-----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, CuNmibeNjA184hh4LUbx3szGKyLHmVksJov/3UrsSyoVc3dn6sz42YnD645ocNeM M7AJfMnpdl8UMwIcosQaMw== 0000950109-97-002533.txt : 19970328 0000950109-97-002533.hdr.sgml : 19970328 ACCESSION NUMBER: 0000950109-97-002533 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 15 FILED AS OF DATE: 19970327 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTH JERSEY GAS CO/NEW CENTRAL INDEX KEY: 0001035216 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 210398330 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-24065 FILM NUMBER: 97565604 BUSINESS ADDRESS: STREET 1: NUMBER ONE SOUTH JERSEY PLAZA STREET 2: ROUTE 54 CITY: FOLSOM STATE: NJ ZIP: 08037 BUSINESS PHONE: 6095619000 MAIL ADDRESS: STREET 1: NUMBER ONE SOUTH JERSEY PLAZA STREET 2: ROUTE 54 CITY: FOLSOM STATE: NJ ZIP: 08037 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SJG CAPITAL TRUST CENTRAL INDEX KEY: 0001036638 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-24065-01 FILM NUMBER: 97565605 BUSINESS ADDRESS: STREET 1: NUMBER ONE SOUTH JERSEY PLAZA STREET 2: ROUTE 54 CITY: FOLSOM STATE: NJ ZIP: 08037 BUSINESS PHONE: 6095619000 MAIL ADDRESS: STREET 1: NUMBER ONE SOUTH JERSEY PLAZA STREET 2: ROUTE 54 CITY: FOLSOM STATE: NJ ZIP: 08037 S-3 1 FORM S-3 Registration No. 333-______ As filed with the Securities and Exchange Commission on March , 1997 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ________________ FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ________________ SJG CAPITAL TRUST SOUTH JERSEY GAS COMPANY (Exact name of Registrant as (Exact name of Registrant specified in its Trust Certificate) as specified in its Charter) DELAWARE NEW JERSEY (State of Organization) (State of Incorporation) 22-6720144 21-0398330 (I.R.S. Employer (I.R.S. Employer Identification Number) Identification Number) NUMBER ONE SOUTH JERSEY PLAZA, ROUTE 54 FOLSOM, NEW JERSEY 08037 (609) 561-9000 ________________ (Address, including zip code, and telephone number, including area code, of Registrants' principal executive offices) ________________ GEORGE L. BAULIG, SECRETARY SOUTH JERSEY GAS COMPANY NUMBER ONE SOUTH JERSEY PLAZA, ROUTE 54 FOLSOM, NEW JERSEY 08037 (609) 561-9000 (Name, address, including zip code, and telephone number, including area code, of agent for service) ________________ Copies to: GEORGE W. PATRICK, ESQUIRE WILLIAM P. ROGERS, JR., ESQUIRE DECHERT PRICE & RHOADS CRAVATH, SWAINE & MOORE 4000 BELL ATLANTIC TOWER 825 EIGHTH AVENUE 1717 ARCH STREET NEW YORK, NEW YORK 10019-7475 PHILADELPHIA, PENNSYLVANIA 19103-2793 (212) 474-1122 (215) 994-2631 ________________ APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO THE PUBLIC: After this Registration Statement becomes effective, as determined by market conditions and other factors. ________________ If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box: [_] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act of 1933 registration statement number of the earlier effective registration statement for the same offering: [_] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [_] If delivery of the prospectus is expected to be made pursuant to Rule 434 under the Securities Act of 1933, please check the following box: [X] ________________ CALCULATION OF REGISTRATION FEE
========================================================================================================================= TITLE OF EACH CLASS OF PROPOSED AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE AGGREGATE REGISTRATION FEE PER UNIT (1)(2)(3) PER UNIT OFFERING PRICE(2)(3) - ------------------------------------------------------------------------------------------------------------------------- Preferred Trust Securities, $25 par value.......................... South Jersey Gas Company Guarantee with respect to Preferred Securities (4).......... South Jersey Gas Company Deferrable Interest Subordinated Securities........................ Total.............................. 1,400,000 $25.00 $35,000,000 $10,606 ==========================================================================================================================
(1) There are being registered hereunder a currently indeterminate number of Preferred Trust Securities of SJG Capital Trust with an aggregate initial offering price not to exceed $35,000,000 and related Guarantees and Deferrable Interest Subordinated Debentures of South Jersey Gas Company for which no separate consideration will be received. (2) Estimated solely for the purpose of determining the registration fee. (3) Pursuant to Rule 457 (n) and (o), the registration fee is calculated on the basis of the proposed maximum offering price of the Preferred Trust Securities. (4) This registration is deemed to include the rights of holders of the Preferred Trust Securities under the Guarantees and certain backup undertakings as described in the Registration Statement. THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. ================================================================================ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A + +REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE + +SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY + +OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT + +BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR + +THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE + +SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE + +UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAW OF + +ANY SUCH STATE. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ SUBJECT TO COMPLETION, DATED , 1997 PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED , 1997 1,400,000 PREFERRED SECURITIES SJG CAPITAL TRUST % PREFERRED SECURITIES (LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY) GUARANTEED TO THE EXTENT SJG CAPITAL TRUST HAS AVAILABLE FUNDS AS SET FORTH HEREIN BY SOUTH JERSEY GAS COMPANY ----------- The % Preferred Securities (the "Preferred Securities") offered hereby represent undivided beneficial interests in the assets of SJG Capital Trust, a statutory business trust created under the laws of the State of Delaware (the "Issuer"). South Jersey Gas Company ("SJG") is the owner of the beneficial interests represented by the common securities of the Issuer (the "Common Securities"). SJG is a wholly owned subsidiary of South Jersey Industries, Inc. ("SJI"). The Bank of New York is the Property Trustee of the Issuer (the "Property Trustee"). The Issuer exists for the sole purpose of issuing beneficial interests in the assets of the Issuer and investing the proceeds thereof in Deferrable Interest Subordinated Debentures to be issued by SJG (the "Debentures"). The Preferred Securities have a preference over the Common Securities under certain circumstances with respect to cash distributions and amounts payable on redemption or liquidation. See "Description of the Preferred Securities--Subordination of Common Securities" in the accompanying Prospectus. (continued on next page) SEE "RISK FACTORS" COMMENCING ON PAGE S-4 FOR CERTAIN INFORMATION RELEVANT TO AN INVESTMENT IN THE PREFERRED SECURITIES, INCLUDING THE PERIOD DURING WHICH AND CIRCUMSTANCES UNDER WHICH PAYMENTS OF DISTRIBUTIONS ON THE PREFERRED SECURITIES MAY BE DEFERRED AND THE RELATED FEDERAL INCOME TAX CONSEQUENCES. The Preferred Securities have been approved for listing on the New York Stock Exchange, subject to official notice of issuance. Trading of the Preferred Securities is expected to commence within a 30-day period after the initial delivery thereof. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Initial Public Underwriting Proceeds to Offering Price(1) Commissions(2) the Issuer(3)(4) - -------------------------------------------------------------------------------- Per Preferred Security........ $25.00 (3) $25.00 - -------------------------------------------------------------------------------- Total......................... $35,000,000 (3) $35,000,000
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (1) Plus accumulated Distributions, if any, from the date of original issuance. (2) SJG and the Issuer have agreed to indemnify the several Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended. See "Underwriting." (3) In view of the fact that the proceeds of the sale of the Preferred Securities will be used to purchase the Debentures under the Underwriting Agreement, SJG will pay to the Underwriters an underwriting commission of $ per Preferred Security (or $ in the aggregate), except that such commission will be $ per Preferred Security sold to certain institutions. See "Underwriting." (4) Expenses of the offering, which are payable by SJG, are estimated to be $ . The Preferred Securities offered hereby are offered severally by the Underwriters, as specified herein, subject to receipt and acceptance by them and subject to their right to reject any order in whole or in part. It is expected that delivery of the Preferred Securities will be made in book-entry- only form through the facilities of The Depository Trust Company ("DTC") in New York, New York on or about , 1997 against payment therefor in immediately available funds. ----------- PAINEWEBBER INCORPORATED ----------- THE DATE OF THIS PROSPECTUS SUPPLEMENT IS , 1997. (continued from previous page) Holders of the Preferred Securities are entitled to receive cumulative cash distributions ("Distributions") at an annual rate of % of the liquidation amount of $25 per Preferred Security, accumulating from the date of original issuance and payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, commencing June 30, 1997. So long as no Debenture Event of Default has occurred and is continuing, SJG has the right to defer payments of interest on the Debentures by extending the interest payment period in respect thereof for up to 20 consecutive quarters (each, an "Extension Period"), but not beyond the maturity or any redemption date of the Debentures. See "Certain Terms of the Preferred Securities--Distributions" herein and "Description of the Debentures--Option to Extend Interest Payment Period" in the accompanying Prospectus. If and for so long as interest payments are deferred, Distributions on the Preferred Securities will also be deferred. During an Extension Period, Distributions will continue to accumulate and owners of Preferred Securities will be required to accrue interest income for Federal income tax purposes. See "United States Taxation-- Potential Extension of Interest Payment Period and Original Issue Discount." SJG has, through the Guarantee, the Trust Agreement, the Indenture and the Debentures, taken together, fully, irrevocably and unconditionally guaranteed all of the Issuer's obligations under the Preferred Securities. Under the Guarantee Agreement, SJG agrees to make payments of Distributions and payments on redemption or liquidation with respect to the Preferred Securities, but only to the extent that the Issuer holds funds available therefor and has not made such payments. See "Description of the Guarantee" in the accompanying Prospectus. If SJG fails to make a payment on the Debentures, the Issuer will not have sufficient funds to make the related payment, including Distributions, on the Preferred Securities. The Guarantee does not cover any such payment when the Issuer does not have sufficient funds available therefor. In such event, the Property Trustee or holders of the Preferred Securities may enforce the rights of the Issuer under the Debentures. See "Description of the Guarantee--Guarantee Events of Default" in the accompanying Prospectus. The obligations of SJG under the Guarantee are subordinate and junior in right of payment to all general liabilities of SJG, and the obligations of SJG under the Debentures are subordinate and junior in right of payment to all present and future Senior Indebtedness of SJG (as defined in the accompanying Prospectus). At February 28, 1997, the Senior Indebtedness of SJG aggregated approximately $251.5 million. The Preferred Securities are subject to mandatory redemption upon payment of the Debentures at maturity on April 30, 2037, or upon earlier redemption. See "Certain Terms of the Preferred Securities--Redemption." SJG has the option at any time on or after April 30, 2002, to redeem, in whole or in part, the Debentures. In addition, the Debentures are subject to redemption, in whole but not in part, at the option of SJG upon the occurrence of certain special events described under "Certain Terms of the Preferred Securities--Special Event Redemption." SJG has the right, at any time, subject to certain conditions, to terminate the Issuer and cause the Debentures to be distributed to the holders of the Preferred Securities and the Common Securities. See "Certain Terms of the Preferred Securities--Distribution of Debentures." If the Debentures are so distributed, SJG will use its best efforts to list them on the New York Stock Exchange, Inc. (the "New York Stock Exchange"). In the event of the termination and liquidation of the Issuer, holders of Preferred Securities will be entitled to receive a liquidation amount of $25 per Preferred Security plus accumulated and unpaid Distributions to the date of payment, unless, in connection therewith, the Debentures are distributed to the holders of the Preferred Securities and the Common Securities. See "Description of the Preferred Securities--Liquidation Distribution Upon Termination" in the accompanying Prospectus. The Preferred Securities are represented by global securities registered in the name of DTC or its nominee. Beneficial interests in the Preferred Securities will be shown on, and transfers thereof will be effected only through, records maintained by participants in DTC. Except as described in the accompanying Prospectus, Preferred Securities in certificated form will not be issued in exchange for the global securities. See "Description of the Preferred Securities--Book-Entry-Only Issuance--The Depository Trust Company" in the accompanying Prospectus. S-2 CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE PREFERRED SECURITIES, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH PREFERRED SECURITIES, AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING". The following information supplements, and should be read in conjunction with, the information contained in the accompanying Prospectus. Each of the capitalized terms used in this Prospectus Supplement and not defined herein has the meaning set forth in the accompanying Prospectus. S-3 RISK FACTORS Prospective purchasers of Preferred Securities should carefully review the information contained elsewhere in this Prospectus Supplement and in the accompanying Prospectus and should particularly consider the following matters. RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND THE DEBENTURES The obligations of South Jersey Gas Company ("SJG") under the Guarantee issued by SJG (the "Guarantee") for the benefit of the holders of the % Preferred Securities (the "Preferred Securities") issued by SJG Capital Trust (the "Issuer") are unsecured and rank subordinate and junior in right of payment to all general liabilities of SJG. The obligations of SJG under its % Deferrable Interest Subordinated Debentures (the "Debentures") issued pursuant to the Indenture dated as of , 1997 (as amended and supplemented from time to time, the "Indenture") between SJG and The Bank of New York, as trustee (the "Debenture Trustee"), are unsecured and rank subordinate and junior in right of payment to all Senior Indebtedness of SJG. At February 28, 1997 the Senior Indebtedness of SJG aggregated approximately $251.5 million. No terms of the Preferred Securities, the Debentures or the Guarantee limit SJG'S ability to incur additional indebtedness, including indebtedness that ranks senior to the Debentures and the Guarantee. See "Description of the Guarantee--Status of the Guarantee" and "Description of the Debentures-- Subordination" in the accompanying Prospectus. The ability of the Issuer to pay cash distributions ("Distributions") on the Preferred Securities and the redemption price or liquidation amount of the Preferred Securities is solely dependent upon SJG making the related payments on the Debentures when due. OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES So long as no event of default with respect to the Debentures (a "Debenture Event of Default") under the Indenture has occurred and is continuing, SJG has the right at any time and from time to time to defer payments of interest on the Debentures by extending the interest payment period on the Debentures for up to 20 consecutive quarters (each, an "Extension Period"), but not beyond the maturity or any redemption date of the Debentures. As a consequence, Distributions on the Preferred Securities would be deferred by the Issuer during any Extension Period (but the amount of Distributions to which holders of the