-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CPI8jpGFr+nbbAZAWzd0IPi7fcTsqsGPtkV6VfydarKUgHuPYx8DpD5TnyWMznJr fbSh4MfjoNHxHEBsKY+pyw== 0000277595-98-000004.txt : 19980218 0000277595-98-000004.hdr.sgml : 19980218 ACCESSION NUMBER: 0000277595-98-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980213 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENERGEN CORP CENTRAL INDEX KEY: 0000277595 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 630757759 STATE OF INCORPORATION: AL FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-07810 FILM NUMBER: 98536955 BUSINESS ADDRESS: STREET 1: 2101 SIXTH AVE N CITY: BIRMINGHAM STATE: AL ZIP: 35203 BUSINESS PHONE: 2053262742 MAIL ADDRESS: STREET 1: 2101 SIXTH AVE N CITY: BIRNINGHAM STATE: AL ZIP: 35203 FORMER COMPANY: FORMER CONFORMED NAME: ALAGASCO INC DATE OF NAME CHANGE: 19851002 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALABAMA GAS CORP CENTRAL INDEX KEY: 0000003146 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 630022000 STATE OF INCORPORATION: AL FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-70466 FILM NUMBER: 98536956 BUSINESS ADDRESS: STREET 1: 2101 SIXTH AVE NORTH CITY: BIRMINGHAM STATE: AL ZIP: 35203 BUSINESS PHONE: 2053262742 MAIL ADDRESS: STREET 1: 2101 SIXTH AVE NORTH CITY: BIRMINGHAM STATE: AL ZIP: 35203 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED DECEMBER 31, 1997 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___ TO ___ Commission IRS Employer File State of Identification Number Registrant Incorporation Number 1-7810 Energen Corporation Alabama 63-0757759 2-38960 Alabama Gas Corporation Alabama 63-0022000 2101 Sixth Avenue North Birmingham, Alabama 35203 Telephone Number 205/326-2700 http://www.energen.com Alabama Gas Corporation, a wholly owned subsidiary of Energen Corporation, meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with reduced disclosure format pursuant to General Instruction H(2). Indicate by a check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have 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 February 10, 1998: Energen Corporation, $0.01 par value 14,506,601 shares Alabama Gas Corporation, $0.01 par value 1,972,052 shares ENERGEN CORPORATION AND ALABAMA GAS CORPORATION FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 1997 TABLE OF CONTENTS Page PART I: FINANCIAL INFORMATION (Unaudited) Item 1. Financial Statements (a) Consolidated Statements of Income of Energen Corporation 3 (b) Consolidated Balance Sheets of Energen Corporation 4 (c) Consolidated Statements of Cash Flows of Energen Corporation 6 (d) Statements of Income of Alabama Gas Corporation 7 (e) Balance Sheets of Alabama Gas Corporation 8 (f) Statements of Cash Flows of Alabama Gas Corporation 10 (g) Notes to Unaudited Financial Statements 11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 15 Selected Business Segment Data of Energen Corporation 18 PART II: OTHER INFORMATION Item 2. Changes in Securities 19 Item 4. Submission of Matters to a Vote of Security Holders 19 Item 6. Exhibits and Reports on Form 8-K 19 SIGNATURES 20 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF INCOME ENERGEN CORPORATION (Unaudited) Three months ended December 31, (in thousands, except share data) 1997 1996 Operating Revenues Natural gas distribution $ 95,755 $ 83,305 Oil and gas production activities 30,133 13,697 Total operating revenues 125,888 97,002 Operating Expenses Cost of gas 50,747 41,460 Operations and maintenance 34,141 30,102 Depreciation, depletion and amortization 17,836 10,397 Taxes, other than income taxes 10,022 7,088 Total operating expenses 112,746 89,047 Operating Income 13,142 7,955 Other Income (Expense) Interest expense (7,235) (4,945) Other, net 818 1,175 Total other expense (6,417) (3,770) Income Before Income Taxes 6,725 4,185 Income taxes 598 1,008 Net Income $ 6,127 $ 3,177 Basic Earnings Per Average Common Share* $ 0.42 $ 0.28 Diluted Earnings Per Average Common Share* $ 0.42 $ 0.28 Dividends Per Common Share* $ 0.31 $ 0.30 Average Common Shares Outstanding* 14,443,610 11,234,471 *Share data has not been restated to reflect a 2-for-1 stock split payable March 2, 1998 (see Note 3) The accompanying Notes are an integral part of these financial statements. CONSOLIDATED BALANCE SHEETS ENERGEN CORPORATION December 31, 1997 September 30, 1997 (in thousands) (unaudited) ASSETS Current Assets Cash and cash equivalents $ 8,729 $ 105,402 Accounts receivable, net of allowance for doubtful accounts of $3,532 at December 31, 1997, and $3,185 at September 30, 1997 92,504 70,676 Inventories, at average cost Storage gas 24,077 25,367 Materials and supplies 7,084 7,281 Liquified natural gas in storage 3,856 3,630 Deferred gas cost 16,677 2,512 Deferred income taxes 7,765 7,438 Prepayments and other 6,677 19,859 Total current assets 167,369 242,165 Property, Plant and Equipment Oil and gas properties, successful efforts method 513,361 454,210 Less accumulated depreciation, depletion and amortization 97,870 87,554 Oil and gas properties, net 415,491 366,656 Utility plant 589,555 583,630 Less accumulated depreciation 291,606 287,749 Utility plant, net 297,949 295,881 Other property, net 4,351 4,466 Total property, plant and equipment, net 717,791 667,003 Other Assets Deferred income taxes 2,138 1,144 Deferred charges and other 8,603 9,485 Total other assets 10,741 10,629 TOTAL ASSETS $ 895,901 $ 919,797 The accompanying Notes are an integral part of these financial statements. CONSOLIDATED BALANCE SHEETS ENERGEN CORPORATION (in thousands, December 31, 1997 September 30, 1997 except share data) (unaudited) CAPITAL AND LIABILITIES Current Liabilities Long-term debt due within one year $ 1,855 $ 1,855 Notes payable to banks 168,000 202,000 Accounts payable 51,601 49,196 Accrued taxes 20,893 18,300 Customers' deposits 17,718 16,399 Amounts due customers 7,619 7,347 Accrued wages and benefits 11,685 13,719 Other 22,535 21,935 Total current liabilities 301,906 330,751 Deferred Credits and Other Liabilities Other 8,621 8,301 Total deferred credits and other liabilities 8,621 8,301 Commitments and Contingencies -- -- Capitalization Preferred stock, cumulative $0.01 par value, 5,000,000 shares authorized -- -- Common shareholders' equity* Common stock, $0.01 par value; 30,000,000 shares authorized, 14,480,071 shares outstanding at December 31, 1997, and 14,398,109 shares outstanding at September 30, 1997 145 144 Premium on capital stock 188,822 185,841 Capital surplus 2,802 2,802 Retained earnings 114,003 112,356 Total common shareholders' equity 305,772 301,143 Long-term debt 279,602 279,602 Total capitalization 585,374 580,745 TOTAL CAPITAL AND LIABILITIES $ 895,901 $ 919,797 *Share data has not been restated to reflect a 2-for-1 stock split payable March 2, 1998 (see Note 3) The accompanying Notes are an integral part of these financial statements. CONSOLIDATED STATEMENTS OF CASH FLOWS ENERGEN CORPORATION (Unaudited) Three months ended December 31, (in thousands) 1997 1996 Operating Activities Net income $ 6,127 $ 3,177 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation, depletion and amortization 17,836 10,397 Deferred income taxes, net (1,375) 1,640 Deferred investment tax credits, net (117) (122) Net change in: Accounts receivable (21,828) (29,963) Inventories 1,261 (14) Deferred gas cost (14,165) (13,379) Accounts payable gas purchases 17,211 39,192 Accounts payable trade (14,806) 601 Other current assets and liabilities 15,932 1,191 Other, net 2,713 1,146 Net cash provided by operating activities 8,789 13,866 Investing Activities Additions to property, plant and equipment (68,556) (14,792) Payments on notes receivable 259 185 Other, net 174 470 Net cash used in investing activities (68,123) (14,137) Financing Activities Payment of dividends on common stock (4,480) (3,375) Issuance of common stock 1,141 1,654 Reduction of long-term debt -- (53) Payment of note payable issued to purchase U.S. Treasury securities (98,636) -- Net change in short-term debt 64,636 8,000 Net cash provided by (used in) financing activities (37,339) 6,226 Net change in cash and cash equivalents (96,673) 5,955 Cash and cash equivalents at beginning of period 105,402 17,074 Cash and Cash Equivalents at End of Period $ 8,729 $ 23,029 The accompanying Notes are an integral part of these financial statements. STATEMENTS OF INCOME ALABAMA GAS CORPORATION (Unaudited) Three months ended December 31, (in thousands) 1997 1996 Operating Revenues $ 95,755 $ 83,305 Operating Expenses Cost of gas 51,404 42,092 Operations and maintenance 25,000 24,205 Depreciation 6,197 5,759 Income taxes Current 2,148 22 Deferred, net (927) 966 Deferred investment tax credits, net (117) (122) Taxes, other than income taxes 7,252 6,328 Total operating expenses 90,957 79,250 Operating Income 4,798 4,055 Other Income Allowance for funds used during construction 85 136 Other, net 79 374 Total other income 164 510 Interest Charges Interest on long-term debt 2,210 2,211 Other interest expense 569 547 Total interest charges 2,779 2,758 Net Income $ 2,183 $ 1,807 The accompanying Notes are an integral part of these financial statements. BALANCE SHEETS ALABAMA GAS CORPORATION December 31, 1997 September 30, 1997 (in thousands) (unaudited) ASSETS Property, Plant and Equipment Utility plant $ 589,555 $ 583,630 Less accumulated depreciation 291,606 287,749 Utility plant, net 297,949 295,881 Other property, net 343 347 Current Assets Cash and cash equivalents 6,841 2,580 Accounts receivable Gas 57,059 36,098 Merchandise 2,457 2,001 Other 1,810 1,442 Allowance for doubtful accounts (3,500) (3,156) Inventories, at average cost Storage gas 24,077 25,367 Materials and supplies 5,428 5,391 Liquified natural gas in storage 3,856 3,630 Deferred gas cost 16,677 2,512 Deferred income taxes 6,016 5,675 Prepayments and other 5,789 6,696 Total current assets 126,510 88,236 Deferred Charges and Other Assets 5,103 5,917 TOTAL ASSETS $ 429,905 $ 390,381 The accompanying Notes are an integral part of these financial statements. BALANCE SHEETS ALABAMA GAS CORPORATION December 31, 1997 September 30, 1997 (in thousands, (unaudited) except share data) CAPITAL AND LIABILITIES Capitalization Common shareholder's equity Common stock, $0.01 par value; 3,000,000 shares authorized, 1,972,052 shares outstanding at December 31, 1997, and September 30, 1997 $ 20 $ 20 Premium on capital stock 31,682 31,682 Capital surplus 2,802 2,802 Retained earnings 109,077 106,894 Total common shareholder's equity 143,581 141,398 Cumulative preferred stock, $0.01 par value, 120,000 shares authorized, issuable in series - $4.70 Series -- -- Long-term debt 125,000 125,000 Total capitalization 268,581 266,398 Current Liabilities Notes payable to banks 25,000 11,000 Accounts payable Trade 45,575 28,923 Affiliated companies 8,265 4,984 Accrued taxes 20,202 16,745 Customers' deposits 17,718 16,399 Other amounts due customers 7,619 7,347 Accrued wages and benefits 4,299 3,879 Other 9,109 10,481 Total current liabilities 137,787 99,758 Deferred Credits and Other Liabilities Deferred income taxes 16,282 16,739 Accumulated deferred investment tax credits 3,012 3,130 Regulatory liability 3,470 3,651 Customer advances for construction and other 773 705 Total deferred credits and other liabilities 23,537 24,225 Commitments and Contingencies TOTAL CAPITAL AND LIABILITIES $ 429,905 $ 390,381 The accompanying Notes are an integral part of these financial statements. STATEMENTS OF CASH FLOWS ALABAMA GAS CORPORATION (Unaudited) Three months ended December 31, 1997 1996 (in thousands) Operating Activities Net income $ 2,183 $ 1,807 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 6,197 5,759 Deferred income taxes, net (927) 966 Deferred investment tax credits (117) (122) Net change in: Accounts receivable (21,441) (28,714) Inventories 1,027 (309) Deferred gas cost (14,165) (13,379) Accounts payable - gas purchases 17,211 39,192 Accounts payable - other trade (559) (2,215) Other current assets and liabilities 5,112 466 Other, net 677 (6) Net cash provided by (used in) operating activities (4,802) 3,445 Investing Activities Additions to property, plant and equipment (8,197) (6,403) Net advances from affiliates 3,281 13,727 Other, net (21) 421 Net cash provided by (used in) investing activities (4,937) 7,745 Financing Activities Payment of dividends on common stock -- (3,350) Net change in short-term debt 14,000 -- Net cash provided by (used in) financing activities 14,000 (3,350) Net change in cash and cash equivalents 4,261 7,840 Cash and cash equivalents at beginning of period 2,580 803 Cash and Cash Equivalents at End of Period $ 6,841 $ 8,643 The accompanying Notes are an integral part of these financial statements. NOTES TO UNAUDITED FINANCIAL STATEMENTS ENERGEN CORPORATION AND ALABAMA GAS CORPORATION 1. BASIS OF PRESENTATION All adjustments to the unaudited financial statements which are, in the opinion of management, necessary for a fair statement of the results of operations for the interim periods have been recorded. Such adjustments consisted of normal recurring items and immaterial adjustments. The consolidated financial statements and notes thereto should be read in conjunction with the financial statements and notes for the years ended September 30, 1997, 1996, and 1995, included in the 1997 Annual Report of Energen Corporation (the Company) on Form 10-K. Certain reclassifications were made to conform prior years' financial statements to the current quarter presentation. The Company's natural gas distribution business is seasonal in character and influenced by weather conditions. Results of operations for the interim periods are not necessarily indicative of the results which may be expected for the fiscal year. 2. REGULATORY As an Alabama utility, Alabama Gas Corporation (Alagasco) is subject to regulation by the Alabama Public Service Commission (APSC) which, in 1983, established the Rate Stabilization and Equalization (RSE) rate-setting process. RSE was extended with modifications in 1985, 1987 and 1990. On October 7, 1996, RSE was extended, without change, for a five-year period through January 1, 2002. Under the terms of that extension, RSE will continue after January 1, 2002, unless, after notice to the Company and a hearing, the Commission votes to either modify or discontinue its operation. Under RSE as extended, the APSC conducts quarterly reviews to determine, based on Alagasco s projections and fiscal year-to-date performance, whether Alagasco s return on equity for the fiscal year will be within the allowed range of 13.15 percent to 13.65 percent. Reductions in rates can be made quarterly to bring the projected return within the allowed range; increases, however, are allowed only once each fiscal year, effective December 1, and cannot exceed 4 percent of prior-year revenues. RSE limits the utility s equity upon which a return is permitted to 60 percent of total capitalization and provides for certain cost control measures designed to monitor Alagasco s operations and maintenance (O&M) expense. If the change in O&M expense per customer falls within 1.25 percentage points above or below the Consumer Price Index For All Urban Customers (index range), no adjustment is required. If, however, the change in O&M expense per customer exceeds the index range, three-quarters of the difference is returned to customers. To the extent the change is less than the index range, the utility benefits by one-half of the difference through future rate adjustments. Under RSE as extended, an $11.8 million annual increase in revenue became effective December 1, 1997. Alagasco calculates a temperature adjustment to customers' monthly bills to remove the effect of departures from normal temperature on Alagasco s earnings. The calculation is performed monthly, and the adjustments to customers bills are made in the same billing cycle the weather variation occurs. Alagasco s rate schedules for natural gas distribution charges contain a Gas Supply Adjustment (GSA) rider, established in 1993, which permits the pass-through to customers of changes in the cost of gas supply, including Gas Supply Realignment (GSR) surcharges imposed by Alagasco s suppliers resulting from changes in gas supply purchases related to the implementation of Federal Energy Regulatory Commission (FERC) Order 636. The APSC on October 7, 1996, issued an order providing for the refund to customers prior to January 31, 1997, of approximately $17 million of supplier refunds, including interest. The Company refunded these amounts to customers during January 1997. The refunds were collected from a variety of sources and most relate to the settlement of rate case and FERC Order 636 proceedings of Southern Natural Gas Company (Southern) as described herein. In accordance with APSC-directed regulatory accounting procedures, Alagasco in 1989 began returning to customers excess utility deferred taxes which resulted from a reduction in the federal statutory tax rate from 46 percent to 34 percent using the average rate assumption method. This method provides for the return to ratepayers of excess deferred taxes over the lives of the related assets. In 1993 those excess taxes were reduced as a result of a federal tax rate increase from 34 percent to 35 percent. Remaining excess utility deferred taxes of $2.1 million are being returned to ratepayers over approximately 13 years. At December 31, 1997, and September 30, 1997, a regulatory liability related to income taxes of $3.5 million and $3.7 million, respectively, was included in the consolidated financial statements. 