable to the Underwriters for damages
arising out of the transactions covered by this Agreement,
provided however that (i) the Company shall remain liable to the
extent provided in Paragraphs 4.(k), 6.(a) and 6.(d) hereof and
(ii) the Company shall pay the out-of-pocket expenses incurred by
the Underwriters in contemplation of the performance by them of
their obligations hereunder, including the fees and disbursements
of their counsel and their travel, postage, telegraph and
telephone expenses, up to a maximum amount of $40,000.
11. NOTICES. The Company shall be entitled to act and rely
upon any request, consent, notice or agreement given or made by
the Underwriters. Any notice to the Underwriters shall
be sufficient if given in writing or by telecopy addressed to
Edward D. Jones & Co., 12555 Manchester Road, St. Louis, Missouri
63131 (Attention: James A. Krekeler); any notice to the Company
shall be sufficient if given in writing or by telecopy addressed
to the Company at: 3617 Lexington Road, Winchester, Kentucky
40391 (Attention: Glenn R. Jennings).
-21-
<PAGE> 22
12. PARTIES. This Agreement shall inure to the benefit of
and be binding upon the Underwriters, the Company and their
respective successors. This Agreement and the terms and
provisions hereof are for the sole benefit of only those persons,
except that (a) the representations, warranties, indemnities and
agreements of the Company contained in this Agreement shall also
be deemed to be for the benefit of the person or persons, if any,
who control the Underwriters within the meaning of Section 15 of
the Act, and (b) the indemnities and agreements of the
Underwriters contained in Paragraph 6 of this Agreement shall be
deemed to be for the benefit of directors of the Company,
officers of the Company who have signed the Registration
Statement and any person controlling the Company. Nothing in
this Agreement is intended or shall be construed to give any
person other than the persons referred to in this paragraph any
legal or equitable right, remedy or claim under or in respect of
this Agreement or any provision contained herein.
13. DEFINED TERMS. For purposes of this Agreement, (a)
"business day" means any day on which the New York Stock Exchange
is open for trading, and (b) "subsidiary" shall have the meaning
set forth in Rule 405 of the Rules and Regulations.
14. SUCCESSORS. This Agreement will inure to the benefit
of and be binding upon the parties hereto and their respective
successors and assigns and the officers and directors and
controlling persons referred to in Paragraph 6 hereof, and no
other person will have any right or obligation hereunder. The
term "successors and assigns" as used in this Agreement shall not
include any purchaser, as such purchaser, of any of the
Debentures or the Shares from the Underwriters.
15. COUNTERPARTS. This Agreement may be executed in
multiple counterparts, all of which, when taken together, shall
constitute one and the same agreement among the parties to such
counterparts.
16 APPLICABLE LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of
Missouri.
-22-
<PAGE> 23
If the foregoing correctly sets forth the agreement
between the Company and the Underwriters, please indicate your
acceptance in the space provided for that purpose.
Very truly yours,
DELTA NATURAL GAS COMPANY, INC.
By:-----------------------------------------
President and Chief Executive Officer
Accepted:
EDWARD D. JONES & CO.,
By:-------------------------------
Title:----------------------------
J.J.B. HILLIARD, W.L. LYONS, INC.
By:-------------------------------
Title:----------------------------
THE OHIO COMPANY
By:-------------------------------
Title:----------------------------
-23-
<PAGE> 24
<TABLE>
SCHEDULE I
$15,000,000 PRINCIPAL AMOUNT OF
-----% DEBENTURES DUE 2026 AND
350,000 SHARES OF COMMON STOCK
OF
DELTA NATURAL GAS COMPANY, INC.
<CAPTION>
Number of Principal
Firm Shares Amount of
to be Debentures to
Underwriters Purchased be Purchased
------------ --------- -------------
<S> <C> <C>
Edward D. Jones & Co.. . . . . . . . . . . .
J.J.B. Hilliard, W.L. Lyons, Inc.. . . . . .
The Ohio Company.. . . . . . . . . . . . . .
---------------------------------------
TOTAL . . . . . . . . . . . . . . . . . 350,000 $15,000,000
</TABLE>
-24-
<PAGE> 1
DELTA NATURAL GAS COMPANY, INC.
and
THE FIFTH THIRD BANK,
TRUSTEE
INDENTURE
Dated as of July 1, 1996
$15,000,000
----% Debentures
Due August 1, 2026
<PAGE> 2
<TABLE>
CROSS-REFERENCE TABLE
<CAPTION>
TIA INDENTURE
SECTION SECTION
-------------------------------------------------
<S> <C>
310 (a) (1) 8.10
(a) (2) 8.10
(a) (3) 8.12
(a) (4) N.A.
(a) (5) 8.10
(b) 8.08; 8.10; 11.02
(c) N.A.
311 (a) 8.11
(b) 8.11
(c) N.A.
312 (a) 2.05
(b) 11.03
(c) 11.03
313 (a) 8.06
(b) (1) N.A.
(b) (2) 8.06
(c) 8.06; 11.02
(d) 8.06
314 (a) 5.02; 5.08; 11.02
(b) N.A.
(c) (1) 11.04
(c) (2) 11.04
(c) (3) N.A.
(d) N.A.
(e) 11.05
(f) N.A.
315 (a) 8.01(b)
(b) 8.05; 11.02
(c) 8.01(a)
(d) 8.01(c)
(e) 7.11
316 (a) (last sentence) 2.09
(a) (1) (A) 7.05
(a) (1) (B) 7.04
(a) (2) N.A.
(b) 7.07
(c) 7.14
<PAGE> 3
<CAPTION>
TIA INDENTURE
SECTION SECTION
-------------------------------------------------
<S> <C>
317 (a) (1) 7.08
(a) (2) 7.09
(b) 2.04
318 (a) 11.01
N.A. means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any
purpose, be deemed to be a part of the Indenture.
</TABLE>
<PAGE> 4
TABLE OF CONTENTS
ARTICLE SECTION HEADING
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PAGE
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1 DEFINITIONS AND INCORPORATION
BY REFERENCE . . . . . . . . . . . . . . 1
1.01 Definitions. . . . . . . . . . . . . . . 1
1.02 Other Definitions. . . . . . . . . . . . 5
1.03 Incorporation by Reference of
Trust Indenture Act. . . . . . . . . . 5
1.04 Rules of Construction. . . . . . . . . . 6
2 THE DEBENTURES . . . . . . . . . . . . . 6
2.01 Form and Dating. . . . . . . . . . . . . 6
2.02 Execution and Authentication . . . . . . 6
2.03 Registrar and Paying Agent . . . . . . . 7
2.04 Paying Agent to Hold Money in
Trust. . . . . . . . . . . . . . . . . 7
2.05 Debentureholder Lists. . . . . . . . . . 8
2.06 Transfer and Exchange. . . . . . . . . . 8
2.07 Replacement Debentures . . . . . . . . . 9
2.08 Outstanding Debentures . . . . . . . . . 9
2.09 Treasury Debentures. . . . . . . . . . . 9
2.10 Temporary Debentures . . . . . . . . . . 10
2.11 Cancellation . . . . . . . . . . . . . . 10
2.12 Defaulted Interest . . . . . . . . . . . 10
2.13 Persons Deemed Owners. . . . . . . . . . 10
3 REDEMPTION OF DEBENTURES AT
CORPORATION'S OPTION . . . . . . . . . . 11
3.01 Redemption Right at
Corporation's Option . . . . . . . . . 11
3.02 Notices to Trustee . . . . . . . . . . . 11
3.03 Selection of Debentures to be
Redeemed . . . . . . . . . . . . . . . 11
3.04 Notice of Redemption . . . . . . . . . . 12
3.05 Effect of Notice of Redemption . . . . . 12
3.06 Deposit of Redemption Price. . . . . . . 12
3.07 Debentures Redeemed in Part. . . . . . . 12
3.08 Corporation's Right to Withdraw
Redemption Election. . . . . . . . . . 13
4 REDEMPTION OF DEBENTURES AT
DEBENTUREHOLDER'S OPTION . . . . . . . . 13
4.01 Redemption Right at Debenture-
holder's Option. . . . . . . . . . . . 13
<PAGE> 5
ARTICLE SECTION HEADING
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PAGE
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5 COVENANTS. . . . . . . . . . . . . . . . 13
5.01 Payment of Debentures. . . . . . . . . . 13
5.02 Reporting. . . . . . . . . . . . . . . . 13
5.03 Corporate Existence. . . . . . . . . . . 14
5.04 Payment of Taxes and Other
Claims . . . . . . . . . . . . . . . . 14
5.05 Limitation on Certain Funded
Indebtedness . . . . . . . . . . . . . 14
5.06 Limitations on Dividends and
Other Payments on Stock. . . . . . . . 14
5.07 Limitation on Secured
Indebtedness . . . . . . . . . . . . . 15
5.08 Compliance Certificate . . . . . . . . . 16
5.09 Default Certificate. . . . . . . . . . . 17
6 SUCCESSORS . . . . . . . . . . . . . . . 17
6.01 When Corporation May Merge, etc. . . . . 17
7 DEFAULTS AND REMEDIES. . . . . . . . . . 17
7.01 Events of Default. . . . . . . . . . . . 17
7.02 Acceleration . . . . . . . . . . . . . . 19
7.03 Other Remedies . . . . . . . . . . . . . 20
7.04 Waiver of Past Defaults. . . . . . . . . 20
7.05 Control by Majority. . . . . . . . . . . 20
7.06 Limitation on Suits. . . . . . . . . . . 20
7.07 Rights of Holders to Receive
Payment. . . . . . . . . . . . . . . . 21
7.08 Collection Suit by Trustee . . . . . . . 21
7.09 Trustee May File Proofs of
Claim. . . . . . . . . . . . . . . . . 21
7.10 Priorities . . . . . . . . . . . . . . . 22
7.11 Undertaking for Costs. . . . . . . . . . 22
7.12 Waiver of Stay or Extension
Laws . . . . . . . . . . . . . . . . . 22
7.13 Restoration of Rights and
Remedies . . . . . . . . . . . . . . . 23
7.14 Record Date for Vote of
Debentureholders . . . . . . . . . . . 23
8 TRUSTEE. . . . . . . . . . . . . . . . . 23
8.01 Duties of Trustee. . . . . . . . . . . . 23
8.02 Rights of Trustee. . . . . . . . . . . . 24
8.03 Individual Rights of Trustee . . . . . . 25
8.04 Trustee's Disclaimer . . . . . . . . . . 25
8.05 Notice of Defaults . . . . . . . . . . . 25
8.06 Reports by Trustee to Holders. . . . . . 25
8.07 Compensation and Indemnity . . . . . . . 26
8.08 Replacement of Trustee . . . . . . . . . 26
8.09 Successor Trustee by Merger, etc. 27
<PAGE> 6
ARTICLE SECTION HEADING
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PAGE
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8.10 Eligibility; Disqualification. . . . . . 27
8.11 Preferential Collection of
Claims Against Corporation . . . . . . 28
8.12 Appointment of Co-Trustee. . . . . . . . 28
9 DISCHARGE OF INDENTURE . . . . . . . . . 29
9.01 Termination of Corporation's
Obligations. . . . . . . . . . . . . . 29
9.02 Application of Trust Money . . . . . . . 30
9.03 Repayment to Corporation . . . . . . . . 30
10 AMENDMENTS, SUPPLEMENTS AND
WAIVERS. . . . . . . . . . . . . . . . 30
10.01 Without Consent of Holders . . . . . . . 30
10.02 With Consent of Holders. . . . . . . . . 31
10.03 Compliance with Trust Indenture
Act. . . . . . . . . . . . . . . . . . 31
10.04 Revocation and Effect of
Consents . . . . . . . . . . . . . . . 31
10.05 Notation on or Exchange of
Debentures . . . . . . . . . . . . . . 31
10.06 Trustee Protected. . . . . . . . . . . . 32
11 MISCELLANEOUS. . . . . . . . . . . . . . 32
11.01 Trust Indenture Act Controls . . . . . . 32
11.02 Notices. . . . . . . . . . . . . . . . . 32
11.03 Communication by Holders with
Other Holders. . . . . . . . . . . . . 33
11.04 Certificate and Opinion as to
Conditions Precedent . . . . . . . . . 33
11.05 Statements Required in Certifi-
cate or Opinion. . . . . . . . . . . . 33
11.06 Rules by Trustee and Agent . . . . . . . 34
11.07 Legal Holidays . . . . . . . . . . . . . 34
11.08 No Recourse Against Others . . . . . . . 34
11.09 Duplicate Originals. . . . . . . . . . . 34
11.10 Governing Law. . . . . . . . . . . . . . 34
11.11 Table of Contents, Headings, etc. 34
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
EXHIBIT A -- FORM OF GLOBAL SECURITY . . . . . . . . . . . . . . A-1
EXHIBIT B -- FORM OF DEBENTURE . . . . . . . . . . . . . . . . . B-1
<PAGE> 7
INDENTURE dated as of July 1, 1996, between DELTA NATURAL
GAS COMPANY, INC., a Kentucky corporation ("CORPORATION"), and
THE FIFTH THIRD BANK, an Ohio banking corporation ("TRUSTEE").
Each party agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Holders of
the Corporation's ----% Debentures Due August 1, 2026
("Debentures"):
ARTICLE 1 - DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"AFFILIATE" means any person directly or indirectly
controlling or controlled by or under direct or indirect
common control with the Corporation.
"AGENT" means any Registrar, Paying Agent or co-registrar
or agent for service of notices and demands. See Section
2.03.
"BOARD OF DIRECTORS" means the Board of Directors of the
Corporation or any authorized committee of the Board.
"BOARD RESOLUTION" means a copy of a resolution certified
by the Corporate Secretary of the Corporation to have been
duly adopted by the Board of Directors and to be in full force
and effect.
"CAPITAL STOCK" means any and all shares, interests,
participations or other equivalents (however designated) of
corporate stock.
"COMMON STOCK" means the common stock, par value $1 per
share, of the Corporation as the same exists at the date of
this Indenture or as such stock shall be constituted from time
to time.
"CONSOLIDATED", when used in connection with any
accounting terms, means the Corporation and its Subsidiaries,
the financial statements of which are consolidated in
accordance with generally accepted accounting principles.
"CONSOLIDATED FUNDED INDEBTEDNESS" means the outstanding
Funded Indebtedness of the Corporation and its Consolidated
Subsidiaries (excluding in all cases Funded Indebtedness owing
to the Corporation or Consolidated Subsidiaries); provided,
however, that if the Corporation owns, directly or indirectly,
less than all of the voting stock of a Consolidated
Subsidiary, only that portion of the Funded Indebtedness of
such Consolidated Subsidiary equal to
<PAGE> 8
the proportion of its outstanding voting stock owned by the
Corporation shall be included in determining Consolidated Funded
Indebtedness.
"CONSOLIDATED NET UTILITY FIXED ASSETS" means the
aggregate value of Utility Fixed Assets of the Corporation and
its Consolidated Subsidiaries less accumulated depreciation,
determined on a consolidated basis in accordance with
generally accepted accounting principles applied in a manner
consistent with the most recent audited financial statements
included in reports delivered to the Trustee pursuant to
Section 5.02; provided, however, that if the Corporation owns,
directly or indirectly, less than all of the outstanding
voting stock of a Consolidated Subsidiary, only that portion
of the Utility Fixed Assets of such Consolidated Subsidiary
equal to the proportion of its outstanding voting stock owned
by the Corporation shall be included in determining
Consolidated Net Utility Fixed Assets.
"CONSOLIDATED TANGIBLE NET WORTH" means an amount equal
to the stockholders' ownership of the Corporation and its
Consolidated Subsidiaries (including capital stock, capital
in excess of par value and retained earnings, but eliminating
any unpaid amounts due for sale of stock) less intangible
assets, all determined on a consolidated basis in accordance
with generally accepted accounting principles applied in a
manner consistent with the most recent audited financial
statements included in reports delivered to the Trustee
pursuant to Section 5.02.
"CORPORATE TRUST OFFICE" means the office of the Trustee
located in Cincinnati, Ohio, at which at any time its
corporate trust business shall be principally administered,
which office at the date of execution of this Indenture is
located at 38 Fountain Square Plaza, Cincinnati, Ohio 45263,
Attention: Corporate Trust Administration.
"CORPORATION" means the party named as such above until
a successor replaces it pursuant to the applicable provisions
of the Indenture and thereafter means the successor.
"CURRENT INDEBTEDNESS" of a Person means, as of the date
of determination thereof, all Indebtedness maturing on demand
or not more than one year after the date as of which such
determination is made (excluding any Indebtedness renewable or
extendible at the option of the debtor, absolutely or
conditionally, for a period or periods ending more than one
year after the date of such determination, whether or not
theretofore extended or renewed), fixed sinking fund payments
(except to the extent that funds for
<PAGE> 9
the payment thereof shall have been deposited with a trustee for
the application thereof) and other prepayments required to be
made with respect to any Indebtedness not more than one year
after such date, and all other items (including taxes accrued as
estimated) which in accordance with generally accepted accounting
principles would be included as current indebtedness.
"DEBENTURE" means the Debentures described above issued
under this Indenture.
"DEFAULT" means any event which is, or after notice or
passage of time would be, an Event of Default.
"DEPOSITORY" means The Depository Trust Company in the
City of New York and any successor to such Person.
"EXCHANGE ACT" means the Securities Exchange Act of 1934,
as from time to time amended.
"FUNDED INDEBTEDNESS" means all Indebtedness other than
Current Indebtedness.
"GLOBAL SECURITY" means a security evidencing all of the
Debentures issued to the Depository or its nominee and
registered in the name of the Depository or its nominee.
"HOLDER" OR "DEBENTUREHOLDER" means a person in whose
name a Debenture is registered; provided, however, that for
purposes of Sections 7.06 and 7.07 hereof, such terms shall
also include the Beneficial Owner (as defined in the
Debentures) of any Debenture.