Preferred Securities would be entitled would continue to accumulate at the rate of % per annum, compounded quarterly). During any Extension Period, SJG may not declare or pay any dividend on, or redeem, purchase, acquire or make a liquidation payment with respect to, any shares of SJG's capital stock. Prior to the termination of any Extension Period, SJG may shorten or further extend the interest payment period on the Debentures; provided that such Extension Period, together with all such previous and further extensions thereof, may not exceed 20 consecutive quarters or extend beyond the maturity or any redemption date of the Debentures. Upon the termination of any Extension Period and the payment of all amounts then due, SJG may elect to begin a new Extension Period, subject to the above requirements. See "Certain Terms of the Preferred Securities--Distributions" herein and "Description of the Debentures--Option to Extend Interest Payment Period" in the accompanying Prospectus. Should an Extension Period occur, an owner of Preferred Securities (which represent undivided beneficial interests in the Debentures) will continue to accrue interest income for Federal income tax purposes in respect of its pro rata share of the Debentures held by the Issuer. As a result, an owner of Preferred Securities will include such interest in gross income for Federal income tax purposes in advance of the receipt of cash and will not receive the cash related to such income from the Issuer if such owner disposes of the Preferred Securities prior to the record date for the payment of Distributions following such Extension Period. See "United States Taxation--Potential Extension of Interest Payment Period and Original Issue Discount." SJG has no current intention of exercising its right to defer payments of interest by extending the interest payment period on the Debentures. However, should SJG exercise such right in the future, the market price of S-4 the Preferred Securities is likely to be affected. An owner who disposes of Preferred Securities during an Extension Period might not receive the same return on investment as an owner who continues to hold Preferred Securities. In addition, as a result of the mere existence of SJG's right to defer interest payments on the Debentures, the market price of the Preferred Securities may be more volatile than other securities on which original issue discount accrues that are not subject to such deferrals. TRADING CHARACTERISTICS OF THE PREFERRED SECURITIES; TAX CONSEQUENCES The Preferred Securities may trade at a price that does not fully reflect the value of accrued but unpaid interest with respect to the Debentures. An owner of Preferred Securities who disposes of Preferred Securities prior to the record date for the payment of Distributions will nevertheless be required to include accrued but unpaid interest on the Debentures through the date of disposition in income as ordinary income and to add such amount to its adjusted tax basis of the Preferred Securities so disposed. Such owner will recognize a capital loss to the extent the selling price (which may not fully reflect the value of accrued but unpaid interest) is less than its adjusted tax basis (which will include accrued but unpaid interest). Subject to certain limited exceptions, capital losses cannot be applied to offset ordinary income for Federal income tax purposes. See "United States Taxation." SPECIAL EVENT REDEMPTION AND PROPOSED FEDERAL INCOME TAX LAW CHANGES Upon the occurrence and continuation of a Tax Event or an Investment Company Event (each as defined in "Certain Terms of the Preferred Securities--Special Event Redemption"), SJG has the right to redeem the Debentures, in whole but not in part, and therefore cause a mandatory redemption of the Preferred Securities and common securities of the Issuer (the "Common Securities" together with the Preferred Securities, the "Trust Securities"), at a redemption price equal to the liquidation amount plus accumulated and unpaid Distributions following the occurrence of such Tax Event or Investment Company Event. On February 6, 1997, President Clinton proposed certain tax law changes (the "Proposed Legislation") that would, among other things, generally deny interest deductions to corporate issuers if the debt instrument has a term exceeding 15 years and is not reflected as indebtedness on such issuer's consolidated balance sheet. Because the term of the Debentures exceeds 15 years, this proposal, were it to become effective, would prevent SJG from deducting interest on the Debentures. The Proposed Legislation is proposed to be effective for instruments issued on or after the date of "first committee action," which has not yet taken place and may not take place before the Debentures are issued. In the opinion of counsel to SJG and the Issuer, under current law, interest on the Debentures is deductible. There can be no assurance, however, that the effective date contained in the Proposed Legislation will not be changed if such legislation were enacted, or that subsequent proposals or final legislation will not affect the ability of SJG to deduct interest on the Debentures which, in turn, could give rise to a Tax Event and, accordingly, SJG's optional right to redeem the Debentures, as described under "Certain Terms of the Preferred Securities--Special Event Redemption." DISTRIBUTION OF DEBENTURES; POSSIBLE ADVERSE EFFECT ON MARKET PRICE At any time, SJG may, in its sole discretion, terminate the Issuer and cause the Debentures to be distributed to the holders of the Trust Securities, provided that SJG shall have delivered to the Issuer Trustees (as defined herein) a written opinion of nationally recognized independent counsel that any such distribution will not be a taxable event to the owners of the Trust Securities. Although SJG has agreed to use its best efforts to list the Debentures so distributed on the New York Stock Exchange, there can be no assurance that the Debentures will be approved for listing on the New York Stock Exchange or that a trading market will exist for the Debentures. There can be no assurance as to the market prices for the Debentures that may be distributed in exchange for the Preferred Securities if a termination of the Issuer were to occur. Accordingly, the Debentures that a holder of Preferred Securities may receive upon such a distribution, or the Preferred Securities held pending such a S-5 distribution, may trade at a discount to the price that the investor paid to purchase such Preferred Securities. Because holders of Preferred Securities may receive Debentures at SJG's sole discretion, prospective purchasers of Preferred Securities are also making an investment decision with regard to the Debentures and should carefully review all the information regarding the Debentures contained herein. See "Certain Terms of the Preferred Securities-- Distribution of Debentures" herein and "Description of the Debentures" in the accompanying Prospectus. RIGHTS UNDER THE GUARANTEE The Guarantee has been qualified as an indenture under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The Bank of New York is the indenture trustee under the Guarantee (the "Guarantee Trustee") for the purposes of compliance with the Trust Indenture Act and holds the Guarantee for the benefit of the holders of the Preferred Securities. Under the Guarantee, SJG agrees to make the following payments to the holders of the Preferred Securities, to the extent not paid by the Issuer (i) any accumulated and unpaid Distributions on the Preferred Securities to the extent that the Issuer has funds available therefor, (ii) the redemption price of any Preferred Securities called for redemption to the extent that the Issuer has funds available therefor, and (iii) upon a voluntary or involuntary termination, winding-up or liquidation of the Issuer, unless the Debentures are distributed to holders of the Preferred Securities, the lesser of (a) the liquidation amount of $25 per Preferred Security plus accumulated and unpaid Distributions to the date of payment, and (b) the amount of assets of the Issuer available for distribution to holders of Preferred Securities upon such termination and liquidation of the Issuer. See "Description of the Guarantee-- General" in the accompanying Prospectus. The holders of at least a majority in aggregate liquidation amount of the Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee in respect of the Guarantee and to direct the exercise of any trust power conferred upon the Guarantee Trustee under the Guarantee. Any holder of the Preferred Securities may institute a legal proceeding directly against SJG to enforce its rights under the Guarantee without first instituting a legal proceeding against the Issuer, the Guarantee Trustee or any other person or entity. If SJG defaults on its obligation to pay amounts payable on the Debentures, the Issuer will not have sufficient funds for the payment of Distributions, amounts payable on redemption of the Preferred Securities or amounts payable upon liquidation of the Issuer and, accordingly, holders of the Preferred Securities will not be able to rely upon the Guarantee for payment of such amounts. Instead, the Property Trustee or holders of the Preferred Securities may enforce the rights of the Issuer under the Debentures against SJG pursuant to the terms of the Debentures. The Amended and Restated Trust Agreement of the Issuer (the "Trust Agreement") provides that each holder of Preferred Securities, by acceptance thereof, agrees to the provisions of the Trust Agreement, the Guarantee and the Indenture. LIMITED VOTING RIGHTS Holders of Preferred Securities have limited voting rights under the Trust Agreement. Holders of Preferred Securities will not be entitled to vote to appoint, remove or replace the Issuer Trustees, which voting rights are vested exclusively in SJG as the holder of the Common Securities, except that upon the occurrence of an event of default under the Trust Agreement, the holders of at least a majority in aggregate liquidation amount of the Preferred Securities may replace The Bank of New York as the Property Trustee for the Issuer (the "Property Trustee") and The Bank of New York (Delaware) as the Delaware Trustee for the Issuer (the "Delaware Trustee"). See "Description of the Preferred Securities--Voting Rights; Amendment of Trust Agreement" and "-- Removal of Issuer Trustees" in the accompanying Prospectus. SJG CAPITAL TRUST The Issuer is a statutory business trust created under the laws of the State of Delaware pursuant to the Trust Agreement. The exclusive business of the Issuer is to issue and sell the Trust Securities representing undivided beneficial interests in the assets of the Issuer and to use the proceeds therefrom to purchase the Debentures, to maintain the status of the Issuer as a grantor trust for Federal income tax purposes and to engage in only those activities that are necessary, convenient or incidental to the foregoing. Accordingly, the Debentures will be the sole assets of the Issuer and payments on the Debentures will be the sole revenues of the Issuer. Pursuant to the S-6 Trust Agreement, SJG will be obligated to pay all expenses and liabilities of the Issuer except the Issuer's obligations under the Preferred Securities. The Issuer has a term of 41 years, but may be terminated earlier as provided in the Trust Agreement. See "Description of the Preferred Securities--Liquidation Distribution Upon Termination" in the accompanying Prospectus. The business and affairs of the Issuer are conducted by three trustees: (i) The Bank of New York, as Property Trustee; (ii) The Bank of New York (Delaware), as Delaware Trustee; and (iii) one individual who is an employee and officer of or affiliated with SJG, as Administrative Trustee (the "Administrative Trustee"). The Property Trustee, the Delaware Trustee and the Administrative Trustee are collectively referred to herein as the "Issuer Trustees." The Trust Agreement is qualified as an indenture under the Trust Indenture Act and the Property Trustee is the indenture trustee thereunder for the purposes of compliance with the Trust Indenture Act. Concurrently with the issuance of the Preferred Securities, SJG will acquire Common Securities of the Issuer with a liquidation amount equal to 3% of the aggregate liquidation amount of all of the Trust Securities of the Issuer. The Common Securities rank pari passu, and payments will be made thereon pro rata, with the Preferred Securities, except that upon the occurrence and continuance of a Debenture Event of Default, the rights of SJG, as holder of the Common Securities, to payment of Distributions and payments upon redemption and liquidation will be subordinated to the rights of the holders of the Preferred Securities. The principal place of business of the Issuer is Number One South Jersey Plaza, Route 54, Folsom, New Jersey 08037, and its telephone number is (609) 561-9000. SOUTH JERSEY GAS COMPANY GENERAL SJG is a regulated New Jersey public utility and is the principal subsidiary of SJI. SJG is a gas distribution utility that supplies natural gas to residential, commercial and industrial customers in the southern part of New Jersey. SJG also makes off-system sales of natural gas on a wholesale basis to various customers on the interstate pipeline system and transports natural gas purchased directly from producers or suppliers by some of its customers. At December 31, 1996, the Company served 253,874 residential, commercial and industrial customers throughout 112 municipalities in Atlantic, Cape May, Cumberland, and Salem counties and portions of Burlington, Camden and Gloucester Counties. The Company's service territory covers approximately 2,500 square miles and has an estimated permanent population of 1.1 million. Gas sales and transportation for 1996 amounted to 66,814,000 Mcf (thousand cubic feet), of which 51,203,000 Mcf was firm sales and transportation, 7,040,000 Mcf was interruptible sales and transportation and 8,571,000 Mcf was off system sales. The breakdown of firm sales includes 42.4% residential, 19.8% commercial, 10.1% cogeneration and electric generation, 2.4% industrial and other and 25.3% transportation. SJG is regulated as to rates and other matters by the New Jersey Board of Public Utilities. RATIO OF EARNINGS TO FIXED CHARGES SJG's ratio of earnings to fixed charges for each of the periods indicated is as follows:
YEARS ENDED DECEMBER 31, ------------------------------------------------------------------------------------------------------- 1992 1993 1994 1995 1996 ---- ---- ---- ---- ---- 2.6 2.7 2.2 2.3 2.5
The ratio of earnings to fixed charges represents, on a pre-tax basis, the number of times earnings cover fixed charges. Earnings consist of net income, to which has been added fixed charges and taxes based on income of SJG, excluding the cumulative effect of an accounting change. Fixed charges consist of interest charges and an interest factor in rentals. S-7 RATIO OF EARNINGS TO FIXED CHARGES PLUS PREFERRED SECURITIES DIVIDEND REQUIREMENTS SJG's ratio of earnings to fixed charges plus preferred securities dividend requirements for each of the periods indicated is as follows:
YEARS ENDED DECEMBER 31, ------------------------------------------------------------------------------------------------------- 1992 1993 1994 1995 1996 ---- ---- ---- ---- ---- 2.6 2.6 2.1 2.3 2.5
The ratio of earnings to fixed charges plus preferred securities dividend requirements represents, on a pre-tax basis, the number of times earnings cover fixed charges plus preferred securities dividend requirements. Earnings consist of net income, to which has been added fixed charges and taxes based on income of SJG, excluding the cumulative effect of an accounting change. Fixed charges consist of interest charges and an interest factor in rentals. Preferred securities dividend requirements represent the pre-tax earnings necessary to pay dividends on outstanding preferred securities, computed at the effective tax rates for the applicable periods. USE OF PROCEEDS The net proceeds to be received by the Issuer from the sale of the Preferred Securities offered hereby and the Common Securities will be used by the Issuer to purchase Debentures from SJG. The net proceeds from the sale of the Debentures will be used by SJG to retire short-term debt and for general corporate purposes. At December 31, 1996, SJG had $108.3 million of short-term debt outstanding with a weighted-average interest cost of 5.854%. CAPITALIZATION The following table sets forth the consolidated capitalization of SJG and the Trust as of February 28, 1997 and as adjusted to give effect to the consummation of the offering of the Preferred Securities and the use of proceeds therefrom. The following data should be read in conjunction with the consolidated financial statements and notes thereto of SJG, incorporated herein by reference.
