SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
----------------------------
For Quarter Ended June 30, 1996
Commission file number 1-8223
NATIONAL GAS & OIL COMPANY
(Exact name of registrant)
Ohio 31-1004640
------- -------------------
(State) (I.R.S. Employer
Identification No.)
1500 Granville Road, Newark, Ohio 43055
(Address of principal executive office)
Registrant's telephone number (614) 344-2102
Area Code
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes __X__ No _____
Indicate the number of shares outstanding of each of the issuers' classes of
common stock, as of the close of the period covered by this report (applicable
only to corporate issuers).
$1.00 Par Value - Common 6,853,389 Shares
Page 1 of 13
<PAGE>
FORM 10-Q
QUARTER ENDED
JUNE 30, 1996
------------------
NATIONAL GAS & OIL COMPANY & SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30,
1996 1995
----------------------------
OPERATING REVENUES:
Gas sales ................................. $ 3,436,866 $3,071,144
Transportation ............................ 853,520 1,324,143
Oil & gas production ...................... 6,125,670 5,009,398
----------- ----------
TOTAL OPERATING REVENUES .................... 10,416,056 9,404,685
----------- ----------
OPERATING EXPENSES:
Purchased gas - gas sales ................. 1,408,690 1,526,905
Purchased gas - oil and gas
production ............................. 4,465,466 3,726,792
Operation and maintenance ................. 2,135,778 2,169,735
Depreciation, depletion &
amortization .............................. 911,157 883,750
Taxes other than income ................... 785,622 666,365
----------- ----------
TOTAL OPERATING EXPENSES .................... 9,706,713 8,973,547
----------- ----------
OPERATING INCOME ............................ 709,343 431,138
----------- ----------
Other income ................................ 121,633 82,324
Interest expense ............................ 195,262 237,726
Federal income taxes ........................ 156,521 49,790
----------- ----------
NET INCOME .................................. $ 479,193 $ 225,946
=========== ==========
Net income per share ........................ $ 0.07 $ 0.03
=========== ==========
Average number of share outstanding ......... 6,853,389 6,860,589
=========== ==========
The per share amounts and the average number of shares outstanding have been
restated to reflect the three percent stock dividend issued in December 1995.
The accompanying notes are an integral part of these statements.
-2-
<PAGE>
FORM 10-Q
QUARTER ENDED
JUNE 30, 1996
----------------
NATIONAL GAS & OIL COMPANY & SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30,
1996 1995
--------------------------
OPERATING REVENUES:
Gas sales .................................. $14,308,768 $13,604,875
Transportation ............................. 2,494,045 3,015,443
Oil & gas production ....................... 16,590,054 10,815,791
----------- -----------
TOTAL OPERATING REVENUES ......................... 33,392,867 27,436,109
----------- -----------
OPERATING EXPENSES:
Purchased gas - gas sales .................. 6,922,348 7,651,338
Purchased gas - oil and gas production ..... 13,365,002 8,017,424
Operation and maintenance .................. 4,338,185 4,413,711
Depreciation, depletion & amortization ..... 1,823,126 1,767,499
Taxes other than income .................... 1,887,608 1,705,143
----------- -----------
TOTAL OPERATING EXPENSES ......................... 28,336,269 23,555,115
----------- -----------
OPERATING INCOME ................................. 5,056,598 3,880,994
----------- -----------
Other income ..................................... 229,862 113,474
Interest expense ................................. 430,080 507,321
Federal income taxes ............................. 1,532,761 1,097,708
----------- -----------
NET INCOME ....................................... $ 3,323,619 $ 2,389,439
=========== ===========
Net income per share ............................. $ 0.48 $ 0.35
=========== ===========
Average number of share outstanding .............. 6,856,272 6,869,589
=========== ===========
The per share amounts and the average number of shares outstanding have been
restated to reflect the three percent stock dividend issued in December 1995.
The accompanying notes are an integral part of these statements.
-3-
<PAGE>
FORM 10-Q
QUARTER ENDED
JUNE 30, 1996
--------------
NATIONAL GAS & OIL COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
June 30, December 31,
1996 1995
--------------------------
PROPERTY, PLANT AND EQUIPMENT
Gas utility properties ........................ $64,524,662 $62,444,717
Less - Accumulated depreciation ............... 23,222,173 22,199,392
----------- -----------
41,302,489 40,245,325
----------- -----------
Oil and gas properties, successful efforts ... 21,615,091 21,218,605
Less - Accumulated depreciation,
depletion and amortization .................. 7,658,516 7,304,416
----------- -----------
13,956,575 13,914,189
----------- -----------
Other - net ................................... 5,145,550 5,492,265
----------- -----------
TOTAL PROPERTY, PLANT AND EQUIPMENT ................ 60,404,614 59,651,779
----------- -----------
CURRENT ASSETS
Cash and cash equivalents ..................... 3,459,564 448,250
Short-term investments ........................ -- 782,788
Accounts receivable - net ..................... 7,307,115 10,285,798
Gas in underground storage .................... 1,507,084 2,321,552
Materials and supplies, at average cost ....... 1,144,356 980,787
Prepaid taxes ................................. 1,973,240 2,896,527
Other ......................................... 774,995 504,340
----------- -----------
TOTAL CURRENT ASSETS ............................... 16,166,354 18,220,042
----------- -----------
OTHER ASSETS ....................................... 1,395,134 1,558,481
----------- -----------
TOTAL ASSETS ....................................... $77,966,102 $79,430,302
=========== ===========
The accompanying notes are an integral part of these statements.
-4-
<PAGE>
FORM 10-Q
QUARTER ENDED
JUNE 30, 1996
-------------------
NATIONAL GAS & OIL COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
LIABILITIES
June 30, December 31,
1996 1995
-----------------------------
CAPITALIZATION
Shareholders' equity -
Common stock, par value $1 per
share, authorized 14,000,000
shares, issued 7,018,512 shares ....... $ 7,018,512 $ 7,018,512
Paid in capital .......................... 31,353,831 31,353,831
Retained earnings ........................ 6,348,851 3,848,185
Treasury shares at cost, 165,123 &
157,923, respectively .................... (1,615,676) (1,550,509)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY ................... 43,105,518 40,670,019
------------ ------------
Long-term debt ........................... 10,184,877 11,079,442
CURRENT LIABILITIES
Current maturities of long-term debt ..... 881,959 877,264
Short-term loans ......................... -- 1,350,000
Accounts payable ......................... 6,827,007 5,491,004
Accrued income and other taxes ........... 2,175,348 3,990,295
LIFO inventory reserve ................... 210,826 --
Refundable gas cost ...................... -- 1,348,047
Other .................................... 1,617,778 1,947,816
------------ ------------
TOTAL CURRENT LIABILITIES .................... 11,712,918 15,004,426
------------ ------------
DEFERRED CREDITS AND OTHER LIABILITIES
Federal income taxes ..................... 8,161,111 8,112,490
Investment tax credits ................... 1,035,246 1,084,188
Accrued transition costs ................. 270,833 1,035,895
Health care and other .................... 3,495,599 2,443,842
------------ ------------
TOTAL DEFERRED CREDITS AND OTHER ............. 12,962,789 12,676,415
------------ ------------
TOTAL CAPITALIZATION AND LIABILITIES ......... $ 77,966,102 $ 79,430,302
============ ============
The accompanying notes are an integral part of these statements.