"INDEBTEDNESS" of a Person means (i) all items of
indebtedness or liability which in accordance with generally
accepted accounting principles would be included in
determining total liabilities as shown on the liability side
of a balance sheet as at the date as of which indebtedness is
to be determined, (ii) indebtedness upon which the Person
whose indebtedness is being determined customarily pays
interest charges and indebtedness secured by any mortgage,
pledge or lien existing on property owned by such Person,
whether or not the indebtedness secured thereby shall have
been assumed but, if (a) any such indebtedness shall not have
been assumed or guaranteed by such Person, (b) such Person
customarily does not pay any interest thereon, and (c) such
mortgage, pledge or lien was created by others upon lands over
which such Person has an easement or right of way, such
indebtedness shall not be deemed to be Indebtedness of such
Person except to the extent of the larger of the fair value or
cost to such Person of such property (including any
improvements thereon) covered by such mortgage, pledge or
lien, and (iii) guaranties,
<PAGE> 10
endorsements (other than for purposes of collection in the
ordinary course of business) and other contingent obligations in
respect of, or to purchase or otherwise acquire, indebtedness of
others.
"INDENTURE" means this Indenture as amended from time to
time.
"INTEREST PAYMENT DATE" means February 1 and August 1 of
each year commencing February 1, 1997 through and including
August 1, 2026.
"LIEN" means any lien, mortgage, pledge, security
interest, charge or other encumbrance of any kind.
"OFFICER" means the principal executive officer,
principal financial officer, principal accounting officer or
President of the Corporation.
"OFFICERS' CERTIFICATE" means a certificate signed by two
Officers of the Corporation. See Sections 11.04 and 11.05.
"OPINION OF COUNSEL" means a written opinion from legal
counsel who may be an employee of or counsel to the
Corporation or the Trustee and who is acceptable to the
Trustee. See Sections 11.04 and 11.05.
"PERSON" means any individual, corporation, partnership,
joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or
political subdivision thereof.
"PRINCIPAL" of the Debenture means the principal of the
Debenture plus the Premium, if any, on the Debenture.
"QUALIFIED INSTITUTION" means a member firm of a
registered national securities exchange or of the National
Association of Securities Dealers, Inc., or a commercial bank
or trust company located in the United States.
"RECORD DATE" means January 15 and July 15.
"REDEMPTION DATE" when used with respect to any Debenture
to be redeemed means the date fixed for such redemption
pursuant to this Indenture.
"REDEMPTION PRICE" when used with respect to any
Debenture to be redeemed means the price at which it is to be
redeemed pursuant to this Indenture and the Debenture.
"SEC" means the Securities and Exchange Commission.
<PAGE> 11
"SPECIAL RECORD DATE" means the date set by the
Corporation for determination of Debentureholders of record
for purposes of paying any defaulted interest.
"SUBSIDIARY" means a corporation at least the majority
of whose voting stock is owned by the Corporation or a
Subsidiary.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as in effect on the date shown above
except as provided in Section 10.03.
"TRUSTEE" means the party named as such above until a
successor replaces it pursuant to the applicable provisions
of the Indenture and thereafter means the successor.
"TRUST OFFICER" means the Chairman of the Board, the
President or any other officer or assistant officer of the
Trustee assigned by the Trustee to administer its corporate
trust matters.
"UNITED STATES" means the United States of America.
"U.S. GOVERNMENT OBLIGATIONS" means securities that are
(i) direct obligations of the United States of America for the
payment of which its full faith and credit is pledged or (ii)
obligations of a person controlled or supervised by and acting
as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as
a full faith and credit obligation by the United States of
America, which, in either case, are not callable or redeemable
at the option of the issuer thereof.
"UTILITY FIXED ASSETS" means all physical property owned
by the Corporation and any Consolidated Subsidiaries and used
or useful to the Corporation in the business of furnishing or
distributing, as a public utility, gas service, the cost of
which is charged and properly chargeable to plant or plant
addition account on the books of the Corporation or such
Consolidated Subsidiary in accordance with sound accounting
practices and generally accepted accounting principles.
Utility Fixed Assets need not consist of a specific or
complete accession, addition or improvement or complete new
property, but may include construction work in progress or any
work such as is carried in fixed property accounts in
accordance with sound accounting practices and generally
accepted accounting principles, whether capable of complete
description and identification or not.
<PAGE> 12
<TABLE>
SECTION 1.02. OTHER DEFINITIONS.
<CAPTION>
TERM DEFINED IN SECTION
------------------------------------------------
<S> <C>
"BANKRUPTCY LAW" 7.01
"CUSTODIAN" 7.01
"EVENT OF DEFAULT" 7.01
"LEGAL HOLIDAY" 11.07
"PAYING AGENT" 2.03
"REGISTRAR" 2.03
</TABLE>
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE
ACT.
Whenever this Indenture refers to a provision of the TIA,
the provision is incorporated by reference in and made a part
of this Indenture.
The following TIA terms used in this Indenture have the
following meanings:
"INDENTURE SECURITIES" means the Debentures.
"INDENTURE SECURITYHOLDER" means a Debentureholder.
"INDENTURE TO BE QUALIFIED" means this Indenture.
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the
Trustee.
"OBLIGOR" on the indenture securities means the
Corporation.
All other terms used in this Indenture that are defined
by the TIA, defined by TIA reference to another statute or
defined by SEC rule under the TIA have the meanings assigned
to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with generally
accepted accounting principles;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in
the plural include the singular;
(5) provisions apply to successive events and
transactions; and
(6) "Section" shall refer to a Section of this
Indenture.
<PAGE> 13
ARTICLE 2 - THE DEBENTURES
SECTION 2.01. FORM AND DATING.
The form of the Debentures to be originally issued as a
Global Security shall be substantially in the form of Exhibit
A, which is part of this Indenture. The form of the
Debentures to be issued in exchange for a Global Security
shall be substantially in the form of Exhibit B, which is part
of this Indenture. The terms of such Exhibits A and B are
hereby incorporated herein by reference. The Debentures may
have notations, legends or endorsements required by law, stock
exchange rule or usage. Each Debenture shall be dated the
date of its authentication.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers shall sign the Debentures for the
Corporation by manual or facsimile signature. The
Corporation's seal shall be reproduced on the Debentures.
If an Officer whose signature is on a Debenture no longer
holds that Office at the time the Debenture is authenticated,
the Debenture shall nevertheless be valid.
A Debenture shall not be valid until authenticated by the
manual signature of the Trustee. The signature shall be
conclusive evidence that the Debenture has been authenticated
under this Indenture.
The Trustee shall authenticate Debentures for original
issue up to the aggregate principal amount of $15,000,000 upon
a written order of the Corporation signed by two officers.
The aggregate principal amount of Debentures outstanding at
any time may not exceed that amount except as provided in
Section 2.07.
The Trustee may appoint an authenticating agent
acceptable to the Corporation to authenticate Debentures. An
authenticating agent may authenticate Debentures whenever the
Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such
agent. An authenticating agent has the same rights as an
Agent to deal with the Corporation or an Affiliate.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Corporation shall maintain an office or agency where
Debentures may be presented for registration or transfer or
for exchange ("REGISTRAR"), an office or agency where
Debentures may be presented for payment ("PAYING AGENT") and
an office or agency where notices and demands to
<PAGE> 14
or upon the Corporation in respect of the Debentures and this
Indenture may be served. The Registrar shall keep a register of
the Debentures and of their transfer and exchange. The
Corporation may appoint one or more co-registrars and one or
more additional paying agents. The Corporation or any
Subsidiary may act as Registrar or Paying Agent. The term
"Paying Agent" includes any additional paying agent.
The Corporation shall notify the Trustee in writing of
the name and address of any Agent not a party to this
Indenture. If the Corporation fails to maintain a Registrar,
Paying Agent or agent for service of notices and demands or
fails to give the foregoing notice, the Trustee shall act as
such.
The Corporation initially appoints The Fifth Third Bank
as Registrar, Paying Agent and agent for service of notices
and demands.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Corporation shall require each Paying Agent other
than the Trustee to agree in writing that the Paying Agent
will hold in trust for the benefit of Debentureholders or the
Trustee all money held by the Paying Agent for the payment of
Principal or interest on the Debentures, and will notify the
Trustee of any Default by the Corporation in making any such
payment. While any such Default continues, the Trustee may
require a Paying Agent to pay all money held by it to the
Trustee. The Corporation at any time may require a Paying
Agent to pay all money held by it to the Trustee. Upon
payment over to the Trustee, the Paying Agent shall have no
further liability for the money. If the Corporation (or any
Subsidiary) acts as Paying Agent, it shall segregate and hold
as a separate trust fund all money held by it as Paying Agent.
SECTION 2.05. DEBENTUREHOLDER LISTS.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it
of the names and addresses of Debentureholders. If the
Trustee is not the Registrar, the Corporation shall furnish
to the Trustee on or before each Interest Payment Date and at
such other times as the Trustee may request in writing a list
of the names and addresses of Debentureholders in such form
and as of such date as the Trustee may reasonably require.
<PAGE> 15
SECTION 2.06. TRANSFER AND EXCHANGE.
When Debentures are presented to the Registrar or a co-
registrar with a request to register the transfer or to
exchange them for an equal principal amount of Debentures of
other denominations, the Registrar shall register the transfer
or make the exchange, provided that every Debenture presented
or surrendered for registration of transfer or exchange shall
be duly endorsed or be accompanied by a written instrument of
transfer in form satisfactory to the Registrar duly executed
by the Holder thereof or by his attorney duly authorized in
writing. To permit registrations of transfer and exchanges,
the Trustee shall authenticate Debentures at the Registrar's
written request (which written request may be waived by the
Trustee so long as the Trustee and Registrar are one and the
same). No service charge shall be made for any registration
of transfer or exchange of Debentures to the Debentureholders,
but the Corporation may require payment of a sum sufficient
to cover any tax or other governmental charge that may be
imposed in relation thereto, other than exchanges pursuant to
Section 2.10, 3.07 or 4.02.
A Global Security shall be exchangeable pursuant to this
Section for Debentures registered in the names of Persons
other than the Depository or its nominee only as provided in
this paragraph. A Global Security shall be exchangeable
pursuant to this Section if (i) such Depository notifies the
Corporation that it is unwilling or unable to continue as
Depository for such Debentures or at any time ceases to be a
clearing agency registered as such under the Exchange Act,
(ii) the Corporation executes and delivers to the Trustee an
Officers' Certificate providing that such Global Security
shall be so exchangeable, or (iii) there shall have occurred
and be continuing an Event of Default. Debentures so issued
in exchange for a Global Security shall be of like tenor, in
authorized denominations of $1,000 or integral multiples
thereof and in the aggregate having the same principal amount
as the Global Security to be exchanged, and shall be
registered in such names as the Depository shall direct.
Notwithstanding any other provision of this Section, a
Global Security may not be transferred except as a whole by
the Depository to a nominee of such Depository or by a nominee
of such Depository to such Depository or another nominee of
such Depository.
SECTION 2.07. REPLACEMENT DEBENTURES.
If the Holder of a Debenture claims that the Debenture
has been lost, destroyed or wrongfully taken, the Corporation
shall issue and the Trustee shall authenticate a replacement
Debenture if the Trustee's requirements are met. If required
by the Trustee or the Corporation, an indemnity bond must be
obtained and be sufficient in the judgment of both to protect
the Corporation, the Trustee, any Agent or any authenticating
agent from any loss which any of them may
<PAGE> 16
suffer if a Debenture is replaced. The Corporation and the
Trustee may charge for their expenses in replacing a Debenture.
Every replacement Debenture is an additional obligation
of the Corporation.
SECTION 2.08. OUTSTANDING DEBENTURES.
The Debentures outstanding at any time are all the
Debentures authenticated by the Trustee except for those
cancelled by it, those delivered to it for cancellation, and
those described in this Section as not outstanding.
If a Debenture is replaced pursuant to Section 2.07, it
ceases to be outstanding unless the Trustee receives proof
satisfactory to it that the replaced Debenture is held by a
bona fide purchaser.
If Debentures are considered paid under Section 5.01,
they cease to be outstanding and interest on them ceases to
accrue.
Except with the limitations set forth in Section 2.09,
a Debenture does not cease to be outstanding because the
Corporation or an Affiliate holds the Debenture.
SECTION 2.09. TREASURY DEBENTURES.
In determining whether the Holders of the required
principal amount of Debentures have concurred in any
direction, waiver or consent, Debentures owned by the
Corporation or an Affiliate shall be disregarded, except for
purposes of determining whether the Trustee shall be protected
in relying on any such direction, waiver or consent. Only
Debentures which the Trustee knows are so owned shall be
disregarded.
SECTION 2.10. TEMPORARY DEBENTURES.
Until definitive Debentures are ready for delivery, the
Corporation may prepare and the Trustee shall authenticate
temporary Debentures. Temporary Debentures shall be
substantially in the form of definitive Debentures but may
have variations that the Corporation considers appropriate for
temporary Debentures. Without unreasonable delay, the
Corporation shall cause to be issued and the Trustee shall
authenticate definitive Debentures in exchange for temporary
Debentures.
<PAGE> 17
SECTION 2.11. CANCELLATION.
The Corporation at any time may deliver Debentures to the
Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Debentures surrendered to
them for registration of transfer, exchange or payment. The
Trustee shall cancel all Debentures surrendered for
registration of transfer, exchange or payment and shall
dispose of cancelled Debentures as the Corporation directs.
The Corporation may not issue new Debentures to replace
Debentures that it has paid for or delivered to the Trustee
for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Corporation defaults in a payment of interest on
the Debentures, it shall pay the defaulted interest in any
lawful manner. It may pay the defaulted interest, plus any
interest payable on the defaulted interest, to the Persons who
are Debentureholders on a subsequent Special Record Date. The
Corporation shall fix the Special Record Date and payment date
in a manner satisfactory to the Trustee. At least 15 days
before the Special Record Date, the Corporation shall mail to
Debentureholders a notice that states the Special Record Date,
the payment date and the amount of interest to be paid.
SECTION 2.13. PERSONS DEEMED OWNERS.
Prior to due presentment of a Debenture for registration
of transfer, the Corporation, the Trustee and any Agent of the
Corporation or the Trustee may treat the Person in whose name
such Debenture is registered as the owner of such Debenture
for the purpose of receiving payment of Principal of (and
premium, if any) and (subject to Section 2.12) interest, if
any, on such Debenture and for all other purposes whatsoever,
whether or not such Debenture be overdue, and neither the
Corporation, the Trustee nor any Agent of the Corporation or
the Trustee shall be affected by notice to the contrary. All
such payments so made to any such Person, or upon such
Person's order, shall be valid, and, to the extent of the sums
so paid, effectual to satisfy and discharge the liability for
moneys payable upon any such Debenture.
Except to the extent provided in Sections 7.06 and 7.07
hereof, no holder of any beneficial interest in any Global
Security held on its behalf by a Depository shall have any
rights under this Indenture with respect to such Global
Security, and such Depository may be treated by the
Corporation, the Trustee, and any Agent of the Corporation or
the Trustee as the owner of such Global Security for all
purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall impair, as between a Depository and such holders
of beneficial interests, the operation of customary practices
governing the exercise of the rights of the Depository as
Holder of any Debenture.
<PAGE> 18
ARTICLE 3 - REDEMPTION OF DEBENTURES AT
CORPORATION'S OPTION
SECTION 3.01. REDEMPTION RIGHT AT CORPORATION'S OPTION.
The Corporation has the right to redeem the Debentures
at its sole option, in whole or in part, at any time and from
time to time on or after August 1, 2001, at the Redemption
Prices specified in paragraph 5 of the Debenture, subject to
the terms and conditions set forth in this Article 3. The
election of the Corporation to redeem any Debenture shall be
evidenced by a Board Resolution.
SECTION 3.02. NOTICES TO TRUSTEE.
If the Corporation wishes to redeem Debentures pursuant
to paragraph 5 of the Debenture, it shall notify the Trustee
in writing of the Redemption Date and the principal amount of
Debentures to be redeemed. The Corporation shall give the
notice provided for in this Section not less than 60 days
prior to the Redemption Date or such shorter time as may be
satisfactory to the Trustee.
SECTION 3.03. SELECTION OF DEBENTURES TO BE REDEEMED.
If less than all the Debentures are to be redeemed, the
Trustee shall select the Debentures to be redeemed by lot.
The Trustee shall, not less than 45 days before the Redemption
Date or such shorter time as may be mutually satisfactory to
the Trustee and the Corporation, inform the Corporation in
writing of those specific Debentures selected for redemption.
The Trustee may select for redemption portions of the
principal of Debentures that have denominations larger than
$1,000. Debentures and portions of Debentures that the
Trustee selects shall be in amounts of $1,000 or integral
multiples of $1,000. Provisions of this Indenture that apply
to Debentures called for redemption also apply to portions of
Debentures called for redemption.
SECTION 3.04. NOTICE OF REDEMPTION.
At least 30 days before a Redemption Date, the
Corporation shall mail notice of redemption to each Holder
whose Debentures are to be redeemed. A copy of each such
notice shall be mailed to the Trustee.
The notice shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) the name and address of the Paying Agent;
<PAGE> 19
(4) that Debentures called for redemption must be
surrendered to the Paying Agent to collect the
Redemption Price;
(5) that interest on Debentures called for redemption
ceases to accrue on and after the Redemption Date
(unless the Corporation shall default in the
payment of the Redemption Price); and
(6) if less than all of the Debentures outstanding are
to be redeemed, the identification (and, in the
case of partial redemption, the respective
principal amounts) of the Debentures to be
redeemed.
At the Corporation's written request, the Trustee shall
give notice of redemption in the Corporation's name and at the
expense of the Corporation.
SECTION 3.05. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed as provided in
Section 3.04, Debentures called for redemption become due and
payable on the Redemption Date at the Redemption Price,
subject, however to the provisions of Section 3.08.
SECTION 3.06. DEPOSIT OF REDEMPTION PRICE.
On or before the Redemption Date, the Corporation shall
deposit with the Paying Agent cash sufficient to pay the
Redemption Price and accrued interest on all Debentures to be
redeemed.
SECTION 3.07. DEBENTURES REDEEMED IN PART.
Upon surrender of a Debenture that is redeemed in part,
the Trustee shall authenticate for the Holder a new Debenture
equal in principal amount to the unredeemed portion of the
Debenture surrendered.