AS OF FEBRUARY 28, 1997 -------------------- AS ACTUAL ADJUSTED(1) -------- ----------- (UNAUDITED) (IN THOUSANDS) Common Equity Common Stock.............................................. $ 5,848 $ 5,848 Other Paid In Capital(2).................................. 77,194 77,194 Retained Earnings......................................... 58,514 58,514 -------- -------- Total Common Equity...................................... 141,556 141,556 Preferred Stock Without Mandatory Redemption............... 2,314 2,314 % Preferred Trust Securities(3)........................... -- 35,000 Long-Term Debt, Net of Current Maturities.................. 149,736 184,736 -------- -------- Total Capitalization..................................... $293,606 $363,606 ======== ========
- -------- (1) Includes $35,000 principal amount of First Mortgage Bonds 7.70% Series due April 1, 2027 issued by SJG on March 21, 1997. (2) Does not include a cash capital contribution of $25,623 to be made to SJG by SJI on March 26, 1997, as authorized by SJI's Board of Directors. (3) The sole asset of the Issuer is the % Debentures in an aggregate principal amount of $36,082 with a stated maturity date of April 30, 2037. S-8 CERTAIN TERMS OF THE PREFERRED SECURITIES The following summary of certain terms and provisions of the Preferred Securities supplements the description of the terms and provisions of the Preferred Securities set forth in the accompanying Prospectus under the heading "Description of the Preferred Securities," to which description reference is hereby made. DISTRIBUTIONS The Preferred Securities represent undivided beneficial interests in the assets of the Issuer, the sole assets of which will be the Debentures. Distributions on the Preferred Securities are cumulative and will accumulate from the date of original issuance at the annual rate of % of the liquidation amount of $25 per Preferred Security. Distributions will be payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, commencing June 30, 1997. Distributions in arrears after the quarterly payment date therefor will accumulate additional Distributions (to the extent permitted by law) compounded quarterly at the annual rate of % thereof. The term "Distributions," as used herein, shall include any such additional Distributions. The amount of Distributions payable for any full quarterly period will be computed on the basis of a 360-day year of twelve 30-day months, and for any period shorter than a full month, shall be computed on the basis of the actual number of days elapsed in such period based on 30-day months. So long as no Debenture Event of Default has occurred and is continuing, SJG in its sole discretion has the right at any time and from time to time to defer the payment of interest by extending the interest payment period on the Debentures for up to 20 consecutive quarters, provided that any such Extension Period shall not extend beyond the maturity or any redemption date of the Debentures. As a consequence, quarterly Distributions on the Preferred Securities would be deferred by the Issuer during any Extension Period, but the amount of Distributions to which holders of the Preferred Securities would be entitled would continue to accumulate at the rate set forth above, compounded quarterly. During any Extension Period, SJG may not declare or pay any dividend on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any shares of SJG's capital stock. Within five business days after receipt by the Property Trustee of notice of an Extension Period, the Property Trustee shall give notice thereof to the holders of Trust Securities by first class mail, postage prepaid. Prior to the termination of any Extension Period, SJG may shorten or further extend the interest payment period on the Debentures, provided that such Extension Period, together with all such previous and further extensions thereof, may not exceed 20 consecutive quarters or extend beyond the maturity or any redemption date of the Debentures. Upon the termination of any Extension Period and the payment of all amounts then due, SJG may elect to begin a new Extension Period, subject to the above requirements. See "United States Taxation--Potential Extension of Interest Payment Period and Original Issue Discount" herein and "Description of the Debentures--Option to Extend Interest Payment Period" in the accompanying Prospectus. SJG has no current intention of exercising its right to defer payments of interest by extending the interest payment period on the Debentures. The Preferred Securities are issued in the form of one or more global securities and DTC or any successor depositary will act as depositary for the Preferred Securities. See "Description of the Preferred Securities--Book- Entry-Only Issuance--The Depository Trust Company" in the accompanying Prospectus. Payments on the Preferred Securities represented by a global security will be made in immediately available funds to DTC, as the depositary for the Preferred Securities. In the event that the Preferred Securities are issued in certificated form, the payment of Distributions and payments on redemption or liquidation will be payable, the transfer of the Preferred Securities will be registerable and Preferred Securities will be exchangeable at the corporate office of the Property Trustee in New York, New York, or at the offices of any other paying agent or transfer agent appointed by the Administrative Trustee; provided, however, that the payment of Distributions may be made at the option of the Property Trustee by check mailed to the address of the persons entitled thereto or by wire transfer. In addition, if the Preferred Securities are issued in certificated form, the record dates for the payment of Distributions will be the 15th day of the last month of each quarter, whether or not a Business Day. REDEMPTION Upon the payment of the Debentures at maturity or upon redemption as provided in the Indenture, the proceeds from such payment will be applied by the Property Trustee to redeem a Like Amount (as defined below) S-9 of the Trust Securities, upon not less than 30 nor more than 60 days' notice, at a redemption price equal to the aggregate liquidation amount plus accumulated and unpaid Distributions to the date of redemption (the "Redemption Price"). See "Certain Terms of the Debentures--Redemption." "Like Amount" means (i) with respect to a redemption of the Trust Securities, Trust Securities having an aggregate liquidation amount equal to the principal amount of Debentures to be repaid in accordance with the Indenture and (ii) with respect to a distribution of Debentures to holders of Trust Securities in connection with a termination and liquidation of the Issuer, Debentures having a principal amount equal to the aggregate liquidation amount of the Trust Securities in exchange for which such Debentures are distributed. SPECIAL EVENT REDEMPTION If a Tax Event or an Investment Company Event (each, a "Special Event") has occurred and is continuing, SJG has the right to redeem the Debentures, in whole but not in part, and therefore cause a mandatory redemption of the Trust Securities, in whole but not in part, at the Redemption Price within 90 days following the occurrence of such Special Event. "Tax Event" means that SJG shall have received a written opinion of nationally recognized independent tax counsel (which must be acceptable to the Property Trustee) experienced in such matters to the effect that, as a result of any amendment to, or change (including any announced prospective change) in the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein affecting taxation, or as a result of any official administrative pronouncement, administrative action, or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which pronouncement, action or decision is announced or taken on or after the date of original issuance of the Preferred Securities, there is more than an insubstantial risk that (i) the Issuer is, or will be within 90 days of the date thereof, subject to Federal income tax with respect to interest on the Debentures, (ii) interest payable by SJG on the Debentures is not, or will not be within 90 days of the date thereof, deductible by SJG for Federal income tax purposes or (iii) the Issuer is, or will be within 90 days of the date thereof, subject to more than a de minimis amount of other taxes, duties, assessments or other governmental charges. "Investment Company Event" means the occurrence of a change in law or regulation or a change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law") to the effect that the Issuer is or will be considered an "Investment Company" that is required to be registered under the Investment Company Act of 1940, as amended, which Change in 1940 Act Law becomes effective on or after the date of original issuance of the Preferred Securities. DISTRIBUTION OF DEBENTURES At any time, SJG may, in its sole discretion, terminate the Issuer and cause a Like Amount of Debentures to be distributed to the holders of the Trust Securities in liquidation of the Issuer upon 30 days' prior notice to the holders of the Trust Securities, provided that SJG shall have delivered to the Issuer Trustees a written opinion of nationally recognized independent counsel that any such distribution will not be a taxable event to the owners of the Trust Securities for Federal income tax purposes. In addition, the Debentures may be distributed to holders of Trust Securities in certain other circumstances as described under "Certain Terms of the Preferred Securities-- Liquidation Distribution Upon Termination" in the accompanying Prospectus. LIQUIDATION AMOUNT The amount payable on the Preferred Securities in the event of the termination and liquidation of the Issuer is $25 per Preferred Security plus accumulated and unpaid Distributions to the date of payment, unless, in connection therewith, the Debentures are distributed to the holders of the Trust Securities. S-10 CERTAIN TERMS OF THE DEBENTURES The following summary of certain terms and provisions of the Debentures supplements the description of the terms and provisions of the Debentures set forth in the accompanying Prospectus under the heading "Description of the Debentures," to which description reference is hereby made. The Debentures are unsecured and rank subordinate and junior in right of payment to all Senior Indebtedness of SJG. INTEREST RATE; MATURITY Concurrently with the issuance of the Preferred Securities, the Issuer is investing the proceeds thereof, together with the consideration paid by SJG for the Common Securities, in the Debentures. The Debentures will be issued under the Indenture. The Debentures will mature on April 30, 2037. The Debentures will bear interest at the annual rate of % of the principal amount thereof, payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, commencing June 30, 1997. Interest which is accrued and unpaid after the quarterly payment date therefor will bear additional interest on the amount thereof (to the extent permitted by law) at the annual rate of % thereof, compounded quarterly. The term "interest," as used herein, shall include quarterly interest payments and interest on quarterly interest payments in arrears, as applicable. The interest payment provisions for the Debentures correspond to the Distribution provisions of the Preferred Securities. REDEMPTION The Debentures are redeemable prior to maturity at the option of SJG at a redemption price equal to 100% of the principal amount thereof plus accrued and unpaid interest to the redemption date (i) at any time on or after April 30, 2002, in whole or in part, or (ii) if a Special Event has occurred and is continuing, in whole but not in part. DISTRIBUTION OF DEBENTURES If Debentures are distributed to the holders of the Trust Securities upon the termination and liquidation of the Issuer, the Debentures will be issued in denominations of $25 and integral multiples thereof. It is anticipated that the Debentures would be distributed in the form of one or more global securities and DTC, or any successor depositary for the Preferred Securities, would act as depositary for the Debentures. The depositary arrangements for the Debentures would be substantially similar to those in effect for the Preferred Securities. Neither SJG, the Debenture Trustee, any paying agent nor any other agent of SJG or the Debenture Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in a global security for such Debentures or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. For a description of DTC and the terms of the depositary arrangements relating to payments, transfers, voting rights, redemption and other notices and other matters, see "Description of the Preferred Securities--Book-Entry-Only Issuance--The Depository Trust Company" in the accompanying Prospectus. Payments on the Debentures represented by a global security will be made in immediately available funds to DTC, as the depositary for the Debentures. In the event that the Debentures are issued in certificated form, principal and interest will be payable, the transfer of the Debentures will be registrable and the Debentures will be exchangeable for Debentures of other authorized denominations of a like aggregate principal amount, at the corporate office of the Debenture Trustee in New York, New York, or at the offices of any other paying agent or transfer agent appointed by SJG; provided, however, that payment of interest may be made at the option of SJG by check mailed to the address of the persons entitled thereto or by wire transfer. In addition, if the Debentures are issued in certificated form, the record dates for payment of interest will be the 15th day of the last month of each quarter, whether or not a Business Day. If the Debentures are distributed to the holders of the Trust Securities upon the termination and liquidation of the Issuer, SJG will use its best efforts to list the Debentures on the New York Stock Exchange. S-11 UNITED STATES TAXATION GENERAL This section is a summary of certain Federal income tax considerations that may be relevant to prospective purchasers of Preferred Securities and is the opinion of Dechert Price & Rhoads, counsel to SJG and the Issuer, insofar as it relates to matters of law and legal conclusions. This section is based upon current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), existing regulations thereunder and current administrative rulings and court decisions, all of which are subject to change (possibly on a retroactive basis). Subsequent changes may cause tax consequences to vary substantially from the consequences described below. This summary does not describe all the possible Federal tax consequences of the purchase, ownership, or disposition of the Preferred Securities and is not intended to reflect the particular tax position of any holder. The parties do not intend to seek a ruling from the Internal Revenue Service on any of the issues described below. Moreover, there can be no assurance that the Internal Revenue Service will not take contrary positions. Unless otherwise stated, this summary deals only with Preferred Securities held as capital assets and does not deal with special classes of holders, such as banks, dealers in securities or currencies, insurance companies, persons holding Preferred Securities as a hedge against or which are hedged against currency risks or as a part of a straddle with other investments or as part of a "synthetic security" or other integrated investment (including a "conversion transaction") comprised of Preferred Securities and one or more other investments, or persons whose functional currency is not the United States dollar. POTENTIAL INVESTORS ARE ADVISED TO CONSULT THEIR TAX ADVISORS AS TO THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE OF PREFERRED SECURITIES PURSUANT TO THE OFFERING MADE HEREBY AND OF THE OWNERSHIP AND DISPOSITION OF PREFERRED SECURITIES IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, AS WELL AS THE EFFECT OF ANY STATE, LOCAL, FOREIGN OR OTHER LAWS. In the opinion of Dechert Price & Rhoads, the Debentures will be treated as indebtedness for Federal income tax purposes. However, holders of Preferred Securities should note that the Internal Revenue Service (the "IRS") may attempt to treat the Debentures as equity rather than indebtedness for tax purposes, as described below. If the IRS were successful in such attempt, the Debentures would be subject to redemption at the option of SJG as described under "Certain Terms of the Debentures--Redemption" and "Certain Terms of the Preferred Securities--Special Event Redemption." On February 6, 1997, President Clinton proposed certain tax law changes that would, among other things, generally deny interest deductions to corporate issuers if the debt instrument has a term exceeding 15 years and is not reflected as indebtedness on such issuer's consolidated balance sheet. Because the term of the Debentures exceeds 15 years, this proposal, were it to become effective, would prevent SJG from deducting interest on the Debentures. The Proposed Legislation is proposed to be effective for instruments issued on or after the date of "first committee action," which has not yet taken place and may not take place before the Debentures are issued. As a result, it is expected that the Proposed Legislation will not apply to the Debentures. In the opinion of Dechert Price & Rhoads, under current law, interest on the Debentures is deductible. There can be no assurance, however, that the effective date contained in the Proposed Legislation will not be changed if such legislation is enacted, or that subsequent proposals or final legislation will not affect the ability of SJG