3. SUBSEQUENT EVENTS On January 28, 1998, Energen announced a 2-for-1 split of the Company's common stock. The split will be in the form of a 100 percent stock dividend and will be payable on March 2, 1998, to shareholders of record on February 13, 1998. If the stock dividend had been applied retroactively, basic earnings per average common share would have been $.21 and $.14 for the three months ended December 31, 1997 and 1996, respectively. Effective January 30, 1998, the Restated Certificate of Incorporation of Energen Corporation was amended to increase Energen's authorized common stock, par value $0.01 per share, from 30,000,000 shares to 75,000,000 shares. On January 29, 1998, Taurus Exploration Inc. (Taurus) closed on a $17 million purchase of Gulf of Mexico properties from Chateau Oil and Gas Inc. The acquisition included an estimated 12.5 billion cubic feet (Bcf) of natural gas reserves in the Gulf of Mexico. Approximately 45 percent of the proved reserves are developed and producing, and Taurus plans to spend another $0.8 million over the next several years to bring on-line the 55 percent of behind-pipe reserves. Current net production is 7.1 million cubic feet a day. Taurus expects to sell approximately 20 percent of its share to a third party who will serve as the operating partner. 4. DERIVATIVE COMMODITY INSTRUMENTS Taurus periodically enters into derivative commodity instruments to hedge its exposure to price fluctuations on oil and gas production. Such instruments include regulated natural gas and crude oil futures contracts traded on the New York Mercantile Exchange and over-the-counter swaps and basis hedges with major energy derivative product specialists. These transactions are accounted for under the hedge method of accounting. Under this method, any unrealized gains and losses are recorded as a current receivable/payable and a deferred gain/loss. Realized gains and losses are deferred until the revenues from the related hedged volumes are recognized in the income statement. These realized deferred gains and losses are reflected in current liabilities or current assets, respectively. Cash flows from derivative instruments are recognized as incurred through changes in working capital. The Company had deferred gains of $1.6 million and deferred losses of $12.9 million on the balance sheet at December 31,1997 and September 30, 1997, respectively. At December 31, 1997, Taurus had entered into contracts and swaps for 30.5 Bcf of its remaining estimated 1998 flowing gas production at an average contract price of $2.24 per Mcf and 315 MBbl of its remaining estimated flowing oil production at an average contract price of $20.40 per barrel. The program has been extended into fiscal year 1999 with contracts and swaps in place for 16.5 Bcf of flowing gas production at an average contract price of $2.20 per Mcf. Realized prices are anticipated to be lower than hedged prices due to basis difference and other factors. All hedge transactions are subject to the Company's risk management policy, approved by the Board of Directors, which does not permit speculative positions. To apply the hedge method of accounting, management must demonstrate that a high correlation exists between the value of the derivative commodity instrument and the value of the item hedged. Management uses the historic relationships between the derivative instruments and the sales prices of the hedged volumes to ensure that a high level of correlation exists. 5. RECENT PRONOUNCEMENTS OF THE FASB During the first quarter, the Company adopted Statement of Financial Accounting (SFAS) No. 128, Earnings Per Share (EPS), which specifies computation, presentation, and disclosure requirements for EPS. SFAS No. 128 requires dual presentation of basic and diluted EPS on the face of the income statement and requires a reconciliation of the numerator and denominator of the basic EPS computation to that of the diluted computation (see Note 7). The Company also is required to adopt during fiscal 1998, SFAS No. 129, Disclosures of Information about Capital Structure, which establishes standards for disclosing information about an entity's capital structure; interim disclosure is not required. This adoption is not expected to have a material impact on the consolidated financial statements. In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income, which requires the reporting and display of comprehensive income and its components in an entity's financial statements, and SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, which specifies revised guidelines for determining an entity's operating segments and the type and level of financial information to be required. The Company is required to adopt these statements in fiscal year 1999. The impact of these pronouncements on the Company is currently being evaluated. 6. SUPPLEMENTAL CASH FLOW INFORMATION ENERGEN CORPORATION Three months ended December 31, 1997 1996 (in thousands) Interest paid $ 9,274 $ 4,825 Income taxes paid $ 137 $ 253 Noncash investing activities (capitalized depreciation and allowance for funds used during construction) $ 117 $ 182 ALABAMA GAS CORPORATION Three months ended December 31, 1997 1996 (in thousands) Interest paid $ 5,173 $ 3,986 Income taxes paid (refunded) $ (508) $ 1,954 Noncash investing activities (capitalized depreciation and allowance for funds used during construction) $ 117 $ 182 7. RECONCILIATION OF EARNINGS PER SHARE (in thousands, except Income Shares Per share* per share amounts) (Numerator) (Denominator) Amount 3 months ended December 31, 1997 Basic EPS* Income available to common stockholders $ 6,127 14,444 $ 0.42 Effect of Dilutive Securities Long-range performance shares 53 Non-qualified stock options 87 Diluted EPS* Income available to common stockholders $ 6,127 14,584 $ 0.42 plus assumed conversions 3 months ended December 31, 1996 Basic EPS* Income available to common stockholders $ 3,177 11,234 $ 0.28 Effect of Dilutive Securities Long-range performance shares 44 Non-qualified stock options 46 Diluted EPS* Income available to common stockholders $ 3,177 11,324 $ 0.28 plus assumed conversions *Share data has not been restated to reflect a 2-for-1 stock split payable March 2, 1998 (see Note 3) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Energen's net income totaled $6.1 million ($0.42 per share) for the three months ended December 31,1997, and compared favorably with net income of $3.2 million ($0.28 per share) recorded in the same period last year. Taurus Exploration Inc. (Taurus), Energen's oil and gas exploration and production subsidiary, realized net income of $3.8 million as compared to $1.5 million in the same period last year, primarily due to a 136 percent increase in oil and gas production volumes to 12.9 billion cubic feet equivalent (Bcfe). Taurus also benefited from increased nonconventional fuels tax credits, partially offset by increased interest expense. Alagasco, Energen's natural gas utility, earned $2.2 million during the first fiscal quarter. This $0.4 million increase from the same period last year primarily was due to Alagasco's earning within its allowed range of return on a higher level of equity representing investment in utility plant. Natural Gas Distribution: Natural gas distribution revenues increased $12.5 million for the quarter primarily due to increased residential sales volumes resulting from colder weather than in the prior year and an increase in charges recovered through the Gas Supply Adjustment (GSA) rider. Weather that was 10 percent colder than the same period last year contributed to a 9 percent increase in residential sales volumes and a 22 percent increase in cost of gas. Gas price fluctuations are passed through volumetrically to the customer via the Company's GSA rider. The temperature adjustment provision allows customer bills to be adjusted on a real-time basis so that temperature variances from normal do not affect Alagasco's operating margins. Operations and maintenance expenses increased slightly in the current year primarily to restore the bad debt reserve to a level appropriate for current receivable balances. A slight increase in depreciation expense primarily was due to normal growth of the utility's distribution system. Taxes other than income primarily reflect various state and local business taxes as well as payroll-related taxes. State and local business taxes are generally based on gross receipts and fluctuate accordingly. As discussed more fully in Note 2, Alagasco is subject to regulation by the APSC. On October 7,1996, the APSC issued an order to extend the Company's rate-setting mechanism through January 1, 2002. Under the terms of that extension, RSE will continue after January 1, 2002, unless, after notice to the Company and a hearing, the Commission votes to either modify or discontinue its operation. Oil and Gas Exploration and Production: Revenues from oil and gas production activities more than doubled in the current quarter to $30.1 million, primarily reflecting Taurus's prior-year property acquisitions. Total production volumes rose 136 percent to 12.9 Bcfe for the quarter. Natural gas production increased 127 percent to 10.3 Bcf. Oil volumes increased 65 percent to 259 MBbl. During 1997 Taurus acquired high BTU-content natural gas reserves in the San Juan Basin which yielded 176 MBbl in natural gas liquids in the current quarter. Taurus also benefited from higher realized gas prices. Gas sales prices increased 7 percent to $2.21 per Mcf. Oil prices, on the other hand, decreased 3 percent to $17.15 per barrel. Natural gas liquids sold for an average price of $9.38 per barrel. Taurus periodically enters into derivative commodity instruments to hedge its exposure to price fluctuations on oil and gas production. Such instruments include regulated natural gas and crude oil futures contracts traded on the New York Mercantile Exchange and over-the-counter swaps and basis hedges with major energy derivative product specialists. All hedge transactions are subject to the Company's risk management policy, approved by the Board of Directors, which does not permit speculative positions. At December 31, 1997, Taurus has entered into contracts and swaps for 30.5 Bcf of its remaining estimated 1998 flowing gas production at an average contract price of $2.24 per Mcf and 315 MBbl of its remaining estimated flowing oil production at an average contract price of $20.40 per barrel. The program has been extended into fiscal year 1999 with contracts and swaps in place for 16.5 Bcf of flowing gas production at an average contract price of $2.20 per Mcf. Realized prices are anticipated to be lower than hedged prices due to basis difference and other factors. O&M expenses increased $3.7 million for the quarter primarily due to significant growth in production and acquisition activity at Taurus. Lease operating expenses rose by $4.7 million. Exploration expense was lower by $0.5 million primarily due to the timing of exploratory efforts in the current period. Taurus's significantly higher production volumes generated the majority of the $7 million increase in DD&A for the quarter. In addition, the average depletion rate in the current year was $0.87 compared to $0.81 for the same period last year. Taurus's expense for taxes other than income primarily reflects production-related taxes which were $2 million higher this quarter due to increased production. Non-Operating Items: Interest expense for the Company increased $2.3 million in the quarter primarily due to the issuance of $85 million of Energen medium-term notes in July 1997 to fund growth at Taurus. The Company also increased borrowings under its short-term credit facilities for the same purpose. The Company's effective tax rates are lower than statutory federal tax rates primarily due to the recognition of nonconventional fuels tax credits and the amortization of investment tax credits. The Company's effective tax rates are expected to remain lower than statutory federal rates through December 31, 2002, as tax credits generated each year are expected to be fully recognized in the financial statements. Income tax expense decreased in the current quarter as the impact of higher consolidated pretax income was more than offset by significantly greater recognition of nonconventional fuels tax credits on an interim basis in the current year. Like many companies, Energen is in the process of evaluating its computer software to determine whether modifications will be required for it to function properly in the year 2000. Costs associated with evaluation and testing are being expensed as incurred. The Company has not yet fully determined the total cost of the project but does not anticipate any material impact on the consolidated financial statements. FINANCIAL POSITION AND LIQUIDITY Operating cash flow was $8.8 million compared to $13.9 million in the prior year. The Company benefited from increased net income caused by significantly higher oil and gas production; however, that increase was more than offset by decreased cash flows from other working capital items, which are highly influenced by throughput and timing of payments. The Company invested $68.1 million primarily to acquire oil and gas properties. In