-5-
<PAGE>
<TABLE>
FORM 10-Q
QUARTER ENDED
JUNE 30, 1996
--------------
NATIONAL GAS & OIL COMPANY & SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
1996 1995
----------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income ......................................... $ 3,323,616 $ 2,389,439
Reconciliation of net income to net cash provided by
operating activities
Depreciation, depletion, and amortization .... 1,888,827 1,835,928
Deferred income taxes ........................ 518,922 (743,630)
Other, net ................................... (75,505) 202,915
Change in assets and liabilities:
Accounts receivable .......................... 3,005,246 3,475,690
Short-term investments ....................... 2,075,059 (836,947)
Gas in underground storage and LIFO reserve .. 1,025,294 1,730,797
Materials and supplies ....................... (163,568) (73,003)
Deferred gas costs ........................... (1,825,253) 334,587
Accounts payable ............................. 43,732 818,160
Prepaid taxes ................................ 923,287 800,585
Other, net ................................... (1,958,692) 989,400
----------- ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES ................ 8,780,965 10,923,921
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures ............................... (2,690,128) (2,827,488)
Salvage on retirement of facilities ................ 48,466 38,388
----------- ------------
NET CASH USED IN INVESTING ACTIVITIES .................... (2,641,662) (2,789,100)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments of long-term debt ............... (439,868) (1,340,483)
Net payments under short-term bank loans ........... (1,800,000) (3,050,000)
Purchase of treasury stock ......................... (65,168) --
Dividends paid ..................................... (822,953) (799,378)
----------- ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES ...... (3,127,989) (5,189,861)
----------- ------------
NET INCREASE IN CASH & CASH EQUIVALENTS .................. 3,011,314 2,944,960
CASH & CASH EQUIVALENTS AT BEGINNING OF PERIOD ........... 448,250 1,271,186
----------- ------------
CASH & CASH EQUIVALENTS AT END OF PERIOD ................. $ 3,459,564 $ 4,216,146
=========== ============
</TABLE>
The accompanying notes are an integral part of these statements.
-6-
<PAGE>
FORM 10-Q
QUARTER ENDED
JUNE 30, 1996
NATIONAL GAS & OIL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying consolidated balance sheets, statement of cash flows,
and income statements have been prepared by National Gas & Oil Company
(the Company) without audit by independent accountants. In the opinion of
the Company, all adjustments necessary for a fair presentation of its
consolidated results of operation at June 30, 1996 and 1995 have been
included, and were normal recurring adjustments. Certain
reclassifications have been made for comparative purposes.
2. Gas in underground storage under the LIFO method is determined using
calendar year-end quantities and costs. LIFO inventory is estimated at
interim periods. At June 30, 1996, gas in underground storage which is
accounted for under LIFO decreased 455,396 Mcf from December 31, 1995,
due to the seasonal nature of the Company's business. The Company injects
natural gas into underground storage in the summer and withdraws the gas
in the winter during high demand periods. The reserve for LIFO inventory
of $210,826 is the difference between the cost to replace this temporary
reduction and the LIFO cost assigned to these volumes.
3. Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Six Months Ended June 30,
1996 1995
------ ------
Income taxes $1,350,000 $1,400,000
Interest $ 396,202 $ 539,507
-7-
<PAGE>
FORM 10-Q
QUARTER ENDED
JUNE 30, 1996
NATIONAL GAS & OIL COMPANY AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Consolidated Results
Operating revenues have been separated into revenues generated from the
sale and transportation of natural gas by National Gas & Oil Corporation
(National Gas) and Producers Gas Sales, Inc. (Producers) and the sale of oil
and gas produced and purchased by NGO Development Corporation (NGO
Development). The revenues of the holding company, National Gas & Oil Company,
and other income from all subsidiaries are included under other income.
Consolidated revenue of $10,416,000 in the second quarter of 1996
increased by 11 percent from second quarter 1995 consolidated revenue. The
major change in revenue can be attributed to increased marketing activities by
NGO Development.
Net income in the second quarter of 1996 amounted to $479,000, an
increase of $253,000 from the second quarter of 1995.
Net income per common share in the second quarter of 1996 was $.07 as
compared to $.03 in the second quarter of 1995. The change is primarily
attributed to the increase in income generated by increased marketing
activities by NGO Development.
Gas Sales and Transportation
Operating revenues associated with this segment of the business
decreased by $105,000 or two percent in the second quarter of 1996 as compared
to the second quarter of 1995 due to a decrease in the volume of gas sold and
transported.
Net income of the gas sales and transportation segment during the second
quarter of 1996 decreased $88,000 as compared to the second quarter of 1995.
This fluctuation is primarly related to decreased throughput.
Volumes of gas sold and transported to various customer classes for the
second quarter decreased two percent over the second quarter of 1995.
Six Months Ended June 30,
Gas Throughput (MCF) 1996 1995
------ ------
Gas Sales:
Industrial 10,469 11,183
Residential 414,442 335,931
Commercial 171,555 143,209
--------- ---------
Total Gas Sales 596,466 490,323
Transportation 1,534,231 1,684,757
--------- ---------
Total Gas Throughput 2,130,697 2,175,080
========= =========
-8-
<PAGE>
The increase in purchased gas expense is the result of the corresponding
increase in gas sales revenue. Operations and maintenance expenditures have
decreased 2 percent during the second quarter as compared to the second
quarter of 1995 primarily due to decreased insurance premiums.
Oil and Gas Production
Operating revenues from the oil and gas production segment increased
$1,116,000 in the second quarter of 1996 as compared to the second quarter of
1995. The increase is due primarily to the increased gas marketing activity by
NGO Development. Operating expenses for this business segment have remained
relatively flat with purchased gas expense increasing to correspond with the
increase in gas marketing revenue. Other operating expenses have decreased due
to cost cutting measures.
Net income for the period increased $332,000 primarily due to favorable
market conditions, the increase in gas marketing activity and expenses
remaining flat.
General
Interest expense decreased $42,000 as compared to first quarter 1995,
due to decreased borrowing by National Gas and NGO Development. Other income
increased $39,000 in the second quarter of 1996 as compared to the second
quarter of 1995, primarily due to the beginning of operations of the
processing plant.
Federal Income Taxes
The change in federal income tax expense for the quarter reflects the
changes in taxable income for the consolidated companies. Taxable income has
increased due to the increased marketing activities by NGO Development.