to deduct interest on the Debentures which, in turn, could give rise to a Tax Event and, accordingly, SJG's optional right to redeem the Debentures, as described under "Certain Terms of the Preferred Securities--Special Event Redemption." INCOME FROM PREFERRED SECURITIES In connection with the issuance of the Debentures, in the opinion of Dechert Price & Rhoads, under current law and assuming full compliance with the terms of the Trust Agreement, the Issuer will be classified as a grantor trust and not as an association taxable as a corporation or partnership for Federal income tax purposes. S-12 As a consequence, each owner of Preferred Securities will be considered the owner of a pro rata portion of the Debentures held by the Issuer. As a further consequence, each owner of Preferred Securities will be required to include in gross income his or her pro rata share of the income accrued on the Debentures held by the Issuer. Such income should not exceed Distributions received by the owners of Preferred Securities on the Preferred Securities except in limited circumstances described under "--Potential Extension of Interest Payment Period and Original Issue Discount." No portion of such income will be eligible for the dividends-received deduction. By their acceptance of a Trust Security, each holder will agree to treat and to take no action inconsistent with the treatment of the Trust Securities (or beneficial interest therein) as interests in a grantor trust for purposes of Federal, state and local income and franchise taxes. POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD AND ORIGINAL ISSUE DISCOUNT Under the Indenture, under certain circumstances, SJG has the right at any time and from time to time to extend the interest payment period on the Debentures for up to 20 consecutive quarters but not beyond the maturity or any redemption date of the Debentures. SJG's right to defer payments of interest by extending the interest payment period will cause the Debentures to be treated as issued with "original issue discount" for Federal income tax purposes. Accordingly, an owner of Preferred Securities will accrue interest income (i.e., original issue discount) under a constant yield basis over the term of the Debentures (including any Extension Period), regardless of the receipt of cash with respect to the period to which such income is attributable. As a result, owners of Preferred Securities during an Extension Period will include interest in gross income in advance of the receipt of cash, and any owners of Preferred Securities who dispose of Preferred Securities prior to the record date for the payment of Distributions following such Extension Period will include interest in gross income, but will not receive any cash related thereto. Because the original issue discount rules apply, actual distributions of stated interest will not be separately reported as income. The tax basis of a Preferred Security will be increased by the amount of any original issue discount that is included in income without a receipt of cash and will be decreased when and if such cash is subsequently received by the owner of the Preferred Security. DISPOSITION OF THE PREFERRED SECURITIES Gain or loss will be recognized on a sale, exchange, or other taxable disposition, including a redemption for cash, of Preferred Securities (which represent undivided beneficial interests in the Debentures) (but excluding the distribution of the Debentures) in an amount equal to the difference between the amount realized and the tax basis of an owner of Preferred Securities in his or her pro rata share of the Debentures. An owner's adjusted tax basis in the Preferred Securities generally will be its initial purchase price increased by interest income (i.e., original issue discount) previously includable in such owner's gross income to the date of disposition and decreased by payments received on the Preferred Securities. Gain or loss recognized by an owner of Preferred Securities on the sale or exchange of Preferred Securities held for more than one year generally will be taxable as long-term capital gain or loss. UNITED STATES ALIEN HOLDERS For purposes of this discussion, a "United States Alien Holder" is any holder or beneficial owner who or which is (i) a nonresident alien individual or (ii) a foreign corporation, partnership, estate or trust, in either case not subject to Federal income tax on a net income basis in respect of a Preferred Security. Under present Federal income tax law, subject to the discussion below with respect to backup withholding: (i) payments by the Issuer or any of its paying agents to any United States Alien Holder will not be subject to Federal withholding tax, provided that (a) the owner of the Preferred Security does not actually or constructively own 10% or more of the total combined voting power of all classes of stock of SJG, (b) the S-13 owner of the Preferred Securities is not a controlled foreign-corporation that is related to SJG through stock ownership, and (c) either (1) the owner of the Preferred Securities certifies to the Issuer or its agent, under penalties of perjury, that it is a United States Alien Holder and, provides its name and address or (2) the holder of the Preferred Securities is a securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business (a "financial institution"), and such holder certifies to the Issuer or its agent, under penalties of perjury, that such statement has been received from the owner by it or by a financial institution between it and the owner and furnishes the payor with a copy thereof; and (ii) a United States Alien Holder of a Preferred Security will not be subject to Federal income or withholding tax on any gain realized on the sale or exchange of a Preferred Security unless such person is present in the United States for 183 days or more in the taxable year of sale and such person has a "tax home" in the United States or certain other requirements are met. BACKUP WITHHOLDING AND INFORMATION REPORTING In general, information reporting requirements will apply to payments to noncorporate United States holders of the proceeds of the sale of the Preferred Securities within the United States and "backup withholding" at a rate of 31% will apply to such payments if the seller fails to provide a correct taxpayer identification number. Any withheld amounts will generally be allowed as a credit against the owner's Federal income tax, provided the required information is timely filed with the Internal Revenue Service. Information reporting requirements and backup withholding will also apply to original issue discount allocable to noncorporate United States holders of the Preferred Securities if the seller fails to provide a correct taxpayer identification number. Payments of the proceeds from the sale by a United States Alien Holder of Preferred Securities made to or through a foreign office of a broker will not be subject to information reporting or backup withholding, except that, if the broker is a United States person, a controlled foreign corporation for United States tax purposes or a foreign person 50% or more of whose gross income is effectively connected with a United States trade or business for a specified three-year period, information reporting may apply to such payment. Payments of the proceeds from a sale of Preferred Securities to or through the United States office of a broker is subject to information reporting and backup withholding unless the holder or beneficial owner certifies as to its non- United States status or otherwise establishes an exemption from information reporting and backup withholding. RECEIPT OF DEBENTURES UPON LIQUIDATION OF THE ISSUER SJG may cause the Issuer to be terminated and cause the Debentures to be distributed to the holders of Preferred Securities in liquidation of such holders' interests in the Issuer, provided that SJG has delivered to the Issuer Trustees a written opinion of nationally recognized independent counsel that any such distribution will not be a taxable event to the owners of the Preferred Securities for Federal income tax purposes. Under current Federal income tax law and interpretation and assuming the Issuer is treated as a grantor trust, such a distribution should not be treated as a taxable event to owners of the Preferred Securities. Such a tax-free transaction would result in the owner of Preferred Securities receiving an aggregate tax basis in the Debentures equal to such owner's aggregate tax basis in such owner's Preferred Securities. An owner's holding period for such Debentures would include the period during which such owner had a beneficial interest in the Preferred Securities. If, however, the Special Event giving rise to the distribution is a Tax Event which results in the Issuer being treated as an association taxable as a corporation, the distribution would constitute a taxable event to owners of the Preferred Securities. S-14 UNDERWRITING Subject to the terms and conditions of the Underwriting Agreement, the Issuer has agreed to sell to each of the Underwriters named below, for whom PaineWebber Incorporated is acting as representative (the "Representative"), and each of the Underwriters has severally agreed to purchase from the Issuer, the respective number of Preferred Securities set forth opposite its name below:
NUMBER OF UNDERWRITER PREFERRED SECURITIES ----------- -------------------- PaineWebber Incorporated.................................. --------- Total................................................... 1,400,000 =========
Under the terms and conditions of the Underwriting Agreement, the Underwriters are committed to take and pay for all of the Preferred Securities offered hereby if any are taken. The Underwriters propose to offer the Preferred Securities in part directly to the public at the initial public offering price set forth on the cover page of this Prospectus Supplement, and in part to certain securities dealers at such price less a concession of $ per Preferred Security, except that such concession will be $ per Preferred Security sold to certain institutions. The Underwriters may allow, and such dealers may reallow, a concession not in excess of $ per Preferred Security to certain other brokers and dealers. After the Preferred Securities are released for sale to the public, the offering price and other selling terms may from time to time be varied by the Representative. In view of the fact that the proceeds from the sale of the Preferred Securities will be used to purchase the Debentures, under the Underwriting Agreement, SJG has agreed to pay to the Underwriters an underwriting commission of $ per Preferred Security, except that such commission will be $ per Preferred Security sold to certain institutions. Prior to this offering, there has been no public market for the Preferred Securities. The Preferred Securities have been approved for listing on the New York Stock Exchange, subject to official notice of issuance. Trading on the Preferred Securities is expected to commence within a 30-day period after the initial delivery thereof. In order to meet one of the requirements for listing the Preferred Securities on the New York Stock Exchange, the Underwriters have undertaken to sell the Preferred Securities to a minimum of [400 beneficial owners]. The Representative has advised SJG that it intends to make a market in the Preferred Securities prior to commencement of trading on the New York Stock Exchange, but is not obligated to do so and may discontinue market making at any time without notice. No assurance can be given as to the liquidity of the trading market for the Preferred Securities. In connection with the offering, the Underwriters may purchase and sell the Preferred Securities in the open market. These transactions may include overallotment and stabilizing transactions and purchases to cover syndicate short positions created by the Underwriters in connection with the offering. Stabilizing transactions consist of certain bids or purchases for the purpose of preventing or retarding a decline in the market price of the Preferred Securities; and syndicate short positions created by the Underwriters involve the sale by the Underwriters of a greater number of Preferred Securities than they are required to purchase from the Issuer in the offering. The Underwriters also may impose a penalty bid, whereby selling concessions allowed to syndicate members or other broker-dealers in respect of the Preferred Securities sold in the offering for their account may be reclaimed by the syndicate if such Preferred Securities are repurchased by the syndicate in stabilizing or covering transactions. These activities may stabilize, maintain or otherwise affect the market price of the Preferred Securities, which may be higher than the price that might otherwise prevail in the open market; and these activities, if commenced, may be discontinued at any time. These transactions may be effected on the New York Stock Exchange, in the over-the-counter market or otherwise. S-15 SJG and the Issuer have agreed, during the period beginning from the date of the Underwriting Agreement and continuing to and including the earlier of (i) the date on which the distribution of the Preferred Securities ceases, as determined by the Representative, or (ii) 30 days after the closing date, not to offer, sell, contract to sell or otherwise dispose of any Preferred Securities or any preferred stock or any other securities of SJG which are substantially similar to the Preferred Securities, including any guarantee of such securities, or any securities convertible into or exchangeable for or representing the right to receive any of the foregoing securities, without the prior written consent of the Representative. SJG and the Issuer have agreed to indemnify the several Underwriters against certain liabilities, including liabilities under the Securities Act. The Underwriters or their affiliates have provided from time to time, and expect to continue to provide in the future, investment banking services to SJG, SJI and their affiliates, for which the Underwriters or their affiliates have received or will receive customary fees and commissions. S-16 PROSPECTUS SUBJECT TO COMPLETION DATED MARCH , 1997 SJG CAPITAL TRUST PREFERRED SECURITIES guaranteed to the extent the Issuer thereof has available funds as set forth herein by SOUTH JERSEY GAS COMPANY ---------------- SJG Capital Trust, a statutory business trust created under the laws of the State of Delaware (the "Issuer") may offer, from time to time, its preferred securities (the "Preferred Securities") representing undivided beneficial interests in the assets of the Issuer. South Jersey Gas Company, a New Jersey corporation ("SJG"), will be the owner of beneficial interests represented by the common securities (the "Common Securities") of the Issuer. SJG is a wholly-owned subsidiary of South Jersey Industries, Inc., a New Jersey corporation ("SJI"). The Bank of New York is the Property Trustee of the Issuer. Concurrently with the issuance by the Issuer of its Preferred Securities, the Issuer will invest the proceeds thereof, together with the consideration paid by SJG for the Common Securities of the Issuer, in a corresponding series of SJG's deferrable interest subordinated debentures (the "Debentures"). The Debentures will be subordinate and junior in right of payment to all Senior Indebtedness (as defined herein) of SJG. The Debentures will be the sole assets of the Issuer and payments in respect of the Debentures will be the only revenues of the Issuer. Pursuant to a guarantee agreement to be entered into by SJG with respect to the Preferred Securities (the "Guarantee"), SJG will agree to make payments of cash distributions ("Distributions") with respect to the Preferred Securities of the Issuer and payments on liquidation or redemption with respect to such Preferred Securities but only to the extent that the Issuer holds funds available therefor and has not made such payments. The obligations of SJG under the Guarantee will be subordinate and junior in right of payment to all Senior Indebtedness of SJG. As described herein, the Guarantee, together with SJG's obligations under the Debentures, the Indenture relating to such Debentures and the Amended and Restated Trust Agreement for the Issuer, will provide for SJG's full, irrevocable and unconditional guarantee of the Preferred Securities. The Preferred Securities may be offered in amounts, at prices and on terms to be determined at the time of offering; provided, however, that the aggregate initial public offering price of all Preferred Securities issued pursuant to the Registration Statement of which this Prospectus forms a part shall not exceed $35,000,000. Certain specific terms of the Issuer's Preferred Securities will be set forth in an accompanying Prospectus Supplement, including where applicable and to the extent not set forth herein, the specific title, the aggregate number, the Distribution rate (or the method for determining such rate), the liquidation amount, redemption provisions, the right, if any, of SJG to terminate the Issuer and cause the corresponding series of Debentures to be distributed to the holders of the Issuer's Preferred Securities and Common Securities, the period during which interest on the corresponding series of Debentures may be deferred, the initial public offering price, and any other special terms, as well as any planned listing on a securities exchange, of such Preferred Securities. The Preferred Securities may be sold in a public offering to or through underwriters or dealers designated from time to time. See "Plan of Distribution." The names of any such