the first quarter, Taurus added $60.4 million in capital expenditures. Utility capital expenditures totaled $8.3 million and represented primarily normal system distribution expansion and support facilities. The Company used $37.3 million for financing activities in the first quarter. For Alabama shares tax planning purposes, the Company borrowed $98.6 million in September 1997 to invest in short-term federal obligations. The Treasuries matured in early October and the proceeds were used to repay the debt. This repayment of debt was offset by increased borrowings under Energen's short-term credit facilities incurred mainly to finance Taurus's acquisition and development strategy. FUTURE CAPITAL RESOURCES AND LIQUIDITY The Company plans to continue to implement its diversified growth strategy. Over the next five years, Taurus plans to invest approximately $750 million to acquire and develop producing activities and to participate in exploration and related development. In fiscal 1998, Taurus plans to spend approximately $165 million, including $100 million for property acquisitions. During the first quarter, Taurus spent $50.9 million on property acquisitions. It should be noted that Taurus's continued ability to invest in property acquisitions will be significantly influenced by industry trends as the producing property acquisition market has historically been cyclical. From time to time, Taurus also may be engaged in negotiations to sell, trade or otherwise dispose of previously acquired property. During the first quarter of 1998, Taurus acquired approximately 79 Bcfe of proved oil and natural gas reserves in the Permian Basin of west Texas from B.C. Oil and Gas Ltd. and certain affiliated companies for $43.3 million. More than half of the proved reserves are behind-pipe and undeveloped, and Taurus plans to spend an additional $17 million over the next two to three years to fully develop the behind-pipe, water flood and undeveloped reserve potential. Oil accounts for 70 percent of the estimated proved reserves. The properties include approximately 350 producing wells, of which Taurus will operate 248. Taurus also purchased an estimated 4.5 Bcfe of predominantly natural gas reserves in southwest Mississippi from Oxy USA Inc. for $7.1 million. Current net production is 5.9 MMcfd and 88 barrels of oil a day. To finance Taurus's investment program, the Company will continue to utilize its short-term credit facilities to supplement internally generated cash flow, with long-term debt and equity providing permanent financing. In December 1997, Energen filed a $400 million shelf registration for debt and common stock and intends to issue long-term debt under that registration during the second quarter. During the first quarter, Energen increased its available short-term credit facilities to $228 million to accommodate its growth plans. Depending upon the Company's level of activity in acquiring oil and gas properties, Energen may issue common equity during this fiscal year. Utility capital expenditures for normal distribution system renewal and expansion and support facilities could approximate $60 million in fiscal 1998. Alagasco also will maintain an investment in storage working gas which is expected to average approximately $24 million in 1998. The utility anticipates funding these capital requirements through internally generated capital and the utilization of short-term credit facilities. Forward-Looking Statements and Risks: Certain statements in this report, including statements of future plans, objectives, and expected performance of the Company and its subsidiaries, are forward-looking statements that are dependent on certain events, risks and uncertainties that may be outside their control which could cause actual results to differ materially from those anticipated. Some of these include, but are not limited to, economic and competitive conditions, inflation rates, legislative and regulatory changes, financial market conditions, future business decisions, and other uncertainties, all of which are difficult to predict. There are numerous uncertainties inherent in estimating quantities of proved oil and gas reserves and in projecting future rates of production and timing of development expenditures. The total amount or timing of actual future production may vary significantly from reserves and production estimates. In the event Taurus is unable to invest fully its planned acquisition expenditures, future operating revenues and proved reserves could be negatively affected. The drilling of exploratory wells can involve significant risk including that related to timing, success rates and cost overruns. These risks can be impacted by lease and rig availability, complex geology and other factors. Results of operations and cash flows also could be affected by future oil and gas prices. Although Taurus makes use of futures, swaps and fixed price contracts to mitigate risk, fluctuations in oil and gas prices may affect the Company's financial position and results of operations. OTHER Recent Pronouncements of the FASB During the first quarter, the Company adopted SFAS No. 128, Earnings Per Share, which specifies computation, presentation, and disclosure requirements for EPS. SFAS No. 128 requires dual presentation of basic and diluted EPS on the face of the income statement and requires a reconciliation of the numerator and denominator of the basic EPS computation to that of the diluted computation (see Note 7). The Company also is required to adopt during fiscal 1998, SFAS No. 129, Disclosures of Information about Capital Structure, which establishes standards for disclosing information about an entity's capital structure; although interim disclosure is not required. This adoption is not expected to have a material impact on the consolidated financial statements. In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income, which requires the reporting and display of comprehensive income and its components in an entity's financial statements, and SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, which specifies revised guidelines for determining an entity's operating segments and the type and level of financial information to be required. The Company is required to adopt these statements in fiscal year 1999. The impact of these pronouncements on the Company is currently being evaluated. SELECTED BUSINESS SEGMENT DATA ENERGEN CORPORATION (Unaudited) Three months ended December 31, (dollars in thousand, except sales price data) 1997 1996 Natural Gas Distribution Operating revenues Residential $ 62,377 $ 55,524 Commercial and industrial - small 23,494 19,454 Transportation 9,357 8,554 Other 527 (227) Total $ 95,755 $ 83,305 Gas delivery volumes (Mmcf) Residential 7,833 7,182 Commercial and industrial - small 3,456 3,036 Transportation 16,374 16,336 Total 27,663 26,554 Other data Depreciation and amortization $ 6,197 $ 5,759 Capital expenditures $ 8,314 $ 6,585 Operating income $ 5,902 $ 4,921 Oil and Gas Exploration and Production Operating revenues Natural gas $ 22,789 $ 9,386 Oil 4,445 2,785 Natural gas liquids 1,649 -- Other 1,250 1,526 Total $ 30,133 $ 13,697 Sales volume Natural gas (Mmcf) 10,304 4,534 Oil (Mbbl) 259 157 Natural gas liquids (Mbbl) 176 -- Average sales price Natural gas (Mmcf) $ 2.21 $ 2.07 Oil (barrel) $ 17.15 $ 17.70 Natural gas liquids (barrel) $ 9.38 $ -- Other data Depreciation, depletion and amortization $ 11,639 $ 4,638 Capital expenditures $ 60,359 $ 8,389 Exploration expenditures $ 123 $ 645 Operating income $ 7,541 $ 3,824 PART II. OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES Effective January 30, 1998, the Restated Certificate of Incorporation of Energen Corporation was amended to increase Energen's authorized common stock, par value $0.01 per share, from 30,000,000 shares to 75,000,000 shares. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS a. At the annual meeting of shareholders held on January 28, 1998, the Energen shareholders elected the following Directors to serve for three year terms expiring in 2001; Director Votes cast for Votes withheld Dr. Stephen D. Ban 12,008,837 546,064 Julian W. Banton 12,001,773 553,128 Wm. Michael Warren, Jr. 12,020,255 534,646 b. A proposed amendment to the Restated Certificate of Incorporation of Energen Corporation was submitted to a vote of the shareholders. The proposed amendment, which became effective January 30, 1998, increased Energen's authorized common stock, par value $0.01 per share, from 30,000,000 shares to 75,000,000 shares. The amendment passed with 10,275,233 shares of common stock voting in favor of the proposal, 2,153,431 shares voting against the proposal, and 126,237 shares abstaining. c. The shareholders approved the Energen Corporation 1997 Stock Incentive Plan. The Plan was approved with 9,466,573 shares of common stock voted in favor of the proposal, 1,824,034 shares voted against the proposal, 211,147 shares abstained, and 1,053,148 broker non-votes. d. The shareholders approved certain issuances of common stock under the Energen Corporation 1997 Deferred Compensation Plan. The proposal was approved with 10,663,055 shares of common stock voted in favor of the proposal, 600,754 shares voted against the proposal, 237,942 shares abstained, and 1,053,151 broker non-votes. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits 3(a) Articles of Amendment to the Restated Certificate of Incorporation, dated January 30, 1998. 3(b) Restated Certificate of Incorporation, as amended through January 30, 1998. 4(a) First Supplemental Indenture, dated as of September 5, 1997, between Energen Corporation and The Bank of New York Trustee, to Indenture dated as of January 1, 1992. 4(b) First Supplemental Indenture, dated as of September 5, 1997, between Energen Corporation and The Bank of New York Trustee, to Indenture dated as of March 1, 1993. 27.1 Financial data schedule of Energen Corporation (for SEC purposes only) 27.2 Financial data schedule of Alabama Gas Corporation (for SEC purposes only) b. Reports on Form 8-K No reports on Form 8-K were filed for the three months ended December 31,1997. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ENERGEN CORPORATION ALABAMA GAS CORPORATION February 11, 1998 By/s/ Wm. Michael Warren, Jr. Wm. Michael Warren, Jr. Chairman, President and Chief Executive Officer of Energen, Chairman and Chief Executive Officer of Alagasco February 11, 1998 By/s/ G. C. Ketcham G. C. Ketcham Executive Vice President, Chief Financial Officer and Treasurer of Energen and Alagasco February 11, 1998 By/s/ Grace B. Carr Grace B. Carr Controller of Energen February 11, 1998 By/s/ Paula H. Rushing Paula H. Rushing Vice President-Finance of Alagasco EX-3.A 2 ARTICLES OF AMENDMENT Exhibit 3(a) ARTICLES OF AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION OF ENERGEN CORPORATION TO THE HONORABLE JUDGE OF PROBATE, JEFFERSON COUNTY, ALABAMA: Pursuant to the provisions of Article 10 of Chapter 2B of Title 10 of the Code of Alabama of 1975 (Section 10-2B-10.01, et seq.), the undersigned corporation executes the following Articles of Amendment to its Restated Certificate of Incorporation: (1) The name of the corporation is Energen Corporation. (2) Section 4.01 of Article IV of the Restated Certificate of Incorporation of the said corporation shall be amended to read as follows: "4.01 The total number of shares of stock which the Corporation shall have authority to issue is as follows: (a) Five million (5,000,000) shares, par value of $0.01 per share, which are hereby designated as preferred stock (hereinafter called "Preferred Stock"). (b) Seventy-Five million (75,000,000) shares, par value of $0.01 per share, which are hereby designated as common stock (hereinafter called "Common Stock")." (3) The foregoing amendment to the Restated Certificate of Incorporation was adopted by the shareholders of the said Corporation on January 28, 1998 in the manner prescribed by the Alabama Business Corporation Act. (4) The common stock of the Corporation, par value $.01 per share, was the only voting group entitled to vote on the foregoing amendment. There were 14,476,686 shares of such common stock outstanding, and the holders of such shares were entitled to cast one vote per share, or an aggregate of 14,476,686 votes. The number of votes entitled to be cast with respect to the foregoing amendment by holders of the Corporation's common stock indisputably represented at the meeting of shareholders at which the foregoing amendment was adopted was 12,554,901. (5) The total number of votes cast for the amendment by the holders of the common stock of the Corporation was 10,275,233, the total number of votes cast against the amendment by the holders of the common stock of the Corporation was 2,153,431 and the number of votes cast for the amendment was sufficient for approval of the amendment by the holders of the common stock of the Corporation. Dated this ______ day of January, 1998. ENERGEN CORPORATION By_________________________ Wm. Michael Warren, Jr. Its Chairman of the Board of Directors Prepared by: Amy F. McIntyre 12th Floor, 2101 Sixth Avenue North Birmingham, AL 35203 EX-3.B 3 RESTATED CERTIFICATE OF INCORPORATION Exhibit 3(b) RESTATED CERTIFICATE OF INCORPORATION OF ENERGEN CORPORATION [As Amended through January 30, 1998] STATE OF ALABAMA ) ) COUNTY OF JEFFERSON ) TO THE HONORABLE JUDGE OF PROBATE, JEFFERSON COUNTY, ALABAMA: Pursuant to the provisions of Article 10 of Chapter 2B of Title 10 of the Code of Alabama of 1975 (Section 10-2A-110, et seq.), the undersigned corporation executes the following Restated Certificate of Incorporation: I. Name of Corporation: 1.01 The name of the corporation shall be Energen Corporation. II. Objects: 2.01 To manufacture, produce, buy, deal in, use, sell, distribute, furnish and supply gas; to construct, equip, use, operate and maintain works for holding, receiving, purifying and distributing gas, and all buildings, works, meters, pipes, fittings, machinery, apparatus and appliances convenient or necessary in connection therewith. 2.02 To carry on the business of a gas company in all its branches; to manufacture, use, deal in, render salable and sell all products, by-products and residual products obtained in the production of gas; to manufacture, buy, sell, rent and deal in all kinds of goods, wares, merchandise and personal property which may seem calculated directly or indirectly to promote the consumption of gas. 2.03 To manufacture, produce, buy, deal in, use, sell, distribute, furnish and supply petroleum, petroleum products and by-products; to construct, equip, use, operate and maintain works for holding, receiving, purifying and distributing petroleum, petroleum products and by-products, and all buildings, works, meters, pipes, fittings, machinery, apparatus and appliances convenient or necessary in connection therewith. 2.04 To acquire, buy, hold, own, sell, lease, exchange, dispose of, finance, deal in, construct, build, equip, improve, use, operate, maintain and work upon any and all kinds of works, plants, stations, systems, machinery, generators, apparatus, devices, supplies and articles of every kind pertaining to or in anywise connected with the production, use, distribution, regulation, control or application of light, heat, refrigeration, ice, water, water-power, electricity, gas, and any other force. 