-9-
<PAGE>
CAPITAL RESOURCES AND LIQUIDITY
Capital Resources
The primary sources and uses of cash during the six month period ending
June 30 are summarized in the following condensed cash flow statement:
Sources and (Uses) of Cash
1996 1995
---- ----
Provided by Operating Activities .............. $ 8,780,965 $ 10,923,921
Capital Expenditures, net of salvage .......... (2,641,662) (2,789,100)
Net Borrowings ................................ (2,239,868) (4,390,483)
Common Dividends .............................. (822,953) (799,378)
Purchase of Treasury Stock .................... (65,168) 0
----------- ------------
Net Increase in Cash & Cash Equivalents .... $ 3,011,314 $ 2,944,960
=========== ============
Cash provided by operating activities consist 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 and cash reserves, coupled with seasonal short-term borrowings,
will continue to be sufficient to satisfy the operating, normal capital
expenditure and dividend requirements of the Company's existing operations in
the near future.
Capital Expenditures
In the first six months of 1996 the gas sales and transportation segment
accounted for 79 percent of the total capital expenditures. The funds were
expended primarily for expansion and upgrading of existing pipeline systems.
The oil and gas sales segment accounted for 21 percent which was primarily
used for the development and/or completion of various interest in oil and gas
wells.
Capital expenditures vary significantly by quarter. The Company
estimates that normal capital expenditures in 1996 to support existing
operations will be approximately $4,600,000. The construction and drilling
programs are continually evaluated and actual expenditures may be more or
less.
Financing and Liquidity
The Company continually assesses various alternatives for expanding its
business, including the acquisition of other business entities.
As of June 30, 1996, the Company and its subsidiaries had short-term
lines of credit with various banks aggregating in excess of $6,000,000, the
upper limit on short-term borrowing imposed by the Board of Directors. The
terms of each borrowing under the lines of credit are negotiated at the time
the funds are requested with interest rates ranging from 6.312 percent to 8.5
percent. During the first six months, the Company utilized these credit lines
and as of June 30, 1996, all short-term draws were repaid. These funds were
used primarily by National Gas to satisfy seasonal working capital
requirements. The Company anticipates that it will utilize its credit lines
for additional funds during the third and fourth quarters of 1996.
Additionally, the Company and all of its subsidiaries, except National
Gas, have a $3 million revolving line of credit which expires in February
1997. This committed credit line is unsecured and may be utilized by any of
the subsidiaries, except National Gas.
-10-
<PAGE>
In March 1994, National Gas issued $6 million of Senior Unsecured Notes
in a private placement to a qualified investor. The proceeds were utilitzed by
National Gas to fund various capital projects in 1994 and 1995, including the
$3.5 million pipeline project to provide gas service to a new customer. The
notes bear a fixed interest rate of 6.63 percent, have a maturity of 15 years
and an average life of 9 years. The notes carry a 100 percent guaranty by the
Company.
The Company is not aware of any material events or uncertainties which
would materially limit or restrict its ability to secure additional funds from
external sources in either the debt or equity markets.
Dividends
The Company paid cash dividends of $822,953 and $799,378 during the six
months ended June 30, 1996 and 1995, respectively. Presently, there are no
restrictions on the payment of dividends, as long as the Company is not in
default of the terms in its long-term loans. Dividend policy is established by
the Company's Board of Directors. The Board's decision takes into
consideration results of operations and retained earnings of the Company.
There are currently no restrictions on the present ability to pay such
dividends.
Effects of Inflation
All of the Company's long-term bank loans accrue interest at a
fluctuating rate equal to either the bank's prime rate or to a rate tied to
the London Interbank Offered Rate (LIBOR). Because of the fluctuating rate,
the Company is exposed to increases in interest expense should rates increase
due to inflation.
During the third quarter of 1993, National Gas analyzed the need for
additional base rate increases and decided to apply for rate increases to
cover increases in operating expenses. Rate increases over a three year period
have been successfully negotiated with all municipalities served by National
Gas.
-11-
<PAGE>
FORM 10-Q
QUARTER ENDED
JUNE 30, 1996
NATIONAL GAS & OIL COMPANY
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Default upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
The 1996 Annual Meeting of Shareholders was held on May 23,
1996, at Newark, Ohio. There were 6,254,987 shares (91.2%)
represented at the meeting. The following persons were elected
as Directors for a term of three years: Alan A. Baker
(6,223,013), Richard O. Johnson (6,019,815) and Thomas E.
Stewart (6,220,993).
By a vote of 5,926,227 (86.4%) in favor, with 137,795 (2.0%)
against and 188,807 (2.8%) abstaining, the shareholders
resolved to adopt the amendment to the Company's Code of
Regulations that "No person shall be eligible to stand for
election, who is 70 years of age or older on the date of the
election or the appointment."
The shareholders further voted in favor of a motion to ratify
the appointment of Price Waterhouse LLP to audit the financial
statements of the Company and its subsidiaries for the year
ending December 31, 1996. There were 6,191,208 (90.3%) votes
cast in favor, 33,510 (0.5%) against and 28,111 (0.4%)
abstaining.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
Exhibit 27 -- Financial Data Schedule
-12-
<PAGE>
FORM 10-Q
QUARTER ENDED
JUNE 30, 1996
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NATIONAL GAS & OIL COMPANY
(Registrant)
Date: August 14, 1996 /s/ John B. Denison
___________________________________________
John B. Denison
Vice President and Secretary
Date: August 14, 1996 /s/ Todd P. Ware
___________________________________________
Todd P. Ware
Vice President and Chief Financial Officer
-13-
<PAGE>
CODE OF REGULATIONS
OF
NATIONAL GAS & OIL COMPANY
Index
Section Caption Page No.
- ------- --------------- --------
ARTICLE ONE
Meetings of Shareholders
1.01 Annual Meetings . . . . . . . . . . . . . . . . 3
1.02 Calling of Meetings . . . . . . . . . . . . . . 3
1.03 Place of Meetings . . . . . . . . . . . . . . . 3
1.04 Notice of Meetings . . . . . . . . . . . . . . 3
1.05 Waiver of Notice . . . . . . . . . . . . . . . 4
1.06 Quorum . . . . . . . . . . . . . . . . . . . . 4
1.07 Votes Required . . . . . . . . . . . . . . . . 4
1.08 Order of Business . . . . . . . . . . . . . . . 4
1.09 Shareholders Entitled to Vote . . . . . . . . . 5
1.10 Cumulative Voting . . . . . . . . . . . . . . . 5
1.11 Proxies . . . . . . . . . . . . . . . . . . . . 5
1.12 Inspectors of Election . . . . . . . . . . . . 5
ARTICLE TWO
Directors
2.01 Authority and Qualifications . . . . . . . . . 6
2.02 Number of Directors and Term of Office . . . . 6
2.03 Nomination and Election . . . . . . . . . . . . 6
2.04 Removal . . . . . . . . . . . . . . . . . . . . 8
2.05 Vacancies . . . . . . . . . . . . . . . . . . . 8
2.06 Meetings . . . . . . . . . . . . . . . . . . . 8
2.07 Notice of Meetings . . . . . . . . . . . . . . 8
2.08 Waiver of Notice . . . . . . . . . . . . . . . 9
2.09 Quorum . . . . . . . . . . . . . . . . . . . . 9
2.10 Executive Committee . . . . . . . . . . . . . . 9
2.11 Compensation . . . . . . . . . . . . . . . . . 10
2.12 By-Laws . . . . . . . . . . . . . . . . . . . . 10
ARTICLE THREE
Officers
3.01 Officers . . . . . . . . . . . . . . . . . . . 11
3.02 Tenure of Office . . . . . . . . . . . . . . . 11
3.03 Duties of the Chairman of the Board . . . . . . 11
Page 1 of 20
<PAGE>
Section Caption Page No.