underwriters or dealers involved in the sale of the Preferred Securities of the Issuer, the number of Preferred Securities to be purchased by any such underwriters or dealers and any applicable commissions or discounts will be set forth in the accompanying Prospectus Supplement. The net proceeds to the Issuer will also be set forth in the accompanying Prospectus Supplement. The accompanying Prospectus Supplement will contain information concerning material Federal income tax considerations applicable to the Preferred Securities offered thereby. ---------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ---------------- The date of this Prospectus is , 1997. STATEMENT OF AVAILABLE INFORMATION South Jersey Gas Company, a New Jersey corporation ("SJG"), will be the owner of beneficial interests represented by the Common Securities (the "Common Securities") of SJG Capital Trust, a statutory business trust created under the laws of the State of Delaware (the "Issuer"). SJG is a wholly owned subsidiary of South Jersey Industries, Inc., a New Jersey corporation ("SJI"). SJG and SJI are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, file reports and other information with the Securities and Exchange Commission (the "SEC"). Such reports and other information can be inspected and copied at the public reference facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. and at its regional offices at 500 West Madison Street, Chicago, Illinois and 7 World Trade Center, New York, New York. Copies of such reports and other information may also be obtained from the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549-1004 at prescribed rates. Such reports and other information can also be inspected at the New York Stock Exchange, Inc. (the "New York Stock Exchange") where certain of SJI's securities are listed. The SEC also maintains a site on the World Wide Web that contains reports, proxies and information statements and other materials that are filed with the SEC's Electronic Data Gathering Analysis and Retrieval System ("EDGAR"). This site can be accessed at http:\\www.sec.gov. No separate financial statements of the Issuer have been included herein. SJG and the Issuer do not consider that such financial statements would be material to holders of the Issuer's preferred securities (the "Preferred Securities") because the Issuer is a newly formed special purpose entity, has no operating history or independent operations and is not engaged in and does not propose to engage in any activity other than holding as trust assets the corresponding series of deferrable interest subordinated debentures (the "Debentures") of SJG and issuing Preferred Securities and Common Securities (the Common Securities, together with the Preferred Securities, the "Trust Securities") representing undivided beneficial interests in such Debentures. See "The Issuer," "Description of the Preferred Securities" and "Description of the Debentures." INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE SJG's Form 10, filed with the SEC pursuant to the Exchange Act on March 7, 1997 (File No. 000-22211), is incorporated herein by reference. Each document filed by SJG and the Issuer subsequent to the date of this Prospectus pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to the termination of the offering of the related Preferred Securities shall be deemed to be incorporated by reference in this Prospectus and the accompanying Prospectus Supplement and shall be a part hereof and thereof from the date of filing of such document. Any statement contained herein or therein or in a document all or a portion of which is incorporated or deemed to be incorporated by reference herein and therein shall be deemed to be modified or superseded for purposes of this Prospectus and the accompanying Prospectus Supplement to the extent that a statement contained herein or therein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein and therein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus or the accompanying Prospectus Supplement. SJG undertakes to provide without charge to each person, including any beneficial owner, to whom this Prospectus and the accompanying Prospectus Supplement are delivered, upon written or oral request of such person, a copy of any or all documents described above under "Incorporation of Certain Documents by Reference," other than exhibits to such documents not specifically incorporated by reference therein. Such requests should be directed to George L. Baulig, Secretary, South Jersey Gas Company, Number One South Jersey Plaza, Route 54, Folsom, New Jersey 08037 (609) 561-9000. 2 THE ISSUER The Issuer is a statutory business trust created under Delaware law pursuant to (i) a trust agreement executed by SJG, as sponsor for the Issuer, and the Issuer Trustees (as defined below) and (ii) the filing of a certificate of trust with the Delaware Secretary of State. The trust agreement will be amended and restated in its entirety (as so amended and restated, the "Trust Agreement") substantially in the form filed as an exhibit to the Registration Statement of which this Prospectus forms a part. The Trust Agreement will be qualified as an indenture under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The Issuer exists for the exclusive purposes of issuing and selling its Trust Securities and using the proceeds from the sale of its Trust Securities to acquire a corresponding series of Debentures, maintaining the status of the Issuer as a grantor trust for Federal income tax purposes and engaging in those activities necessary, convenient or incidental to the foregoing. All of the Common Securities of the Issuer will be owned by SJG. The Common Securities of the Issuer will rank pari passu, and payments will be made thereon pro rata, with the Preferred Securities of the Issuer, except that upon the occurrence and continuance of an event of default with respect to the corresponding series of Debentures (a "Debenture Event of Default") under the Indenture dated as of April , 1997 (as amended and supplemented from time to time, the "Indenture") between SJG and The Bank of New York, as trustee (the "Debenture Trustee"), the rights of the holders of such Common Securities to payment of cash distributions ("Distributions") and payments upon redemption and liquidation will be subordinated to the rights of the holders of such Preferred Securities. The Indenture will be qualified as an indenture under the Trust Indenture Act. The Issuer's business and affairs are conducted by three trustees, each appointed by SJG as holder of the Common Securities: (i) The Bank of New York as property trustee (the "Property Trustee"); (ii) The Bank of New York (Delaware) as Delaware trustee (the "Delaware Trustee"); and (iii) one individual trustee who is an employee or officer of or affiliated with SJG (the "Administrative Trustee," and together with the Property Trustee and the Delaware Trustee, the "Issuer Trustees"). The holder of the Common Securities, or the holders of at least a majority in aggregate liquidation amount of the Issuer's Preferred Securities if an event of default under the Trust Agreement (a "Trust Agreement Event of Default") has occurred and is continuing, will be entitled to remove and replace the Property Trustee. In no event will the holders of the Preferred Securities have the right to vote to appoint, remove or replace the Administrative Trustee, which voting rights are vested exclusively in the holder of the Common Securities. The duties and obligations of each of the Issuer Trustees are governed by the Trust Agreement. Pursuant to the Trust Agreement, SJG will pay all fees and expenses related to the Issuer and the offering of its Preferred Securities and will pay, directly or indirectly, all ongoing costs, expenses and liabilities of the Issuer except such Issuer's obligations under its Preferred Securities. The principal place of business of the Issuer is Number One South Jersey Plaza, Route 54, Folsom, New Jersey 08037, and its telephone number is (609) 561-9000. 3 SOUTH JERSEY GAS COMPANY SJG is a regulated New Jersey public utility and is the principal subsidiary of SJI. SJG is a gas distribution utility that supplies natural gas to residential, commercial and industrial customers in the southern part of New Jersey. SJG also makes off-system sales of natural gas on a wholesale basis to various customers on the interstate pipeline system and transports natural gas purchased directly from producers or suppliers by some of its customers. At December 31, 1996, the Company served 253,874 residential, commercial and industrial customers throughout 112 municipalities in Atlantic, Cape May, Cumberland, and Salem counties and portions of Burlington, Camden and Gloucester Counties. The Company's service territory covers approximately 2,500 square miles and has an estimated permanent population of 1.1 million. Gas sales and transportation for 1996 amounted to 66,814,000 Mcf (thousand cubic feet), of which 51,203,000 Mcf was firm sales and transportation, 7,040,000 Mcf was interruptible sales and transportation and 8,571,000 Mcf was off-system sales. The breakdown of firm sales includes 42.4% residential, 19.8% commercial, 10.1% cogeneration and electric generation, 2.4% industrial and other and 25.3% transportation. SJG is regulated as to rates and other matters by the New Jersey Board of Public Utilities. SJG's executive offices are located at Number One South Jersey Plaza, Route 54, Folsom, New Jersey, 08037, and its telephone number is (609) 561-9000. USE OF PROCEEDS Unless otherwise specified in the accompanying Prospectus Supplement, the proceeds to be received by the Issuer from the sale of the Preferred Securities offered hereby will be used by the Issuer to purchase Debentures from SJG. The proceeds from the sale of the Debentures will be used by SJG to retire short-term debt and for general corporate purposes. At December 31, 1996, SJG had $108.3 million of short-term debt outstanding with a weighted- average interest cost of 5.854%. DESCRIPTION OF THE PREFERRED SECURITIES Pursuant to the terms of the Trust Agreement, the Issuer will issue the Preferred Securities and the Common Securities. The Preferred Securities of the Issuer will represent undivided beneficial interests in the assets of the Issuer and the holders thereof will be entitled to a preference in certain circumstances with respect to the payment of Distributions and amounts payable on redemption or liquidation over the Common Securities of the Issuer, as well as other benefits as described in the Trust Agreement. GENERAL The Preferred Securities of the Issuer will rank pari passu, and payments will be made thereon pro rata, with the Common Securities of the Issuer except as described under "--Subordination of Common Securities." The proceeds from the sale of the Preferred Securities and the Common Securities will be used by the Issuer to purchase a corresponding series of Debentures from SJG. The Debentures will be held in trust by the Property Trustee for the benefit of the holders of the related Trust Securities. The Guarantee Agreement executed by SJG for the benefit of the holders of the Issuer's Preferred Securities (the "Guarantee") will be subordinate and junior in right of payment to all general liabilities of SJG. Pursuant to the Guarantee, SJG will agree to make payments of Distributions and payments on redemption or liquidation with respect to such Preferred Securities, but only to the extent the Issuer holds funds available therefor and has not made such payments. See "Description of the Guarantee." It is anticipated that the assets of the Issuer available for distribution to the holders of its Preferred Securities will be limited to payments from SJG under the corresponding series of Debentures in which the Issuer will invest the proceeds from the issuance and sale of its Trust Securities. See "Description of the Debentures." If SJG fails to make a payment on a series of Debentures, the Issuer will not have sufficient funds to make related payments, including Distributions, on the corresponding series of Preferred Securities. 4 DISTRIBUTIONS Distributions on the Preferred Securities of the Issuer will be payable at a rate specified in the accompanying Prospectus Supplement for such Preferred Securities. The amount of Distributions payable for any full quarterly period will be computed on the basis of a 360-day year of twelve 30-day months and for any period shorter than a full month shall be computed on the basis of the actual number of days elapsed in such period based on 30-day months. Distributions on the Preferred Securities will be cumulative and will accumulate from the date of original issuance and will be payable quarterly in arrears on the dates specified in the accompanying Prospectus Supplement except as otherwise described below. In the event that any date on which Distributions are otherwise payable on the Preferred Securities is not a Business Day (as defined below), payment of such Distributions will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect to any such delay), except that if such Business Day is in the next succeeding calendar year, payment of such Distributions shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date (each date on which Distributions are payable in accordance with the foregoing is referred to herein as a "Distribution Date"). A "Business Day" shall mean any day other than a Saturday, Sunday or a day on which banking institutions in The City of New York or the State of New Jersey are required by law or executive order to remain closed. Distributions on the Preferred Securities will be payable to the holders thereof as they appear on the securities register of the Issuer on the relevant record date, which, as long as the Preferred Securities remain in book-entry-only form, will be one Business Day prior to the relevant Distribution Date. Subject to any applicable laws and regulations and the provisions of the Trust Agreement, each such payment will be made as described under "--Book-Entry-Only Issuance--The Depository Trust Company." In the event that any Preferred Securities are not in book-entry-only form, the relevant record date for such Preferred Securities will be the 15th day of the last month of each calendar quarter, whether or not a Business Day. So long as no Debenture Event of Default has occurred and is continuing with respect to a series of Debentures, SJG in its sole discretion will have the right at any time and from time to time to defer payments of interest by extending the interest payment period on such series of Debentures for up to the maximum period specified in the accompanying Prospectus Supplement for such series of Debentures (each, an "Extension Period"), provided that any such Extension Period shall not extend beyond the maturity or any redemption date of the Debentures of such series. As a consequence, quarterly Distributions on the corresponding Preferred Securities would be deferred by the Issuer during such Extension Period, but the amount of Distributions to which holders of the Preferred Securities would be entitled will continue to accumulate at the annual rate applicable to quarterly Distributions thereon, compounded quarterly. During an Extension Period for the Debentures, the rate per annum at which Distributions on the Trust Securities accumulate shall be increased by an amount such that the aggregate amount of Distributions that accumulate on all Trust Securities during any such Extension Period is equal to the aggregate amount of interest (including interest payable on unpaid interest at the rate per annum set forth in the Prospectus Supplement for such Preferred Securities, compounded quarterly) that accrues during any such Extension Period on the Debentures. During any Extension Period, SJG may not declare or pay any dividend on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any shares of SJG's capital stock. Within five business days after receipt by the Property Trustee of notice of an Extension Period, the Property Trustee shall give notice thereof to the holders of Trust Securities by first class mail, postage prepaid. Prior to the termination of any Extension Period, SJG may shorten or further extend the interest payment period on a series of Debentures, provided that such Extension Period, together with all such previous and further extensions thereof, may not exceed the maximum Extension Period or extend beyond the maturity or any redemption date of such Debentures. Upon the termination of any Extension Period and the payment of all amounts then due, SJG may elect to begin a new Extension Period, subject to the above requirements. See "Description of the Debentures--Option to Extend Interest Payment Period." REDEMPTION Upon the repayment of the Debentures at maturity or upon redemption, the proceeds from such repayment will be applied by the Property Trustee to redeem a like amount of the corresponding Trust Securities of the 5 Issuer at a redemption price (the "Redemption Price") equal to the liquidation amount of such Trust Securities plus all accumulated and unpaid Distributions to the redemption date (the "Redemption Date"). The redemption terms of the Debentures and the corresponding Trust Securities will be set forth in the accompanying Prospectus Supplement. If less than all the Trust Securities of the Issuer are to be redeemed on a Redemption Date, then the aggregate amount of such Trust Securities to be redeemed shall be selected by the Property Trustee among the Issuer's Preferred Securities and Common Securities pro rata based on the respective aggregate liquidation amounts of such Preferred Securities and Common