2.05 To acquire, buy, hold, own, sell, lease, exchange, dispose of, distribute, deal in, use, produce, furnish and supply light, heat, refrigeration, ice, water, water-power, electricity, and any other power or force. 2.06 To acquire, buy, hold, own, sell, lease, exchange and dispose of lands or the gas, oil and mineral rights in lands; to develop such lands by drilling gas and oil wells thereon; to produce therefrom gas, oil or other volatile or mineral substances; to produce, deal in, use, distribute, furnish and sell such gas or oil or other volatile or mineral substances; to install, construct, build, equip, improve, use, operate and maintain any and all manner of plants, machinery and appliances for any and all such purposes and the marketing and selling of such products. 2.07 To carry on the business of aiding in the construction and operations of plants and works, including those of gas companies, electric companies, and other public utility companies, and for or in connection with any or all of the foregoing purposes to furnish services and advice of engineers, auditors, executives and other experts. 2.08 To acquire, organize, assemble, develop, build up and operate, constructing and operating and other organizations and systems and to hire, sell, lease, exchange, turn over, deliver and dispose of such organizations, in whole or in part, and to enter into and perform contracts, agreements and undertakings of any kind in connection with any or all of the foregoing objects. 2.09 To purchase, acquire, hold, own, develop and dispose of lands and interests in and rights with respect to lands and waters and fixed and movable property, franchises, concessions, consents, privileges and licenses in its opinion useful or desirable for or in connection with any or all of the foregoing objects. 2.10 To acquire by purchase, subscription or otherwise, and to sell, use, assign, transfer, mortgage, pledge, exchange or otherwise dispose of, and to make and enter into all manner and kinds of contracts, agreements and obligations for the purchasing, acquiring, dealing in or selling of, real and personal property of every sort and description and wheresoever situated, including shares of stock, bonds, debentures, notes, scrip, securities, evidences of indebtedness, contracts or obligations of any corporation or corporations, association or associations, domestic or foreign, or of any firm or individual of the United States or any state, territory or dependency of the United States or any foreign country, or any municipality or local authority within or without the United States, and also to issue in exchange therefor stocks, bonds or other securities or evidences of indebtedness of the Corporation and while the owner or holder of any such property, to receive, collect and dispose of the interest, dividends and income on or from such property, and to possess and exercise in respect thereto all of the rights, powers and privileges of ownership, including voting rights. 2.11 To act as financial, business, managing and/or purchasing agent, general or special. 2.12 To carry on the business of general brokers and dealers in stocks, bonds, securities, mortgages and other choses in action, including the acquisition thereof by original subscription; to make investments in such property; and to hold, manage, mortgage, pledge, sell and dispose of the same in like manner as individuals may do. 2.13 To acquire by purchase or otherwise and to own, hold, buy, sell, donate, convey, lease, mortgage or incumber real or personal property both within and without the State of Alabama; to survey, sub-divide, plat, improve and develop lands for the purposes of sale or otherwise; to lay off such lands in streets, lanes, squares, parks and alleys, city blocks and lots and to sell or otherwise dispose of lots and to secure the purchase by purchase-money notes, mortgages, or otherwise, to open and improve the streets, lanes, parks, squares and alleys which may be laid off and to do and perform all things needful for the development and improvement of such lands for trade or business and to make donations of any of its lands when in the opinion of its Board of Directors the same may be desirable to further the Corporation's interest. 2.14 To engage in and carry on a general mercantile and trade business and to buy, manufacture, produce or otherwise acquire, hold, own, use, import, export, trade or otherwise deal in or turn to account, sell, lease, pledge or otherwise dispose of any and all kinds of goods, wares and merchandise and other articles of commercial and personal property without limit as to character or manner. 2.15 To borrow or otherwise raise moneys for any of the purposes of the Corporation from time to time and without limit as to amount, except as may be provided in a resolution or resolutions adopted by the shareholders of the Corporation, to issue bonds, debentures, notes or other obligations of any nature, or in any manner, and to secure the payment of the principal and interest of any thereof by mortgage upon, or pledge or conveyance or assignment in trust of, the whole or any part of the property of the Corporation, real and personal, whether at the time owned or thereafter acquired, including contract rights; and to sell, pledge, or otherwise dispose of such bonds, debentures, notes or other obligations of any nature of the Corporation for its corporate purposes. 2.16 To lend and advance money and extend credit, either with or without security, and to underwrite for investment, resale or otherwise stocks, bonds and other securities, and to aid the organization, financing, liquidation or reorganization of corporations, associations or firms. 2.17 To purchase or otherwise acquire and to hold, cancel, re-issue, sell or transfer shares of its own capital stock (so far as may be permitted by law) and its bonds, debentures, notes, scrip or other securities or evidences of indebtedness, provided that it shall not use its funds or property for the purchase of shares of its own capital stock when such use would cause any impairment of its capital, and provided, further, that shares of its own capital stock belonging to it shall not be voted directly or indirectly. 2.18 In connection with the purchase or lease or other acquisition by the Corporation of any property of whatever nature, to pay therefor in cash or property or to issue in exchange therefor shares of its capital stock, bonds, or other obligations or other securities of the Corporation and to assume any liabilities of any person, firm, association or corporation. 2.19 To sell, exchange or barter for other property, assign, transfer, lease as lessor, mortgage, pledge or otherwise dispose of or encumber any part or parts, or all, of the property or assets of the Corporation; to cease to conduct the business connected with any such property or assets so disposed of; to resume any business which it shall cease to conduct; and the Corporation may receive any form of; to resume any business which it shall cease to conduct; and the Corporation may receive any form of consideration for property so sold, exchanged, bartered or otherwise disposed of, including (but not excluding other forms of consideration) bonds, debentures and/or other obligations and/or shares of stock of any existing corporate or other entity or of any corporate or other entity in process of organization. 2.20 To endorse, or otherwise guarantee, or become a surety with respect to, or obligate itself for, or without becoming liable therefor, nevertheless, to pledge or mortgage all or any part of its properties to secure the payment of the principal of, and interest on, or either thereof, any bonds, including construction or performance bonds, debentures, notes, scrip, coupons, contracts or other obligations or evidences of indebtedness, or the performance of any contract, lease, construction, performance or other bond, mortgage, or obligation of any other corporation or association, domestic or foreign, or of any firm, partnership, joint venture, or other person whatsoever, in which this Corporation may have a lawful interest, or on account of, or with respect to, any transaction in which this Corporation shall receive any lawful consideration, advantage or benefit, on any account whatsoever. Irrespective of the relative net worth of the corporations, associations, or persons involved, and of the relative amounts of obligations involved, this Corporation shall be deemed to have a lawful interest in any corporation, association or person (A) which owns stock in this Corporation, or (B) which owns stock in another corporation which owns stock in this Corporation, or (C) in which this Corporation owns stock, or (D) in which another corporation owns stock which also owns stock in this Corporation, or (E) in which any one or more persons who own stock in this Corporation also own stock, or (F) which or who has entered into any contractual arrangement pursuant to which any such corporation or persons undertakes corresponding or like obligations of endorsement, guarantee, or suretyship, with respect to all or any such obligations or evidences of indebtedness, contracts of this Corporation, or which may engage with this Corporation, in the conduct of any joint venture or enterprise, or in the use of common facilities or services. 2.21 To engage in any commercial, financial, mercantile, industrial, manufacturing, marine, exploration, mining, agricultural, research, licensing, servicing or agency business not prohibited by law, and any, some or all of the foregoing. 2.22 In general, to do any or all of the things hereinbefore set forth to the same extent as natural persons could do, and as principal or agent or otherwise, and either alone or in conjunction with any other persons, firms, associations or corporations. 2.23 To exercise its powers in accomplishment of its objects and purposes in any part of the world and to have one or more offices out of the State of Alabama. 2.24 To do all acts and things which it shall find necessary or convenient to do in aid of or in connection with the transaction, promotion and carrying on of the objects and purposes hereinabove stated or necessary or incidental to the protection and benefit of the corporation, and in general to carry on any lawful business necessary or incidental to the attainment of the purposes of the Corporation, whether such business is similar in nature to the objects and powers hereinabove set forth or otherwise. 2.25 The Corporation's power to acquire property of any kind which it is or shall be authorized to acquire may be exercised directly or indirectly through the acquisition of stocks and bonds representative of such property and for the purpose of acquiring and holding either in perpetuity or for a limited period. The foregoing clauses shall be construed as powers and provisions for the regulation of the business and the conduct and affairs of the Corporation, the Directors and stockholders and each class of stockholders, and it is hereby expressly provided that the foregoing specific enumeration shall not be held to limit or restrict in any manner the powers of the Corporation. III. Location: 3.01 The location of the Corporation's principal office in the State of Alabama shall be: 1918 First Avenue North Birmingham, Alabama 35295 IV. Capital Stock: 4.01 The total number of shares of stock which the Corporation shall have authority to issue is as follows: (a) Five million (5,000,000) shares, par value of $0.01 per share, which are hereby designated as preferred stock (hereinafter called "Preferred Stock"). (b) Seventy-five million (75,000,000) shares, par value of $0.01 per share, which are hereby designated as common stock (hereinafter called "Common Stock"). 4.02 (a) The Preferred Stock may be issued in such one or more series as shall from time to time be created and authorized to be issued by the Board of Directors as hereinafter provided. The Board of Directors is hereby expressly authorized, by resolution or resolutions from time to time adopted providing for the issuance of Preferred Stock, to fix and determine, to the extent not fixed by the provisions hereinafter set forth, the relative rights and preferences of the shares of each series of Preferred Stock, including (but without limiting the generality of the foregoing) any of the following with respect to which the Board of Directors may make specific provisions: (i) the distinctive name and any serial designations; (ii) the annual dividend rate or rates and the dividend payment dates; (iii) with respect to the declaration and payment of dividends upon each series of the Preferred Stock, whether such dividends are to be cumulative or noncumulative, preferred, subordinate or equal to dividends declared and paid upon other series of the Preferred Stock or upon any other shares of stock of the Corporation, and the participating or other special rights, if any, of such dividends; (iv) the redemption provisions, if any, with respect to any series, and if any series is subject to redemption, the manner and time of redemption and the redemption price or prices; (v) the amount or amounts of preferential or other payment to which any series of Preferred Stock is entitled over any other series of Preferred Stock or over the Common Stock on voluntary or involuntary liquidation, dissolution or winding-up, subject to the provisions set forth in paragraph (c)(ii) of Section 4.02 hereof; (vi) any sinking fund or other retirement provisions and the extent to which the charges therefor are to have priority over the payment of dividends on or the making of sinking fund or other like retirement provisions for shares of any other series of Preferred Stock or for shares of the Common Stock; (vii) any conversion, exchange, purchase or other privileges to acquire shares of any other series of Preferred Stock or of the Common Stock; (viii) the number of shares of such series; and (ix) the voting rights, if any, of such series, subject to the provisions set forth in paragraph (c)(i) of Section 4.02 hereof. Each share of each series of Preferred Stock shall have the same relative rights and be identical in all respects with all the other shares of the same series. Before the Corporation shall issue any shares of Preferred Stock of any series authorized as hereinbefore provided, a statement setting forth a copy of the resolution or resolutions with respect to such series adopted by the Board of Directors of the Corporation pursuant to the foregoing authority vested in said Board shall be made, filed and recorded in accordance with the then applicable requirements, if any, of the laws of the State of Alabama, or, if no statement is then so required, a certificate shall be signed and acknowledged on behalf of the Corporation by its Chairman of the Board, President or a Vice-President and its corporate seal shall be affixed thereto and attested by its Secretary or an Assistant Secretary and such certificate shall be filed and kept on file at the principal office of the Corporation in the State of Alabama and in such other place or places as the Board of Directors shall designate. (b) The authority of the Board of Directors to provide for the issuance of any shares of the Corporation's stock shall include, but shall not be limited to, authority to issue shares of stock of the Corporation for any purpose and in any manner (including issuance pursuant to