- ------- --------------- --------
3.04 Duties of the President . . . . . . . . . . . . 11
3.05 Duties of the Vice Presidents . . . . . . . . . 12
3.06 Duties of the Secretary . . . . . . . . . . . . 12
3.07 Duties of the Treasurer . . . . . . . . . . . . 12
ARTICLE FOUR
Shares
4.01 Certificates . . . . . . . . . . . . . . . . . 13
4.02 Transfers . . . . . . . . . . . . . . . . . . . 13
4.03 Transfer Agents and Registrars . . . . . . . . 13
4.04 Lost, Wrongfully Taken or
Destroyed Certificates . . . . . . . . . . . 13
ARTICLE FIVE
Indemnification, Insurance and Similar Protection
5.01 Mandatory Indemnification . . . . . . . . . . . 15
5.02 Court-Approved Indemnification . . . . . . . . 15
5.03 Indemnification for Expenses . . . . . . . . . 16
5.04 Determination Required . . . . . . . . . . . . 16
5.05 Advances for Expenses . . . . . . . . . . . . . 17
5.06 Article Five Not Exclusive . . . . . . . . . . 18
5.07 Insurance and Similar Protection . . . . . . . 18
5.08 Certain Definitions . . . . . . . . . . . . . . 18
5.09 Venue . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE SIX
Miscellaneous
6.01 Seal . . . . . . . . . . . . . . . . . . . . . 20
6.02 Amendments . . . . . . . . . . . . . . . . . . 20
6.03 Action by Shareholders or Directors Without
a Meeting . . . . . . . . . . . . . . . . . . 20
Page 2 of 20
<PAGE>
CODE OF REGULATIONS
OF
NATIONAL GAS & OIL COMPANY
ARTICLE ONE
Meetings of Shareholders
SECTION 1.01. Annual Meetings. The annual meeting of the shareholders
for the election of directors, for the consideration of reports to be laid
before such meeting and for the transaction of such other business as may
properly come before such meeting, shall be held on the Thursday, following
the third Tuesday in May in each year or on such other date as may be fixed
from time to time by the Directors.
SECTION 1.02. Calling of Meetings. Meetings of the shareholders may be
called only by the Chairman of the Board or the President, or, in case of the
Chairman's or President's absence, death, or disability, the Vice president
authorized to exercise the authority of the President; the Secretary; the
Directors by action at a meeting, or a majority of the Directors acting
without a meeting; or the holders of at least 50% of all shares outstanding
and entitled to vote thereat.
SECTION 1.03. Place of Meetings. All meetings of shareholders
shall be held at the principal office of the corporation, unless otherwise
provided by action of the Directors. Meetings of shareholders may be held at
any place within or without of the State of Ohio.
SECTION 1.04. Notice of Meetings.
(A) Written notice stating the time, place and purposes of a meeting of
the shareholders shall be given either by personal delivery or by mail not
less than seven nor more than sixty days before the date of the meeting (1) to
each shareholder of record entitled to notice of the meeting, (2) by or at the
direction of the Chairman of the Board, the President or the Secretary. If
mailed, such notice shall be addressed to the shareholder at his address as it
appears on the record of the corporation. Notice of adjournment of a meeting
need not be given if the time and place to which it is adjourned are fixed and
announced at such meeting. In the event of a transfer of shares after the
record date for determining the shareholders who are entitled to receive
notice of a meeting of shareholders, it shall not be necessary to give notice
to the transferee. Nothing herein contained shall prevent the setting of a
record date in the manner provided by law, the
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Articles or the Regulations for the determination of shareholders who are
entitled to receive notice of or to vote at any meeting of shareholders or for
any purpose required or permitted by law.
(B) Following receipt by the Chairman of the Board, the President or the
Secretary of a request in writing, specifying the purpose or purposes for
which the persons properly making such request have called a meeting of the
shareholders, delivered either in person or by registered mail to such officer
by any persons entitled to call a meeting of shareholders, such officer shall
cause to be given to the shareholders entitled thereto notice of a meeting to
be held on a date not less than seven nor more than 60 days after the receipt
of such request, as such officer may fix. If such notice is not given within
15 days after the receipt of such request by the Chairman of the Board, the
President or the Secretary, then, and only then, the persons properly calling
the meeting may fix the time of meeting and give notice thereof in accordance
with the provisions of the Regulations.
SECTION 1.05. Waiver of Notice. Notice of the time, place and purpose or
purposes of any meeting of shareholders may be waived in writing, either
before or after the holding of such meeting, by any shareholder, which writing
shall be filed with or entered upon the records of such meeting. The
attendance of any shareholder, in person or by proxy, at any such meeting
without protesting the lack of proper notice prior to or at the commencement
of the meeting shall be deemed to be a waiver by such shareholder of notice of
such meeting.
SECTION 1.06. Quorum. At any meeting of shareholders, the holders of a
majority in amount of the voting shares of the corporation then outstanding
and entitled to vote thereat, present in person or by proxy, shall constitute
a quorum for such meeting. The holders of a majority of the voting shares
represented at a meeting, whether or not a quorum is present, or the Chairman
of the Board, the President, or the officer of the corporation acting as
chairman of the meeting, may adjourn such meeting from time to time, and if a
quorum is present at such adjourned meeting, any business may be transacted as
if the meeting had been held as originally called.
SECTION 1.07. Votes Required. At all elections of Directors the
candidates receiving the greatest number of votes shall be elected. Any other
matter submitted to the shareholders for their vote shall be decided by the
vote of such proportion of the shares, or of any class of shares, or of each
class, as is required by law, the Articles or the Regulations.
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SECTION 1.08.Order of Business. The order of business at any meeting of
shareholders shall be determined by the officer of the corporation acting as
chairman of such meeting unless otherwise determined by a vote of the holders
of a majority of the voting shares of the corporation then outstanding,
present in person or by proxy, and entitled to vote at such meeting.
SECTION 1.09. Shareholders Entitled to Vote. Each shareholder of record
on the books of the corporation on the record date for determining the
shareholders who are entitled to vote at a meeting of shareholders shall be
entitled at such meeting to one vote for each share of the corporation
standing in his name on the books of the corporation on such record date. The
Directors may fix a record date for the determination of the shareholders who
are entitled to receive notice of and to vote at a meeting of shareholders,
which record date shall not be a date earlier than the date on which the
record date is fixed and which record date may be a maximum of 60 days
preceding the date of the meeting of shareholders.
