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EXHIBIT 1
$40,000,000 PRINCIPAL AMOUNT OF
[ ]% INSURED QUARTERLY NOTES DUE APRIL 1, 2021
DELTA NATURAL GAS COMPANY, INC.
FORM OF UNDERWRITING AGREEMENT
[
], 2006
Edward D. Jones & Co., L.P.
12555 Manchester Road
St. Louis, Missouri
63131
Ladies and Gentlemen:
Delta Natural Gas Company, Inc., a Kentucky corporation (the
"Company") confirms its agreement with Edward D. Jones & Co.,
L.P. (the
"Underwriter") as follows:
1. Description of Notes. The Company proposes to issue and sell
to
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the Underwriter $40,000,000 aggregate principal amount of [ ]%
Insured
Quarterly Notes due April 1, 2021 (the "Notes") described in the
Indenture
(as defined below). The Notes are more fully described in the
Registration
Statement and the Prospectus as hereinafter defined. The Notes will
be
issued by the Company under a certain Trust Indenture, dated as of
March 1,
2006 (the "Indenture"), between the Company and The Bank of New
York Trust
Company, N.A., as trustee (the "Trustee"). No amendments to the
Indenture
will be made prior to the Closing Date hereinafter referred to
without your
prior approval. The Company understands that the Underwriter
proposes to
make a public offering of the Notes as soon as it deems advisable
after this
Agreement has been executed and delivered.
2. Representations and Warranties of the Company. The Company
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represents, warrants and agrees as follows:
(a) The Company meets the requirements for use of Form S-3
under the Securities Act of 1933, as amended (the "Act") and
has
prepared and filed with the Securities and Exchange Commission
(the
"Commission") a registration statement on Form S-3
(Registration
Statement No. 333-[ ]) relating to $40,000,000 aggregate
principal
amount of its Notes 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
Underwriter. 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
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statement, as so amended, became effective under the Act and
any prospectus filed by the Company with the consent of the
Underwriter 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
Underwriter 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, and
all
documents incorporated by reference therein. The Commission has
not
issued any order preventing or suspending the use of any
Preliminary Prospectus.
(b) Each Preliminary Prospectus and each Permitted Free
Writing Prospectus (as defined below), at the time of the
filing
thereof, did not and will 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 or any
Permitted Free Writing Prospectus in reliance upon and in
conformity with written information furnished to the Company by
or
on behalf of the Underwriter specifically for inclusion
therein.
The Registration Statement has been declared effective by the
Commission.
(c) The Registration Statement and the Prospectus in all
material respects: (i) complied as of the date the Registration
Statement became effective, (ii) comply as of the date hereof
and
(iii) will comply as of the Closing Date, as hereinafter
defined,
with the requirements of the Act, the Securities Exchange Act
of
1934, as amended (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 (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 Underwriter 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-3 under the Act, at
the
time they were filed with the Commission, complied in all
material
respects with the requirements of 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 did 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.
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(e) Each Permitted Free Writing Prospectus (as defined
below) listed on Schedule I hereto did not and will not include
anything that conflicts with the information contained in the
Registration Statement, the Prospectus and each such Permitted
Free
Writing Prospectus, did not and 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,
except that the Company makes no warranty or representation to
the
Underwriter with respect to any statement or omissions made in
a
Permitted Free Writing Prospectus in reliance upon and in
conformity with information furnished in writing to the Company
by
the Underwriter expressly for use therein.
(f) At the determination date for purposes of the Notes
within the meaning of Rule 164(h) under the Act, the Company
was
not an "ineligible issuer" as defined in Rule 405 under the
Act.
(g) Deloitte & Touche LLP, the accountants whose report
forms a part of the Registration Statement and the Prospectus,
are
independent registered public accountants as required by the
Act
and the Rules and Regulations.
(h) The consolidated financial statements of the Company
and its subsidiaries incorporated by reference in the
Registration
Statement and forming a part of any Preliminary Prospectus or
the
Prospectus present fairly, and the financial statements forming
a
part of 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
forming a part
of 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 or incorporated by reference in the Registration
Statement
or the Prospectus under the Act or the Rules and Regulations
thereunder.
(i) 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 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.
(j) 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 their
properties
and to conduct the business in which they are engaged.