Securities, subject to the provisions described under "--Subordination of Common Securities." REDEMPTION PROCEDURES Notice of any redemption of Trust Securities will be given by the Property Trustee to the holders of such Trust Securities to be redeemed not less than 30 nor more than 60 days prior to the Redemption Date. If a notice of redemption is given with respect to any Trust Securities, then, to the extent funds are available therefor, the Issuer will irrevocably deposit with the paying agent for such Trust Securities funds sufficient to pay the applicable Redemption Price for the Trust Securities being redeemed on the Redemption Date and will give such paying agent irrevocable instructions and authority to pay the Redemption Price to the holders of such Trust Securities upon surrender thereof. Notwithstanding the foregoing, Distributions payable on or prior to the Redemption Date for any Trust Securities called for redemption shall be payable to the holders of such Trust Securities on the relevant record dates for the related Distribution Dates. If notice of redemption shall have been given and funds irrevocably deposited as required, then upon the date of such deposit, all rights of the holders of such Trust Securities so called for redemption will cease, except the right of the holders of such Trust Securities to receive the Redemption Price, but without interest thereon, and such Trust Securities will cease to be outstanding. In the event that any Redemption Date for Trust Securities is not a Business Day, then the Redemption Price will be payable on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay), except that if such Business Day is in the next succeeding calendar year, the Redemption Price will be payable on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. In the event that payment of the Redemption Price in respect of any Trust Securities called for redemption is improperly withheld or refused and not paid either by the Issuer thereof or by SJG pursuant to the Guarantee as described under "Description of the Guarantee," Distributions on such Trust Securities will continue to accumulate at the then applicable rate from the original Redemption Date to the date of payment, in which case the actual payment date will be considered the Redemption Date for purposes of calculating the Redemption Price. Subject to applicable law, SJG, SJI or its subsidiaries may at any time and from time to time purchase outstanding Preferred Securities by tender, in the open market or by private agreement. SUBORDINATION OF COMMON SECURITIES Payment of Distributions on, and the Redemption Price of, the Issuer's Trust Securities, as applicable, shall be made pro rata based on the respective aggregate liquidation amounts of such Trust Securities; provided, however, that if a Debenture Event of Default has occurred and is continuing with respect to the Debentures, no payment of any Distribution on, or Redemption Price of, any of the Issuer's Common Securities, and no other payment on account of the liquidation of such Common Securities, shall be made unless payment in full in cash of all accumulated and unpaid Distributions on all of the Issuer's outstanding Preferred Securities for all Distribution periods terminating on or prior thereto, or in the case of a redemption, the full amount of such Redemption Price on all of the Issuer's outstanding Preferred Securities then being redeemed shall have been made or provided for, and all funds available to the Property Trustee shall first be applied to the payment in full in cash of all Distributions on, or Redemption Price of, all of the Issuer's outstanding Preferred Securities then due and payable. 6 If a Debenture Event of Default has occurred and is continuing with respect to the Debentures, the holder of the Issuer's Common Securities will be deemed to have waived any right to act with respect to such Debenture Event of Default or any related Trust Agreement Event of Default until the effect of such Debenture Event of Default and related Trust Agreement Event of Default has been cured, waived or otherwise eliminated. Until any such Debenture Event of Default has been so cured, waived or otherwise eliminated, the Property Trustee shall act solely on behalf of the holders of the corresponding Preferred Securities and not on behalf of SJG, as holder of such Common Securities, and only the holders of such Preferred Securities will have the right to direct the Property Trustee to act on their behalf. LIQUIDATION DISTRIBUTION UPON TERMINATION Pursuant to the Trust Agreement, the Issuer shall be terminated on the earliest to occur of (i) the expiration of the term of the Issuer; (ii) the bankruptcy, dissolution or liquidation of SJG or an acceleration of the maturity of the Debentures held by the Issuer; (iii) if provided for in the accompanying Prospectus Supplement, upon the election of SJG to terminate the Issuer and cause the distribution of the Debentures to the holders of the Issuer's Trust Securities; (iv) the redemption of all of the Issuer's Trust Securities; and (v) an order for the termination of the Issuer shall have been entered by a court of competent jurisdiction. The election of SJG pursuant to clause (iii) above shall be made by SJG giving written notice to the Issuer Trustees not less than 30 days prior to the date of distribution of the Debentures and shall be accompanied by a written opinion of nationally recognized independent counsel that such event will not be a taxable event to the holders of the Trust Securities for Federal income tax purposes. If a termination event occurs as described in clause (i), (ii) or (v) above with respect to the Issuer, the Issuer shall be liquidated by the Administrative Trustee as expeditiously as the Issuer Trustees determine to be possible by distributing, after satisfaction of liabilities to creditors of the Issuer as provided by applicable law, to the holders of its Trust Securities a like amount of the Debentures, unless such distribution is determined by the Property Trustee not to be practical, in which event such holders will be entitled to receive out of the assets of the Issuer available for distribution to holders, after satisfaction of liabilities to creditors of the Issuer as provided by applicable law, an amount equal to, in the case of holders of Preferred Securities, the aggregate liquidation amount per Preferred Security specified in the accompanying Prospectus Supplement plus accumulated and unpaid Distributions thereon to the date of payment (such amount, the "Liquidation Distribution"). If the Liquidation Distribution with respect to the Issuer's Preferred Securities can be paid only in part because the Issuer has insufficient assets available to pay in full the aggregate Liquidation Distribution, then the amounts payable by the Issuer on such Preferred Securities shall be paid on a pro rata basis. The holders of the Issuer's Common Securities will be entitled to receive the Liquidation Distribution upon any such liquidation pro rata with the holders of its Preferred Securities, except that if a Debenture Event of Default has occurred and is continuing, the Preferred Securities shall have a priority over the Common Securities with respect to payment of such Liquidation Distribution. TRUST AGREEMENT EVENT OF DEFAULT; NOTICE A Debenture Event of Default shall constitute a Trust Agreement Event of Default with respect to the Preferred Securities issued by the Issuer under the Trust Agreement. Within 90 days after the occurrence of any Trust Agreement Event of Default actually known to the Property Trustee, the Property Trustee shall transmit notice of such Trust Agreement Event of Default to the holders of the corresponding Trust Securities, the Administrative Trustee and SJG, unless such Trust Agreement Event of Default shall have been cured or waived. SJG and the Administrative Trustee are required to file annually with the Property Trustee a certificate as to whether or not they are in compliance with all the conditions and covenants applicable to them under the Trust Agreement. Under the Trust Agreement, if the Property Trustee has failed to enforce its rights under the Trust Agreement or the Indenture to the fullest extent permitted by law and subject to the terms of the Trust Agreement and the Indenture, any holder of the corresponding Preferred Securities may institute a legal proceeding directly 7 to enforce the Property Trustee's rights under the Trust Agreement or the Indenture with respect to Debentures having a principal amount equal to the aggregate liquidation amount of the Preferred Securities of such holder without first instituting a legal proceeding against the Property Trustee or any other person. To the extent that any action under the Indenture is entitled to be taken by the holders of at least a specified percentage of the principal amount of the Debentures, holders of the Preferred Securities may take such action if such action is not taken by the Property Trustee. Notwithstanding the foregoing, if a Trust Agreement Event of Default attributable to SJG's failure to pay principal of or premium, if any, or interest on the Debentures has occurred and is continuing, then each holder of Preferred Securities may institute a legal proceeding directly against SJG for enforcement of payment to such holder, all as provided in the Indenture. If a Debenture Event of Default has occurred and is continuing with respect to the Debentures, the Preferred Securities shall have a preference over the Issuer's Common Securities with respect to the payment of Distributions and amounts payable on redemption and liquidation as described above. See "-- Liquidation Distribution Upon Termination" and "--Subordination of Common Securities." REMOVAL OF ISSUER TRUSTEES Unless a Trust Agreement Event of Default has occurred and is continuing, any Issuer Trustee may be removed and replaced at any time by SJG, as the holder of the Common Securities. If a Trust Agreement Event of Default has occurred and is continuing, the Property Trustee and the Delaware Trustee may be removed and replaced at such time only by the holders of at least a majority in aggregate liquidation amount of the outstanding Preferred Securities. In no event will the holders of the Preferred Securities have the right to vote to appoint, remove or replace the Administrative Trustee, which voting rights are vested exclusively in SJG, as the holder of the Common Securities. No resignation or removal of an Issuer Trustee and no appointment of a successor trustee shall be effective until the acceptance of appointment by the successor trustee in accordance with the provisions of the Trust Agreement. CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE Unless a Trust Agreement Event of Default has occurred and is continuing, at any time and from time to time, for the purpose of meeting the legal requirements of the Trust Indenture Act or of any jurisdiction in which any part of the Trust Property (as defined in the Trust Agreement) may at such time be located, SJG, as the holder of the Common Securities, and the Administrative Trustee shall have the power (i) to appoint one or more persons approved by the Property Trustee either to act as co-trustee, jointly with the Property Trustee, of all or any part of such Trust Property, or to act as separate trustee of any such Trust Property, in either case with such powers as may be provided in the instrument of appointment, and (ii) to vest in such person or persons in such capacity any property, title, right or power deemed necessary or desirable, subject to the provisions of the Trust Agreement. If a Trust Agreement Event of Default has occurred and is continuing, or if SJG does not join with the Administrative Trustee in making such appointment, only the Property Trustee shall have power to make such appointment. MERGER OR CONSOLIDATION OF ISSUER TRUSTEES Any corporation or other entity into which any Issuer Trustee may be merged or converted or with which it may be consolidated, or any corporation or other entity resulting from any merger, conversion or consolidation to which any Issuer Trustee shall be a party, or any corporation or other entity succeeding to all or substantially all the corporate trust business of any Issuer Trustee, shall be the successor of such Issuer Trustee under the Trust Agreement, provided such corporation or other entity shall be otherwise qualified and eligible. MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE ISSUER The Issuer may not merge with or into, consolidate, amalgamate, or be replaced by, or convey, transfer or lease its properties and assets as an entirety or substantially as an entirety to any corporation or other entity, except as described below. The Issuer may, at the request of SJG, with the consent of the Administrative Trustee 8 and without the consent of the holders of the Preferred Securities, merge with or into, consolidate, amalgamate, or be replaced by a trust organized as such under the laws of any state, provided that (i) such successor entity either (a) expressly assumes all of the obligations of the Issuer with respect to the Preferred Securities or (b) substitutes for the Preferred Securities other securities substantially similar to the Preferred Securities (the "Successor Securities") so long as the Successor Securities rank the same as the Preferred Securities rank with respect to the payment of Distributions and payments upon redemption and liquidation, (ii) SJG expressly appoints a trustee of such successor entity possessing the same powers and duties as the Property Trustee as the holder of the Debentures, (iii) the Successor Securities are listed, or any Successor Securities will be listed upon notification of issuance, on any national securities exchange or other organization on which the Preferred Securities are then listed, (iv) such merger, consolidation, amalgamation or replacement does not cause the Preferred Securities (including any Successor Securities) to be downgraded by any nationally recognized statistical rating organization, (v) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the holders of the Preferred Securities (including any Successor Securities) in any material respect, (vi) such successor entity has a purpose substantially similar to that of the Issuer, (vii) prior to such merger, consolidation, amalgamation or replacement, SJG has received an opinion of nationally recognized independent counsel to the Issuer to the effect that (a) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the holders of the Preferred Securities (including any Successor Securities) in any material respect, and (b) following such merger, consolidation, amalgamation or replacement, neither the Issuer nor such successor entity will be required to register as an investment company under the Investment Company Act of 1940, as amended (the "Investment Company Act"), and (viii) SJG or any permitted successor assignee owns all of the common securities of such successor entity and guarantees the obligations of such successor entity under the Successor Securities at least to the extent provided by the Guarantee and Trust Agreement. Notwithstanding the foregoing, the Issuer shall not, except with the consent of all holders of the Preferred Securities, consolidate, amalgamate, merge with or into, or be replaced by, any other entity, or permit any other entity to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger or replacement would cause the Issuer or the successor entity not to be classified as a grantor trust for Federal income tax purposes. VOTING RIGHTS; AMENDMENT OF TRUST AGREEMENT Except as provided below and under "--Mergers, Consolidations, Amalgamations or Replacements of the Issuer" and "Description of the Guarantee--Amendments and Assignment" and as otherwise required by law and the Trust Agreement, the holders of the Preferred Securities will have no voting rights. The Trust Agreement may be amended from time to time by SJG and any Issuer Trustee, without the consent of the holders of the Preferred Securities, (i) to cure any ambiguity, defect or inconsistency or (ii) to make any other change that does not adversely affect in any material respect the interests of any holder of the Preferred Securities. The Trust Agreement may be amended by SJG and the Issuer Trustees in any other respect, with the consent of the holders of at least a majority in aggregate liquidation amount of the Preferred Securities affected thereby, provided that no such modification, without the consent of each holder of such Preferred Securities, may (i) change the amount, timing or currency or otherwise adversely affect the method of payment of any Distribution or Liquidation Distribution required to be made as of a specified date, (ii) restrict the right of a holder of any Preferred Security to institute suit for enforcement of any Distribution, Redemption Price or Liquidation Distribution, (iii) change the purpose of the Issuer, (iv) authorize the issuance of any additional beneficial interests in the Issuer other than as contemplated by the Trust Agreement, (v) change the redemption provisions, (vi) change the conditions precedent for SJG to elect to terminate the Issuer and distribute the Debentures to the holders of the Preferred Securities, (vii) affect the limited liability of any holder of the Preferred Securities, or (viii) alter the amendment provisions described by this sentence only. No amendment may be made without receipt by the Issuer of an opinion of nationally recognized independent counsel experienced in such matters to the effect that such amendment will not affect the Issuer's status as a grantor trust for Federal income tax purposes or its exemption from regulation as an investment company under the Investment Company Act. Notwithstanding the foregoing, no additional duties may be imposed upon the Delaware Trustee or the Property Trustee without such Trustee's consent. 