SECTION 1.10. Cumulative Voting. If notice in writing shall be given by
a shareholder to the President, a Vice President or the Secretary of the
corporation, not less than forty-eight hours before the time fixed for holding
a meeting of the shareholders for the purpose of electing Directors if notice
of such meeting shall have been given at least ten days prior thereto, and
otherwise not less than twenty-four hours before such time, that such
shareholder desires that the voting at such election shall be cumulative, and
if an announcement of the giving of such notice is made upon the convening of
the meeting by the presiding officer or secretary of the meeting or by or on
behalf of the shareholder giving such notice, each shareholder shall have the
right to cumulate such voting power as he possesses and to give one candidate
as many votes as is determined by multiplying the number of Directors to be
elected by the number of votes to which such shareholder is entitled, or to
distribute such number of votes on the same principle among two or more
candidates, as he sees fit.
SECTION 1.11. Proxies. At meetings of the shareholders, any shareholder
of record entitled to vote thereat may be represented and may vote by a proxy
or proxies appointed by an instrument in writing signed by such shareholder,
but such instrument shall be filed with the secretary of the meeting before
the person holding such proxy shall be allowed to vote thereunder. No proxy
shall be valid after the expiration of eleven months, after the date of its
execution, unless the shareholder executing it shall have specified therein
the length of time it is to continue in force.
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SECTION 1.12. Inspectors of Election. In advance of any meeting of
shareholders, the Directors may appoint inspectors of election to act at such
meeting or any adjournment thereof; if inspectors are not so appointed, the
officer of the corporation acting as chairman of any such meeting may make
such appointment. In case any person appointed as inspector fails to appear or
act, the vacancy may be filled only by appointment made by the Directors in
advance of such meeting, or, if not so filled, at the meeting by the officer
of the corporation acting as chairman of such meeting. No other person or
persons may appoint or require the appointment of inspectors of election.
ARTICLE TWO
Directors
SECTION 2.01. Authority and Qualifications. Except where the law, the
Articles or the Regulations otherwise provide, all authority of the
corporation shall be vested in and exercised by a Board of Directors.
Directors need not be shareholders of the corporation. The Chairman of the
Board and the President shall be directors.
SECTION 2.02. Number of Directors and Term of Office. Until changed by
amendment of the Regulations, by the adoption of new Regulations or by action
of the Directors, the number of Directors of the corporation shall be nine.
Directors shall be classified into three classes consisting of not less than
three or more than four Directors each. At the initial meeting of
shareholders, an election shall be held to elect a class of Directors to serve
for one year and until their successors are elected, an election shall be held
to elect a class of Directors to serve for two years and until their
successors are elected and an election shall be held to elect a class of
Directors to serve for three years and until their successors are elected. At
each annual meeting of shareholders thereafter, a class of Directors shall be
elected to serve for three years and until their successors are elected. The
Directors may change the number of Directors and may fill any Director's
office that is created by an increase in the number of Directors; provided,
however, that the Directors may not increase the number of Directors to more
than twelve or the number of directors in each class to more than four, and
provided further that the Directors may not reduce the number of Directors to
fewer than nine or the number of Directors in each class to fewer than three.
No reduction in the number of Directors shall of itself have the effect of
shortening the term of any incumbent Director.
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SECTION 2.03. Nomination and Election. (A) Any nominee for election as a
Director of the corporation may be proposed only by the Board of Directors or
by any shareholder entitled to vote for the election of Directors. No person,
other than a nominee proposed by the Board of Directors, may be nominated for
election as a director of the corporation unless such person shall have been
proposed in a written notice, delivered or mailed by first-class United States
mail, postage prepaid, to the Secretary of the corporation at its principal
office. In the case of a nominee proposed for election as a Director at an
annual meeting of shareholders, such written notice of a proposed nominee
shall be received by the Secretary of the corporation on or before the later
of (i) February 1, immediately preceding such annual meeting or (ii) the
sixtieth (60th) day prior to the first anniversary of the most recent annual
meeting of shareholders of the corporation held for the election of Directors;
provided, however, that if the annual meeting for the election of Directors in
any year is not held on or before the thirty-first (31st) day next following
such anniversary, then the written notice required by this subparagraph (A)
shall be received by the Secretary within a reasonable time prior to the date
of such annual meeting. In the case of a nominee proposed for election as a
Director at a special meeting of shareholders at which Directors are to be
elected, such written notice of a proposed nominee shall be received by the
Secretary of the corporation no later than the close of business on the
seventh day following the day on which notice of the special meeting was
mailed to shareholders. Each such written notice of a proposed nominee shall
set forth (1) the name, age, business or residence address of each nominee
proposed in such notice, (2) the principal occupation or employment of each
such nominee, and (3) the number of common shares of the corporation owned
beneficially and/or of record by each such nominee and the length of time any
such shares have been so owned.
(B) If a shareholder shall attempt to nominate one or more persons for
election as a Director at any meeting at which Directors are to be elected
without having identified each such person in a written notice given as
contemplated by, and/or without having provided therein the information
specified in, subparagraph (A) of this Section, each such attempted nomination
shall be invalid and shall be disregarded unless the person acting as chairman
of the meeting determines that the facts warrant the acceptance of such
nomination.
(C) At each annual meeting of shareholders, Directors shall be elected
to succeed the class of Directors whose term shall expire in that year, but if
the annual meeting is not held or if one or more of such Directors are not
elected thereat, they may be
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elected at a special at a special meeting called for that purpose. The
election of Directors shall be by ballot whenever requested by the presiding
officer of the meeting or by the holders of a majority of the voting shares
outstanding, entitled to vote at such meeting and present in person or by
proxy, but unless such request is made, the election shall be viva voce.
(This section 2.03, Paragraphs (A), (B) and (C) were adopted by
shareholder ratification at the Annual Meeting of Shareholders held on May 21,
1987.)
(D) No person shall be eligible to stand for election, who is 70 years
of age or older on the date of the election or the appointment.
(This Section 2.03 (D) was adopted by shareholder ratification at the
Annual Meeting of Shareholders held on May 23, 1996.)
SECTION 2.04. Removal. A Director or Directors may be removed from
office, with or without assigning any cause, only by the vote of the holders
of shares entitling them to exercise not less than 80% of the voting power of
the corporation to elect Directors in place of those to be removed. In case of
any such removal, a new Director may be elected at the same meeting for the
unexpired term of each Director removed. Failure to elect a Director to fill
the unexpired term of any Director removed shall be deemed to create a vacancy
in the Board.
SECTION 2.05. Vacancies. Vacancies in the Board may be filled in the
manner provided by law, the Articles or the Regulations.
SECTION 2.06. Meetings. A meeting of the Directors shall be held
immediately following the adjournment of each annual meeting of shareholders
at which Directors are elected, and notice of such meeting need not be given.
The Directors shall hold such other meetings as may from time to time be
called, and such other meetings of Directors may be called only by the
Chairman of the Board, the President, or any two Directors. All meetings of
Directors shall be held at the principal office of the corporation in Ohio, or
at such other place within or without the State of Ohio, as the Directors may
from time to time determine by a resolution. Meetings of the Directors may be
held through any communications equipment if all persons participating can
hear each other and participation in a meeting pursuant to this provision
shall constitute presence at such meeting.