rights, warrants, or other options) permitted by law, for delivery as all or part of the consideration for or in connection with the acquisition of all or part of the stock of another corporation or of all or part of the assets of another corporation or enterprise, irrespective of the amount by which the issuance of such stock shall increase the number of shares outstanding (but not in excess of the number of shares authorized). (c) The following relative rights and preferences of the stock of the Corporation are fixed as follows: (i) Voting Rights. (A) Common Stock. At all elections of directors of the Corporation, and in respect of all other matters as to which the vote or consent of stockholders of the Corporation shall be required to be taken, the holders of the Common Stock shall be entitled to one (1) vote for each share held by them. (B) Preferred Stock. The holders of each series of the Preferred Stock shall have such voting rights as may be fixed by resolution or by resolutions of the Board of Directors providing for the issuance of each such series. (ii) Liquidation, Dissolution, etc. In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Corporation, the assets of the Corporation available for distribution to the stockholders (whether from capital or surplus) shall be distributed among those of the respective series of the outstanding Preferred Stock, if any, as may be entitled to any preferential amounts and among the respective holders thereof in accordance with the relative rights and preferences, if any, fixed and determined for each such series and the holders thereof by resolution or resolutions of the Board of Directors providing for the issue of each such series of the Preferred Stock; and after payment in full of the amounts payable in respect of the Preferred Stock, if any, the holders of any series of the outstanding Preferred Stock who are not entitled to preferential treatment pursuant to resolutions of the Board of Directors providing for the issue thereof and the holders of the outstanding Common Stock shall be entitled (to the exclusion of the holders of any series of the outstanding Preferred Stock entitled to preferential treatment pursuant to resolutions of the Board of Directors providing for the issue thereof) to share ratably in all the remaining assets of the Corporation available for distribution to its stockholders. A merger, consolidation or reorganization of the Corporation with or into one or more corporations, or a sale, lease or other transfer of all or substantially all the assets of the Corporation, that does not result in the termination of the enterprise and distribution of the assets to stockholders, shall not be deemed to constitute a liquidation, dissolution or winding- up of the Corporation within the meaning of this paragraph (c)(ii) of Section 4.02 hereof, notwithstanding the fact that the Corporation may cease to exist or may surrender its Certificate of Incorporation. (iii) Dividends. Dividends on any stock of the Corporation shall be payable only out of earnings or assets of the Corporation legally available for the payment of such dividends and only as and when declared by the Board of Directors. (d) No holder of any share or shares of any class of stock of the Corporation shall have any preemptive rights to subscribe for any shares of stock of any class of the Corporation now or hereafter authorized or for any securities convertible into or carrying any optional rights to purchase or subscribe for any shares of stock of any class of the Corporation now or hereafter authorized, provided, however, that no provision of the Certificate of Incorporation shall be deemed to deny to the Board of Directors the right, in its discretion, to grant to the holders of shares of any class of stock at the time outstanding the right to purchase or subscribe for shares of stock of any class or any other securities of the Corporation now or hereafter authorized at such prices and upon such other terms and conditions as the Board of Directors, in its discretion, may fix. 4.03 The amount of the capital stock with which the Corporation shall begin business shall be 1,000 shares of Common Stock. V. Officer to Receive Subscription: 5.01 The name and post office address of the officer designated by the incorporators to receive subscriptions to the capital of the Corporation are: Name: A. S. Lacy Post Office Address: 1918 First Avenue North Birmingham Alabama 35295 VI. Incorporators and Shares: The names and post office addresses of the incorporators and the number of shares of Common Stock subscribed for by each are as follows: Number of Shares of Common Stock Name Post Office Address Subscribed for Howard Higgins 1918 First Avenue North 334 Birmingham, Alabama 35295 Rex J. Lysinger 1918 First Avenue North 333 Birmingham, Alabama 35295 A. S. Lacy 1918 First Avenue North 333 Birmingham, Alabama 35295 Total 1,000 VII. Directors and Officers: 7.01 The number of directors constituting the initial board of directors of the Corporation shall be nine. Subject to Section 10.01 of Article X hereof, the number of directors of the Corporation shall be as provided in and fixed by the Bylaws of the Corporation. The names and post office addresses of the directors and the officers chosen for the first year are: Directors Name Post Office Address Emory O. Cunningham Post Office Box 2581 Birmingham, Alabama 35202 James S. M. French Post Office Box 247 Birmingham, Alabama 35201 Robert F. Henry Post Office Box 2230 Montgomery, Alabama 36103 Howard Higgins 1918 First Avenue North Birmingham, Alabama 35295 Norman R. Kerredge 1918 First Avenue North Birmingham, Alabama 35295 Rex J. Lysinger 1918 First Avenue North Birmingham, Alabama 35295 Harry H. Pritchett Post Office Box 2389 Tuscaloosa, Alabama 35401 Richard A. Puryear, Jr. 3700-A Country Club Drive Birmingham, Alabama 35213 Robert S. Weatherly 2865 Stratford Road Birmingham, Alabama 35213 Officers Officers Title Post Office Address Howard Higgins Chairman of the 1918 First Avenue N. Board and CEO Birmingham, AL 35295 Rex J. Lysinger President 1918 First Avenue N. Birmingham, AL 35295 A. S. Lacy Vice President and 1918 First Avenue N. Secretary Birmingham, AL 35295 Richard J. Patzke Vice President and 1918 First Avenue N. Treasurer Birmingham, AL 35295 VIII. Time Limit: 8.01 The duration of the Corporation shall be perpetual. IX. Certain Provisions Respecting Business Combinations: 9.01 Definitions. For the purposes of this Article IX: (a) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on June 11, 1984. (b) "Announcement Date" means, with respect to any Business Combination, the date of the first public announcement of such Business Combination. (c) A person shall be a "beneficial owner" of any Voting Stock: (i) which such person or any of its Affiliates or Associates beneficially owns, directly or indirectly; or (ii) which such person or any of its Affiliates or Associates has (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (B) the right to vote or direct the vote pursuant to any agreement, arrangement or understanding; or (iii) which is beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement, or understanding for the purpose of acquiring, holding, voting or disposing of any shares of capital stock of the Corporation. (d) For the purposes of determining whether a person is an Interested Stockholder pursuant to paragraph (k) of this Section 9.01 hereof, the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned by the Interested Stockholder through application of paragraph of Section 9.01 hereof, but shall not include any other shares of Voting Stock which may be issuable pursuant to any agreement, or upon exercise of conversion rights, warrants or options, or otherwise. (e) "Board" means the Board of Directors of the Corporation. (f) A "Business Combination" shall mean any one or more of the following: (i) any merger or consolidation-dation of the Corporation or any Subsidiary with or into (A) any Interested Stockholder or (B) any other corporation (whether or not itself an Interested Stockholder) which is, or after such merger or consolidation would be, an Affiliate of an Interested Stockholder; or (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Stockholder or any Affiliate of any Interested Stockholder of any assets of the Corporation or any Subsidiary having an aggregate Fair Market Value of $1,000,000 or more; or (iii) the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the Corporation or any Subsidiary to any Interested Stockholder or any Affiliate of any Interested Stockholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate Fair Market Value of $1,000,000 or more; or (iv) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of an Interested Stockholder or an Affiliate of any Interested Stockholder; or (v) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any similar transaction (whether or not with or into or otherwise involving an Interested Stockholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity securities, or securities convertible into equity securities, of the Corporation or any Subsidiary, including, without limitation, any class or series of Protected Stock, which is directly or indirectly owned by any Interested Stockholder or any Affiliate of any Interested Stockholder. (g) "Consummation Date" means, with respect to any Business Combination, the date on which such Business Combination is effected. (h) "Determination Date" means, with respect to any Interested Stockholder, the date on which such Interested Stockholder first became an Interested Stockholder. (i) "Disinterested Director" means any member of the Board who is unaffiliated with, and not a nominee of, the Interested Stockholder and was a member of the Board prior to the time that the Interested Stockholder became an Interested Stockholder, and any successor of a Disinterested Director who is a member of the Board and who is unaffiliated with, and not a nominee of, the Interested Stockholder and was recommended to succeed a Disinterested Director by a majority of Disinterested Directors on the Board at the time of such recommendation. (j) "Fair Market Value" means (i) in the case of stock, the highest closing sale price during the thirty-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange, Inc. Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, Inc., or, if such stock is not listed on the New York Stock Exchange, Inc., on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the thirty-day period preceding the date in question as reported by the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by a majority of the Disinterested Directors in good faith; and (ii) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined by a majority of the Disinterested Directors in good faith. (k) "Interested Stockholder" shall mean, in respect of any Business Combination, any person (other than the Corporation) who or which, as of the date of the first public announcement of such Business Combination, or on the day immediately prior to the consummation of any such Business Combination: (i) is the beneficial owner, directly or indirectly, of ten percent (10%) or more of the voting power of the outstanding Voting Stock; or (ii) is an Affiliate of the Corporation and at any time within two years prior thereto was the beneficial owner, directly or indirectly, of ten percent (10%) or more of the voting power of the then outstanding Voting Stock; or (iii) is an assignee of or has otherwise succeeded to any shares of Voting Stock of the Corporation which were at any time within the two-year period immediately prior to the date in question beneficially owned by any Interested Stockholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933. (l) A "person" shall mean any individual, firm, corporation or other entity. (m) "Protected Stock" means all Voting Stock and all other shares of capital stock of the Corporation having, or which may have upon the happening of some contingency, the right to vote for the election of some or all of the directors of the Corporation, regardless of whether at the time in question such shares then have a present right to so vote. (n) "Subsidiary" means any corporation of which a majority of any class of equity security is owned, directly or indirectly, by the Corporation. (o) "Voting Stock" means, at any time, all shares of capital stock of the Corporation entitled to vote generally in the election of directors, which shares shall be considered for the purpose of the vote required by this Article IX as one class. (p) In the event of any Business Combination in which the Corporation survives, the phrase "other consideration to be received" as used in clauses (i) and (ii) of paragraph (b) of 9.03 of this Article IX shall include the shares of Common Stock and/or the shares of any other class of outstanding Protected Stock retained by the holders of such shares. 9.02 Higher Vote for Certain Business Combinations. In addition to any affirmative vote required by law or this Certificate of Incorporation, and except as otherwise expressly provided in 9.03 of this Article IX, any Business Combination shall require the affirmative vote of the holders of at least eighty percent (80%) of the then outstanding shares of Voting Stock. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that some lesser percentage may be specified, by law or under the rules of, or in any agreement with, any United States securities exchange registered under the Securities Exchange Act of 1934, or any successor act thereto, on which any of the Voting Stock is listed, or otherwise. 