9 The Issuer Trustees shall not (i) direct the time, method and place of conducting any proceeding for any remedy available to the Debenture Trustee or executing any trust or power conferred on the Debenture Trustee with respect to the corresponding series of Debentures, (ii) waive any past default pursuant to Section 6.04 of the Indenture, (iii) exercise any right to rescind or annul an acceleration of the principal of the Debentures or (iv) consent to any amendment or modification of the Indenture, where such consent shall be required, without, in each case, obtaining the consent of the holders of at least a majority in aggregate liquidation amount of all outstanding Preferred Securities; provided, however, that where a consent under the Indenture would require the consent of each holder of Debentures affected thereby, no such consent shall be given by the Property Trustee without the prior consent of each holder of the Preferred Securities. The Issuer Trustees shall not revoke any action previously authorized or approved by a vote of the holders of the Preferred Securities except by subsequent vote of the holders thereof. The Property Trustee shall notify all holders of Preferred Securities of any notice received from the Debenture Trustee as a result of the Issuer being the holder of the corresponding Debentures. In addition to obtaining the consent of the holders of the Preferred Securities, prior to taking any of the foregoing actions, the Issuer Trustees shall obtain an opinion of nationally recognized independent counsel experienced in such matters to the effect that the Issuer will not be classified as an association taxable as a corporation or a partnership for Federal income tax purposes on account of such action and will continue to be classified as a grantor trust for Federal income tax purposes. Any required consent of holders of Preferred Securities may be given at a meeting of holders of the Preferred Securities convened for such purpose, by proxy or pursuant to written consent. The Property Trustee will cause a notice of any meeting at which holders of Preferred Securities are entitled to vote, or of any matter upon which action by written consent of such holders is to be taken, to be given to each holder of record of the Preferred Securities in the manner set forth in the Trust Agreement. Notwithstanding that holders of Preferred Securities are entitled to vote or consent under certain circumstances, any Preferred Securities that are owned by SJG, the Issuer Trustees or any affiliate of SJG or any Issuer Trustee shall, for purposes of such vote or consent, be treated as if they were not outstanding. BOOK-ENTRY-ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY The Depository Trust Company ("DTC") will act as securities depositary for all of the Preferred Securities. The Preferred Securities will be issued only as fully-registered securities registered in the name of Cede & Co. (DTC's nominee) as the holder thereof. One or more fully-registered global securities will be issued for the Preferred Securities of the Issuer, representing in the aggregate the total number of the Issuer's Preferred Securities, and will be deposited with DTC. DTC is a limited purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC holds securities that its participants ("Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations ("Direct Participants"). DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain custodial relationships with Direct Participants, either directly or indirectly ("Indirect Participants"). The rules applicable to DTC and its Participants are on file with the SEC. Purchases of Preferred Securities within the DTC system must be made by or through Direct Participants, which will receive a credit for the Preferred Securities on DTC's records. The ownership interest of each actual purchaser of each Preferred Security ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect 10 Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchases, but Beneficial Owners are expected to receive written confirmations providing details of the transactions, as well as periodic statements of their holdings, from the Direct or Indirect Participants through which the Beneficial Owners purchased Preferred Securities. Transfers of ownership interests in the Preferred Securities are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Preferred Securities, except in the event that use of the book-entry system for the Preferred Securities of the Issuer is discontinued. DTC has no knowledge of the actual Beneficial Owners of the Preferred Securities; DTC's records reflect only the identity of the Direct Participants to whose accounts such Preferred Securities are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants and by Direct and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to Cede & Co. as the registered holder of the Preferred Securities. If less than all of the Issuer's Preferred Securities are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant to be redeemed. Although voting with respect to the Preferred Securities is limited to the holders of record of the Preferred Securities, in those instances in which a vote is required, neither DTC nor Cede & Co. will itself consent or vote with respect to the Preferred Securities. Under its usual procedures, DTC would mail an omnibus proxy (the "Omnibus Proxy") to the Property Trustee as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts such Preferred Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). Distributions on the Preferred Securities will be made in immediately available funds by the Property Trustee on behalf of the Issuer to DTC. DTC's practice is to credit Direct Participants' accounts on the relevant payment date in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payments on such payment date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices and will be the responsibility of such Participant and not of DTC, the Property Trustee, the Issuer or SJG, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of Distributions to DTC is the responsibility of the Property Trustee on behalf of the Issuer, disbursement of such payments to Direct Participants is the responsibility of DTC and disbursements of such payments to the Beneficial Owners is the responsibility of the Direct and Indirect Participants. The securities registrar and the Issuer Trustees may conclusively rely on, and shall be protected in relying on, transfer instructions delivered by DTC (or any successor depository) in issuing such definitive Preferred Securities. Neither the securities registrar nor the Issuer Trustees shall be liable for any delay in delivery of transfer instructions by DTC (or any successor depository). DTC may discontinue providing its services as securities depositary with respect to the Preferred Securities at any time by giving reasonable notice to the Property Trustee and SJG. In the event that a successor securities depositary is not obtained, SJG elects to terminate the book-entry system or a Trust Agreement Event of Default occurs and is continuing, definitive Preferred Security certificates representing such Preferred Securities are required to be printed and delivered. SJG, at its option, may decide to discontinue use of the system of book-entry transfers through DTC (or a successor depositary) as a result of such discontinuance or as a result of DTC's ineligibility to so act. Upon distribution of definitive Preferred Securities certificates, owners of such Preferred Securities will become the registered holders of such Preferred Securities. The information set forth above concerning DTC and DTC's book-entry system has been obtained from sources that the Issuer and SJG believe to be accurate, but the Issuer and SJG assume no responsibility for the accuracy thereof. Neither the Issuer nor SJG has any responsibility for the performance by DTC or its 11 Participants of their respective obligations as described herein or under the rules and procedures governing their respective operations. In the event that the book-entry-only system is discontinued, the payment of any Distribution, Redemption Price and Liquidation Distribution in respect of the Preferred Securities will be payable in the manner described in the accompanying Prospectus Supplement, and the following provisions would apply. The Property Trustee shall keep the registration books for the Preferred Securities at its corporate office. The Preferred Securities may be transferred or exchanged for one or more Preferred Securities upon surrender thereof at the corporate office of the Property Trustee by the holders or their duly authorized attorneys or legal representatives. Upon surrender of any Preferred Securities to be transferred or exchanged, the Property Trustee shall record the registration of transfer or exchange in the registration books and shall deliver new Preferred Securities appropriately registered. The Property Trustee shall not be required to register the transfer of any Preferred Securities that have been called for redemption or on or after the liquidation date. The Issuer and the Property Trustee shall be entitled to treat the holders of the Preferred Securities, as their names appear in the registration books, as the owners of those Preferred Securities for all purposes under the Trust Agreement. INFORMATION CONCERNING THE PROPERTY TRUSTEE The Property Trustee is the sole Trustee under the Trust Agreement for purposes of the Trust Indenture Act and shall have and be subject to all of the duties and responsibilities specified with respect to an indenture trustee under the Trust Indenture Act. The Property Trustee, other than during the occurrence and continuance of a Trust Agreement Event of Default, undertakes to perform only such duties as are specifically set forth in the Trust Agreement and, upon a Trust Agreement Event of Default, must use the same degree of care and skill in the exercise thereof as a prudent person would exercise or use in the conduct of his or her own affairs. Subject to this provision, the Property Trustee is under no obligation to exercise any of the powers vested in it by the Trust Agreement at the request of any holder of Preferred Securities unless it is offered reasonable security or indemnity against the costs, expenses and liabilities that might be incurred thereby. If no Trust Agreement Event of Default has occurred and is continuing, and the Property Trustee is required to decide between alternative courses of action, construe ambiguous provisions in the Trust Agreement or is unsure of the application of any provision of the Trust Agreement, and the matter is not one on which holders of Preferred Securities are entitled under the Trust Agreement to vote, then the Property Trustee shall take such action as is directed by SJG and, if not so directed, may take such action as it deems advisable and in the best interests of the holders of the corresponding Trust Securities and will have no liability except for its own negligent action, negligent failure to act or willful misconduct. TAX STATUS OF THE TRUST The Trust, the Depositor, the Property Trustee, the Administrative Trustee and the Delaware Trustee will enter into the Trust Agreement, and the Trust Securities will be issued, with the intention that (i) the Trust will be classified as a grantor trust under subpart E, part I of subchapter J of the Internal Revenue Code of 1986, as amended and not as a corporation or a publicly traded partnership taxable as a corporation for purposes of Federal income tax law, and (ii) the Holders will be treated as the owners of a pro rata undivided interest in each asset of the Trust. The Trust, the Depositor, the Property Trustee, the Administrative Trustee and the Delaware Trustee will agree to treat and to take no action inconsistent with the treatment of the Trust Securities (or beneficial interest therein) as interests in a grantor trust for purposes of federal, state and local income and franchise taxes. The Trust, the Depositor, the Property Trustee, the Administrative Trustee and the Delaware Trustee will agree in the Trust Agreement to take no action with respect to the Trust or any interest therein that would cause the Trust to be treated as an association or publicly traded partnership taxable as a corporation for purposes of Federal income tax law. Each holder of Trust Securities, by acquisition of a Trust Security (or a beneficial interest therein), will agree to this tax treatment. Notwithstanding any other provision in the Trust Agreement to the contrary, the Issuer Trustees shall have no power to vary the investment of the Holders within the meaning of Treasury Department Regulation (S)301.7701-4(c) or to engage in business unless the Issuer Trustees shall have received a written opinion of nationally recognized counsel that such activity shall not cause the Trust to fail to be a grantor trust for federal income tax purposes. The provisions of the Trust Agreement will be construed in light of the foregoing intended tax treatment. 12 MISCELLANEOUS The Administrative Trustee is authorized and directed to conduct the affairs of and to operate the Issuer in such a way that (i) the Issuer will not be deemed to be an "investment company" required to be registered under the Investment Company Act or to be taxed as a corporation or partnership for Federal income tax purposes, (ii) the Issuer will be classified as a grantor trust for Federal income tax purposes and (iii) the Debentures held by the Issuer will be treated as indebtedness of SJG for Federal income tax purposes. In this connection, SJG and the Administrative Trustee are authorized to take any action, not inconsistent with applicable law, the certificate of trust of the Issuer or the Trust Agreement, that each of SJG and the Administrative Trustee determine in their discretion to be necessary or desirable for such purposes, even if such action adversely affects the interests of the holders of the corresponding Preferred Securities. Holders of the Preferred Securities have no preemptive or similar rights. The Issuer may not borrow money, issue debt, execute mortgages or pledge any of its assets. Except as otherwise provided in the Trust Agreement, any action requiring the consent or vote of the Issuer Trustees shall be approved by the Administrative Trustee. GOVERNING LAW The Trust Agreement will be governed by and construed in accordance with the laws of the State of Delaware. DESCRIPTION OF THE GUARANTEE The Guarantee will be executed and delivered by SJG concurrently with the issuance by the Issuer of its Preferred Securities for the benefit of the holders of the Preferred Securities. The Guarantee will be qualified as an indenture under the Trust Indenture Act and The Bank of New York will act as indenture trustee (the "Guarantee Trustee") under the Guarantee for the purposes of compliance with the Trust Indenture Act. The Guarantee Trustee will hold the Guarantee for the benefit of the holders of the Issuer's Preferred Securities. GENERAL SJG will irrevocably and unconditionally agree, to the extent set forth in the Guarantee, to pay in full, to the holders of the Issuer's Preferred Securities, the Guarantee Payments (as defined below) (except to the extent previously paid), as and when due, regardless of any defense, right of set-off or counterclaim which the Issuer may have or assert. The following payments, to the extent not paid by the Issuer (the "Guarantee Payments"), will be subject to the Guarantee (without duplication): (i) any accumulated and unpaid Distributions required to be paid on such Preferred Securities, to the extent that the Issuer has funds available therefor, (ii) the Redemption Price to the extent that the Issuer has funds available therefor, and (iii) upon a voluntary or involuntary termination, winding-up or liquidation of the Issuer, unless the Debentures are distributed to holders of such Preferred Securities, the lesser of (a) the aggregate of the liquidation amount specified in the Prospectus Supplement per Preferred Security plus all accumulated and unpaid Distributions on the Preferred Securities to the date of payment, to the extent the Issuer has funds available therefor and (b) the amount of assets of the Issuer remaining available for distribution to holders of Preferred Securities upon a termination and liquidation of the Issuer. SJG's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by SJG to the holders of the corresponding Preferred Securities or by causing the Issuer to pay such amounts to such holders. While the assets of SJG will not be available pursuant to the Guarantee for the payment of any Distribution, Liquidation Distribution or Redemption Price on any Preferred Securities if the Issuer does not have funds available therefor as described above, SJG has agreed under the Trust Agreement to pay all expenses of the Issuer except the Issuer's obligations under its Preferred Securities. Accordingly, the Guarantee, together with the backup undertakings consisting of SJG's obligations under the Trust Agreement, the Debentures and the Indenture, provide for SJG's full, irrevocable and unconditional guarantee of the Preferred Securities. 