(k) The authorized and outstanding capitalization of the
Company as of December 31, 2005 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 December 31, 2005
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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 Notes have been validly and
sufficiently taken. When the Notes have been executed, issued,
delivered and paid for in the manner described in the
Indenture,
the Notes 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 Notes 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); the Notes conform to all statements relating thereto
in
the Registration Statement, and holders of the Notes will not
be
entitled to preemptive rights.
(l) The issued shares of capital stock of the Company's
subsidiaries have been duly authorized and validly issued, are
fully paid and nonassessable with no personal liability
attaching
to the ownership thereof and are owned entirely by the Company
free
and clear of any security interests, liens, encumbrances,
equities
or claims. The Company does not have any subsidiaries and does
not
own a material interest in or control, directly or indirectly,
any
other corporation, partnership, joint venture, association,
trust
or other business organization, except those set forth in
Exhibit
21 to the Annual Report on Form 10-K of the Company for the
fiscal
year ended June 30, 2005 ("Company's 10-K"). As used in this
Agreement, subsidiaries shall mean those subsidiaries set forth
in
Exhibit 21 to the Company's 10-K.
(m) 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.
(n) 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.
(o) The Company has duly authorized all necessary action
to be taken by it for the procurement of an irrevocable
financial
guarantee insurance policy (the "Insurance Policy") issued by
Ambac
Assurance Corporation (the "Insurer"), insuring the payment of
principal and interest on the Notes, when due.
(p) 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 Registration Statement or the
Prospectus) which might materially interfere with the conduct
of
the business of the Company and its subsidiaries taken as a
whole.
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(q) Except to the extent disclosed in the Registration
Statement or 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 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 Notes, compliance by the Company with
the
provisions of the Notes 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 Registration Statement or
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
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
Notes, the Indenture or this Agreement or otherwise adversely
affect the rights, duties or obligations of the Trustee, the
Underwriter or the holders of the Notes.
(r) 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.
(s) Except as described in the Registration Statement or
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.
(t) There are no contracts or other documents that are
required to be filed as exhibits to the Registration Statement
by
the Act or by the Rules and Regulations or as exhibits to any
reports filed by the Company under the Exchange Act that are
incorporated by reference in the Registration Statement and the
Prospectus, which have not been filed as exhibits to the
Registration Statement or any such reports incorporated by
reference in the Registration Statement and the Prospectus.
(u) Except as disclosed in the Registration Statement or
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
in
all material respects their respective businesses as presently
conducted and as described in the Registration Statement and
Prospectus and any document incorporated therein by reference.
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(v) Except as set forth in the Registration Statement and
the Prospectus, the
Company and its subsidiaries are not in
violation of or liable under any statute, any rule, regulation,
decision or order of any governmental agency or body or any
court,
domestic or foreign, relating to the use, disposal or release
of
hazardous or toxic substances or relating to the protection or
restoration of the environment or human exposure to hazardous
or
toxic substances (collectively, "environmental laws"), own or
operate no real property contaminated with any substance that
is
subject to any environmental laws, are not liable for any
off-site
disposal or contamination pursuant to any environmental laws,
or
are not subject to any claim relating to any environmental
laws,
and are not aware of any pending investigation that might lead
to
such a claim, which violation, contamination, disposal,
liability,
claim or investigation would individually or in the aggregate
have
a material adverse effect on the current or future consolidated
financial position, stockholders' equity or results of
operations
of the Company and its subsidiaries, taken together as a whole.
(w) No material 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.
(x) Each of the Company and its subsidiaries owns,
possesses or has the right to use all material 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.
(y) 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.
(z) 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.
(aa) Except as otherwise disclosed in the Registration
Statement or 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
Registration Statement or 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.
Any certificate signed by any officer of the Company and
delivered
to you or to counsel for the Underwriter shall be deemed a
representation
and warranty by the Company to the Underwriter as to the matters
covered
thereby.