SECTION 3.08. CORPORATION'S RIGHT TO WITHDRAW REDEMPTION
ELECTION.
Notwithstanding any other provision of this Article 3,
the Corporation shall have the right, at its option, to
withdraw, in whole or in part, its election and notice of
redemption pursuant to Article 3 by written notice of such
withdrawal given by the Corporation to the Trustee and to each
Holder affected thereby at least five (5) days prior to the
Redemption Date. At the Corporation's request, the Trustee
shall give such notice of withdrawal to such Holders in the
Corporation's name and at the expense of the Corporation.
Upon the giving of such notice of withdrawal,
<PAGE> 20
the Corporation's redemption election and all notices given
pursuant thereto shall be deemed rescinded to the extent set
forth in such notice of withdrawal and all parties affected
thereby shall be restored to their respective former positions
hereunder as if no redemption election had been made by the
Corporation and no such redemption notices had been given.
ARTICLE 4 - REDEMPTION OF DEBENTURES AT
DEBENTUREHOLDER'S OPTION
SECTION 4.01. REDEMPTION RIGHT AT DEBENTUREHOLDER'S OPTION.
Representatives of deceased Debentureholders and, in the
case of a Global Security, representatives of deceased
beneficial owners of such Global Security, have certain
optional redemption rights all as set forth in the forms of
Debenture attached hereto as Exhibits A and B.
ARTICLE 5 - COVENANTS
SECTION 5.01. PAYMENT OF DEBENTURES.
The Corporation shall pay the Principal of and interest
on the Debentures on the dates and in the manner provided in
the Debentures. Principal and interest shall be considered
paid on the date due if the Trustee or any Paying Agent holds
on that date money sufficient to pay all Principal and
interest then due, provided that, if Debentures are to be
redeemed, notice of such redemption has been duly given
pursuant to this Indenture or provision therefor satisfactory
to the Trustee has been made.
The Corporation shall pay interest on overdue principal
at the rate borne by the Debentures; it shall pay interest on
overdue installments of interest at the same rate to the
extent lawful.
SECTION 5.02. REPORTING.
The Corporation shall file with the Trustee within 15
days after it files them with the SEC copies of the annual
reports and of the information, documents, and other reports
(or copies of such portions of any of the foregoing as the SEC
may by rules and regulations prescribe) which the Corporation
is required to file with the SEC pursuant to Section 13 or
15(d) of the Exchange Act. The Corporation also shall comply
with the other provisions of TIA Section 314(a).
SECTION 5.03. CORPORATE EXISTENCE.
Subject to Article 6, the Corporation will do or cause
to be done all things necessary to preserve and keep in full
force and effect its corporate existence and the rights
<PAGE> 21
(articles and statutory) of the Corporation; provided,
--------
however, that the Corporation shall not be required to
- -------
preserve any such right if the Board of Directors shall
determine that the preservation thereof is no longer desirable
in the conduct of the business of the Corporation taken as a
whole and that the loss thereof is not, and will not be,
adverse in any material respect to the Holders.
SECTION 5.04. PAYMENT OF TAXES AND OTHER CLAIMS.
The Corporation will pay or discharge or cause to be paid
or discharged, before the same shall become delinquent, (i)
all material taxes, assessments and governmental charges
levied or imposed upon it or any Subsidiary or upon the
income, profits or property of the Corporation or any
Subsidiary and (ii) all material lawful claims for labor,
materials and supplies which, if unpaid, might by law become
a lien upon the property of the Corporation or any of its
Subsidiaries; provided, however, that the Corporation shall
not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good
faith by appropriate proceedings.
SECTION 5.05. LIMITATION ON CERTAIN FUNDED INDEBTEDNESS.
Neither the Corporation nor a Subsidiary will create,
issue, incur, guarantee or assume any Funded Indebtedness
which ranks prior to or on a parity with the Debentures in
right of payment unless immediately thereafter, and after
giving effect thereto and to the application of the proceeds
thereof, Consolidated Net Utility Fixed Assets shall be at
least equal to Consolidated Funded Indebtedness.
<PAGE> 22
SECTION 5.06. LIMITATIONS ON DIVIDENDS AND OTHER
PAYMENTS ON STOCK.
The Corporation will not declare or pay any dividends or
make any distributions upon any Common Stock of the
Corporation (other than dividends and distributions payable
only in shares of Common Stock of the Corporation) and will
not directly or indirectly apply any of the assets of the
Corporation to the redemption, retirement, purchase or other
acquisition of any stock of the Corporation of any class,
except purchases or redemptions in compliance with any
mandatory sinking fund or purchase fund or redemption
requirement in respect of any preferred stock of the
Corporation, whether now or hereafter authorized or issued,
unless after giving effect to such declaration, payment,
distribution or application of assets the Consolidated
Tangible Net Worth of the Corporation shall be at least equal
to $18,000,000 as reflected on the Corporation's latest
available balance sheet, which in no event shall be as of a
date more than three months prior to the date of declaration
of a dividend or application of assets.
SECTION 5.07. LIMITATION ON SECURED INDEBTEDNESS.
Neither the Corporation nor a Subsidiary will issue,
assume or guarantee any Indebtedness secured by a Lien on any
property or asset at any time owned by it, without effectively
securing, prior to or concurrently with the issuance,
assumption or guarantee of any such Indebtedness, the
Debentures equally and ratably with (or, at the Corporation's
option, in a prior position to) such Indebtedness. The
foregoing described restriction does not apply to or prevent
the creation of:
(i) existing Liens on property or Indebtedness of a
corporation which is merged with or into or
consolidated with the Corporation or a Subsidiary
provided that the Liens do not apply to any
property theretofore owned by the Corporation;
(ii) any Lien existing on the effective date of this
Indenture, and, if the Corporation purchases in fee
real property and acquires or constructs
improvements thereon to be used by the Corporation
as office space, a Lien on such real property and
improvements to secure Indebtedness incurred for
the purchase of such real property and
improvements, so long as such Lien is limited to
such real property and improvements and such
Indebtedness does not exceed 75% of the purchase
price thereof;
(iii) Liens on moneys or U.S. Government Obligations
deposited with the Trustee pursuant to
<PAGE> 23
the provisions of the Indenture summarized under
Article 9 below:
(iv) Liens (which term for purposes of this Subsection
(iv) shall include conditional sale agreements or
other title retention agreements and leases in the
nature of title retention agreements) upon motor
vehicles or office equipment acquired by the
Corporation or a Subsidiary after the effective
date of this Indenture, under credit terms
customarily extended to purchasers by the
manufacturers or other sellers, provided that no
such Lien shall extend to or cover any property of
the Corporation or any Subsidiary, as the case may
be, other than the property then being acquired;
(v) Liens for the sole purpose of extending, renewing
or replacing, in whole or in part, Liens securing
Indebtedness of the type referred to in the
foregoing Subsections (i) through (iv) above,
provided, however, that the principal amount of the
Indebtedness so secured at the time of such
extension, renewal or replacement shall not be
increased and that such extension, renewal or
replacement shall be limited to all or part of the
property or Indebtedness which secured the Lien so
extended, renewed or replaced (plus improvements on
such property);
(vi) Liens for taxes or assessments or other
governmental charges or levies not yet due and
payable;
(vii) Materialmen's, mechanics', workmen's, repairmen's
or other like Liens arising in the ordinary course
of business so long as the obligations giving rise
to such Liens are satisfied in a timely manner;
(viii) Liens created by or existing from any litigation or
legal proceeding which is currently being contested
in good faith by appropriate proceedings, and as to
which execution is effectively stayed; or
(ix) Liens to secure Indebtedness having an outstanding
principal balance aggregating not more than
$3,000,000 exclusive of Indebtedness described in
the foregoing Subsections (i) through (viii) above.
The Corporation further covenants that it will not incur
any such Lien unless the instruments and collateral documents
equally and ratably securing the Debentures are
<PAGE> 24
approved by the Trustee, and in the opinion of independent
counsel selected by the Trustee, the transaction creating such
Lien complies with the requirements of this Section.
SECTION 5.08. COMPLIANCE CERTIFICATE.
The Corporation shall deliver to the Trustee within 120
days after the end of each fiscal year of the Corporation an
Officers' Certificate as to the Corporation's compliance with
all conditions and covenants under the Indenture, and further
stating whether or not the signers know of any Default that
occurred during the fiscal year. If the signers know of any
such Default, the Officers' Certificate shall describe the
Default and its status, and the Corporation's compliance shall
be determined without regard to any grace period or notice
requirements under this Indenture. The certificate need not
comply with Section 11.05.
SECTION 5.09. DEFAULT CERTIFICATE.
The Corporation shall deliver to the Trustee, within
seven (7) days of obtaining knowledge of the existence of a
Default hereunder, or within seven (7) days of any event of
default as described in Section 7.01(4) herein, a certificate
signed by one of its Officers, setting forth the nature of the
Default and the steps taken, if any, to cure such Default.
ARTICLE 6 - SUCCESSORS
SECTION 6.01. WHEN CORPORATION MAY MERGE, ETC.
The Corporation shall not consolidate or merge into, or
transfer or lease all or substantially all of its assets to,
any Person unless:
(1) the Person is a corporation organized and existing
under the Laws of the United States, or any State
thereof or the District of Columbia;
(2) the Person assumes by supplemental indenture all
the obligations of the Corporation under the
Debentures and this Indenture;
(3) immediately after the transaction no Default
exists; and
(4) the Corporation has delivered to the Trustee an
Officers' Certificate and Opinion of Counsel each
stating that the transaction and supplemental
indenture comply with this Article.
<PAGE> 25
The surviving transferee or lessee corporation shall be
the successor Corporation and deemed to and be substituted for
the Corporation under the Indenture, and the predecessor
Corporation in the case of a transfer or lease shall be
released from all obligations and covenants under the
Indenture and the Debentures.
ARTICLE 7 - DEFAULTS AND REMEDIES
SECTION 7.01. EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" occurs if:
(1) the Corporation defaults in the payment of interest
on any Debenture when the same becomes due and
payable and the Default continues for a period of
30 days;
(2) the Corporation defaults in the payment of the
Principal of any Debenture when the same becomes
due and payable at maturity, upon redemption or
otherwise;
(3) the Corporation fails to comply with any of its
other agreements in the Debentures or this
Indenture and the Default continues for the period
and after the notice specified below;
(4) an event of default as defined in any mortgage,
indenture or instrument under which there may be
issued, or by which there may be secured or
evidenced, any Indebtedness for money borrowed for
which the Corporation or any Consolidated
Subsidiary is responsible or liable as obligor,
guarantor or otherwise or obligations of the
Corporation or any Consolidated Subsidiary as a
lessee under leases required to be capitalized
under generally accepted accounting principles, in
an aggregate principal amount of $100,000 or more,
whether such Indebtedness or obligation now exists
or shall hereafter be created, shall happen and
shall result in such Indebtedness or obligation
becoming or being declared due and payable prior to
the date on which it would otherwise become due and
payable, and such acceleration shall not be
rescinded or annulled, or such Indebtedness or
obligation shall not have been discharged, within
a period of 10 days after written notice has been
given to the Corporation by the Trustee or to the
Corporation and the Trustee by the Holders of at
least 25% in principal amount of the Debentures
then outstanding, specifying such event of default
and requiring the Corporation to cause such
<PAGE> 26
acceleration to be rescinded or annulled or to
cause such Indebtedness or obligation to be
discharged and stating that such notice is a
"Notice of Default" hereunder;
(5) the Corporation pursuant to or within the meaning
of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief
against it in an involuntary case,
(C) consents to the appointment of a Custodian of
it or for all or substantially all of its
property, or
(D) makes a general assignment for the benefit of
its creditors; or
(6) a court of competent jurisdiction enters an order
or decree under any Bankruptcy Law, and the order
or decree remains unstayed and in effect for 60
days, that:
(A) is for relief against the Corporation in an
involuntary case,
(B) appoints a Custodian of the Corporation for
all or substantially all of its property, or
(C) orders the liquidation of the Corporation.
The term "BANKRUPTCY LAW" means title 11, U.S. Code or
any similar Federal or State law for the relief of debtors.
The term "CUSTODIAN" means any receiver, trustee, assignee,
liquidator or similar official under any Bankruptcy Law.
A Default under clause (3) is not an Event of Default
until (i) the Trustee or the Holders of at least 25% in
principal amount of the Debentures then outstanding notify the
Corporation of the Default, or (ii) the Corporation provides
notice to the Trustee pursuant to the provisions of Section
5.08 hereof, and the Corporation does not cure the Default
within 60 days after receipt of such respective notice. The
notice must specify the Default, demand that it be remedied
and state that the notice is a "Notice of Default." The
Trustee shall, if requested to do so by the Holders of 25% in
principal amount of the Debentures, notify the Corporation of
the Default pursuant to this Section.
Subject to the provisions of Sections 8.01 and 8.02, the
Trustee shall not be charged with knowledge of any Event
<PAGE> 27
of Default unless written notice thereof shall have been given to
a Trust Officer of the Trustee at the Corporate Trust Office
by the Corporation, the Paying Agent, the Holder of a
Debenture or an agent of such Holder or, in the case of an
Event of Default under clause (4), by the trustee acting under
any mortgage, indenture or other instrument under which the
event of default shall have occurred or by the holder or the
agent of any holder of such Indebtedness.
SECTION 7.02. ACCELERATION.
If an Event of Default occurs and is continuing, the
Trustee, by notice to the Corporation, or the Holders of at
least 25% in principal amount of the Debentures then
outstanding, by notice to the Corporation and the Trustee, may
declare the principal of, and accrued interest on, all the
Debentures to be due and payable. Upon such declaration the
principal and interest shall be due and payable immediately.
The Holders of a majority in principal amount of the
Debentures then outstanding, by notice to the Trustee, may
rescind an acceleration of all the Debentures and its
consequences if (i) all existing Events of Default have been
cured or waived except nonpayment of the principal and
interest that has become due solely because of the
acceleration and (ii) if the rescission would not conflict
with any judgment or decree of a court of competent
jurisdiction. No such rescission shall affect any subsequent
default or impair any right consequent thereon.
SECTION 7.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the
Trustee may pursue any available remedy to collect the payment
of principal or interest on the Debentures or to enforce the
performance of any provision of the Debentures or this
Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Debentures or does not produce any of them
in the proceeding. A delay or omission by the Trustee or any
Debentureholder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in such Event of
Default. All remedies are cumulative to the extent permitted
by law.
<PAGE> 28
SECTION 7.04. WAIVER OF PAST DEFAULTS.
The Holders of a majority in principal amount of the
Debentures, by notice to the Trustee, on behalf of all
Debentureholders, may waive a past Default and its
consequences, except a Default in the payment of the Principal
of or interest on any Debenture, an uncured failure to make
any redemption payment or an uncured Default with respect to
a provision which cannot be modified under the terms of this
Indenture without the consent of each Holder affected.
SECTION 7.05. CONTROL BY MAJORITY.
The Holders of a majority in principal amount of the
Debentures then outstanding may direct the time, method and
place of conducting any proceeding for any remedy available
to the Trustee or exercising any trust or power conferred on
it. However, the Trustee may refuse to follow any direction
that conflicts with law or this Indenture, is unduly
prejudicial to the rights of other Debentureholders, or would
involve the Trustee in personal liability; provided, that the
--------
Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction. However, the
Trustee is under no duty or obligation to exercise its
discretion in determining whether such directions may conflict
with law or this Indenture, or are unduly prejudicial to the
rights of Debentureholders.
SECTION 7.06. LIMITATION ON SUITS.
A Debentureholder may pursue a remedy with respect to
this Indenture or the Debentures only if:
(1) the Holder gives to the Trustee written notice of
a continuing Event of Default;
(2) the Holders of at least 25% in principal amount of
the Debentures then outstanding make a written
request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee
indemnity satisfactory to the Trustee against any
loss, liability or expense;
(4) the Trustee does not comply with the request by
Debentureholders pursuant to Section 7.06(2) above,
within 60 days after receipt of the request and the
offer of indemnity; and
(5) during such 60-day period the Holders of a majority
in principal amount of the Debentures then
outstanding do not give the Trustee a direction
inconsistent with the request.
<PAGE> 29
A Debentureholder may not use this Indenture to prejudice
the rights of another Debentureholder or to obtain a
preference or priority over another Debentureholder.
SECTION 7.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture,
the right of any Holder of a Debenture to receive payment of
Principal and interest on the Debenture, on or after the
respective due dates expressed in the Debenture, or to bring
suit for the enforcement of any such payment on or after such
respective dates, is absolute and unconditional and shall not
be impaired or affected without the consent of the Holder.
SECTION 7.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default in payment of interest or
Principal specified in Section 7.01(1) or (2) occurs and is
continuing, the Trustee may recover judgment in its own name
and as trustee of an express trust against the Corporation for
the whole amount of unpaid Principal and accrued interest
remaining unpaid.
SECTION 7.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other
papers or documents as may be necessary or advisable in order
to have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel) and the
Debentureholders allowed in any judicial proceedings relative
to the Corporation upon the Debentures, its creditors or its
property, and shall be entitled and empowered to collect and
receive any monies or other property payable or deliverable on
any such claims and to distribute the same, and any Custodian
in any such judicial proceeding is hereby authorized by each
Debentureholder to make such payments to the Trustee, and in
the event that the Trustee shall consent to the making of such
payments directly to the Debentureholders, to pay to the
Trustee any amount due to it for the reasonable compensation,
expenses and disbursements and advances of the Trustee, its
agents and counsel, and any other amounts due the Trustee
under Section 8.07.
SECTION 7.10. PRIORITIES.
If the Trustee collects any money pursuant to this
Article, it shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 8.07;
-----
<PAGE> 30
Second: to Debentureholders for amounts due and unpaid
------
on the Debentures for Principal and interest, ratably,
without preference or priority of any kind, according to
the amounts due and payable on the Debentures for
Principal and interest, respectively; and
Third: to the Corporation.
-----
The Trustee may fix a record date and payment date for
any payment to Debentureholders pursuant to this Article.
SECTION 7.11. UNDERTAKING FOR COSTS.