9.03 When Higher Vote Is Not Required. The provisions of 9.02 of this Article IX shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote, if any, as is required by law and any other Article of this Certificate of Incorporation, if all of the conditions specified in either of the following paragraphs (a) and (b) are met: (a) Approval by the Disinterested Directors. The Business Combination shall have been approved by a majority of the Disinterested Directors. (b) Price and Procedure Requirements. All of the following conditions shall have been met: (i) Common Stock. The aggregate amount of the cash and the Fair Market Value as of the Consummation Date of consideration other than cash to be received by holders of the Common Stock of the Corporation in such Business Combination, computed on a per share basis, shall be at least equal to the higher of the following: (A) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Stockholder for any shares of Common Stock acquired by the Interested Stockholder (i) within the two-year period immediately prior to the Announcement Date or (II) in the transaction or transactions by which the Interested Stockholder became an Interested Stockholder, whichever is higher; or (B) the Fair Market Value per share of the Common Stock on the Announcement Date or the Determination Date, whichever is higher. (ii) Protected Stock. The aggregate amount of cash and the Fair Market Value as of the Consummation Date of consideration other than cash to be received per share by holders of shares of any other class of outstanding Protected Stock regardless of whether the Interested Stockholder has previously acquired any shares of a particular class of such Protected Stock shall be at least equal to the highest of the following: (A) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Stockholder for any shares of such class of Protected Stock acquired by the Interested Stockholder (i) within the two-year period immediately prior to the Announcement Date or (II) in the transaction or transactions by which the Interested Stockholder became an Interested Stockholder, whichever is higher; (B) the highest preferential amount per share to which the holders of shares of such class of Protected Stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation; or (C) the Fair Market Value per share of such class of Protected Stock on the Announcement Date or the Determination Date, whichever is higher. (iii) Form of Consideration. The consideration to be received by holders of a particular class or series of outstanding Protected Stock (including Common Stock) shall be in cash or in the same form as the Interested Stockholder has paid for shares of such class of Protected Stock prior to the Consummation Date. If the Interested Stockholder has paid for shares of any class of Protected Stock with varying forms of consideration, the form of consideration for such class of Protected Stock shall be either cash or the form used to acquire the largest number of shares of such class of Protected Stock previously acquired by it. (iv) Maintain Dividends. After such Interested Stockholder has become an Interested Stockholder and prior to the consummation of such Business Combination: (A) except as approved by a majority of the Disinterested Directors, there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) on any outstanding Preferred Stock of the Corporation; and (B) there shall have been (i) no reduction in the annual rate of dividends paid on the Common Stock except as necessary to reflect any subdivision of the Common Stock, except as approved by a majority of the Disinterested Directors, and (II) an increase in such annual rate of dividends as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding shares of the Common Stock unless the failure so to increase such annual rate is approved by a majority of the Disinterested Directors. (v) Acquisition of Additional Shares. After such Interested Stockholder has become an Interested Stockholder and prior to the consummation of such Business Combination, such Interested Stockholder shall not have become the beneficial owner of any additional shares of Voting Stock except as part of the transaction which results in such Interested Stockholder becoming an Interested Stockholder. (vi) No Disproportionate Benefits. After such Interested Stockholder has become an Interested Stockholder, such Interested Stockholder shall not have received the benefit, directly or indirectly (except proportionately as a stockholder), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the Corporation, whether in anticipation of or in connection with such Business Combination or otherwise. (vii) Furnish Information. A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to all stockholders of this Corporation at least 30 days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or any such subsequent provisions). 9.04 Powers of Board of Directors. A majority of the Disinterested Directors of the Corporation shall have the power and duty to determine for the purposes of this Article IX on the basis of the information known to them after reasonable inquiry, (1) the number of shares of Voting Stock beneficially owned by any person, (2) whether a person is an Interested Stockholder or is an Affiliate or Associate of another person, (3) whether a person has an agreement, arrangement or understanding with another as to the matters referred to in paragraph (C) of Section 9.01 of this Article IX, (4) whether the assets which are the subject of any Business Combination have, or the consideration to be received for the issuance or transfer of securities by the Corporation or any Subsidiary in any Business Combination has, an aggregate Fair Market Value of $1,000,000 or more, or (5) whether the requirements of paragraph (a) or (b) of Section 9.03 of this Article IX have been met with respect to any Business Combination. 9.05 No Effect on Fiduciary Obligations of Interested Stockholders. Nothing contained in this Article IX shall be construed to relieve any Interested Stockholder from any fiduciary obligation imposed by law. 9.06 Amendment, Repeal, Etc. Notwithstanding any other provisions of this Certificate of Incorporation or the Bylaws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, this Certificate of Incorporation or the Bylaws of the Corporation), the affirmative vote of the holders of at least eighty percent (80%) of the shares of the then outstanding Voting Stock shall be required to amend or repeal, or adopt any provisions inconsistent with, this Article IX of this Certificate of Incorporation. X. Board of Directors: 10.01 (a) Number, election and terms. All corporate powers shall be exercised by or under the authority of, and the business and affairs of the Corporation shall be managed under the direction of, a Board of Directors which, except as otherwise fixed by or pursuant to the provisions of Article IV hereof relating to the rights of the holders of any class or series of Preferred Stock to elect additional directors under specified circumstances, shall consist of not less than nine (9) nor more than fifteen (15) persons. The exact number of directors within the minimum and maximum limitations specified in the preceding sentence shall be fixed from time to time by the Board of Directors pursuant to a resolution adopted by a majority of the entire Board of Directors. At the annual meeting of stockholders of the Corporation held in 1985, the directors, other than those who may be elected by the holders of any class or series of Preferred Stock, shall be divided into three classes, as nearly equal in number as possible, with the term of office of the first class of directors to expire at the annual meeting of stockholders of the Corporation to be held in 1986, the term of office of the second class of directors to expire at the annual meeting of stockholders of the Corporation to be held in 1987 and the term of office of the third class of directors to expire at the annual meeting of stockholders of the Corporation to be held in 1988. At each annual meeting of stockholders of the Corporation following such initial classification and election, and except as otherwise so fixed by or pursuant to the provisions of Article IV hereof relating to the rights of the holders of any or series of Preferred Stock to elect additional directors under specified circumstances, directors elected to succeed those directors whose terms expire at such annual meeting shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders of the Corporation after their election. (b) Vacancies and Newly Created Directorships. Subject to the rights of the holders of any series of Preferred Stock then outstanding, any vacancy occurring in the Board of Directors may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the Board of Directors. A director elected to fill a vacancy shall be elected to serve until the next annual meeting of stockholders. Any directorship to be filled by reason of an increase in the number of directors shall be filled by election at an annual meeting or at a special meeting of stockholders called for that purpose, unless applicable law then permits such directorship to be filled by the affirmative vote of a majority of the remaining directors (even though less than a quorum of the Board of Directors). No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. (c) Continuance in Office. Notwithstanding the foregoing provisions of Section 10.01 hereof, any director whose term of office has expired shall continue to hold office until his successor shall be elected and qualify. (d) Removal. Subject to the rights of the holders of any class or series of Preferred Stock then outstanding, any director, or the entire Board of Directors, may be removed from office at any time, with or without cause, but only by the affirmative vote of the holders of at least eighty percent (80%) of the voting power of all of the shares of the Corporation then entitled to vote for the election of directors. (e) Amendment, repeal, etc. Notwithstanding any other provisions of this Certificate of Incorporation or the Bylaws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, this Certificate of Incorporation or the Bylaws of the Corporation), the affirmative vote of the holders of at least eighty percent (80%) of the voting power of all of the shares of the Corporation then entitled to vote for the election of directors shall be required to amend or repeal, or to adopt any provision inconsistent with, Section 10.01 hereof. 10.02 In furtherance, not in limitation, of the powers conferred upon the Board of Directors by statute, the Board of Directors is expressly authorized, without any vote or other action by stockholders other than such as at the time shall be expressly required by statute applicable to such action, to exercise in a manner not inconsistent with any of the provisions of the Certificate of Incorporation all of the powers, rights and privileges of the Corporation (whether expressed or implied in this Certificate of Incorporation or conferred by statute) and do all acts and things which may be done by the Corporation, and particularly, among other things: (a) Subject to Section 9.06 of Article IX and paragraph (e) of Section 10.01 hereof, to make, alter and repeal Bylaws of the Corporation, subject to the power of the stockholders to alter or repeal Bylaws made by the Board of Directors, which action by the directors shall fully protect third parties in dealing with the Corporation; provided, however, that the Board of Directors may not alter, amend or repeal any Bylaw establishing what constitutes a quorum at any meeting of the stockholders of the Corporation; (b) To determine, subject to the provisions of Article IX hereof, whether any, and if any, what part, of the net income of the Corporation or of its net assets in excess of its capital shall be declared in dividends and paid to the stockholders and whether or not in cash or capital stock of the Corporation or in other property, and generally to determine and direct the use and disposition of any such net income or any such excess of net assets over capital; and to fix the times for the declaration and payment of dividends; (c) From time to time, to fix the amount to be reserved over and above the capital stock of the Corporation paid in and to determine and direct how amount so reserved shall be used; (d) To determine from time to time at what times and places and under what conditions and regulations the accounts and books of the Corporation, or any of them, shall be open to the inspection of stockholders; and no stockholders shall have any right to inspect any account or book or document of the Corporation except as conferred by the laws of the State of Alabama or authorized by resolution of the Board of Directors or of the stockholders; (e) From time to time, and without other limit as to amount, except as may be provided in a resolution or resolutions adopted by the stockholders of the Corporation, to borrow or otherwise raise moneys for any of the purposes of the Corporation; to authorize the issue of bonds, debentures, notes, or other obligations of the Corporation, of any nature, or in any manner, and to authorize the creation of mortgages upon, or the pledge or conveyance or assignment in trust of, the whole or any part of the property of the Corporation, real or personal, whether at the time owned or thereafter acquired, including contract rights, to secure the payment of any of such bonds, debentures, notes or other obligations and the interest thereon; and to authorize the sale or pledge or other disposition of such bonds, debentures, notes or other obligations of the Corporation for its corporate purposes; (f) To provide, subject to the requirements of law and the bylaws of the Corporation, for the holding of stockholders and Directors meetings within or without the State of Alabama at such places as may be from time to time designated by resolution of the Board of Directors and to provide for an office or offices and for the keeping of the books of the Corporation (subject to the provisions of the statute) within or without the State of Alabama; (g) By resolution adopted by majority vote of all the Directors of the Corporation as at the time fixed by its bylaws, to designate three or more of their number to constitute an executive committee, which, to the extent provided in such resolution or in the bylaws of the Corporation, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation, and may have power to authorize the seal of the Corporation to be affixed to all papers which may require it, and by like resolution, from time to time, to constitute other committees out of their number, with such powers as shall be provided in such resolutions or in the bylaws of the Corporation; (h) Any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting, if prior to such action a written consent thereto is signed by all members of the Board or such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board or committee; (i) To exercise such further powers as may be conferred by the bylaws of the Corporation in addition to the powers and authority expressly conferred in the foregoing or by law. XI. Limitation of Liability: 11.01 A director of the Corporation shall not be liable to the Corporation or its shareholders for money damages for any action taken, or failure to take action, as a director, except for (i) the amount of a financial benefit received by such director to which such director is not entitled; (ii) an intentional infliction of harm by such director on the Corporation or its shareholders; (iii) a violation of Section 10-2B-8.33 of the Code of Alabama of 1975 or any successor provision to such section; (iv) an intentional violation by such director of criminal law; or (v) a breach of such director's duty of loyalty to the Corporation or its shareholders. If the Alabama Business Corporation Act, or any successor statute thereto, is hereafter amended to authorize the further elimination or limitation of the liability of a director of a corporation, then the liability of a director of the Corporation, in addition to the limitations on liability provided herein, shall be limited to the fullest extent permitted by the Alabama Business Corporation Act, as amended, or any successor statute thereto. The limitation on liability of directors of the Corporation contained herein shall apply to liabilities arising out of acts or omissions occurring subsequent to the adoption of this Article XI and, except to the extent prohibited by law, to liabilities arising out of acts or omissions occurring prior to the adoption of this Article XI. Any repeal or modification of this Article XI by the shareholders of the Corporation shall be prospective only and shall not adversely affect any limitation on the liability of a director of the Corporation existing at the time of such repeal or modification. XII. General Provisions 12.01 Capital surplus, paid-in surplus and premiums on stock of the Corporation now existing or hereafter created shall not be available for the payment of dividends other than liquidating dividends. 