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Notwithstanding anything to the contrary in this paragraph 2 or
any
other section or part of this Agreement, the Company makes no
warranties,
representations or agreements regarding: (i) the accuracy of any
information
in or incorporated by reference into the Registration Statement
or
prospectus regarding the Insurer or any affiliate or control entity
of the
Insurer; (ii) whether any information incorporated by reference
into the
Registration Statement or prospectus regarding the Insurer or any
affiliate
or control entity of the Insurer complied at the time the
information was
filed with the Commission or at any other time with the
requirements of the
Exchange Act, the Exchange Act Rules and Regulations or any other
state or
federal laws or regulations; (iii) whether any information in
or
incorporated by reference into the Registration Statement or
prospectus
regarding the Insurer or any affiliate or control entity of the
Insurer
meets the requirements for the Company's use of Form S-3 or is
otherwise
compliant with the Company's obligations under the Act, Rules
and
Regulations or any other state or federal laws or regulations in
connection
with the offering contemplated in this Agreement. As used in this
immediate
paragraph, "prospectus" includes Prospectus, each Preliminary
Prospectus,
prospectus or each Free Writing Prospectus (as those are defined in
this
Agreement). As used in this paragraph, "accuracy of any
information" means
that the information contains no material misstatement or material
omission
of fact.
3. Purchase, Sale and Delivery of Notes. On the basis of the
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representations and warranties contained in, and subject to the
terms and
conditions of, this Agreement, the Company agrees to sell to
the
Underwriter, and the Underwriter agrees to purchase from the
Company, the
Notes. The purchase price for the Notes shall be [ ]% of the
principal
amount thereof.
Delivery of the Notes, 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 Underwriter and the Company, such day and time of
delivery and
payment being herein called the "Closing Date." On the Closing
Date, the
Notes shall be delivered by the Company to the Underwriter 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 Underwriter for inspection
and
packaging in New York, New York, at least one full business day
prior to the
Closing Date, certificates for the Notes so to be delivered in good
delivery
form and in such denominations and registered in such names as
the
Underwriter shall have requested, all such requests to have been
made in
writing at least one full business day prior to the Closing
Date.
4. Free Writing Prospectuses.
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(a) The Company represents and agrees that, without the
prior consent of the Underwriter, it has not made and will not
make
any offer relating to the Notes that would constitute a "free
writing prospectus" as defined in Rule 405 under the Act, other
than a Permitted Free Writing Prospectus; the Underwriter
represents and agrees that, without the prior consent of the
Company, it has not made and will not make any offer relating
to
the Notes that would constitute a "free writing prospectus" as
defined in Rule 405 under the Act, other than a Permitted Free
Writing Prospectus or a free writing prospectus that is not
required to be filed by the Company pursuant to Rule 433; any
such
free writing prospectus (which shall include the pricing term
sheet
discussed in paragraph 4(b) hereof), the use of which has been
consented to by the Company and the Underwriter, is listed on
Schedule I
and herein called a "Permitted Free Writing Prospectus."
(b) The Company agrees to prepare a pricing term sheet,
substantially in the form of Schedule I hereto and approved by
the
Underwriter, and to file such pricing term sheet pursuant to
Rule
433(d) under the Act within the time period prescribed by such
Rule.
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(c) The Company and the Underwriter have complied and will
comply with the requirements of Rule 433 under the Act
applicable
to any free writing prospectus, including timely Commission
filing
where required and legending.
(d) The Company agrees that if at any time following
issuance of a Permitted Free Writing Prospectus any event
occurred
or occurs as a result of which such Permitted Free Writing
Prospectus would conflict with the information in the
Registration
Statement or the Prospectus or include an untrue statement of a
material fact or omit to state any material fact necessary in
order
to make the statements therein, in light of the circumstances
then
prevailing, not misleading, the Company will give prompt notice
thereof to the Underwriter and, if requested by the
Underwriter,
will prepare and furnish without charge to the Underwriter a
free
writing prospectus or other document, which will correct such
conflict, statement or omission; provided, however, that this
representation and warranty shall not apply to any statements
or
omissions in a Permitted Free Writing Prospectus made in
reliance
upon and in conformity with information furnished in writing to
the
Company by the Underwriter, expressly for use therein.
5. Covenants. The Company covenants and agrees with the
---------
Underwriter:
(a) To furnish promptly to the Underwriter and counsel for
the Underwriter 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 Underwriter 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, Permitted Free
Writing Prospectus, the Prospectus and any amended or
supplemented
Prospectus as the Underwriter may reasonably req