Subject to the provisions of Section 8.02 hereof, in any
suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action
taken or omitted by it as Trustee, a court in its discretion
may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit,
having due regard to the merits and good faith of the claims
or defenses made by the party litigant. This Section does not
apply to a suit by the Trustee, a suit by a Holder pursuant to
Section 7.07 or a suit by Holders of more than 10% in
principal amount of the Debentures.
SECTION 7.12. WAIVER OF STAY OR EXTENSION LAWS.
The Corporation covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, or
plead, or in any manner whatsoever claim or take the benefit
or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the
covenants or the performance of the Indenture; and the
Corporation (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and
execution of any power herein granted to the Trustee, but will
suffer and permit the execution of every such power as though
no such law had been enacted.
SECTION 7.13. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any
proceeding to enforce any right or remedy under the Indenture
and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or to
such Holder, then and in every such case the Corporation, the
Trustee and the Holders shall, subject to any determination in
such proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights
and remedies of the
<PAGE> 31
Trustee and the Holders shall continue as though no such
proceeding had been instituted.
SECTION 7.14. RECORD DATE FOR VOTE OF DEBENTUREHOLDERS.
The Corporation may set a record date for purposes of
determining the identity of Debentureholders entitled to vote
or consent to any action by vote or consent authorized or
permitted by Section 7.04 and Section 7.05 of this Indenture.
Such record date shall be the later of 30 days prior to the
first solicitation of such consent or the date of the most
recent list of Holders furnished to the Trustee pursuant to
Section 2.05 of this Indenture prior to such solicitation.
ARTICLE 8 - TRUSTEE
SECTION 8.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the
rights and powers vested in it by this Indenture,
and use the same degree of care and skill in their
exercise as a prudent man would exercise or use
under the circumstances in the conduct of his own
affairs.
(b) Except during the continuance of an Event of
Default:
(1) The Trustee need perform only those duties
that are specifically set forth in this
Indenture and no others.
(2) In the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth
of the statements and the correctness of the
opinions expressed therein, upon certificates
or opinions furnished to the Trustee and
conforming to the requirements of this
Indenture. However, the Trustee shall examine
the certificates and opinions to determine
whether or not they conform to the
requirements of this Indenture.
(c) The Trustee may not be relieved from liability for
its own negligent action, its own gross negligent
failure to act or its own willful misconduct,
except that:
(1) This paragraph does not limit the effect of
paragraph (b) of this Section.
<PAGE> 32
(2) The Trustee shall not be liable for any error
of judgment made in good faith by a Trust
Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent
facts; and
(3) The Trustee shall not be liable with respect
to any action it takes or omits to take in
good faith in accordance with a direction
received by it pursuant to Section 7.05.
(d) Every provision of this Indenture that in any way
relates to the Trustee is subject to paragraphs
(a), (b) and (c) of this Section.
(e) The Trustee may refuse to perform any duty or
exercise any right or power unless it receives
indemnity satisfactory to it against any loss,
liability or expense.
(f) The Trustee shall not be liable for interest on any
money received by it except as otherwise agreed
with the Corporation. Money held in trust by the
Trustee need not be segregated from other funds
except to the extent required by law.
SECTION 8.02. RIGHTS OF TRUSTEE.
Except as otherwise provided in Section 8.01:
(a) The Trustee may rely on any document believed by it
to be genuine and to have been signed or presented
by the proper person. The Trustee need not
investigate any fact or matter stated in the
document.
(b) Before the Trustee acts or refrains from acting, it
may require an Officers' Certificate or an Opinion
of Counsel. The Trustee shall not be liable for
any action it takes or omits to take in good faith
in reliance on the Officers' Certificate or Opinion
of Counsel.
(c) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any
agent appointed with due care.
(d) The Trustee shall not be liable for any action it
takes or omits to take in good faith which it
believes to be authorized or within its rights or
powers.
<PAGE> 33
SECTION 8.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may
become the owner or pledgee of Debentures and may otherwise
deal with the Corporation or an Affiliate with the same rights
it would have if it were not Trustee. Any Agent may do the
same with like rights. However, the Trustee is subject to
Sections 8.10 and 8.11.
SECTION 8.04. TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity
or adequacy of this Indenture or the Debentures, it shall not
be accountable for the Corporation's use of the proceeds from
the Debentures, and it shall not be responsible for any
statement in the Debentures other than its authentication.
SECTION 8.05. NOTICE OF DEFAULTS.
If a Default occurs and is continuing and if it is known
to the Trustee, the Trustee shall mail to Debentureholders, in
the manner and to the extent provided in TIA Section 313(c),
a notice of the Default within 90 days after it occurs.
Except in the case of a Default in payment of the principal of
or interest on any Debenture, the Trustee may withhold the
notice if and so long as the Board of Directors, the Executive
Committee or a committee of its Trust Officers in good faith
determines that withholding the notice is in the interests of
Debentureholders.
SECTION 8.06. REPORTS BY TRUSTEE TO HOLDERS.
On or before each December 15 beginning with the December
15 following the date of this Indenture, the Trustee shall
mail to each Debentureholder a brief report, dated as of such
reporting date, with respect to any of the events listed in
TIA Section 313(a) which may have occurred within the previous
12 months, but if no such event has occurred within such
period no such report need be mailed. The Trustee also shall
comply with TIA Section 313(b)(2).
A copy of each report required in this Section shall be
mailed to such Debentureholders as required by TIA Section
313(c) and shall, at the time of its mailing to such
Debentureholders, be filed with the Corporation, the SEC and
each stock exchange on which the Debentures are listed. The
Corporation shall notify the Trustee when the Debentures are
listed on any stock exchange.
<PAGE> 34
SECTION 8.07. COMPENSATION AND INDEMNITY.
The Corporation shall pay to the Trustee from time to
time reasonable compensation for its services. The Trustee's
compensation shall not be limited by any law on compensation
of a trustee of an express trust. If an Event of Default
should occur, the Trustee shall be entitled to reasonable
additional compensation for all additional or extraordinary
services rendered and expenses (including counsel fees)
incurred in connection with said Event of Default.
The Corporation shall indemnify the Trustee against any
loss or liability incurred by it. The Trustee shall notify
the Corporation promptly of any claim for which it may seek
indemnity. The Corporation shall defend the claim and the
Trustee shall cooperate in the defense. The Trustee may have
separate counsel, and the Corporation shall pay the reasonable
fees and expenses of such counsel. The Corporation need not
pay for any settlement made without its consent.
The Corporation need not reimburse any expense or
indemnify against any loss or liability incurred by the
Trustee through negligence or bad faith.
To secure the Corporation's payment obligations in this
Section, the Trustee shall have a lien prior to the Debentures
on all money or property held or collected by the Trustee.
When the Trustee incurs expenses or renders services
after an Event of Default specified in Section 7.01(5) or (6)
occurs, the expenses and the compensation for the services are
intended to constitute expenses of administration under any
Bankruptcy Law.
SECTION 8.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment
of a successor Trustee shall become effective only upon the
successor Trustee's acceptance of appointment as provided in
this Section.
The Trustee may resign by so notifying the Corporation.
The Holders of a majority in principal amount of the
Debentures may remove the Trustee by so notifying the Trustee
and the Corporation. The Corporation may remove the Trustee
if:
(1) the Trustee fails to comply with Section 8.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
<PAGE> 35
(3) a receiver or public officer takes charge of the
Trustee or its property;
(4) the Trustee becomes incapable of acting; or
(5) the Trustee fails to comply with TIA Section 310(b)
after an Event of Default.
If the Trustee resigns or is removed or if a vacancy
exists in the office of Trustee for any reason, the
Corporation shall promptly appoint a successor Trustee.
Within one year after the successor Trustee assumes office,
the Holders of a majority in principal amount of the
Debentures may appoint a successor Trustee to replace the
successor Trustee appointed by the Corporation.
If a successor Trustee does not take office within 60
days after the retiring Trustee resigns or is removed, the
retiring Trustee, the Corporation or the Holders of at least
10% in principal amount of the Debentures then outstanding may
petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 8.10, any
Debentureholder may petition any court of competent
jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance
of its appointment to the retiring Trustee and to the
Corporation. Thereupon the resignation or removal of the
retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the
Trustee under this Indenture. The successor Trustee shall
mail a notice of its succession to Debentureholders. The
retiring Trustee shall promptly transfer all property held by
it as Trustee to the successor Trustee, subject to the lien
provided for in Section 8.07.
SECTION 8.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust
business to, another corporation, the resulting, surviving or
transferee corporation without any further act shall be the
successor Trustee.
SECTION 8.10. ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies
the requirements of TIA Section 310(a)(1). The Trustee shall
always have a combined capital and surplus of at least
<PAGE> 36
$15,000,000 as set forth in its most recent published annual
report of condition. Neither the Corporation nor any
Affiliate shall serve as Trustee upon the Debentures or
pursuant to this Indenture. The Trustee is subject to TIA
Section 310(b).
SECTION 8.11. PREFERENTIAL COLLECTION OF CLAIMS
AGAINST CORPORATION.
The Trustee is subject to TIA Section 311(a), excluding
any creditor relationship listed in TIA Section 311(b). A
Trustee who has resigned or been removed is subject to TIA
Section 311(a) to the extent indicated.
SECTION 8.12. APPOINTMENT OF CO-TRUSTEE.
It is the purpose of this Indenture that there shall be
no violation of any law of any jurisdiction denying or
restricting the right of banking corporations or associations
to transact business as trustee in such jurisdiction. It is
recognized that in case of litigation under this Indenture,
and in particular in case of the enforcement of an Event of
Default, or in case the Trustee deems that by reason of any
present or future law of any jurisdiction it may not exercise
any of the powers, rights or remedies herein granted to the
Trustee in trust, as herein granted, or take any other action
which may be desirable or necessary in connection therewith,
it may be necessary that an additional individual or
institution be appointed as a separate or Co-Trustee.
At any time or times, for the purpose of meeting the
legal requirements of any jurisdiction, the Trustee and the
Corporation may appoint an additional individual or
institution as a separate or Co-Trustee, in which event each
and every remedy, power, right, claim, demand, cause of
action, immunity, estate, title, interest and lien expressed
or intended by this Indenture, to be exercised by or vested
in or conveyed to the Trustee with respect thereto shall be
exercisable by and vest in such separate or Co-Trustee but
only to the extent necessary to enable such separate or
Co-Trustee to exercise such powers, rights and remedies, and
every covenant and obligation necessary to the exercise
thereof by such separate or Co-Trustee shall run to and be
enforceable by either of them. If the Corporation does not
join in such appointment within 15 days after receipt by it
of a request so to do, or in case an Event of Default has
occurred and is continuing, the Trustee alone shall have power
to make such appointment.
Should any deed, conveyance or instrument in writing from
the Corporation be required by the separate or Co-Trustee so
appointed by the Trustee for more fully and certainly vesting
in and confirming to it such properties,
<PAGE> 37
rights, powers, trusts, duties and obligations, including
particularly the right to be paid its fees for services rendered,
any and all such deeds, conveyances and instruments in writing
shall, on request, be executed, acknowledged and delivered by the
Corporation. In case any separate or Co-Trustee, or a
successor to either, shall die, become incapable of acting,
resign or be removed, all the estates, properties, rights,
powers, trusts, duties and obligations of such separate or
Co-Trustee, so far as permitted by law, shall vest in and be
exercised by the Trustee until the appointment of a new
Trustee or successor to such separate or Co-Trustee.
The rights, powers, duties and obligations hereby
conferred or imposed upon the Trustee in respect of this
Indenture shall be conferred or imposed upon and exercised or
performed by the Trustee or by the Trustee and such separate
or Co-Trustee jointly, as shall be provided in the instrument
appointing such separate or Co-Trustee, except to the extent
that under any law of any jurisdiction in which any particular
act is to be performed, the Trustee shall be incompetent or
unqualified to perform such act, in which event such rights,
powers, duties and obligations shall be exercised and
performed by such separate or Co-Trustee
ARTICLE 9 - DISCHARGE OF INDENTURE
SECTION 9.01. TERMINATION OF CORPORATION'S OBLIGATIONS.
The Corporation may at any time terminate all of its
obligations under this Indenture if:
(1) the Corporation provides written notice to the
Trustee of the Corporation's intent to terminate
its obligation under this Indenture;
(2) the Debentures mature within one year of the
Corporation's written notice of its intent to
terminate or all of the Debentures are to be called
for redemption within one year of the Corporation's
written notice of its intent to terminate under
arrangements satisfactory to the Trustee for giving
the notice of redemption; and
(3) the Corporation irrevocably deposits in trust with
the Trustee money or U.S. Government Obligations
sufficient to pay Principal and interest on the
Debentures at maturity or on redemption, as the
case may be. The Corporation may make the deposit
only during the one-year period referred to in
paragraph (2) above.
However, the Corporation's obligations in Sections 2.03,
2.04, 2.05, 2.06, 2.07, 5.01, 8.07, 8.08 and 9.03
<PAGE> 38
shall survive until the Debentures are no longer outstanding.
Thereafter, the Corporation's obligations in Sections 8.07 and
9.03 shall survive.
After a deposit the Trustee upon request shall
acknowledge in writing the discharge of the Corporation's
obligations under this Indenture except for those surviving
obligations specified above.
In order to have money available on a payment date to pay
Principal or interest on the Debentures, the U.S. Government
Obligations shall be payable as to principal or interest on or
before such payment date in such amounts as will provide the
necessary money. The U.S. Government Obligations shall not be
callable at the issuer's option.
SECTION 9.02. APPLICATION OF TRUST MONEY.
The Trustee shall hold in trust money or U.S. Government
Obligations deposited with it pursuant to Section 9.01. It
shall apply the deposited money and the money from the U.S.
Government Obligations through the Paying Agent and in
accordance with this Indenture to the payment of Principal and
interest on the Debentures.
SECTION 9.03. REPAYMENT TO CORPORATION.
The Trustee and the Paying Agent shall promptly pay to
the Corporation upon request any excess money or securities
held by the Trustee as a result of the Corporation's making
payments to the Trustee and Paying Agent in excess of that
required under the provisions of this Indenture. The
obligation of the Trustee and the Paying Agent to pay such
excess money or securities to the Corporation shall survive
the payment and/or cancellation of all of the Debentures until
all such excess funds or securities have been so paid.
The Trustee and the Paying Agent shall pay to the
Corporation annually as of August 1 of each year any money
held by them for the payment of Principal or interest that
remains unclaimed for two years. After payment to the
Corporation, Debentureholders entitled to the money must look
to the Corporation for payment as general creditors unless an
applicable abandoned property law designates another person.
ARTICLE 10 - AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.01. WITHOUT CONSENT OF HOLDERS.
The Corporation and the Trustee may amend or supplement
this Indenture or the Debentures without notice to or consent
of any Debentureholder:
<PAGE> 39
(1) to cure any ambiguity, omission, defect or
inconsistency;
(2) to comply with Section 6.01;
(3) to provide for uncertificated Debentures in
addition to or in place of certificated Debentures;
or
(4) to make any change that does not materially
adversely affect the rights of any Debentureholder.
SECTION 10.02. WITH CONSENT OF HOLDERS.
The Corporation and the Trustee may amend or supplement
this Indenture or the Debentures with the written consent of
the Holders of at least a majority in principal amount of the
Debentures then outstanding. Without the consent of each
Debentureholder affected, however, an amendment under this
Section may not:
(1) reduce the amount of Debentures whose Holders must
consent to an amendment or waiver;
(2) reduce the rate of or change the time for payment
of interest on any Debenture;
(3) reduce the Principal of or change the maturity of
any Debenture;
(4) waive a Default in the payment of the Principal of
or interest on any Debenture;
(5) make any Debenture payable in money other than that
stated in the Debenture; or
(6) modify the provisions of Sections 7.04, 7.07 and
10.02 (second sentence).
After an amendment or supplement under this Section
becomes effective, the Corporation shall mail to
Debentureholders a notice briefly describing the amendment.
SECTION 10.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment to or supplement of this Indenture or the
Debentures shall be set forth in a supplemental indenture that
complies with the TIA as then in effect.
<PAGE> 40
SECTION 10.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes
effective, a consent to it by a Holder of a Debenture is a
continuing consent by the Holder and every subsequent Holder
of a Debenture or portion of a Debenture that evidences the
same debt as the consenting Holder's Debenture, even if
notation of the consent is not made on any Debenture.
However, any such Holder or subsequent Holder may revoke the
consent as to his Debenture or portion of a Debenture if the
Trustee receives the notice of revocation before the date the
amendment, supplement or waiver becomes effective.
SECTION 10.05. NOTATION ON OR EXCHANGE OF DEBENTURES.
The Trustee may place an appropriate notation about an
amendment, supplement or waiver on any Debenture thereafter
authenticated. The Corporation in exchange for all Debentures
may issue and the Trustee shall authenticate new Debentures
that reflect the amendment, supplement or waiver.
SECTION 10.06. TRUSTEE PROTECTED.
The Trustee need not sign any supplemental indenture that
adversely affects its rights.
ARTICLE 11 - MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies, or
conflicts with the duties imposed by operation of TIA Section
318(c), the imposed duties shall control.
SECTION 11.02. NOTICES.
Any notice or communication by the Corporation or the
Trustee to the other is duly given if in writing and when
delivered in person or mailed by first-class mail addressed
as follows:
if to the Corporation:
DELTA NATURAL GAS COMPANY, INC.
3617 Lexington Road
Winchester, Kentucky 40391
Attention: Treasurer
if to the Trustee:
THE FIFTH THIRD BANK
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Attention: Corporate Trust Administration
The Corporation or the Trustee by notice to the other may
designate additional or different addresses for subsequent
notices or communications.
<PAGE> 41
Any notice or communication to a Debentureholder shall
be mailed by first-class mail to his address shown on the
register kept by the Registrar. Failure to mail a notice or
communication to a Debentureholder or any defect in it shall
not affect its sufficiency with respect to other
Debentureholders.
If a notice or communication is mailed in the manner
provided above within the time prescribed, it is duly given,
whether or not the addressee receives it.