12.02 All persons who shall acquire stock in the Corporation shall acquire it subject to the provisions of this Certificate of Incorporation. 12.03 So far as not otherwise expressly provided by the laws of the State of Alabama, the Corporation shall be entitled to treat the person in whose name any share is registered as the owner thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in said share on the part of any other person, whether or not the Corporation shall have notice thereof. 12.04 Attached hereto, marked Exhibit "A" and made a part hereof, is a statement, under oath, made by A. S. Lacy, the officer or agent authorized by the incorporators to receive subscriptions to the capital stock of the Corporation subscribed for and the amount thereof which has been paid in. There is also attached hereto, marked Exhibit "B" and made a part hereof, a true and correct copy of the subscription list of the Corporation showing the amount of capital stock subscribed for by the incorporators and the manner in which such subscriptions are provided to be discharged. The board of directors of the Corporation adopted a resolution with respect to the restatement of the certificate of incorporation of the corporation on July 19, 1984. The foregoing restated certificate of incorporation of the Corporation sets forth all of the operative provisions of the Certificate of Incorporation of the Corporation, correctly sets forth without change the corresponding provisions of the Certificate of Incorporation of the Corporation as heretofore amended and supersedes the original Certificate of Incorporation of the Corporation and all amendments thereto. Dated this 20th day of July, 1984. ENERGEN CORPORATION By /s/ Rex J. Lysinger Its Chairman of the Board of Directors and President and /s/ A. S. Lacy Its Secretary STATE OF ALABAMA ) ) COUNTY OF JEFFERSON ) Before me, the undersigned authority in and for said County in said State, personally appeared Rex J. Lysinger known to me, who being first duly sworn doth depose and say that he is the Chairman of the Board of Directors and President of Energen Corporation, that he signed the foregoing Restated Certification of Incorporation of said corporation as Chairman of the Board of Directors and President of said corporation and with full authority and that the statements made in the foregoing Restated Certification of Incorporation of said corporation are true and correct. /s/ Rex J. Lysinger Rex J. Lysinger Subscribed and sworn before me on this 20th day of July, 1984, in witness whereof I hereunto subscribe my name and attach the seal in my office. Margaret G. Priola Notary Public [NOTARIAL SEAL] My Commission Expires: 4/20/85 EXHIBIT "A" STATE OF ALABAMA ) ) COUNTY OF JEFFERSON ) Before me, Evelyn E. Pulley, a Notary Public in and for said county in said state, personally appeared A. S. Lacy, who is known to me, and who, being by me first duly sworn according to law, deposed and said that he is the officer or agent designated and authorized by the incorporators of Energen Corporation, an corporation proposed to be incorporated under the laws of the State of Alabama, to receive the subscription to the capital stock of said corporation; that the amount of capital stock of said corporation that has been paid in cash is One Thousand Dollars ($1,000.00) which amount is at least twenty percent (20%) of the stock subscribed; that a true copy of the subscription list of capital stock of said corporation and the price paid in cash therefor by each subscriber is attached hereto, marked Exhibit "B" and made a part hereof; and that affiant now holds said cash for delivery to said corporation, upon completion of the organization thereof. /s/ A. S. LACY A. S. Lacy Subscribed and sworn to before me this 26th day of October, 1978. /s/ Evelyn E. Pulley Notary Public in and for the County of Jefferson, Alabama My Commission expires: March 16, 1980 EXHIBIT "B" SUBSCRIPTION LIST OF THE CAPITAL STOCK OF ENERGEN CORPORATION We, the undersigned, do hereby respectively subscribe for and agree to take and pay in cash for the number of shares of common stock of the par value of One Dollar ($1.00) per share of Energen Corporation, a corporation proposed to be organized under the laws of the State of Alabama, that is set opposite our respective signatures. IN WITNESS WHEREOF, each of the undersigned subscribers has signed his name hereto, all opposite the number of shares subscribed for by each of the undersigned, this 19th day of October, 1978. NUMBER AMOUNT OF PAID SHARES IN CASH /s/ Howard Higgins 334 $334.00 Howard Higgins /s/ Rex J. Lysinger 333 $333.00 Rex J. Lysinger /s/ A. S. Lacy 333 $333.00 A. S. Lacy EX-4.A 4 8% DEBENTURES Exhibit 4(a) ENERGEN CORPORATION and THE BANK OF NEW YORK Trustee FIRST SUPPLEMENTAL INDENTURE Dated as of September 5, 1997 $20,000,000 8% Debentures Due February 1, 2007 THIS FIRST SUPPLEMENTAL INDENTURE dated as of September 5, 1997, between ENERGEN CORPORATION, an Alabama corporation ("Corporation"), and THE BANK OF NEW YORK, a New York banking corporation ("Trustee"), W I T N E S S E T H: WHEREAS, the Corporation and Boatmen's Trust Company, a Missouri corporation ("Boatmen's"), have heretofore executed and delivered that certain Indenture, dated as of January 1, 1992 (the "1992 Indenture"), pursuant to which the Corporation's 8% Debentures Due February 1, 2007 (the "Debentures") were issued; and WHEREAS, the Trustee has succeeded Boatmen's as the trustee under the Indenture pursuant to Section 8.09 of the Indenture; and WHEREAS, the Corporation has requested that the 1992 Indenture be amended in certain respects as more fully set forth herein (the "Amendments") and solicited the written consent of the Holders of the Debentures to the Amendments; and WHEREAS, there is presently outstanding $18,704,000 principal amount of the Debentures; and WHEREAS, in accordance with Section 10.01 of the 1992 Indenture, approval of the Amendments requires the written consent of the Holders of greater than $9,352,000 principal amount of the Debentures; and WHEREAS, the Holders of greater than $9,352,000 principal amount of the Debentures have consented in writing to the Amendments; and WHEREAS, the Corporation and the Trustee desire to execute and deliver this First Supplemental Indenture to the 1992 Indenture to evidence the Amendment of the 1992 Indenture; NOW, THEREFORE, in consideration of the foregoing premises and covenants and for other good and valuable consideration, each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Debentures: Section 1. Definitions. Except as provided herein, all definitions of terms contained in Section 1.01 and Section 1.02 of the 1992 Indenture are incorporated herein by reference. Section 2. Amendment of 1992 Indenture. (a) Elimination of Section 5.05 of the 1992 Indenture. The 1992 Indenture is hereby amended by deleting Section 5.05 of the 1992 Indenture in its entirety. (b) Addition of Article IV-A to the 1992 Indenture. The 1992 Indenture is hereby amended by adding thereto following Article IV thereof a new Article IV-A, which shall read as follows: ARTICLE IV-A EFFECT OF RATING DECLINE Section 4A-01. Definitions. For purposes of this Article, the following terms shall have the meanings set forth in this Section 4A.01: "Lowest Investment Grade" shall mean a rating of BBB- by S&P, Baa 3 by Moody's or the equivalent of such rating by any other Rating Agency; if either S&P or Moody's should modify its rating categories, "Lowest Investment Grade" with respect to such agency shall be the rating generally recognized as the lowest investment grade rating by such agency. "Debentures to be Redeemed" means all of the Debentures then outstanding in the case of a Mandatory Repurchase Event, or all Debentures as to which a proper and timely Exercise Notice has been given in the case of a Put Event. "Exercise Notice" shall mean a notice in writing by a Holder of such Holder's exercise of a Put Right as provided in Section 4A.02. "Mandatory Repurchase Event" shall mean either (i) a rating of the Debentures by one or more Rating Agencies that is lower than the Lowest Investment Grade, or (ii) failure of the Corporation to obtain a rating for the Debentures from a Rating Agency within 60 days following any date on which the Debentures are not rated by at least one Rating Agency. "Moody's" shall mean Moody's Investors Service, Inc. and its successors. "Put Event" shall mean a rating of the Debentures by one or more Rating Agencies at the Lowest Investment Grade. "Put Right" shall mean the right of a Holder to have such Holder's Debentures redeemed following a Put Event. "Rating Agency" shall mean Moody's or S&P, or if neither Moody's nor S&P shall make a rating on the Debentures publicly available, a nationally recognized securities rating agency or agencies, as the case may be, selected by the Corporation which shall be substituted for Moody's and S&P. "Repurchase Date" shall mean the date that is 100 days after the public notice of the occurrence of a Put Event or a Mandatory Repurchase Event, and thereafter, in the case of a Put Event, each February 1 and August 1 occurring more than 100 days after a Put Event (each such February 1 and August 1, a "Subsequent Repurchase Date"), unless, on the 70th day prior to any such Subsequent Repurchase Date, the Debentures are rated by all Rating Agencies higher than the Lowest Investment Grade. "Repurchase Price" with respect to any Debenture shall mean the following prices (expressed as percentages of principal amount of the Debentures), plus accrued interest to the Repurchase Date: If redeemed during the 12-month period beginning February 1: Year Percentage 1997 103% 1998 103% 1999 102% 2000 101% 2001 until maturity 100% "S&P" shall mean Standard & Poor's Corporation and its successors. Section 4A.02. Put Right of Holders Upon a Put Event. In the event that there occurs at any time a Put Event, each Holder of the Debentures shall have the Put Right, at the Holder's option and in the manner set forth in Section 4A.07, to require the Corporation to redeem all or any part of such Holder's Debentures on each Repurchase Date at the Repurchase Price; provided, however, that Debentures redeemed in part will be redeemed only in integral multiples of $1,000 principal amount. Section 4A.03. Redemption of Debentures upon a Mandatory Repurchase Event. In the event there occurs at any time a Mandatory Repurchase Event, the Debentures shall be redeemed in full by the Corporation on the Repurchase Date at the Repurchase Price. Section 4A.04. Notice to Trustee. On or before the twenty- eighth day after the occurrence of a Put Event or a Mandatory Repurchase Event, the Corporation shall notify the Trustee of such event. Section 4A.05. Notice to Holders. Notice of each Repurchase Date with respect to the Debentures shall be given or caused to be given by the Corporation to each Holder of the Debentures on or before the thirty-third day after the occurrence of a Mandatory Repurchase Event or a Put Event and not less than 60 days prior to each Subsequent Repurchase Date in the case of a Put Event. The notice as to Repurchase Date shall describe briefly the Put Event or the Mandatory Repurchase Event, as the case may be, and the rights of the Holders resulting therefrom and shall state: (a) The Repurchase Date; (b) the Repurchase Price; (c) the place or places where such Debentures are to be surrendered for payment of the Repurchase Price; and (d) in the case of a Put Event: (1) the date by which Debentures are to be surrendered in order to be repurchased; (2) a description of the procedure which a Holder must follow to exercise a Put Right; and (3) that exercise of the option to elect redemption is irrevocable. At the Corporation's request, the Trustee shall give notice of the Repurchase Date in the Corporation's name and at its expense. No failure of the Corporation to give the foregoing notice shall limit any Holder's right to exercise a Put Right or to have such Holder's Debentures redeemed following a Mandatory Repurchase Event. Section 4A.06. Deposit of Repurchase Price. By the Repurchase Date, the Corporation shall deposit with the Paying Agent an amount of money sufficient to pay the Repurchase Price of the Debentures which are to be redeemed on that date. Principal and interest on the Notes to be redeemed shall be considered paid on the Repurchase Date if the Trustee or any Paying Agent holds on the Repurchase Date money sufficient to pay all principal and interest then due. Section 4A.07. Exercise of Put Right by Holder. To exercise the Put Right set forth in Section 4A.02, the Holder of such Debentures must deliver at least thirty days prior to the applicable Repurchase Date the Exercise Notice to the Trustee together with the Debentures with respect to which the Put Right is being exercised, duly endorsed for transfer. If any Debenture so delivered is, at the option of the Holder, to be redeemed only in part, such Exercise Notice from the Holder shall state the principal amount of the Debenture which is to be redeemed. The written notice given by any Holder pursuant to this Section 4A.07 shall be irrevocable. If the Debentures are in the form of a Global Security at the time a Put Right is exercised, the Exercise Notice may be made by delivering such notice to the Depository, in the case of a Participant which is the Beneficial Owner of an interest in such Global Security, or to the Participant through whom the Beneficial Owner owns such interest, in form satisfactory to the Participant, in either case in sufficient time for the Exercise Notice to be delivered to the Depository (in the case of a Beneficial Owner which is not a Participant) and by the Depository to the Trustee. The Exercise Notice shall specify the principal amount of the interest in the Global Security to be redeemed. An Exercise Notice in form satisfactory to a Participant, together with certification by the Participant that it holds the interest on behalf of the Person giving the Exercise Notice, shall be provided to the Depository by a Participant and the Depository will forward the Exercise Notice to the Trustee. Exercise Notices shall be in form satisfactory to the Trustee. The Company will have no obligation to redeem an interest in the Global Security as to which the Exercise Notice is not delivered to the Trustee by the Depository at least thirty days prior to the applicable Repurchase Date. Section 4A.08. Debentures Payable on Repurchase Date. The Debentures so to be redeemed shall, on the applicable Repurchase Date, become due and payable at the Repurchase Price applicable thereto and from and after such date (unless the Corporation shall default in the payment of the Repurchase Price) such Debentures shall cease to bear interest. Upon surrender of any such Debenture for redemption, such Debenture shall be paid by the Corporation at the Repurchase Price, provided, however, that installments of interest payable on or prior to such Repurchase Date shall be payable to the Holders of such Debentures registered as such at the close of business on the relevant record date for payment of such interest according to their terms. If any Debentures shall not be paid upon surrender thereof for redemption, the principal shall, until paid, bear interest from the Repurchase Date at the rate prescribed therefor in such Debentures. Section 4A.09. Debentures Redeemed