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SECTION 2.07. Notice of Meetings. Notice of the time and place of each
meeting of Directors for which such notice is required by law, the Articles,
the Regulations or the By-Laws shall be given to each of the Directors by at
least one of the following methods:
(A) In a writing mailed not less than three days before such meeting and
addressed to the residence or usual place of business of a Director, as such
appears on the records of the corporation; and
(B) By telegraph, cable, radio, wireless or a writing sent or delivered
to the residence or usual place of business of a Director as the same appears
on the records of the corporation, not later than the day before the date on
which such meeting is to be held; or
(C) Personally or by telephone not later than the day before the date on
which such meeting is to be held.
Notice given to a Director by any one of the methods specified in the
Regulations shall be sufficient, and the method of giving notice to all
Directors need not be uniform. Notice of any meeting of Directors may be given
only by the Chairman of the Board, the President or the Secretary of the
corporation. Any such notice, need not specify the purpose or purposes of the
meeting. Notice of adjournment of a meeting of Directors need not be given if
the time and place to which it is adjourned are fixed and announced at such
meeting.
SECTION 2.08. Waiver of Notice. Notice of any meeting of Directors may
be waived in writing, either before or after the holding of such meeting, by
any Director, which writing shall be filed with or entered upon the records of
the meeting. The attendance of any Director at any meeting of Directors
without protesting, prior to or at the commencement of the meeting, the lack
of proper notice, shall be deemed to be a waiver by him of notice of such
meeting.
SECTION 2.09. Quorum. A majority of the whole authorized number of
Directors shall be necessary to constitute a quorum for a meeting of
Directors, except that a majority of the Directors in office shall constitute
a quorum for filing a vacancy in the Board. The act of a majority of the
Directors present at a meeting at which a quorum is present is the act of the
Board, except as otherwise provided by law, the Articles or the Regulations.
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SECTION 2.10. Executive Committee. The Directors may create an Executive
Committee or any other committee of Directors, to consist of not less than
three Directors, and may authorize the delegation to such Executive Committee
or other committees of any of the authority of the Directors, however
conferred, other than that of filling vacancies among the Directors or in the
Executive Committee or in any other committee of the Directors. The President
shall be an ex officio member of the Executive Committee.
Such Executive Committee or any other committee of Directors shall serve
at the pleasure of the Directors, shall act only in the intervals between
meetings of the Directors, and shall be subject to the control and direction
of the Directors. Such Executive Committee or other committee of Directors may
act by a majority of its members at a meeting or by a writing or writings
signed by all of its members.
Any act or authorization of an act by the Executive Committee or any
other committee within the authority delegated to it shall be as effective for
all purposes as the act or authorization of the Directors. No notice of a
meeting of the Executive Committee or of any other committee of Directors
shall be required. A meeting of the Executive Committee or of any other
committee of Directors may be called only by the Chairman of the Board or by a
member of such Executive or other committee of Directors.
SECTION 2.11. Compensation. Directors shall be entitled to receive as
compensation for services rendered and expenses incurred as Directors, such
amounts as the Directors may determine.
SECTION 2.12. By-Laws. The Directors may adopt, and amend from time
to time, By-Laws for their own government, which By-Laws shall not be
inconsistent with the law, the Articles or the Regulations.
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ARTICLE THREE
Officers
SECTION 3.01. Officers. The officers of the corporation to be elected by
the Directors shall be a Chairman of the Board, a President, a Secretary, a
Treasurer and such other officers and assistant officers as the Directors may
from time to time elect. The Chairman of the Board and President shall be
Directors. Officers need not be shareholders of the corporation, and may be
paid such compensation as the Board of Directors may determine. Any two or
more offices may be held by the same person, but no officer shall execute,
acknowledge, or verify any instrument in more than one capacity if such
instrument is required by law, the Articles, the Regulations or the By-Laws to
be executed, acknowledged, or verified by two or more officers.
SECTION 3.02. Tenure of Office. The officers of the corporation shall
hold office at the pleasure of the Directors. Any officer of the corporation
may be removed, either with or without cause, at any time, by the affirmative
note of a majority of all the Directors then in office; such removal, however,
shall be without prejudice to the contract rights, if any, of the person so
removed.
SECTION 3.03. Duties of the Chairman of the Board. The Chairman of the
Board shall preside at all meetings of the shareholders and at all meetings of
the Directors and shall have such other powers and perform such duties as the
Directors shall from time to time assign to him. The Chairman of the Board
shall, unless some other officer shall be specifically authorized by
resolution of the Directors, sign all certificates evidencing shares of the
corporation and all deeds, mortgages, bonds, contracts, notes and other
instruments requiring the signature of the chief executive officer of the
corporation.
(This Section 3.03 was adopted by ratification of the shareholders at
the Annual Meeting of the Shareholders held on May 22, 1986.)
SECTION 3.04. Duties of the President. The President shall perform such
duties as the Directors or the Chairman of the Board shall from time to time
assign to him. In the absence of the Chairman of the Board or in the event of
his disability or refusal to act, the President shall perform the duties of
the Chairman of the Board, and when so acting, shall have all of the powers of
and be subject to all restrictions upon the Chairman of the Board.
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(This Section 3.04 was adopted by ratification of the shareholders at
the Annual Meeting of the Shareholders held on May 22, 1986.)
SECTION 3.05. Duties of the Vice Presidents. In the absence of the
President or in the event of his inability or refusal to act, the Vice
President, if any, (or in the event there be more than one Vice President, the
Vice Presidents in the order designated, or in the absence of any designation,
then in the order of their election) shall perform the duties of the
President, and when so acting, shall have all the powers of and be subject to
all restrictions upon the President. The Vice Presidents shall perform such
other duties and have such other powers as the Board of Directors may from
time to time prescribe.
SECTION 3.06. Duties of the Secretary. It shall be the duty of the
Secretary, or of an Assistant Secretary, if any, in case of the absence or
inability to act of the Secretary, to keep minutes of all the proceedings of
the shareholders and the Directors and to make a proper record of the same,
which shall be attested by him; to sign all certificates for shares, and all
deeds, mortgages, bonds, contracts, notes and other instruments requiring his
signature on behalf of the corporation, to perform such other duties as may be
required by law, the Articles or the Regulations; to keep such books as may be
required by the Directors; to file all reports to states and to the federal
government; to perform such other and further duties as may from time to time
be assigned to him by the Directors or the President; and to deliver all
books, paper and property of the corporation in his possession to his
successor, or to the President.
SECTION 3.07. Duties of the Treasurer. The Treasurer, or an Assistant
Treasurer, if any, in case of the absence or inability to act of the
Treasurer, shall receive and safely keep in charge all money, bills, notes,
choses in action, securities, deeds, leases, mortgages and similar property
belonging to the corporation, and shall do with or disburse the same as
directed by the President or the Directors; shall keep an accurate account of
the finances and business of the corporation, including accounts of its
assets, liabilities, receipts, disbursements, gains, losses stated capital and
shares, together with such other accounts as may be required and hold the same
open for inspection and examination by the Directors; shall give bond in such
sum with such security as the Directors may require for the faithful
performance of his duties; shall, upon the expiration of his term of office,
deliver all money and other property of the corporation in his possession or
custody to his successor or the President; and shall perform such other duties
as from time to time may be assigned to him by the Directors.