If the Corporation mails a notice or communication to
Debentureholders, it shall mail a copy to the Trustee and each
Agent at the same time.
All notices or communications shall be in writing, except
as set forth below.
In case by reason of the suspension of regular mail
service, or by reason of any other cause, it shall be
impossible to mail any notice required by this Indenture, then
such method of notification as shall be made with the approval
of the Trustee shall constitute a sufficient mailing of such
notice.
SECTION 11.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Debentureholders may communicate pursuant to TIA Section
312(b) with other Debentureholders with respect to their
rights under this Indenture or the Debentures. The
Corporation, the Trustee, the Registrar and anyone else shall
have the protection of TIA Section 312(c).
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS
PRECEDENT.
Upon any request or application by the Corporation to the
Trustee to take any action under this Indenture, the
Corporation shall furnish to the Trustee:
(1) an Officers' Certificate stating that, in the
opinion of the signers, all conditions precedent,
if any, provided for in this Indenture relating to
the proposed action have been complied with; and
(2) an Opinion of Counsel addressed to the Trustee and
upon which the Trustee may rely, stating that, in
the opinion of such counsel, all such conditions
precedent have been complied with.
<PAGE> 42
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each Officers' Certificate or Opinion of Counsel with
respect to compliance with a condition or covenant provided
for in this Indenture shall include:
(1) a statement that the persons making such Officers'
Certificate or Opinion of Counsel have read such
covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the
statements or opinions contained in such Officers'
Certificate or Opinion of Counsel are based;
(3) a statement that, in the opinion of each such
person, he has made such examination or
investigation as is necessary to enable him to
express an informed opinion as to whether or not
such covenant or condition has been complied with;
and
(4) a statement as to whether or not, in the opinion of
such persons, such condition or covenant has been
complied with.
SECTION 11.06. RULES BY TRUSTEE AND AGENT.
The Trustee may make reasonable rules for action by, or
a meeting of, Debentureholders. The Registrar or Paying Agent
may make reasonable rules and set reasonable requirements for
its functions.
SECTION 11.07. LEGAL HOLIDAYS.
A "LEGAL HOLIDAY" is a Saturday, a Sunday, or a day on
which banking institutions in Cincinnati, Ohio, are not
required to be open. If a payment date is a Legal Holiday at
a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period.
SECTION 11.08. NO RECOURSE AGAINST OTHERS.
No liability under the Debentures shall inure to any
director, officer, employee or stockholders, as such, of the
Corporation and each Debentureholder, by accepting the
Debenture, waives and releases all such liability.
SECTION 11.09. DUPLICATE ORIGINALS.
The parties may sign any number of copies of this
Indenture. One signed copy is enough to prove this Indenture.
<PAGE> 43
SECTION 11.10. GOVERNING LAW.
The laws of the Commonwealth of Kentucky shall govern
this Indenture and the Debentures.
SECTION 11.11. TABLE OF CONTENTS, HEADINGS, ETC.
The table of contents, cross-reference sheet and headings
of the Articles and Sections of this Indenture have been
inserted for convenience of reference only, are not to be
considered a part hereof, and shall in no way modify or
restrict any of the terms or provisions hereof.
SIGNATURES
Dated: --------------, 1996 DELTA NATURAL GAS COMPANY, INC.
("Corporation")
(SEAL) By:
- ---------------------------
Its: President and Chief
Executive Officer
Attest: -------------------------
Its: Corporate Secretary
Dated: --------------, 1996 THE FIFTH THIRD BANK
("Trustee")
(SEAL) By:
- ---------------------------
Its: Trust Officer
Attest: -------------------------
349\023\5522\058.IND
<PAGE> 44
FORM OF GLOBAL SECURITY
EXHIBIT A
THIS DEBENTURE IS A GLOBAL SECURITY WITHIN THE MEANING
OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN
THE NAME OF A DEPOSITORY OR NOMINEE OF A DEPOSITORY. THIS
GLOBAL SECURITY IS EXCHANGEABLE FOR DEBENTURES REGISTERED IN
THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE
ONLY IN LIMITED CIRCUMSTANCES HEREINAFTER DESCRIBED AND MAY
NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A
NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO
THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY.
Unless this certificate is presented by an authorized
representative of THE DEPOSITORY TRUST COMPANY, a New York
corporation ("DTC"), to Delta Natural Gas Company, Inc., a
Kentucky corporation, or its agent for registration of
transfer, exchange, or payment, and any certificate issued is
registered in the name of CEDE & CO. or in such other name as
is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is
requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
DELTA NATURAL GAS COMPANY, INC.
-----% DEBENTURE DUE AUGUST 1, 2026
$15,000,000
No.----------------------- CUSIP No. --------------
DELTA NATURAL GAS COMPANY, INC., a Kentucky corporation,
for value received, hereby promises to pay to CEDE & CO., or
registered assigns, the principal sum of FIFTEEN MILLION
DOLLARS on August 1, 2026, and to pay interest on said
principal sum at the rate of ----% per annum calculated on the
basis of a 360-day year of twelve 30-day months.
<PAGE> 45
1. INTEREST.
DELTA NATURAL GAS COMPANY, INC. ("CORPORATION"), a
Kentucky corporation, promises to pay interest on the
principal amount of this Debenture at the rate per annum shown
above. The Corporation will pay interest semi-annually on
February 1 and August 1 of each year (each such date being an
"INTEREST PAYMENT DATE"), commencing February 1, 1997.
Interest on the Debentures will accrue from the most recent
date to which interest has been paid, or, if no interest has
been paid previously, from the date of original issuance of
this Debenture; provided that, if there is no existing default
in the payment of interest, and if this Debenture is
authenticated between a "Record Date" (as hereinafter defined)
and the next succeeding Interest Payment Date, interest shall
accrue from the next Interest Payment Date. The term "RECORD
DATE" as used herein shall mean the January 15 or July 15, as
the case may be, immediately preceding each Interest Payment
Date.
2. METHOD OF PAYMENT.
The Corporation will pay interest on the Debentures
(except defaulted interest) to the Paying Agent who will then
pay such interest to the Persons who are registered Holders of
Debentures at the close of business on the Record Date next
preceding the Interest Payment Date. The Corporation shall
pay appropriate amounts to the Paying Agent in immediately
available funds at least one (1) business day preceding the
Interest Payment Date. The Paying Agent will pay interest to
such Holders on the next Interest Payment Date even though
Debentures are cancelled after the Record Date but on or
before the Interest Payment Date. Holders must surrender
Debentures to the Paying Agent to collect Principal payments;
except that, with respect to a Global Security, the Depository
need not surrender the Global Security to collect payments of
Principal other than the final payment of Principal of such
Global Security, provided that the Depository makes
appropriate endorsement on such Global Security of such
prepayments on the Table of Prepayments. The Paying Agent
will pay Principal and interest in money of the United States
that at the time of payment is legal tender for payment of
public and private debts. However, except as set forth in the
last sentence of this paragraph: (i) the Paying Agent may pay
Principal and interest by check payable in such money; and
(ii) the Paying Agent may mail an interest check to a Holder's
registered address. Any Holder of at least $1,000,000
aggregate principal amount of Debentures shall have the right
to receive payment of Principal of and interest on the
Debentures by wire transfer of funds, provided that such
Debentureholder requests such form of payment, accompanied by
appropriate wire transfer instructions, by written notice
<PAGE> 46
to the Trustee and the Paying Agent given not later than the
Record Date immediately preceding such payment.
3. PAYING AGENT AND REGISTRAR.
Initially, The Fifth Third Bank, 38 Fountain Square
Plaza, Cincinnati, Ohio 45263, will act as Paying Agent and
Registrar. The Corporation may change any Paying Agent,
Registrar or Co-Registrar without notice. The Corporation or
any of its Subsidiaries may act in any such capacity.
4. INDENTURE.
The Corporation issued the Debentures under an Indenture
dated as of July 1, 1996 ("INDENTURE"), between the
Corporation and the Trustee. The terms of the Debentures
include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S.C. Sections 77aaa-77bbbb) (the "ACT") as in effect on
the date of the Indenture. The Debentures are subject to all
such terms, and Debentureholders are referred to the Indenture
and the Act for a statement of such terms. Capitalized terms
used but not otherwise defined herein shall have the same
meanings such terms are given in the Indenture. The
Debentures are unsecured general obligations of the
Corporation limited to $15,000,000 in aggregate principal
amount.
5. REDEMPTION AT CORPORATION'S OPTION.
The Corporation may, at its option, at any time on or
after August 1, 2001, redeem all the Debentures or some of
them from time to time at the following Redemption Prices
(expressed in percentages of principal amount of the
Debentures) plus unpaid accrued interest to the Redemption
Date.
<TABLE>
If redeemed during the 12-month period beginning August
1:
<CAPTION>
YEAR PERCENTAGE
----------------------------------
<S> <C>
2001 105%
2002 104
2003 103
2004 102
2005 101
2006 until maturity 100
</TABLE>
Notice of redemption at the Corporation's option will be
mailed at least 30 days before the Redemption Date to each
Holder of Debentures to be redeemed at his registered address
as set forth in the register. Debentures in
<PAGE> 47
denominations larger than $1,000 may be redeemed in part but only
in integral multiples of $1,000. On and after the Redemption
Date (if there is no default in the payment of the Redemption
Price by the Corporation), interest ceases to accrue on
Debentures or portions thereof called for redemption. The
Corporation shall have the right, at its option, to withdraw
and rescind, in whole or in part, any such optional redemption
by the Corporation and any such notice of redemption given in
connection therewith at any time prior to the Redemption Date
by written notice of such withdrawal to the Trustee and to the
Debentureholders affected thereby.
6. REDEMPTION AT BENEFICIAL OWNER'S OPTION.
For purposes hereof, a "BENEFICIAL OWNER" means the
Person who has the right to sell, transfer or otherwise
dispose of an interest in this Debenture and the right to
receive the proceeds therefrom, as well as the interest and
Principal payable to the Holder hereof. In general, a
determination of beneficial ownership in this Debenture will
be subject to the rules, regulations and procedures governing
the Depository and institutions that have accounts with the
Depository or a nominee thereof ("PARTICIPANTS").
Participants may hold interests in this Debenture as
Beneficial Owners for their own accounts, or as nominees for
other persons.
Unless the Debentures have been declared due and payable
prior to their maturity by reason of an Event of Default, the
Representative (as hereinafter defined) of a deceased
Beneficial Owner has the right to request redemption of all or
part of his interest, expressed in integral multiples of
$1,000 principal amount, in this Debenture for payment prior
to its maturity, and the Corporation will redeem the same
subject to the limitations that the Corporation will not be
obligated to redeem, during the period from the original
issuance of the Debentures through and including August 1,
1997 (the "INITIAL PERIOD"), and during any twelve-month
period which ends on and includes each August 1 thereafter
(each such twelve-month period being hereinafter referred to
as a "SUBSEQUENT PERIOD"), (i) on behalf of a deceased
Beneficial Owner any interest in this Debenture which exceeds
an aggregate principal amount of $25,000 or (ii) interests in
this Debenture in an aggregate principal amount exceeding
$500,000. In the case of interests in this Debenture owned
by a deceased Beneficial Owner, a request for redemption may
be presented to the Trustee at any time and in any principal
amount. If the Corporation, although not obligated to do so,
chooses to redeem interests of any deceased Beneficial Owner
in this Debenture in the Initial Period or any Subsequent
Period in excess of the $25,000 limitation, such
<PAGE> 48
redemption, to the extent that it exceeds the $25,000 limitation
for any deceased Beneficial Owner, shall not be included in the
computation of the $500,000 limitation for such Initial Period
or such Subsequent Period, as the case may be, or for any
succeeding Subsequent Period.
Subject to the $25,000 and $500,000 limitations, the
Corporation will, upon the death of any Beneficial Owner,
redeem the interest of such Beneficial Owner in this Debenture
within 60 days following receipt by the Trustee of a
Redemption Request (as herein defined) from such Beneficial
Owner's personal representative, or surviving joint tenant(s),
tenant(s) by the entirety or tenant(s) in common, or other
Persons entitled hereunder to effect such a Redemption Request
(each, a "REPRESENTATIVE"). If Redemption Requests exceed the
aggregate principal amount of interests in Debentures required
to be redeemed during the Initial Period or during any
Subsequent Period, then such excess Redemption Requests will
be applied to successive Subsequent Periods, regardless of the
number of Subsequent Periods required to redeem such
interests.
A request for redemption of an interest in this Debenture
may be made by delivering a request to the Depository, in the
case of a Participant which is the Beneficial Owner of such
interest, or to the Participant through whom the Beneficial
Owner owns such interest, in form satisfactory to the
Participant, together with evidence of the death of the
Beneficial Owner and evidence of the authority of the
Representative satisfactory to the Participant and Trustee.
A Representative of a deceased Beneficial Owner may make the
request for redemption and shall submit such other evidence of
the right to such redemption as the Participant or Trustee
shall require. The request shall specify the principal amount
of the interest in this Debenture to be redeemed. A request
for redemption in the form satisfactory to the Participant and
accompanied by the documents relevant to the request as above
provided, together with a certification by the Participant
that it holds the interest on behalf of the deceased
Beneficial Owner with respect to whom the request for
redemption is being made (a "REDEMPTION REQUEST"), shall be
provided to the Depository by a Participant and the Depository
will forward the request to the Trustee. Redemption Requests
shall be in form satisfactory to the Trustee.
The price to be paid by the Corporation for interests in
the Debentures to be redeemed pursuant to a Redemption Request
from a deceased Beneficial Owner's Representative is 100% of
the principal amount thereof plus accrued but unpaid interest
to the date of payment. Subject to arrangements with the
Depository, payment for interests in the Debentures which are
to be redeemed shall be made to the Depository
<PAGE> 49
upon presentation of Debentures to the Trustee for redemption in
the aggregate principal amount specified in the Redemption
Requests submitted to the Trustee by the Depository which are
to be fulfilled in connection with such payment. Any
acquisition of Debentures by the Corporation or its
Subsidiaries other than by redemption at the option of any
Representative of a deceased Beneficial Owner pursuant to this
paragraph 6 shall not be included in the computation of either
the $25,000 or the $500,000 limitation for the Initial Period
or for any Subsequent Period.
For purposes of this paragraph 6, an interest in a
Debenture held in tenancy by the entirety, joint tenancy or
by tenants in common will be deemed to be held by a single
Beneficial Owner and the death of a tenant by the entirety,
joint tenant or tenant in common will be deemed the death of
a Beneficial Owner. The death of a person, who, during his
lifetime, was entitled to substantially all of the rights of
a Beneficial Owner of an interest in this Debenture will be
deemed the death of the Beneficial Owner, regardless of the
recordation of such interest on the records of the
Participant, if such rights can be established to the
satisfaction of the Participant and the Trustee. Such
interests shall be deemed to exist in typical cases of street
name or nominee ownership, ownership under the Uniform Gifts
to Minors Act or the Uniform Transfers to Minors Act,
community property or other joint ownership arrangements
between a husband and wife (including individual retirement
accounts or Keogh [H.R. 10] plans maintained solely by or for
the decedent or by or for the decedent and his spouse), and
trust and certain other arrangements where one Person has
substantially all of the rights of a Beneficial Owner during
his lifetime. Beneficial interests shall include the power to
sell, transfer or otherwise dispose of an interest in this
Debenture and the right to receive the proceeds therefrom, as
well as interest and Principal payable with respect thereto.
In the case of any Redemption Request which is presented
pursuant to this paragraph 6 and which has not been fulfilled
at the time the Corporation gives notice of its election to
redeem Debentures pursuant to paragraph 5, such interest or
portion thereof shall not be subject to redemption pursuant to
paragraph 5 but shall remain subject to redemption pursuant
to this paragraph 6.
Subject to the provisions of the immediately preceding
sentence, any Redemption Request may be withdrawn by the
Person(s) presenting the same upon delivery of a written
request for such withdrawal given by the Depository to the
Trustee prior to the issuance of a check in payment of such
Redemption Request.
<PAGE> 50
7. DENOMINATIONS, TRANSFER, EXCHANGE.
The Debentures are in registered form without coupons in
denominations of $1,000 and integral multiples thereof. The
transfer of Debentures shall be registered and Debentures may
be exchanged as provided in the Indenture. The Registrar may
require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and
fees required by law or permitted by the Indenture. The
Registrar need not exchange or register the transfer of any
Debenture or portion of a Debenture selected for redemption.
Also, it need not exchange or register the transfer of any
Debentures during that period of time subsequent to any Record
Date and prior to the next succeeding Interest Payment Date.
8. PERSONS DEEMED OWNERS.
The registered Holder of a Debenture may be treated as
its owner for all purposes.
9. AMENDMENTS, SUPPLEMENTS AND WAIVERS.
Subject to certain exceptions, the Indenture or the
Debentures may be amended or supplemented, and any existing
Default may be waived, with the consent of Holders of a
majority in principal amount of the Debentures then
outstanding. Without the consent of any Debentureholder, the
Indenture or the Debentures may be amended or supplemented,
for among other reasons, to cure any ambiguity, defect or
inconsistency, to provide for assumption of Corporation
obligations to Debentureholders or to make any change that
does not materially adversely affect the rights of any
Debentureholder.
10. DEFAULTS AND REMEDIES.
An Event of Default is: default for 30 days in payment
of interest on the Debentures; default in payment of Principal
of the Debentures; failure by the Corporation for 60 days
after notice to it to comply with any of its other agreements
in the Indenture or the Debentures; default in the payment of
Indebtedness having an outstanding principal balance of
$100,000 or more under certain circumstances; and certain
events of bankruptcy or insolvency. If an Event of Default
occurs and is continuing, the Trustee or the Holders of at
least 25% in principal amount of the Debentures may declare
all the Debentures to be due and payable immediately.
Debentureholders may not enforce the Indenture or the
Debentures except as provided in the Indenture. The Trustee
may require indemnity satisfactory to it before it enforces
the Indenture or the Debentures. Subject to certain
limitations, Holders of a majority in principal amount of the
Debentures may direct the Trustee in its exercise of any trust
or power. The Trustee may withhold
<PAGE> 51
from Debentureholders notice of any continuing Default (except a
default in payment of principal or interest) if it determines
that withholding notice is in their interests. The Corporation
must furnish an annual Officers' Certificate to the Trustee.