in Part. In the case of a Put Event, any Debenture which at the option of the Beneficial Owner is to be redeemed only in part shall be surrendered to the Trustee (with, if the Corporation or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Corporation and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Corporation shall execute, and the Trustee shall authenticate and deliver to the Holder of such Debenture without service charge, a new Debenture or Debentures, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Debenture so surrendered. Section 4A.10. Substitute Rating Agency. Should either S&P or Moody's or both cease to rate the Debentures, the Corporation shall, as soon as practicable but in any event not more than 60 days thereafter, obtain a rating for the Debentures by another Rating Agency. Section 3. Confirmation of 1992 Indenture. All the terms, covenants, and conditions of the 1992 Indenture, as amended hereby, are hereby in all respects ratified and confirmed, and the 1992 Indenture as so amended shall continue in full force and effect. [The remainder of this page is left blank intentionally.] IN WITNESS WHEREOF, the Corporation has caused this First Supplemental Indenture to be executed in its corporate name and on its behalf by its executive vice president and treasurer and its corporate seal to be hereunto affixed and attested by its assistant secretary, and the Trustee has caused this First Supplemental Indenture to be executed in its corporate name and on its behalf by a duly authorized officer, and the Corporation and the Trustee have caused this instrument to be dated as of September 5, 1997. Dated: September 12, 1997 ENERGEN CORPORATION ("Corporation") (SEAL) By /s/ G.C. Ketcham Its Executive Vice President and Treasurer Attest /s/ J.D. Woodruff Its Assistant Secretary Dated: September 24, 1997 THE BANK OF NEW YORK ("Trustee") By /s/ Marie Trimboli Its Assistant Treasurer EX-4.B 5 SERIES 1993 NOTES Exhibit 4(b) ENERGEN CORPORATION and THE BANK OF NEW YORK Trustee FIRST SUPPLEMENTAL INDENTURE Dated as of September 5, 1997 $15,000,000 Series 1993 Notes THIS FIRST SUPPLEMENTAL INDENTURE (the "First Supplemental Indenture") dated as of September 5, 1997, between ENERGEN CORPORATION, an Alabama corporation ("Corporation"), and THE BANK OF NEW YORK, a New York banking corporation ("Trustee"), W I T N E S S E T H: WHEREAS, the Corporation and Boatmen's Trust Company, a Missouri corporation ("Boatmen's"), have heretofore executed and delivered that certain Indenture, dated as of March 1, 1993 (the "1993 Indenture"), pursuant to which the Corporations's Series 1993 Notes (the "Notes") were issued; and WHEREAS, the Trustee has succeeded Boatmen's as the trustee under the Indenture pursuant to Section 8.09 of the Indenture; and WHEREAS, the Corporation has requested that the 1993 Indenture be amended in certain respects as more fully set forth herein (the "Amendments") and solicited the written consent of the Holders of the Notes to the Amendments; and WHEREAS, there is presently outstanding $12,753,000 principal amount of the Notes; and WHEREAS, in accordance with Section 10.01 of the 1993 Indenture, approval of the Amendments requires the written consent of the Holders of greater than $6,376,500 principal amount of the Notes; and WHEREAS, the Holders of greater than $6,376,500 principal amount of the Notes have consented in writing to the Amendments; and WHEREAS, the Corporation and the Trustee desire to amend and restate the 1993 Indenture as provided herein; NOW, THEREFORE, in consideration of the foregoing premises and covenants and for other good and valuable consideration, each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Notes: Section 1. Definitions. Except as provided herein, all definitions of terms contained in Section 1.01 and Section 1.02 of the 1993 Indenture are incorporated herein by reference. Section 2. Amendment of 1993 Indenture. (a) Elimination of Section 5.05 of the 1993 Indenture. The 1993 Indenture is hereby amended by deleting Section 5.05 of the 1993 Indenture in its entirety. (b) Addition of Article IV-A to the 1993 Indenture. The 1993 Indenture is hereby amended by adding thereto following Article IV thereof a new Article IV-A, which shall read as follows: ARTICLE IV-A EFFECT OF RATING DECLINE Section 4A-01. Definitions. For purposes of this Article, the following terms shall have the meanings set forth in this Section 4A.01: "Lowest Investment Grade" shall mean a rating of BBB- by S&P, Baa 3 by Moody's or the equivalent of such rating by any other Rating Agency; if either S&P or Moody's should modify its rating categories, "Lowest Investment Grade" with respect to such agency shall be the rating generally recognized as the lowest investment grade rating by such agency. "Notes to be Redeemed" means all of the Notes then outstanding in the case of a Mandatory Repurchase Event, or all Notes as to which a proper and timely Exercise Notice has been given in the case of a Put Event. "Exercise Notice" shall mean a notice in writing by a Holder of such Holder's exercise of a Put Right as provided in Section 4A.02. "Mandatory Repurchase Event" shall mean either (i) a rating of the Notes by one or more Rating Agencies that is lower than the Lowest Investment Grade, or (ii) failure of the Corporation to obtain a rating for the Notes from a Rating Agency within 60 days following any date on which the Notes are not rated by at least one Rating Agency. "Moody's" shall mean Moody's Investors Service, Inc. and its successors. "Put Event" shall mean a rating of the Notes by one or more Rating Agencies at the Lowest Investment Grade. "Put Right" shall mean the right of a Holder to have such Holder's Notes redeemed following a Put Event. "Rating Agency" shall mean Moody's or S&P, or if neither Moody's nor S&P shall make a rating on the Notes publicly available, a nationally recognized securities rating agency or agencies, as the case may be, selected by the Corporation which shall be substituted for Moody's and S&P. "Repurchase Date" shall mean the date that is 100 days after the public notice of the occurrence of a Put Event or a Mandatory Repurchase Event, and thereafter, in the case of a Put Event, each March 1 and September 1 occurring more than 100 days after a Put Event (each such March 1 and September 1, a "Subsequent Repurchase Date"), unless, on the 70th day prior to any such Subsequent Repurchase Date, the Notes are rated by all Rating Agencies higher than the Lowest Investment Grade. "Repurchase Price" with respect to any Note shall mean the following prices (expressed as percentages of principal amount of the Notes), plus accrued interest to the Repurchase Date: If redeemed during the 12-month period beginning March 1: Year Percentage 1997 103% 1998 103% 1999 102% 2000 101% 2001 until maturity 100% "S&P" shall mean Standard & Poor's Corporation and its successors. Section 4A.02. Put Right of Holders Upon a Put Event. In the event that there occurs at any time a Put Event, each Holder of the Notes shall have the Put Right, at the Holder's option and in the manner set forth in Section 4A.07, to require the Corporation to redeem all or any part of such Holder's Notes on each Repurchase Date at the Repurchase Price; provided, however, that Notes redeemed in part will be redeemed only in integral multiples of $1,000 principal amount. Section 4A.03. Redemption of Notes upon a Mandatory Repurchase Event. In the event there occurs at any time a Mandatory Repurchase Event, the Notes shall be redeemed in full by the Corporation on the Repurchase Date at the Repurchase Price. Section 4A.04. Notice to Trustee. On or before the twenty- eighth day after the occurrence of a Put Event or a Mandatory Repurchase Event, the Corporation shall notify the Trustee of such event. Section 4A.05. Notice to Holders. Notice of each Repurchase Date with respect to the Notes shall be given or caused to be given by the Corporation to each Holder of the Notes on or before the thirty-third day after the occurrence of a Mandatory Repurchase Event or a Put Event and not less than 60 days prior to each Subsequent Repurchase Date in the case of a Put Event. The notice as to Repurchase Date shall describe briefly the Put Event or the Mandatory Repurchase Event, as the case may be, and the rights of the Holders resulting therefrom and shall state: (a) The Repurchase Date; (b) the Repurchase Price; (c) the place or places where such Notes are to be surrendered for payment of the Repurchase Price; and (d) in the case of a Put Event: (1) the date by which Notes are to be surrendered in order to be repurchased; (2) a description of the procedure which a Holder must follow to exercise a Put Right; and (3) that exercise of the option to elect redemption is irrevocable. At the Corporation's request, the Trustee shall give notice of the Repurchase Date in the Corporation's name and at its expense. No failure of the Corporation to give the foregoing notice shall limit any Holder's right to exercise a Put Right or to have such Holder's Notes redeemed following a Mandatory Repurchase Event. Section 4A.06. Deposit of Repurchase Price. By the Repurchase Date, the Corporation shall deposit with the Paying Agent an amount of money sufficient to pay the Repurchase Price of the Notes which are to be redeemed on that date. Principal and interest on the Notes to be redeemed shall be considered paid on the Repurchase Date if the Trustee or any Paying Agent holds on the Repurchase Date money sufficient to pay all principal and interest then due. Section 4A.07. Exercise of Put Right by Holder. To exercise the Put Right set forth in Section 4A.02, the Holder of such Notes must deliver at least thirty days prior to the applicable Repurchase Date the Exercise Notice to the Trustee together with the Notes with respect to which the Put Right is being exercised, duly endorsed for transfer. If any Note so delivered is, at the option of the Holder, to be redeemed only in part, such Exercise Notice from the Holder shall state the principal amount of the Note which is to be redeemed. The written notice given by any Holder pursuant to this Section 4A.07 shall be irrevocable. If the Notes are in the form of a Global Security at the time a Put Right is exercised, the Exercise Notice may be made by delivering such notice to the Depository, in the case of a Participant which is the Beneficial Owner of an interest in such Global Security, or to the Participant through whom the Beneficial Owner owns such interest, in form satisfactory to the Participant, in either case in sufficient time for the Exercise Notice to be delivered to the Depository (in the case of a Beneficial Owner which is not a Participant) and by the Depository to the Trustee. The Exercise Notice shall specify the principal amount of the interest in the Global Security to be redeemed. An Exercise Notice in form satisfactory to a Participant, together with certification by the Participant that it holds the interest on behalf of the Person giving the Exercise Notice, shall be provided to the Depository by a Participant and the Depository will forward the Exercise Notice to the Trustee. Exercise Notices shall be in form satisfactory to the Trustee. The Company will have no obligation to redeem an interest in the Global Security as to which the Exercise Notice is not delivered to the Trustee by the Depository at least thirty days prior to the applicable Repurchase Date. Section 4A.08. Notes Payable on Repurchase Date. The Notes so to be redeemed shall, on the applicable Repurchase Date, become due and payable at the Repurchase Price applicable thereto and from and after such date (unless the Corporation shall default in the payment of the Repurchase Price) such Notes shall cease to bear interest. Upon surrender of any such Note for redemption, such Note shall be paid by the Corporation at the Repurchase Price, provided, however, that installments of interest payable on or prior to such Repurchase Date shall be payable to the Holders of such Notes registered as such at the close of business on the relevant record date for payment of such interest according to their terms. If any Notes shall not be paid upon surrender thereof for redemption, the principal shall, until paid, bear interest from the Repurchase Date at the rate prescribed therefor in such Notes. Section 4A.09. Notes Redeemed in Part. In the case of a Put Event, any Note which at the option of the Beneficial Owner is to be redeemed only in part shall be surrendered to the Trustee (with, if the Corporation or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Corporation and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Corporation shall execute, and the Trustee shall authenticate and deliver to the Holder of such Note without service charge, a new Note or Notes, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Note so surrendered. Section 4A.10. Substitute Rating Agency. Should either S&P or Moody's or both cease to rate the Notes, the Corporation shall, as soon as practicable but in any event not more than 60 days thereafter, obtain a rating for the Notes by another Rating Agency. Section 3. Confirmation of 1993 Indenture. All the terms, covenants, and conditions of the 1993 Indenture, as amended hereby, are hereby in all respects ratified and confirmed, and the 1993 Indenture as so amended shall continue in full force and effect. [The remainder of this page is left blank intentionally.] IN WITNESS WHEREOF, the Corporation has caused this First Supplemental Indenture to be executed in its corporate name and on its behalf its executive vice president and treasurer and its corporate seal to be hereunto affixed and attested by its assistant secretary, and the Trustee has caused this First Supplemental Indenture to be executed in its corporate name and on its behalf by a duly authorized officers, and the Corporation and the Trustee have caused this instrument to be dated as of September 5, 1997. Dated: September 12, 1997 ENERGEN CORPORATION ("Corporation") (SEAL) By /s/ G.C. Ketcham Its Executive Vice President and Treasurer Attest /s/ J.D. Woodruff Its Assistant Secretary Dated: September 24, 1997 THE BANK OF NEW YORK ("Trustee") By /s/ Marie Trimboli Its Assistant Treasurer EX-27.1 6
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF ENERGEN CORPORATION FOR THE THREE-MONTHS ENDED DECEMBER 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000277595 ENERGEN CORPORATION 1,000 3-MOS SEP-30-1998 OCT-1-1997 DEC-31-1997 PER-BOOK 297,949 419,842 167,369 8,603 0 895,901 145 191,624 114,003 305,772 0 0 279,602 168,000 0 0 1,855 0 0 0 140,672 895,901 125,888 598 112,746 113,344 13,142 (6,417) 13,362 7,235 6,127 0 6,127 4,480 5,045 8,789 0.42 0.42
EX-27.2 7
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF ALABAMA GAS CORPORATION FOR THE THREE-MONTHS ENDED DECEMBER 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000003146 ALABAMA GAS CORPORATION 1,000 3-MOS SEP-30-1998 OCT-1-1997 DEC-31-1997 PER-BOOK 297,949 343 126,510 5,103 0 429,905 20 34,484 109,077 143,581 0 0 125,000 25,000 0 0 0 0 0 0 136,324 429,905 95,755 1,104 89,853 90,957 4,798 164 4,962 2,779 2,183 0 2,183 0 2,210 (4,802) 0 0 ALABAMA GAS CORPORATION (ALAGASCO) IS A SUBSIDIARY OF ENERGEN CORPORATION. EARNINGS PER SHARE IS NOT CALCULATED FOR ALAGASCO AS AMOUNT WOULD NOT BE MEANINGFUL.
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