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ARTICLE FOUR
Shares
SECTION 4.01. Certificates. Certificates evidencing ownership of shares
of the corporation shall be issued to those entitled to them. Each certificate
evidencing shares of the corporation shall bear a distinguishing number; the
signatures of the Chairman of the Board, the President, or a Vice President,
and of the Secretary or an Assistant Secretary (except that when any such
certificate is countersigned by an incorporated transfer agent or registrar,
such signatures may be facsimile, engraved, stamped or printed); and such
recitals as may be required by law. Certificates evidencing shares of the
corporation shall be of such tenor and design as the Directors may from time
to time adopt and may bear such recitals as are permitted by law.
SECTION 4.02. Transfers. Where a certificate evidencing a share or
shares of the corporation is presented to the corporation or its proper
agents with a request to register transfer, the transfer shall be registered
as requested if:
(1) An appropriate person signs on each certificate so presented or
signs on a separate document an assignment or transfer of shares evidenced by
each such certificate, or signs a power to assign or transfer such shares, or
when the signature of an appropriate person is written without more on the
back of each such certificate; and
(2) Reasonable assurance is given that the indorsement of each
appropriate person is genuine and effective; the corporation or its agents may
refuse to register a transfer of shares unless the signature of each
appropriate person is guaranteed by a commercial bank or trust company having
an office or a correspondent in the City of New York or by a firm having
membership in the New York Stock Exchange; and
(3) All applicable laws relating to the collection of transfer or
other taxes have been complied with; and
(4) The corporation or its agents are not otherwise required or
permitted to refuse to register such transfer.
SECTION 4.03. Transfer Agents and Registrars. The Directors may
appoint one or more agents to transfer or to register shares of the
corporation, or both.
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SECTION 4.04. Lost, Wrongfully Taken or Destroyed Certificates. Except as
otherwise provided by law, where the owner of a certificate evidencing shares
of the corporation claims that such certificate has been lost, destroyed or
wrongfully taken, the Directors must cause the corporation to issue a new
certificate in place of the original certificate if the owner:
(1) So requests before the corporation has notice that such original
certificate has been acquired by a bona fide purchaser; and
(2) Files with the corporation, unless waived by the Directors, an
indemnity bond, with surety or sureties satisfactory to the corporation, in
such sum as the Directors may, in their discretion, deem reasonably,
sufficient as indemnity against any loss or liability that the corporation may
incur by reason of the issuance of each such new certificate; and
(3) Satisfies any other reasonable requirements which may be imposed by
the Directors, in their direction.
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ARTICLE FIVE
Indemnification, Insurance and Similar Protection
(This entire Article Five was adopted by shareholder ratification at the
Annual Meeting of Shareholders held on May 21, 1987.)
SECTION 5.01. Mandatory Indemnification. The corporation shall indemnify
any officer or director of the corporation who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(including, without limitation, any action threatened or instituted by or in
the right of the corporation), by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, trustee, officer, employee or
agent of another corporation (domestic or foreign, nonprofit or for profit),
partnership, joint venture, trust or other enterprise, against expenses
(including, without limitation, attorneys' fees, filing fees, court reporters'
fees and transcript costs), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit
or proceeding if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation, and with
respect to any criminal action or proceeding, he had not reasonable cause to
believe his conduct was unlawful. A person claiming indemnification under this
Section 5.01 shall be presumed, in respect of any act or omission giving rise
to such claim for indemnification, to have acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal matter, to have had no
reasonable cause to believe his conduct was unlawful, and the termination of
any action, suit or proceeding by judgment, order settlement or conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, rebut
such presumption.
SECTION 5.02. Court-Approved Indemnification. Anything contained in
the Regulations or elsewhere to the contrary notwithstanding:
(A) the corporation shall not indemnify any officer or director of the
corporation who was a party to any completed action or suit instituted by or
in the right of the corporation to procure a judgment in its favor by reason
of the fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, trustee, officer, employee or agent of another corporation (domestic
or foreign, nonprofit or for profit), partnership, joint venture, trust or
other enterprise, in respect of any claim, issue or matter asserted in such
action or suit as to which he shall have
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been adjudged to be liable for gross negligence or misconduct (other than
negligence) in the performance of his duty to the corporation unless and only
to the extent that the Court of Common Pleas of Licking County, Ohio or the
court in which such action or suit was brought shall determine upon
application that, despite such adjudication of liability, and in view of all
the circumstances of the case, he is fairly and reasonably entitled to such
indemnity as such Court of Common Pleas or such other court shall deem proper;
and
(B) the corporation shall promptly make any such unpaid indemnification
as is determined by a court to be proper as contemplated by this Section 5.02.
SECTION 5.03. Indemnification for Expenses. Anything contained in the
Regulations or elsewhere to the contrary notwithstanding, to the extent that
an officer or director of the corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Section
5.01, or in defense of any claim, issue or matter therein, he shall be
promptly indemnified by the corporation against expenses (including, without
limitation, attorneys' fees, filing fees, court reporters' fees and transcript
costs) actually and reasonably incurred by him in connection therewith.
SECTION 5.04. Determination Required. Any indemnification required under
Section 5.01 and not precluded under Section 5.02 shall be made by the
corporation only upon a determination that such indemnification of the officer
or director is proper in the circumstances because he has met the applicable
standard of conduct set forth in Section 5.01. Such determination may be made
only (A) by a majority vote of a quorum consisting of directors of the
corporation who were not and are not parties to, or threatened with, any such
action, suit or proceeding, or (B) if such a quorum is not obtainable or if a
majority of a quorum of disinterested directors so directs, in a written
opinion by independent legal counsel other than an attorney, or a firm having
associated with it an attorney, who has been retained by or who has performed
services for the corporation, or any person to be indemnified, within the past
five years, or (C) by the shareholders, or (D) by the Court of Common Pleas of
Licking County, Ohio or (if the corporation is a party thereto) the court in
which such action, suit or proceeding was brought, if any; any such
determination may be made by a court under division (D) of this Section 5.04
at any time [including, without limitation, any time before, during or after
the time when any such determination may be requested of, be under
consideration by or have been denied or disregarded by the disinterested
directors under division (A) or by independent legal counsel under division
(B) or by the shareholders under division (C) of this Section 5.04]; and no
failure for any reason to make any such determination, and no decision for any
reason to deny any such determination, by the disinterested directors under
division (A) or
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by independent legal counsel under division (B) or by shareholders under
division (C) of this Section 5.04 shall be evidence in rebuttal of the
presumption recited in Section 5.01. Any determination made by the
disinterested directors under division (A) or by independent legal counsel
under division (B) of this Section 5.04 to make indemnification in respect of
any claim, issue or matter asserted in an action or suit threatened or brought
by or in the right of the corporation shall be promptly communicated to the
person who threatened or brought such action or suit, and within ten (10) days
after receipt of such notification such person shall have the right to
petition the Court of Common Pleas of Licking County, Ohio or the court in
which such action or suit was brought, if any, to review the reasonableness of
such determination.