The Trustee shall not be charged with knowledge of any
Event of Default as defined in the Indenture, unless written
notice thereof shall have been given to a Trust Officer of the
Trustee at the Corporate Trust Office by the Corporation, the
Paying Agent, the Holder of a Debenture or an agent of such
Holder.
11. TRUSTEE DEALINGS WITH CORPORATION.
The Fifth Third Bank, the Trustee under the Indenture,
in its individual or any other capacity, may make loans to,
accept deposits from, and perform services for the Corporation
or its Affiliates, and may otherwise deal with the Corporation
or its Affiliates, as if it were not Trustee, subject to any
limitations imposed by the Act.
<PAGE> 52
12. NO RECOURSE AGAINST OTHERS.
A director, officer, employee or stockholder, as such,
of the Corporation shall not have any liability for any
obligations of the Corporation under the Debentures or the
Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. Each
Debentureholder by accepting a Debenture waives and releases
all such liability. The waiver and release are part of the
consideration for the issue of the Debentures.
13. AUTHENTICATION.
This Debenture shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating
agent.
14. ABBREVIATIONS.
Customary abbreviations may be used in the name of a
Debentureholder or an assignee, such as TEN COM ( = tenants
in common), TEN ENT ( = tenants by the entireties), JT TEN (
= joint tenants with right of survivorship and not as tenants
in common), CUST ( = Custodian), and U/G/M/A ( = Uniform Gifts
to Minors Act).
Dated:
Authenticated:
THE FIFTH THIRD BANK, DELTA NATURAL GAS
AS TRUSTEE COMPANY, INC.
By:-------------------------- By:---------------------------
Its: Authorized Signer Its: President
By:---------------------------
Its: Corporate Secretary
(SEAL)
-------------------------
The Corporation will furnish to any Debentureholder upon
written request and without charge a copy of the Indenture,
which has in it the text of this Debenture in larger type.
Requests may be made to: Treasurer, Delta Natural Gas Company,
Inc., 3617 Lexington Road, Winchester, Kentucky 40391.
-------------------------
<PAGE> 53
TABLE OF PREPAYMENTS
Upon all partial payments of principal of the within
Debenture, this Debenture shall be surrendered to the Trustee
for issuance of a new Debenture unless the registered Holder
hereof shall make appropriate endorsements on the table below
indicating the amount of principal so prepaid, prior to any
transfer to this Debenture. Any purchaser or transferee of
this Debenture shall verify with the Trustee the principal
balance outstanding prior to the purchase or transfer hereof.
PRINCIPAL REMAINING UNPAID
DATE AMOUNT PAID PRINCIPAL BALANCE SIGNATURE
- ---------------------------------------------------------------------------
<PAGE> 54
ASSIGNMENT FORM
I/We assign and transfer this Debenture to
[------------------]
(Insert assignee's social
security or tax I.D. number)
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- -----------------------------------------------------------------
(Print or type name, address and zip code of assignee)
and irrevocably appoint -----------------------------------------
- ---------------------------------------- agent to transfer this
Debenture on the books of the Corporation. The agent may
substitute another to act for him.
Date: ------------------- Signature: ------------------------
(Sign exactly as your
name appears on this
Debenture)
Signature Guarantee
- -------------------------
<PAGE> 55
FORM OF DEBENTURE
EXHIBIT B
(Face of Debenture)
DELTA NATURAL GAS COMPANY, INC.
-----% DEBENTURE DUE 2026
No. ---------------------- $-------------------------
DELTA NATURAL GAS COMPANY, INC., a Kentucky corporation,
for value received, hereby promises to pay to
- ------------------------, or registered assigns, the principal
sum of----------------------- DOLLARS on August 1, 2026, and
to pay interest on said principal sum at the rate of -----%
per annum calculated on the basis of a 360-day year of twelve
30-day months.
INTEREST PAYMENT DATES: February 1 and August 1
RECORD DATES: January 15 and July 15
Dated:
Authenticated:
THE FIFTH THIRD BANK, DELTA NATURAL GAS
AS TRUSTEE COMPANY, INC.
By:-------------------------- By:---------------------------
Its: Authorized Signer Its: President
By:---------------------------
Its: Corporate Secretary
(SEAL)
<PAGE> 56
(Back of Debenture)
DELTA NATURAL GAS COMPANY, INC.
-----% DEBENTURE DUE AUGUST 1, 2026
1. INTEREST.
DELTA NATURAL GAS COMPANY, INC. ("CORPORATION"), a
Kentucky corporation, promises to pay interest on the
principal amount of this Debenture at the rate per annum shown
above. The Corporation will pay interest semi-annually on
February 1 and August 1 of each year (each such date being an
"Interest Payment Date"), commencing February 1, 1997.
Interest on the Debentures will accrue from the most recent
date to which interest has been paid, or, if no interest has
been paid previously, from the date of original issuance of
this Debenture; provided that, if there is no existing default
in the payment of interest, and if this Debenture is
authenticated between a Record Date referred to on the face
hereof and the next succeeding Interest Payment Date, interest
shall accrue from the next Interest Payment Date.
2. METHOD OF PAYMENT.
The Corporation will pay interest on the Debentures
(except defaulted interest) to the Paying Agent who will then
pay such interest to the Persons who are registered Holders of
Debentures at the close of business on the Record Date next
preceding the Interest Payment Date. The Corporation shall
pay appropriate amounts to the Paying Agent in immediately
available funds at least one (1) business day preceding the
Interest Payment Date. The Paying Agent will pay interest to
such Holders on the next Interest Payment Date even though
Debentures are cancelled after the Record Date but on or
before the Interest Payment Date. Holders must surrender
Debentures to the Paying Agent to collect Principal payments.
The Paying Agent will pay Principal and interest in money of
the United States that at the time of payment is legal tender
for payment of public and private debts. However, except as
set forth in the last sentence of this paragraph: (i) the
Paying Agent may pay Principal and interest by check payable
in such money; and (ii) the Paying Agent may mail an interest
check to a Holder's registered address. Any Holder of at
least $1,000,000 aggregate principal amount of Debentures
shall have the right to receive payment of Principal of and
interest on the Debentures by wire transfer of funds, provided
that such Debentureholder requests such form of payment,
accompanied by appropriate wire transfer instructions, by
written notice to the Trustee and the
<PAGE> 57
Paying Agent given not later than the Record Date immediately
preceding such payment.
3. PAYING AGENT AND REGISTRAR.
Initially, The Fifth Third Bank, 38 Fountain Square
Plaza, Cincinnati, Ohio 45263, will act as Paying Agent and
Registrar. The Corporation may change any Paying Agent,
Registrar or Co-Registrar without notice. The Corporation or
any of its Subsidiaries may act in any such capacity.
4. INDENTURE.
The Corporation issued the Debentures under an Indenture
dated as of July 1, 1996 ("INDENTURE"), between the
Corporation and the Trustee. The terms of the Debentures
include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S.C. Sections 77aaa-77bbbb) (the "ACT") as in effect on
the date of the Indenture. The Debentures are subject to all
such terms, and Debentureholders are referred to the Indenture
and the Act for a statement of such terms. Capitalized terms
used but not otherwise defined herein shall have the same
meanings such terms are given in the Indenture. The
Debentures are unsecured general obligations of the
Corporation limited to $15,000,000 in aggregate principal
amount.
5. REDEMPTION AT CORPORATION'S OPTION.
The Corporation may, at its option, at any time on or
after August 1, 2001, redeem all the Debentures or some of
them from time to time at the following Redemption Prices
(expressed in percentages of principal amount of the
Debentures) plus unpaid accrued interest to the Redemption
Date.
<TABLE>
If redeemed during the 12-month period beginning August
1:
<CAPTION>
YEAR PERCENTAGE
- ----------------------------------------------------------
<S> <C>
2001 105%
2002 104
2003 103
2004 102
2005 101
2006 until maturity 100
</TABLE>
Notice of redemption at the Corporation's option will be
mailed at least 30 days before the Redemption Date to each
Holder of Debentures to be redeemed at his registered address
as set forth in the register. Debentures in
<PAGE> 58
denominations larger than $1,000 may be redeemed in part but only
in integral multiples of $1,000. On and after the Redemption
Date (if there is no default in the payment of the Redemption
Price by the Corporation), interest ceases to accrue on
Debentures or portions thereof called for redemption. The
Corporation shall have the right, at its option, to withdraw
and rescind, in whole or in part, any such optional redemption
by the Corporation and any such notice of redemption given in
connection therewith at any time prior to the Redemption Date
by written notice of such withdrawal to the Trustee and to the
Debentureholders affected thereby.
6. REDEMPTION AT HOLDER'S OPTION.
Unless the Debentures have been declared due and payable
prior to their maturity by reason of an Event of Default, the
Representative (as hereinafter defined) of a deceased
Debentureholder has the right to present Debentures for
payment prior to their maturity, and the Corporation will
redeem the same subject to the limitations that the
Corporation will not be obligated to redeem, during the period
from the original issuance of the Debentures through and
including August 1, 1997 (the "INITIAL PERIOD"), and during
any twelve-month period which ends on and includes each August
1 thereafter (each such twelve-month period being hereinafter
referred to as a "SUBSEQUENT PERIOD"), (i) Debentures
presented on behalf of a deceased Debentureholder exceeding an
aggregate principal amount of $25,000 or (ii) Debentures in an
aggregate principal amount exceeding $500,000. In the case of
Debentures owned by a deceased Holder, Debentures may be
presented to the Trustee for redemption at any time and in any
principal amount. If the Corporation, although not obligated
to do so, chooses to redeem Debentures of any deceased
Debentureholder in any such period in excess of the $25,000
limitation, such redemption, to the extent that it exceeds the
$25,000 limitation for any deceased Debentureholder, shall not
be included in the computation of the $500,000 limitation for
such Initial Period or such Subsequent Period, as the case may
be, or for any succeeding Subsequent Period.
Subject to the $25,000 and $500,000 limitations, the
Corporation will, upon the death of any Debentureholder,
redeem Debentures within 60 days following receipt by the
Trustee of a request therefor from such Debentureholder's
personal representative, or surviving joint tenant(s),
tenant(s) by the entirety or tenant(s) in common, or other
Persons entitled hereunder to request such redemption (each,
a "REPRESENTATIVE"). If Debentures presented for redemption
exceed the aggregate principal amount of Debentures required
to be redeemed during the Initial Period or during any
Subsequent Period, then such excess Debentures presented for
<PAGE> 59
redemption will be applied to successive Subsequent Periods,
regardless of the number of Subsequent Periods required to
redeem such Debentures.
Debentures may be presented for redemption by delivering
to the Trustee: (i) a written request for redemption, in form
satisfactory to the Trustee, signed by the Representative of
the deceased Debentureholder, (ii) the Debenture(s) to be
redeemed and (iii) appropriate evidence of death of the
Debentureholder and appropriate evidence of the authority of
the Representative of the deceased Debentureholder. No
particular forms of request for redemption or authority to
request redemption are necessary. The price to be paid by the
Corporation for all Debentures presented to it pursuant to the
provisions described in this paragraph 6 is 100% of the
principal amount thereof plus accrued but unpaid interest to
the date of payment. Any acquisition of Debentures by the
Corporation or its Subsidiaries other than by redemption at
the option of any Representative of a deceased Debentureholder
pursuant to this paragraph 6 shall not be included in the
computation of either the $25,000 or the $500,000 limitation
for the Initial Period or for any Subsequent Period.
For purposes of this paragraph 6, a Debenture held in
tenancy by the entirety, joint tenancy or by tenants in common
will be deemed to be held by a single Debentureholder and the
death of a tenant by the entirety, joint tenant or tenant in
common will be deemed the death of a Debentureholder. The
death of a person, who, during his lifetime, was entitled to
substantially all of the beneficial interests of ownership of
a Debenture will be deemed the death of the Debentureholder,
regardless of the registered Debentureholder, if such
beneficial interest can be established to the satisfaction of
the Trustee. Such beneficial interest shall be deemed to
exist in typical cases of street name or nominee ownership,
ownership under the Uniform Gifts to Minors Act or the Uniform
Transfers to Minors Act, community property or other joint
ownership arrangements between a husband and wife (including
individual retirement accounts or Keogh [H.R. 10] plans
maintained solely by or for the decedent or by or for the
decedent and his spouse), and trust and certain other
arrangements where one person has substantially all of the
beneficial ownership interests in the Debenture during his
lifetime. Beneficial interests shall include the power to
sell, transfer or otherwise dispose of a Debenture and the
right to receive the proceeds therefrom, as well as interest
and Principal payable with respect thereto.
In the case of Debentures held by Qualified Institutions
on behalf of beneficial owners, the $25,000 limitation shall
apply to each such beneficial owner and the death of such
beneficial owner shall entitle a Qualified
<PAGE> 60
Institution to seek redemption of such Debentures as if the
deceased beneficial owner were the record Debentureholder. Such
Qualified Institutions, in their request for redemption on behalf
of such beneficial owners, must submit evidence, satisfactory to
the Trustee, that they hold Debentures on behalf of such
beneficial owners and must certify that the aggregate requests
for redemption tendered by such Qualified Institution on
behalf of each such beneficial owner in the Initial Period or
any Subsequent Period does not exceed $25,000. In addition,
any request for redemption made by a Qualified Institution on
behalf of a beneficial owner must be delivered to the Trustee
by registered mail, return receipt requested.
In the case of any Debenture which is presented for
redemption in part only, upon such redemption the Corporation
shall execute and the Trustee shall authenticate and deliver
to or on the order of the Holder of such Debenture, without
service charge to the Debentureholder, a new Debenture or
Debentures, of any authorized denomination or denominations as
requested by such Holder, in aggregate principal amount equal
to the unredeemed portion of the principal of the Debenture so
presented.
In the case of any Debenture or portion thereof which is
presented for redemption pursuant to this paragraph 6 and
which has not been redeemed at the time the Corporation gives
notice of its election to redeem Debentures pursuant to
paragraph 5, such Debenture or portion thereof shall not be
subject to redemption pursuant to paragraph 5 but shall remain
subject to redemption pursuant to this paragraph 6.
Subject to the provisions of the immediately preceding
sentence, any Debentures presented for redemption at the
option of the Representative of a deceased Debentureholder may
be withdrawn by the Person(s) presenting the same upon
delivery of a written request for such withdrawal given to the
Trustee prior to the issuance of a check in payment of such
Debentures presented by reason of the death of a
Debentureholder.
7. DENOMINATIONS, TRANSFER, EXCHANGE.
The Debentures are in registered form without coupons in
denominations of $1,000 and integral multiples thereof. The
transfer of Debentures shall be registered and Debentures may
be exchanged as provided in the Indenture. The Registrar may
require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and
fees required by law or permitted by the Indenture. The
Registrar need not exchange or register the transfer of any
Debenture or portion of a Debenture selected for redemption.
Also, it need not exchange or register the transfer of any
Debentures during that period
<PAGE> 61
of time subsequent to any Record Date and prior to the next
succeeding Interest Payment Date.
8. PERSONS DEEMED OWNERS.
The registered Holder of a Debenture may be treated as
its owner for all purposes.
9. AMENDMENTS, SUPPLEMENTS AND WAIVERS.
Subject to certain exceptions, the Indenture or the
Debentures may be amended or supplemented, and any existing
Default may be waived, with the consent of Holders of a
majority in principal amount of the Debentures then
outstanding. Without the consent of any Debentureholder, the
Indenture or the Debentures may be amended or supplemented,
for among other reasons, to cure any ambiguity, defect or
inconsistency, to provide for assumption of Corporation
obligations to Debentureholders or to make any change that
does not materially adversely affect the rights of any
Debentureholder.
10. DEFAULTS AND REMEDIES.
An Event of Default is: default for 30 days in payment
of interest on the Debentures; default in payment of Principal
of the Debentures; failure by the Corporation for 60 days
after notice to it to comply with any of its other agreements
in the Indenture or the Debentures; default in the payment of
Indebtedness having an outstanding principal balance of
$100,000 or more under certain circumstances; and certain
events of bankruptcy or insolvency. If an Event of Default
occurs and is continuing, the Trustee or the Holders of at
least 25% in principal amount of the Debentures may declare
all the Debentures to be due and payable immediately.
Debentureholders may not enforce the Indenture or the
Debentures except as provided in the Indenture. The Trustee
may require indemnity satisfactory to it before it enforces
the Indenture or the Debentures. Subject to certain
limitations, Holders of a majority in principal amount of the
Debentures may direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Debentureholders
notice of any continuing Default (except a default in payment
of principal or interest) if it determines that withholding
notice is in their interests. The Corporation must furnish an
annual Officers' Certificate to the Trustee.
The Trustee shall not be charged with knowledge of any
Event of Default as defined in the Indenture, unless written
notice thereof shall have been given to a Trust Officer of the
Trustee at the Corporate Trust Office by the Corporation, the
Paying Agent, the Holder of a Debenture or an agent of such
Holder.
<PAGE> 62
11. TRUSTEE DEALINGS WITH CORPORATION.
The Fifth Third Bank, the Trustee under the Indenture,
in its individual or any other capacity, may make loans to,
accept deposits from, and perform services for the Corporation
or its Affiliates, and may otherwise deal with the Corporation
or its Affiliates, as if it were not Trustee, subject to any
limitations imposed by the Act.
12. NO RECOURSE AGAINST OTHERS.
A director, officer, employee or stockholder, as such,
of the Corporation shall not have any liability for any
obligations of the Corporation under the Debentures or the
Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. Each
Debentureholder by accepting a Debenture waives and releases
all such liability. The waiver and release are part of the
consideration for the issue of the Debentures.
13. AUTHENTICATION.
This Debenture shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating
agent.
14. ABBREVIATIONS.
Customary abbreviations may be used in the name of a
Debentureholder or an assignee, such as TEN COM ( = tenants
in common), TEN ENT ( = tenants by the entireties), JT TEN (
= joint tenants with right of survivorship and not as tenants
in common), CUST ( = Custodian), and U/G/M/A ( = Uniform Gifts
to Minors Act).