SECTION 5.05. Advances for Expenses. (A) Expenses (including, without
limitation, attorneys' fees, filing fees, court reporters' fees and transcript
costs) incurred in defending any action, suit or proceeding referred to in
Section 5.01 shall be paid by the corporation as they are incurred in advance
of the final disposition of such action, suit or proceeding to or on behalf of
a director promptly as such expenses are incurred by him, but only if such
director shall first agree, in writing, to cooperate reasonably with the
corporation concerning the action, suit or proceeding and to repay all amounts
so paid in respect of any claim, issue or other matter asserted in such
action, suit or proceeding if it is proved by clear and convincing evidence in
a Court of competent jurisdiction that his action or failure to act involved
an act or omission undertaken with deliberate intent to cause injury to the
corporation or undertaken with reckless disregard for the best interests of
the corporation.
(B) Expenses (including, without limitation, attorneys' fees, filing
fees, court reporters' fees and transcript costs) incurred in defending any
action, suit or proceeding referred to in Section 5.01 shall be paid by the
corporation as they are incurred in advance of the final disposition of such
action, suit or proceeding to or on behalf of the trustee, officer, employee
or agent promptly as such expenses are incurred by him, but only if such
trustee, officer, employee or agent shall first agree in writing, to cooperate
reasonably with the corporation concerning the action, suit or proceeding and
to repay all amounts so paid in respect of any claim, issue or other matter
asserted in such action, suit or proceeding in defense of which he shall not
have been successful on the merits of otherwise:
(1) unless it shall ultimately be determined as provided in Section 5.04
that he is entitled to be indemnified by the corporation as provided under
Section 5.01; or
(2) if, in respect of any claim, issue or other matter asserted by or
in the right of the corporation in such action or
Page 17 of 20
<PAGE>
suit, he shall have been adjudged to be liable for gross negligence or
misconduct (other than negligence) in the performance of his duty to the
corporation, unless and only to the extent that the Court of Common Pleas of
Licking County, Ohio or the court in which such action or suit was brought
shall determine upon application that, despite such adjudication of liability,
and in view of all the circumstances, he is fairly and reasonably entitled to
all or part of such indemnification.
SECTION 5.06. Article Five Not Exclusive. The indemnification provided
by this Article Five shall not be exclusive of, and shall be in addition to,
any other rights granted to any person seeking indemnification under the law,
the Articles or any agreement, vote of shareholders or disinterested
directors, or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to
a person who has ceased to be an officer or director of the corporation and
shall inure to the benefit of the heirs, executors and administrators of such
a person.
SECTION 5.07. Insurance and Similar Protection. The corporation may
purchase and maintain insurance or furnish similar protection, including but
not limited to trust funds, letters of credit, or self-insurance, on behalf of
or for any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, trustee, officer, employee, or agent of another corporation
(domestic or foreign, nonprofit or for profit), partnership, joint venture,
trust or other enterprise, against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the obligation or the power to
indemnify him against such liability under the provisions of this Article
Five. Insurance may be purchased from or maintained with a person in which the
corporation has a financial interest.
SECTION 5.08. Certain Definitions. For purpose of this Article Five,
and as examples and not by way of limitation:
(A) A person claiming indemnification under this Article Five shall be
deemed to have been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Section 5.01, or in defense of any
claim, issue or other matter therein, if such action, suit or proceeding shall
be terminated as to such person, with or without prejudice, without the entry
of a judgment or order against him, without a conviction of him, without the
imposition of a fine upon him and without his payment or agreement to pay any
amount in settlement thereof (whether or not any such termination is based
upon a judicial or other determination of the lack of merit of the claims made
against him or otherwise results in a vindication of him); and
Page 18 of 20
<PAGE>
(B) References to an "other enterprise" shall include employee benefit
plans; references to a "fine" shall include any excise taxes assessed on a
person with respect to an employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee or agent with respect
to any employee benefit plan, its participants or beneficiaries; and a person
who acted in good faith and in a manner he reasonably believed to be in the
best interests of the participants and beneficiaries of an employee benefit
plan shall be deemed to have acted in a manner "not opposed to the best
interests of the corporation" within the meaning of that term as used in this
Article Five.
SECTION 5.09. Venue. Any action, suit or proceeding to determine a claim
for indemnification under this Article Five may be maintained by the person
claiming such indemnification, or by the corporation, in the Court of Common
Please of Licking County, Ohio. The corporation and (by claiming such
indemnification) each such person consent to the exercise of jurisdiction over
its or his person by the Court of Common Pleas of Licking County, Ohio in any
such action, suit or proceeding.
(This entire Article Five was adopted by shareholders ratification at
the Annual Meeting of Shareholders held on May 21, 1987.)
Page 19 of 20
<PAGE>
ARTICLE SIX
Miscellaneous
SECTION 6.01. Seal. The corporation shall have no seal.
SECTION 6.02. Amendments. The Regulations may be amended, or new
Regulations may be adopted, at a meeting of shareholders held for such
purpose, only by the affirmative vote of the holders of shares entitling them
to exercise not less than a majority of the voting power of the corporation on
such proposal, or without a meeting by the written consent of the holders of
shares entitling them to exercise not less than a majority of the voting power
of the corporation on such proposal; provided, however, (A) that the
affirmative vote of the holders of shares entitling them to exercise 80% of
the voting power on such proposal shall be required to amend, alter, change or
repeal Sections 2.02, 2.03 or 2.04 of Article Two, Article Five or this
Section 6.02 or to amend, alter change or repeal these Regulations in any way
inconsistent with the intent of the foregoing provisions, and (B) that with
respect to any other proposal, if any three Directors of the corporation shall
affirmatively vote against the amendment or new Regulations, the affirmative
vote or written consent of the holders of shares entitling them to exercise
not less than 80% of the voting power of the corporation shall be required to
adopt such proposal. The written objection of a Director to any such proposal
submitted to the Chairman of the Board, President or Secretary of the
corporation not less than three days before the meeting of shareholders at
which any such proposal is to be considered shall be deemed the affirmative
vote by such Director against the matter.
(This Section 6.02 was adopted by shareholder ratification at the Annual
Meeting of Shareholders held on May 21, 1987.)
SECTION 6.03. Action by Shareholders or Directors Without a Meeting.
Anything contained in the Regulations to the contrary not withstanding, any
action which may be authorized or taken at a meeting of the shareholders or of
the Directors or of a committee of the Directors, as the case may be, may be
authorized or taken without a meeting with the affirmative vote or approval
of, and in a writing or writings signed by, all the shareholders who would be
entitled to notice of a meeting of the shareholders held for such purpose, or
all the Directors, or all the members of such committee of the Directors,
respectively, which writings shall be filed with or entered upon the records
of the corporation.
Page 20 of 20
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