The Corporation will furnish to any Debentureholder upon
written request and without charge a copy of the Indenture,
which has in it the text of this Debenture in larger type.
Requests may be made to: Treasurer, Delta Natural Gas
Company, Inc., 3617 Lexington Road, Winchester, Kentucky
40391.
<PAGE> 63
ASSIGNMENT FORM
I/We assign and transfer this Debenture to
[------------------]
(Insert assignee's social
security or tax I.D. number)
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- -----------------------------------------------------------------
(Print or type name, address and zip code of assignee)
and irrevocably appoint ----------------------------
- ---------------------------------------- agent to transfer
this Debenture on the books of the Corporation. The agent may
substitute another to act for him.
Date: ------------------- Signature: ------------------------
(Sign exactly as your
name appears on the
other side of this
Debenture)
Signature Guarantee
- -------------------------
349\023\5522\060.EXH
<PAGE> 1
June 20, 1996
Page 1
STOLL, KEENON & PARK, LLP
201 East Main Street, Suite 1000
Lexington, Kentucky 40507-1380
(606) 231-3000
FAX (606) 253-1093
June 20, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
RE: Delta Natural Gas Company, Inc.
Registration Statement
Dear Sir or Madam:
We are acting as counsel to Delta Natural Gas Company,
Inc. ("Delta"), a Kentucky corporation, in connection with the
issuance and sale by Delta of 400,000 shares of $1 par value
Common Stock (the "Common Stock") and $15,000,000 in
debentures due 2026 (the "Debentures"). A Registration
Statement on Form S-2 with respect to the Common Stock and the
Debentures has been filed by Delta with the Securities and
Exchange Commission.
In our capacity as such counsel to Delta, we have
familiarized ourselves with the corporate affairs of Delta and
are familiar with the actions taken by Delta in connection
with the aforementioned issuance and sale. We have examined
the original or certified copies of all such records of Delta
and all such agreements, certificates of public officials,
certificates of officers or representatives of Delta and
others and such other documents as we deem relevant and
necessary as a basis for the opinions hereinafter expressed.
In such examination we have assumed the genuineness of all
signatures on original documents and the conformity to
original documents of all copies submitted to us as conformed
or photostatic copies. As to various questions of fact
material to such opinions, we have relied upon statements or
certificates of officials and representatives of Delta and
others.
<PAGE> 2
June 20, 1996
Page 2
Based upon the foregoing, it is our opinion that:
1. Delta is a corporation duly organized and validly
existing under the laws of the State of Kentucky.
2. The Common Stock and the Debentures have been
legally authorized by Delta and will, when sold, be legally
issued, fully paid and non-assessable, and the Debentures will
be binding obligations of Delta.
We hereby consent to the filing of this opinion as an
Exhibit to the Registration Statement. We also hereby consent
to the use of our name under "Legal Opinions" in the
Prospectus constituting part of the Registration Statement.
Very truly yours,
/s/ STOLL, KEENON & PARK, LLP
STOLL, KEENON & PARK, LLP
/dgr
<PAGE> 1
EXHIBIT 12
<TABLE>
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
COMPUTATION OF THE CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
<CAPTION>
FOR THE
TWELVE
MONTHS
ENDED FOR THE FISCAL YEARS ENDED JUNE 30,
MARCH 31, ----------------------------------------------------------------------
1996 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Net Income............................ $2,680,551 $1,917,735 $2,671,001 $2,620,664 $2,453,813 $1,162,582
Provisions for income taxes........... 1,503,200 1,042,400 1,509,600 1,543,700 1,441,600 560,500
Fixed charges......................... 2,589,151 2,387,935 2,214,659 2,210,833 2,166,597 1,968,390
---------- ---------- ---------- ---------- ---------- ----------
Total............................. $6,772,902 $5,348,070 $6,395,260 $6,375,197 $6,062,010 $3,691,472
========== ========== ========== ========== ========== ==========
Fixed Charges:
Interest on debt...................... $2,500,351 $2,299,135 2,123,255 $2,134,306 $2,091,117 $1,914,894
Amortization of debt expense.......... 88,800 88,800 91,404 76,527 75,480 53,496
---------- ---------- ---------- ---------- ---------- ----------
$2,589,151 $2,387,935 $2,214,659 $2,210,833 $2,166,597 $1,968,390
========== ========== ========== ========== ========== ==========
Ratio of Earnings to Fixed Charges:
Actual................................ 2.62x 2.24x 2.89x 2.88x 2.80x 1.88x
Pro Forma:
Actual fixed charges.................. $2,589,151
Pro forma interest on debt
to be sold, assuming a
rate of 8%.......................... 1,200,000
Actual interest on debt to be
retired............................. (603,078)
Pro forma fixed charges............... 3,186,073
Pro forma ratio of earnings to fixed
charges............................. 2.12x
</TABLE>
<PAGE> 1
EXHIBIT 23(A)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
Registration Statement.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Louisville, Kentucky
June 19, 1996
<PAGE> 1
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Statement of Eligibility Under the
Trust Indenture Act of 1939 of a Corporation
Designated to Act as Trustee
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A
TRUSTEE PURSUANT TO SECTION 305(B)(2) ------
THE FIFTH THIRD BANK
- -------------------------------------------------------------------------
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
OHIO
- -------------------------------------------------------------------------
(JURISDICTION OF INCORPORATION OR ORGANIZATION IF NOT A
NATIONAL BANK)
31-0854433
- -------------------------------------------------------------------------
(I.R.S. EMPLOYER IDENTIFICATION NO.)
38 FOUNTAIN SQUARE PLAZA, CINCINNATI, OHIO
- -------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
45263
- -------------------------------------------------------------------------
(ZIP CODE)
Paul L. Reynolds, 5th and Walnut Streets
CINCINNATI, OHIO, 45263 (513) 579-5300
- -------------------------------------------------------------------------
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
DELTA NATURAL GAS COMPANY, INC.
- -------------------------------------------------------------------------
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
KENTUCKY
- -------------------------------------------------------------------------
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
61-0458329
- -------------------------------------------------------------------------
(I.R.S. EMPLOYER IDENTIFICATION NO.)
3617 LEXINGTON ROAD, WINCHESTER, KENTUCKY
- -------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
40391
- -------------------------------------------------------------------------
(ZIP CODE)
DEBENTURES DUE 2026
- -------------------------------------------------------------------------
(TITLE OF THE INDENTURE SECURITIES)
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE -
(a) Name and address of each examining or supervising authority to
which it is subject.
Ohio Superintendent of Banks
State Office Tower
30 E. Broad Street
Columbus, Ohio 43215
Federal Reserve Bank of Cleveland
East Sixth Street and Superior Avenue
Cleveland, Ohio 44101
Federal Deposit Insurance Corporation,
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
ITEM 3. VOTING SECURITIES OF THE TRUSTEE.<F1>
FURNISH THE FOLLOWING INFORMATION AS TO EACH CLASS OF VOTING
SECURITIES OF THE TRUSTEE:
[FN]
- ------------------------
<F1> All of the outstanding voting securities of the trustee
are owned by Fifth Third Bancorp, an Ohio corporation. Answers
to the following items herein concerning voting securities of the
trustee owned by third parties relate to outstanding voting
securities of Fifth Third Bancorp. Answers to all other items of
this statement of eligibility on Form T-1 relate to the Trustee
only, and do not contain information regarding Fifth Third
Bancorp or other subsidiaries of Fifth Third Bancorp.
<PAGE> 3
AS OF MAY 31, 1996
COL. A. COL. B
TITLE OF CLASS AMOUNT OUTSTANDING
-------------- ------------------
[Capital Stock, par value 32,000]
$2,200.00 per share
ITEM 4. TRUSTEESHIPS UNDER OTHER INDENTURES.
IF THE TRUSTEE IS A TRUSTEE UNDER ANOTHER INDENTURE UNDER WHICH
ANY OTHER SECURITIES, OR CERTIFICATES OF INTEREST OR PARTICIPATION IN
ANY OTHER SECURITIES, OF THE OBLIGOR ARE OUTSTANDING, FURNISH THE
FOLLOWING INFORMATION:
(A) TITLE OF THE SECURITIES OUTSTANDING UNDER EACH SUCH OTHER
INDENTURE.
(1) None.
(B) A BRIEF STATEMENT OF THE FACTS RELIED UPON AS A BASIS FOR THE
CLAIM THAT NO CONFLICTING INTEREST WITHIN THE MEANING OF
SECTION 310(B)(1) OF THE ACT ARISES AS A RESULT OF THE
TRUSTEESHIP UNDER ANY SUCH OTHER INDENTURE, INCLUDING A
STATEMENT AS TO HOW THE INDENTURE SECURITIES WILL RANK AS
COMPARED WITH THE SECURITIES ISSUED UNDER SUCH OTHER INDENTURE.
(1) None, so far as is known to the trustee.
ITEM 5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE
OBLIGOR OR UNDERWRITERS.
IF THE TRUSTEE OR ANY OF THE DIRECTORS OR EXECUTIVE OFFICERS
OF THE TRUSTEE IS A DIRECTOR, OFFICER, PARTNER, EMPLOYEE, APPOINTEE,
OR REPRESENTATIVE OF THE OBLIGOR OR OF ANY UNDERWRITER FOR THE
OBLIGOR, IDENTIFY EACH SUCH PERSON HAVING ANY SUCH CONNECTION AND
STATE THE NATURE OF EACH SUCH CONNECTION.
None.
ITEM 6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS
OFFICIALS.
FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES
OF THE TRUSTEE OWNED BENEFICIALLY BY THE OBLIGOR AND EACH DIRECTOR,
PARTNER AND EXECUTIVE OFFICER OF THE OBLIGOR.
<PAGE> 4
AS OF MAY 31, 1996
COL. D
PERCENTAGE OF VOTING
COL. A COL. B COL. C. SECURITIES REPRESENTED
NAME OF TITLE AMOUNT OWNED BY AMOUNT GIVEN IN
OWNER OF CLASS BENEFICIALLY COL. C
- ------- -------- ------------ ----------------------
None, so far as is known to the trustee.
ITEM 7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR
OFFICIALS.
FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES
OF THE TRUSTEE OWNED BENEFICIALLY BY EACH UNDERWRITER FOR THE OBLIGOR
AND EACH DIRECTOR, PARTNER, AND EXECUTIVE OFFICER OF EACH SUCH
UNDERWRITER.
AS OF MAY 31, 1996
COL. D
PERCENTAGE OF VOTING
COL. A COL. B COL. C. SECURITIES REPRESENTED
NAME OF TITLE AMOUNT OWNED BY AMOUNT GIVEN IN
OWNER OF CLASS BENEFICIALLY COL. C
- ------- -------- ------------ ----------------------
None, so far as is known to the trustee.
Item 8. Securities of the obligor owned or held by the trustee.
FURNISH THE FOLLOWING INFORMATION AS TO SECURITIES OF THE
OBLIGOR OWNED BENEFICIALLY OR HELD AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT BY THE TRUSTEE.
AS OF MAY 31, 1996
COL. C
COL. B AMOUNT OWNED
WHETHER THE BENEFICIALLY COL. D
SECURITIES ARE OR HELD AS PERCENT OF CLASS
COL. A VOTING OR COLLATERAL SECURITY REPRESENTED BY
TITLE OF NON-VOTING FOR OBLIGATIONS AMOUNT GIVEN IN
CLASS SECURITIES IN DEFAULT COL. C
- -------- -------------- ------------------- ----------------
None.
<PAGE> 5
ITEM 9. SECURITIES OF UNDERWRITERS OWNED OR HELD BY THE TRUSTEE.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL
SECURITY FOR OBLIGATIONS IN DEFAULT ANY SECURITIES OF AN UNDERWRITER
FOR THE OBLIGOR, FURNISH THE FOLLOWING INFORMATION AS TO WHICH CLASS
OF SECURITIES OF SUCH UNDERWRITER ANY OF WHICH ARE SO OWNED OR HELD
BY THE TRUSTEE.
AS OF MAY 31, 1996
COL. D
COL. C PERCENT
AMOUNT OWNED OF CLASS
COL. A BENEFICIALLY OR HELD REPRESENTED
TITLE OF COL. B AS COLLATERAL SECURITY BY AMOUNT
ISSUER AND AMOUNT FOR OBLIGATIONS IN GIVEN IN
TITLE OF CLASS OUTSTANDING DEFAULT BY TRUSTEE COL. C.
- -------------- ----------- ---------------------- -----------
None, so far as is known to the trustee.
ITEM 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF
CERTAIN AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL
SECURITY FOR OBLIGATIONS IN DEFAULT VOTING SECURITIES OF A PERSON WHO,
TO THE KNOWLEDGE OF THE TRUSTEE (1) OWNS 10 PERCENT OR MORE OF THE
VOTING SECURITIES OF THE OBLIGOR OR (2) IS AN AFFILIATE, OTHER THAN
A SUBSIDIARY, OF THE OBLIGOR, FURNISH THE FOLLOWING INFORMATION AS TO
THE VOTING SECURITIES OF SUCH PERSON.
AS OF MAY 31, 1996
COL. D
COL. C PERCENT
AMOUNT OWNED OF CLASS
COL. A BENEFICIALLY OR HELD REPRESENTED
TITLE OF COL. B AS COLLATERAL SECURITY BY AMOUNT
ISSUER AND AMOUNT FOR OBLIGATIONS IN GIVEN IN
TITLE OF CLASS OUTSTANDING DEFAULT BY TRUSTEE COL. C.
- -------------- ----------- ---------------------- -----------
None, so far as is known to the trustee.
ITEM 11. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF ANY SECURITIES OF A
PERSON OWNING 50 PERCENT OR MORE OF THE VOTING SECURITIES OF
THE OBLIGOR.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL
SECURITY FOR OBLIGATIONS IN DEFAULT ANY SECURITIES OF A PERSON WHO,
TO THE KNOWLEDGE OF THE TRUSTEE, OWNS 50 PERCENT OR MORE
<PAGE> 6
OF THE VOTING SECURITIES OF THE OBLIGOR, FURNISH THE FOLLOWING
INFORMATION AS TO EACH CLASS OF SECURITIES OF SUCH PERSON ANY OF
WHICH ARE SO OWNED OR HELD BY THE TRUSTEE.
AS OF MAY 31, 1996
COL. D
COL. C PERCENT
AMOUNT OWNED OF CLASS
COL. A BENEFICIALLY OR HELD REPRESENTED
TITLE OF COL. B AS COLLATERAL SECURITY BY AMOUNT
ISSUER AND AMOUNT FOR OBLIGATIONS IN GIVEN IN
TITLE OF CLASS OUTSTANDING DEFAULT BY TRUSTEE COL. C.
- -------------- ----------- ---------------------- -----------
None, so far as is known to the trustee.
ITEM 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE
EXCEPT AS NOTED IN THE INSTRUCTIONS, IF THE OBLIGOR IS INDEBTED TO THE
TRUSTEE, FURNISH THE FOLLOWING INFORMATION:
COL. A COL. B
NATURE OF AMOUNT COL. C
INDEBTEDNESS OUTSTANDING DATE DUE
- ------------ ----------- --------
None.
ITEM 13. DEFAULTS BY THE OBLIGOR.
(A) STATE WHETHER THERE IS OR HAS BEEN A DEFAULT WITH RESPECT TO
THE SECURITIES UNDER THIS INDENTURE. EXPLAIN THE NATURE OF ANY SUCH
DEFAULT.
None.
(B) IF THE TRUSTEE IS A TRUSTEE UNDER ANOTHER INDENTURE UNDER
WHICH ANY OTHER SECURITIES, OR CERTIFICATES OF INTEREST OR PARTICIPATION
IN ANY OTHER SECURITIES, OF THE OBLIGOR ARE OUTSTANDING, OR IS TRUSTEE
FOR MORE THAN ONE OUTSTANDING SERIES OF SECURITIES UNDER THE INDENTURE,
STATE WHETHER THERE HAS BEEN A DEFAULT UNDER ANY SUCH INDENTURE OR
SERIES, IDENTIFY THE INDENTURE OR SERIES AFFECTED, AND EXPLAIN THE
NATURE OF ANY SUCH DEFAULT.
None.
<PAGE> 7
ITEM 14. AFFILIATIONS WITH THE UNDERWRITERS.
IF ANY UNDERWRITER IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH
SUCH AFFILIATION.
Not applicable.
ITEM 15. FOREIGN TRUSTEE.
IDENTIFY THE ORDER OR RULE PURSUANT TO WHICH THE FOREIGN TRUSTEE IS
AUTHORIZED TO ACT AS SOLE TRUSTEE UNDER INDENTURES QUALIFIED OR TO BE
QUALIFIED UNDER THE ACT.
Not applicable.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS STATEMENT OF
ELIGIBILITY. (EXHIBITS IDENTIFIED IN PARENTHESES, ON FILE WITH THE
COMMISSION, ARE INCORPORATED HEREIN BY REFERENCE AS EXHIBITS
HERETO.)
(1) A copy of the Certificate of Incorporation of the trustee as
now in effect.
(2) A copy of the certificate of authority of the trustee to
commence business. (Included in Exhibit 1)
(3) A copy of the authorization of the trustee to exercise
corporate trust powers.
(4) A copy of the existing code of regulations of the trustee
incorporating amendments to date.
(5) A copy of each indenture referred to in Item 4.
(6) The consent of the trustee required by Section 321 (b) of the
Trust Indenture Act of 1939.
(7) A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority.
(8) A copy of any order pursuant to which the foreign trustee is
authorized to act as sole trustee under indentures qualified
or to be qualified under the Act.
(9) Foreign trustees are required to file a consent to service of
process of Form F-X.
<PAGE> 8
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of
1939, the trustee, The Fifth Third Bank, a corporation organized and
existing under the laws of the State of Ohio, has duly caused this
statement of eligibility and qualification to be signed on its behalf by
the undersigned, thereunto duly authorized, all in the City of
Cincinnati and the State of Ohio, on the 14th day of June, 1996.
THE FIFTH THIRD BANK
By: /s/ Fred Overbeck
--------------------------------
Fred Overbeck, Trust Officer
<PAGE> 9
EXHIBIT 1
CERTIFICATE OF INCORPORATION
OF THE TRUSTEE AS NOW IN EFFECT
[See Attached]
<PAGE> 10
CERTIFICATE OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
THE FIFTH THIRD BANK
George A. Schaefer, Jr., President and Phillip C. Long, Secretary
to The Fifth Third Bank, an Ohio banking corporation, with its principal
office located at Cincinnati, Hamilton County, Ohio, do hereby certify
that a duly called meeting of the Board of Directors held on May 18,
1993, at which a quorum was present and at a special meeting of the
shareholder on May 18, 1993, the following resolution to amend the Third
Amended Articles of Incorporation which adopted by affirmative vote of
all the Directors in attendance and by an unanimous vote of the sole
shareholder.
RESOLVED, that Article FOURTH of the Third Amendment Articles of
Incorporation be and is hereby amended in its entirety to read as
follows:
FOURTH: The maximum number of shares with the corporation is
authorized to have outstanding shall be Thirty-Two Thousand
(32,000) shares with a par value of Two Thousand Two Hundred
Dollars ($2,200.00) per share.
IN WITNESS WHEREOF, said George A. Schaefer, Jr., President and
Phillip C. Long, Secretary of The Fifth Third Bank, acting for and on
behalf of said corporation have hereunto subscribed their names this
18th day of May , 1993.
- -------- ---------
/s/ George A. Schaefer, Jr.
-----------------------------------
George A. Schaefer, Jr., President
Approved this 16th day of June, 1993
/s/ Allison M. Meeks
- -------------------------------------
Allison M. Meeks, Superintendent
/s/ Phillip C. Long
-----------------------------------
Phillip C. Long, Secretary
<PAGE> 11
THIRD AMENDED ARTICLES OF INCORPORATION
OF
THE FIFTH THIRD BANK
FIRST: The name of said Corporation shall be "The Fifth Third
Bank".
SECOND: The place in Ohio where its principal office is to be
located is Cincinnati, Hamilton County, and its principal business there
transacted.
THIRD: Said Corporation is formed for the purposes of (a) receiving
on deposit or in trust, moneys, securities and other valuable property,
on such terms as may be agreed, and of doing the business of a savings
bank and of a trust company; (b) of disposing of box vaults for
safekeeping of valuables by lease or otherwise; (c) of investing and
loaning the funds of the company and those received by it on deposit or
in trust; (d) of doing a commercial banking business; and, (e) of doing
the business of a special plan bank, and in furtherance of said
purposes, to exercise all the powers of which may be lawfully exercised
by a corporation formed therefore, and to do all things necessary to
incident thereto.
FOURTH: The maximum number of shares which the corporation is
authorized to have outstanding shall be Thirty-Two Thousand (32,000)
shares with a par value of One Thousand Nine Hundred Dollars ($1,900.00)
per share.
FIFTH: These Amended Articles of Incorporation supersede and take
the place of the existing Articles of Incorporation.
<PAGE> 12
EXHIBIT 2
CERTIFICATE OF AUTHORITY OF THE
TRUSTEE TO COMMENCE BUSINESS
(INCLUDED IN EXHIBIT 1)
<PAGE> 13
EXHIBIT 3
A COPY OF THE AUTHORIZATION OF THE TRUSTEE
TO EXERCISE CORPORATE TRUST POWERS
[See Attached]
<PAGE> 14
STATE OF OHIO
DIVISION OF FINANCIAL INSTITUTIONS
TO WHOM IT MAY CONCERN:
This is to certify that The Fifth Third Bank, Cincinnati, Ohio,
organized under the laws of the State of Ohio, has complied with the
laws relating to trust companies under Sections 1105.02 and 1109.04 of
the Ohio Revised Code and is qualified to exercise trust powers in Ohio.
Witness my hand at Columbus, Ohio, this 10th day of June, 1996.
/s/ W. Curtis Stitt
-------------------------------------
W. CURTIS STITT
Superintendent
Division of Financial
Institutions
/s/ Allison M. Meeks
-------------------------------------
ALLISON M. MEEKS
Deputy Superintendent
of Banks
<PAGE> 15
EXHIBIT 4
A COPY OF THE EXISTING CODE OF REGULATIONS OF THE TRUSTEE
INCORPORATING AMENDMENTS TO DATE
[See Attached]
<PAGE> 16
CODE OF REGULATIONS OF THE FIFTH THIRD BANK
ARTICLE I
STOCKHOLDERS
SECTION 1. MEETINGS. The annual meeting of the Stockholders shall
be held at the principal office of the Company at such hour, as may be
fixed in the notice of such meeting, and on such date, not earlier than
the second Tuesday of January or later than the third Tuesday of April
of each year, as shall be fixed by the Board of Directors and
communicated in writing to the Shareholders not later than twenty (20)
days prior to such meeting.
SECTION 2. QUORUM. Stockholders, whether in person or by lawful
proxies, representing a majority in amount of the outstanding stock of
the Company, shall constitute a quorum at any stockholders' meeting. If
there be less than a majority in amount of such stock at any meeting,
the meeting may be adjourned from time to time.
ARTICLE II
DIRECTORS
SECTION 1. NUMBER. The Board of Directors shall be composed of
eighteen (18) persons unless this number is changed by: (1) the
Shareholders in accordance with the laws of Ohio or (2) the vote of a
majority of the Directors in office. The Directors may increase the
number to not more than twenty-four (24) persons and may decrease the
number to not less than fifteen (15) persons. Any Director's office
created by the Directors by reason of an increase in their number may be
filled by action of a majority of the Directors in office.
SECTION 2. TERM. Directors shall hold office until the expiration
of the term for which they were erected, and shall continue in office
until their respective successors shall have been duly elected and
qualified.
SECTION 3. QUALIFICATIONS AND COMPENSATION. No person shall serve
as a Director who is not the owner of record of at least Five Hundred
($500.00) Dollars par value of stock of the Company. Each Director
shall be entitled to receive such compensation for attendance at
meetings of the Board of Directors of Committees thereof as the Board of
Directors may, from time to time, fix.
SECTION 4. REPLACEMENT OR REMOVAL. Directors may be replaced or
removed as provided by Ohio Law, provided that Directors may be removed
without cause only by an affirmative vote of not less than two-thirds
(2/3) of the outstanding shares of the Company.
<PAGE> 17
SECTION 5. VACANCIES. Any vacancy occurring in the Board of
Directors may be filled by the Board of Directors until an election to
fill such vacancy is had.
SECTION 6. QUORUM. A majority of the whole authorized number of
Directors, as the same shall be established from time to time in
accordance with Section 1 of this Code of Regulations, shall constitute
a quorum for a meeting of the Directors, except that a majority of the
Directors in office constitute a quorum for the filling of a vacancy or
vacancies of the Board.
SECTION 7. ELECTION OF OFFICERS. The Board of Directors at the
first meeting after the election of Directors may elect one of its own
number Chairman of the Board and one of its own number Vice Chairman of
the Board; and it shall elect one of its own number President. It may
also elect one or more vice presidents (one or more of whom may be
designated Executive Vice President and/or Senior Vice President and/or
Vice President and Trust Officer), a Cashier, a Secretary, and a
Treasurer, and it may appoint such other officers as the Board may deem
advisable. Any two of said offices may be held by the same person.
Officers so elected shall hold office during the term of the Board by
whom they are elected, subject to the power of the Board to remove them
at its discretion. They shall be bonded in such amount and with such
survey or sureties as the Board of Directors shall require.
SECTION 8. MEETINGS OF THE BOARD. Regular meetings of the Board
of Directors shall be held on the third Tuesday of each month, or at
such other times as may be determined by the Board of Directors. Except
as otherwise provided by law, any business may be transacted at any
regular meeting of the Board of Directors. Special meetings shall be
held upon the call of the Chairman of the Board, if one be elected, or
by the President, or in their absence, by a Vice President or any three
(3) Directors.
SECTION 9. NOTICE OF MEETINGS. The Secretary shall give notice
of each meeting of the Board of Directors, whether regular or special,
to each member of the Board.
SECTION 10. COMMITTEES.
SECTION 10.1 EXECUTIVE COMMITTEE. The Board of Directors shall
appoint any Executive Committee consisting of at least three (3)
members, all of whom may be members of the Board of Directors, or at
least one (1) of whom shall be a Director, the remainder to be officers
of the Bank. Such Executive Committee shall serve until their
successors are appointed. A majority of the members of said Committee
shall constitute a quorum. The Executive Committee shall conduct the
business of the Company and shall have all the powers of the Board of
Directors when said Board is not in session, except that of declaring a
dividend. The Secretary of the Company shall keep a record of the
Committee's proceedings, which, signed by the Chairman of the Committee,
shall be presented at the
<PAGE> 18
meetings of the Committee and at the meetings of the Board of
Directors.
SECTION 10.2 OTHER COMMITTEES. The Board of Directors shall
appoint a Trust Committee of which the Vice President and Trust Officer
and at least three (3) of its members who are not officers of the
Company shall be members. The Vice President and Trust Officer shall be
Chairman of the Trust Committee. In addition thereto, the Chairman of
the Board, Chief Executive Officer, may appoint such additional
Committees, by and with the approval of the Board of Directors, as may
be deemed desirable or necessary.
Each such Committee, so appointed, shall have such powers and
perform such duties, not inconsistent with law, as may be delegated to
it by the Board of Directors.
SECTION 11. INDEMNIFICATION. The Company shall indemnify each
Director and each Officer of the Company, and each person employed by
the Company who serves at the written request of the President of the
Company as a director, trustee, officer, employee or agent of another
corporation, domestic or foreign, non-profit or for profit, partnership,
joint venture, trust or other enterprise, to the full extent permitted
by Ohio law. The term "Officer" as used in this Section shall include
the Chairman of the Board and the Vice Chairman of the Board if such
offices are filled, the President, each Vice President, the Treasurer,
the Secretary, the Cashier, the Controller, the Auditor, the Counsel and
any other person who is specifically designated as an "Officer" within
the operation of this Section by action of the Board of Directors. The
Company may indemnify assistant Officers, employees and others by action
of the Board of Directors to the extent permitted by Ohio law.
ARTICLE III
OFFICERS
SECTION 1. POWERS AND DUTIES. The Chairman of the Board if the
office be filled, otherwise the Vice Chairman of the Board, if the
office be filled, otherwise the President shall preside at all meetings
of the Stockholders, the Board of Directors, and the supervision and
control over the business of the Company and shall serve at the pleasure
of the Board of Directors. In the absence or disability of any of the
foregoing officers, their respective duties shall be performed by the
Chairman of the Board, the Vice Chairman of the Board, the President, or
by a Vice President specifically designated by the Board of Directors,
in the order named.
The Secretary, or in his absence or disability, the Assistant
Secretary, shall act, ex officio, as Secretary of all meetings of the
Stockholders, the Board of Directors and the Executive Committee. The
other officers of the Company shall have such powers and duties as
usually and customarily attach to their offices.
<PAGE> 19
ARTICLE IV
CERTIFICATES OF STOCK
SECTION 1. FORM. Certificates for shares of stock shall be signed
by the Chairman of the Board, or by the President, or by one of the Vice
Presidents, and by the Secretary or Treasurer or by the Cashier or an
Assistant Cashier, shall contain such statements as are required by law,
and shall otherwise be in such form as the Board of Directors may, from
time to time, require.
SECTION 2. TRANSFERS. Shares shall be transferable on the books
of the Company by the holders thereof in person or by duly authorized
attorney upon surrender of the certificates therefor with duly executed
assignment endorsed thereon or attached thereto.
SECTION 3. CLOSING OF TRANSFER BOOKS. The books for transfer of
the stock of the Company shall be closed for at least five (5) days
preceding the annual meeting of stockholders, and may be closed by order
of the Board of Directors, or Executive Committee, for a like period
before any other meeting of the Stockholders.
ARTICLE V
AMENDMENTS
These regulations may be changed, and new regulations adopted by
the assent thereto in writing of two-thirds (2/3) of the Stockholders of
the Company in number an in amount; or by a majority of such
Stockholders in number and in amount, at a meeting held for that
purpose, notice of which has been given by the President, the Secretary,
or any two (2) Directors personally or by written notice, to each
Stockholders, and by publication once a week for four (4) consecutive
weeks in some newspaper of general circulation in Hamilton County, Ohio,
or in such other manner as may then be authorized by the laws of Ohio.
<PAGE> 20
EXHIBIT 5
A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4
(NOT APPLICABLE)
<PAGE> 21
EXHIBIT 6
THE CONSENT OF THE TRUSTEE REQUIRED BY SECTION 321 (B)
OF THE TRUST INDENTURE ACT OF 1939
[See Attached]
<PAGE> 22
EXHIBIT 6 TO FORM T-1
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust
Indenture Act of 1939 in connection with the proposed issuance of Debt
Securities of The Cincinnati Gas & Electric Company, The Fifth Third
Bank hereby consents that reports of examination by Federal, State,
Territorial or District Authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
THE FIFTH THIRD BANK
By: /s/ Fred Overbeck
------------------------------------
Fred Overbeck, Trust Officer
<PAGE> 23
EXHIBIT 7
A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE
PUBLISHED PURSUANT TO LAW OR THE REQUIREMENTS
OF ITS SUPERVISING OR EXAMINING AUTHORITY
[See Attached]
<PAGE> 24
R E P O R T O F C O N D I T I O N
Consolidated Report of Condition of FIFTH THIRD BANK of
---------------------------
CINCINNATI, OHIO and Foreign and Domestic Subsidiaries, a member of
- -------------------
the Federal Reserve System, at the close of business on December 31,
1995, published in accordance with a call made by the Federal Reserve
Bank of this District pursuant to the provisions of the Federal Reserve
Act.
<TABLE>
<CAPTION>
ASSETS
Thousands
of Dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin. . . . . . . . . . . . . . . . . . . . . . . . . . 506,991
Interest-bearing balances. . . . . . . . . . . . . . . . . . . . . . 99
Held-to-maturity securities . . . . . . . . . . . . . . . . . . . . . . 79,493
Available-for-sale securities . . . . . . . . . . . . . . . . . . . . . 782,293
Federal funds sold and securities purchased . . . . . . . . . . . . . . //////////
under agreements to resell in domestic offices . . . . . . . . . . . //////////
of the bank and of its . . . . . . . . . . . . . . . . . . . . . . . //////////
Edge and Agreement subsidiaries, and in IBFs:
Federal Funds sold . . . . . . . . . . . . . . . . . . . . . . . . . 721,158
Securities purchased under agreements to resell. . . . . . . . . . . 0
Loans and leases financing receivables:
Loans and leases, net of unearned income . . . . . . . . . . . . . . 6,678,430
LESS: Allowance for loan and leases losses . . . . . . . . . . . . . 78,268
LESS: Allocated transfer risk reserve. . . . . . . . . . . . . . . . 0
Loans and leases, net of unearned income, allowance,
and reserve. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,600,162
Trading Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 322
Premises and fixed assets (including capitalized leases). . . . . . . . 103,273
Other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . 1,451
Investments in unconsolidated subsidiaries and
associated companies . . . . . . . . . . . . . . . . . . . . . . . . 0
Customers' liability to this bank on
acceptances outstanding. . . . . . . . . . . . . . . . . . . . . . . 31,046
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,034
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,035
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,032,357
<PAGE> 25
<CAPTION>
LIABILITIES
<S> <C>
Deposits:
In domestic offices. . . . . . . . . . . . . . . . . . . . . . . . . 4,971,593
Noninterest-bearing. . . . . . . . . . . . . . . . . . . . . . . . . 1,147,812
Interest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . 3,823,781
In foreign offices, Edge and Agreement subsidiaries,
and IBFs:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,056,398
Noninterest-bearing. . . . . . . . . . . . . . . . . . . . . . . . . 0
Interest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . 1,056,398
Federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and of its
Edge and Agreement subsidiaries, and in IBFs:
Federal funds purchased. . . . . . . . . . . . . . . . . . . . . . . 785,783
Securities sold under agreements to repurchase . . . . . . . . . . . 226,020
Demand notes issued to the U.S. Treasury. . . . . . . . . . . . . . . . 54,613
Trading liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Other borrowed money: . . . . . . . . . . . . . . . . . . . . . . . . . //////////
With original maturity of one year or less . . . . . . . . . . . . . 477,838
With original maturity of more than one year . . . . . . . . . . . . 185,000
Mortgage indebtedness and obligations under
capitalized leases . . . . . . . . . . . . . . . . . . . . . . . . . 0
Bank's liability on acceptances executed and outstanding. . . . . . . . 31,046
Subordinated notes and debentures . . . . . . . . . . . . . . . . . . . 381,715
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 184,974
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,354,980
Limited-life preferred stock and related surplus. . . . . . . . . . . . 0
EQUITY CAPITAL
Perpetual preferred stock and related surplus . . . . . . . . . . . . . 0
Common stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,400
Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,854
Undivided profits and capital reserves. . . . . . . . . . . . . . . . . 493,203
Net unrealized holding gains (losses) on
available-for-sale securities. . . . . . . . . . . . . . . . . . . . 3,072
Cumulative foreign currency translation adjustments . . . . . . . . . . 0
Total equity capital. . . . . . . . . . . . . . . . . . . . . . . . . . 677,377
Total liabilities, limited-life preferred stock,
and equity capital . . . . . . . . . . . . . . . . . . . . . . . . . 9,032,357
</TABLE>
<PAGE> 26
EXHIBIT 8
A COPY OF ANY ORDER PURSUANT TO WHICH THE FOREIGN TRUSTEE IS AUTHORIZED
TO ACT AS SOLE TRUSTEE UNDER INDENTURES QUALIFIED OR TO BE QUALIFIED
UNDER THE ACT
(NOT APPLICABLE)
<PAGE> 27
EXHIBIT 9
FOREIGN TRUSTEES ARE REQUIRED TO FILE A CONSENT TO SERVICE OF
PROCESS OF FORM F-X
(NOT APPLICABLE)# . . . . . . .