13 No single document executed by SJG in connection with the issuance of the Preferred Securities will provide for SJG's full, irrevocable and unconditional guarantee of the Preferred Securities. It is only the combined operation of SJG's obligations under the Guarantee, the Trust Agreement, the Debentures and the Indenture that has the effect of providing a full, irrevocable and unconditional guarantee of the Issuer's obligations under its Preferred Securities. See "Relationship Among the Preferred Securities, the Debentures and the Guarantee." STATUS OF THE GUARANTEE The Guarantee will constitute an unsecured obligation of SJG and will rank subordinate and junior in right of payment to all general liabilities of SJG. The Trust Agreement provides that each holder of Preferred Securities by acceptance thereof agrees to the subordination provisions and other terms of the Guarantee. The Guarantee will constitute a guarantee of payment and not of collection (i.e., the guaranteed party may institute a legal proceeding directly against SJG to enforce its rights under the Guarantee without first instituting a legal proceeding against any other person or entity). The Guarantee will not be discharged except by payment of the Guarantee Payments in full to the extent not previously paid or upon distribution to the holders of the Preferred Securities of the Debentures pursuant to the Trust Agreement. The Guarantee shall rank pari passu with any similar guarantee agreements issued by SJG on behalf of the holders of preferred or capital securities issued by the Issuer and with any other security, guarantee, or other obligation that is expressly stated to rank pari passu with the obligations of SJG under the Guarantee. AMENDMENTS AND ASSIGNMENT Except with respect to any changes which do not materially adversely affect the rights of holders of the Preferred Securities (in which case no consent of the holders will be required), the Guarantee may not be amended without the prior approval of the holders of at least a majority in aggregate liquidation amount of the Preferred Securities (excluding any Preferred Securities held by SJG or an affiliate thereof). The manner of obtaining any such approval will be as set forth under "Description of the Preferred Securities--Voting Rights; Amendment of Trust Agreement." All agreements contained in the Guarantee shall bind the successors, assigns, receivers, trustees and representatives of SJG and shall inure to the benefit of the holders of the Preferred Securities. GUARANTEE EVENTS OF DEFAULT An event of default under the Guarantee (a "Guarantee Event of Default") will occur upon the failure of SJG to perform any of its payment or other obligations thereunder, provided that except with respect to a Guarantee Event of Default resulting from a failure to make any of the Guarantee Payments, SJG shall have received notice of such Guarantee Event of Default from the Guarantee Trustee and shall not have cured such Guarantee Event of Default within 60 days after receipt of such notice. The holders of at least a majority in aggregate liquidation amount of the Preferred Securities will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee in respect of the Guarantee or to direct the exercise of any trust power conferred upon the Guarantee Trustee under the Guarantee. Any holder of the Preferred Securities may institute a legal proceeding directly against SJG to enforce such holder's rights under the Guarantee without first instituting a legal proceeding against the Issuer, the Guarantee Trustee or any other person or entity. SJG, as guarantor, will be required to file annually with the Guarantee Trustee a certificate as to whether or not SJG is in compliance with all the conditions and covenants applicable to it under the Guarantee. INFORMATION CONCERNING THE GUARANTEE TRUSTEE The Guarantee Trustee, other than during the occurrence and continuance of a Guarantee Event of Default, undertakes to perform only such duties as are specifically set forth in the Guarantee (and no implied covenants 14 shall be read into the Guarantee against the Guarantee Trustee) and, upon a Guarantee Event of Default, must exercise such of the rights and powers vested in it by the Guarantee and use the same degree of care and skill in the exercise thereof as a prudent person would exercise or use in the conduct of his or her own affairs. Subject to this provision, the Guarantee Trustee is under no obligation to exercise any of the powers vested in it by the Guarantee at the request of any holder of Preferred Securities unless it is offered reasonable indemnity as would satisfy a reasonable person in the position of the Guarantee Trustee against the costs, expenses and liabilities that might be incurred thereby. TERMINATION OF THE GUARANTEE The Guarantee will terminate and be of no further force and effect upon full payment of the Redemption Price or Liquidation Distribution for the Preferred Securities or upon distribution of the Debentures to the holders of the Preferred Securities. The Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any holder of the Preferred Securities must restore payment of any sums paid under such Preferred Securities or the Guarantee. GOVERNING LAW The Guarantee will be governed by and construed in accordance with the laws of the State of New Jersey. 15 DESCRIPTION OF THE DEBENTURES GENERAL The Debentures will be issued under the Indenture. All Debentures will rank pari passu with all other Debentures. The Debentures will be unsecured and will rank subordinate and junior in right of payment, to the extent and in the manner set forth in the Indenture, to all Senior Indebtedness (as defined below) of SJG. See "--Subordination." The Indenture does not limit the incurrence or issuance of Senior Indebtedness by SJG. The accompanying Prospectus Supplement will describe the following terms of the Debentures: (i) the title of such Debentures; (ii) the aggregate principal amount of such Debentures; (iii) the date or dates on which the principal of such Debentures shall be payable or the method of determination thereof; (iv) the rate or rates, if any, at which such Debentures shall bear interest, the interest payment dates on which any such interest shall be payable or the method by which any of the foregoing shall be determined; (v) any terms regarding redemption; (vi) the maximum Extension Period for such Debentures; and (vii) any other terms of such Debentures not inconsistent with the provisions of the Indenture. Certain Federal income tax consequences and special considerations relating to the Debentures will be described in the accompanying Prospectus Supplement. OPTION TO EXTEND INTEREST PAYMENT PERIOD Under the Indenture, SJG shall have the right in its sole and absolute discretion at any time and from time to time, so long as no Debenture Event of Default has occurred and is continuing with respect to the Debentures, to defer payments of interest by extending the interest payment period for the Debentures for up to the maximum Extension Period provided for in the Debentures, provided that no Extension Period shall extend beyond the maturity or any redemption date of such Debentures. At the end of the Extension Period, SJG shall be obligated to pay all interest then accrued and unpaid (together with interest thereon to the extent permitted by applicable law). During any Extension Period, SJG may not declare or pay any dividend on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any shares of SJG's capital stock. Prior to the termination of any Extension Period, SJG may shorten or further extend the interest payment period, provided that such Extension Period, together with all such previous and further extensions thereof, may not exceed the maximum Extension Period for the Debentures or extend beyond the maturity or any redemption date of the Debentures. Upon the termination of any Extension Period and the payment of all amounts then due, SJG may elect to begin a new Extension Period, subject to the above requirements. SJG shall be required to give notice to the Debenture Trustee and cause the Debenture Trustee to give notice to the holders of the Debentures of its election to begin an Extension Period, or any shortening or extension thereof, at least five Business Days prior to the date the notice of the record or payment date of the related Distribution on the Preferred Securities or payment of interest on such Debentures is required to be given to any national securities exchange on which the Debentures or the Preferred Securities are then listed or other applicable self-regulatory organization but in any event not less than five Business Days prior to such record date. RIGHTS OF EXISTING PREFERRED SHAREHOLDERS OF SJG If during any Extension Period, SJG fails to pay dividends on any shares of SJG's preferred stock in an amount equal to or exceeding four full quarterly dividend payments, pursuant to SJG's Restated Certificate of Incorporation, as amended, the holders of SJG's preferred stock, voting separately as a single class, shall be entitled to elect the smallest number of directors necessary to constitute a majority of SJG's Board of Directors. Such voting rights of the holders of preferred stock to elect directors shall continue until all accumulated and unpaid dividends thereon have been paid. SUBORDINATION All payments by SJG of the principal of, premium, if any, and interest on the Debentures shall be subordinated to the prior payment in full of all amounts payable on, under, or in connection with Senior 16 Indebtedness. The term "Senior Indebtedness" means: (i) the principal of and premium, if any, in respect of (a) indebtedness of SJG for money borrowed and (b) indebtedness evidenced by securities, debentures, bonds or other similar instruments issued by SJG; (ii) all capital lease obligations of SJG; (iii) all obligations of SJG issued or assumed as the deferred purchase price of property, all conditional sale obligations of SJG and all obligations of SJG under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business); (iv) all obligations of SJG for the reimbursement of any obligation, any letter of credit, banker's acceptance, security purchase facility or similar credit transaction (other than obligations with respect to letters of credit securing obligations (other than obligations described in (i) through (iii) above) entered into in the ordinary course of business by SJG to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the third business day following payment on the applicable letter of credit); (v) all obligations of the type referred to in clauses (i) through (iv) of other persons and all dividends of other persons (other than the Preferred Securities or similar securities) for the payment of which, in either case, SJG is responsible or liable as obligor, guarantor or otherwise (other than the Guarantee and obligations ranking pari passu with the Guarantee); and (vi) certain obligations of the type referred to in clauses (i) through (v) of other persons secured by any lien on any property or asset of SJG (whether or not such obligation is assumed by SJG), the amount of such obligation being deemed to be the lesser of the value of such property or assets or the amount of the obligation so secured; provided, however, that Senior Indebtedness will not include endorsements of negotiable instruments for collection in the ordinary course of business. Upon any payment or distribution of assets or securities of SJG, as the case may be, of any kind or character, whether in cash, property or securities, upon any dissolution or winding-up or total or partial liquidation or reorganization of SJG, whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or other proceedings, all amounts payable on Senior Indebtedness (including any interest accruing on such Senior Indebtedness subsequent to the commencement of a bankruptcy, insolvency or similar proceeding) shall first be paid in full in cash, or payment provided for in cash or cash equivalents before the holders of the Debentures or the Debenture Trustee on behalf of such holders shall be entitled to receive from SJG any payment of principal of, premium, if any, or interest on, the Debentures or distributions of any assets or securities. No direct or indirect payment by or on behalf of SJG of principal of, premium, if any, or interest on, the Debentures, whether pursuant to the terms of the Debentures or upon acceleration or otherwise, shall be made if, at the time of such payment, there exists (i) a default in the payment of all or any portion of any Senior Indebtedness or (ii) any other default pursuant to which the maturity of Senior Indebtedness has been accelerated and, in either case, requisite notice has been given to the Debenture Trustee and such default shall not have been cured or waived by or on behalf of the holders of such Senior Indebtedness. If the Debenture Trustee or any holder of the Debentures shall have received any payment on account of the principal of, premium, if any, or interest on, the Debentures when such payment is prohibited and before all amounts payable on, under, or in connection with Senior Indebtedness are paid in full, then such payment shall be received and held in trust for the holders of Senior Indebtedness and shall be paid to the holders of the Senior Indebtedness remaining unpaid to the extent necessary to pay such Senior Indebtedness in full. Nothing in the Indenture shall limit the right of the Debenture Trustee or the holders of the Debentures to take any action to accelerate the maturity of the Debentures or to pursue any rights or remedies against SJG, provided that all Senior indebtedness shall be paid before holders of the Debentures are entitled to receive any payment from SJG of principal of, premium, if any, or interest on, the Debentures. Upon the payment in full of all Senior Indebtedness, the holders of the Debentures shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments or distributions of assets of SJG made on such Senior Indebtedness until the Debentures shall be paid in full. CERTAIN COVENANTS OF SJG SJG will covenant that it may not declare or pay any dividend on, or redeem, purchase, acquire or make a liquidation payment with respect to, any shares of SJG's capital stock (i) during an Extension Period, (ii) if there has occurred and is continuing any event that is, or, with the giving of notice or the lapse of time or both would 17 constitute, a Debenture Event of Default or (iii) if SJG is in default with respect to its payment or other obligations under the Guarantee. See "-- Debenture Events of Default" and "Description of the Guarantee--Guarantee Events of Default." Any waiver of any Debenture Event of Default will require the approval of the holders of at least a majority of the aggregate principal amount of the Debentures or, if such Debentures are held by the Issuer, the approval of the holders of at least a majority in aggregate liquidation amount of the Preferred Securities of the Issuer; provided, however, that a Debenture Event of Default resulting from the failure to pay the principal of, premium, if any, or interest on, such Debentures may not be waived. MODIFICATION OF THE INDENTURE From time to time, SJG and the Debenture Trustee, without notice to or the consent of any holders of Debentures, may amend or supplement the Indenture for any of the following purposes: (i) to cure any ambiguity, defect or inconsistency; (ii) to comply with the provisions of the Indenture regarding consolidation, merger or sale, conveyance, transfer or lease of the properties as an entirety or substantially as an entirety of SJG; (iii) to provide for uncertificated Debentures in addition to or in place of certificated Debentures; (iv) to make any other change that does not in the reasonable judgment of SJG adversely affect the rights of any holder of the Debentures; or (v) to comply with any requirement of the SEC in connection with the qualification of the Indenture under the Trust Indenture Act. In addition, SJG and the Debenture Trustee may modify the Indenture or any supplemental indenture or waive future compliance by SJG with the provisions of the Indenture, with the consent of the holders of at least a majority of the aggregate principal amount of the Debentures affected thereby, provided that no such modification, without the consent of each holder of such Debentures, may (i) reduce the principal amount of such Debentures, (ii) reduce the principal amount of outstanding Debentures the holders of which must consent to an amendment of the Indenture or a waiver, (iii) change the stated maturity of the principal of, or interest on, or the rate of interest on, such Debentures, (iv) change the redemption provisions applicable to such Debentures adversely to the holders thereof, (v) impair the right to institute suit for the enforcement of any payment with respect to such Debentures, (vi) change the currency in which payments with respect to such Debentures are to be made, or (vii) change the subordination provisions applicable to such Debentures adversely to the holders thereof, provided that if such Debentures are held by the Issuer, no modification shall be made that adversely affects the holders of the Preferred Securities of the Issuer, and no waiver of any Debenture Event of Default with respect to such Debentures or compliance with any covenant under the Indenture shall be effective, without the prior consent of the holders of at least a majority of the aggregate liquidation amount of the Preferred Securities of the Issuer or the holder of each such Preferred Security, as applicable. DEBENTURE EVENTS OF DEFAULT The following are "Debenture Events of Default" with respect to the Debentures: (i) default for 30 days in payment of any interest on the Debentures (other than the payment of interest during an Extension Period), (ii) default in payment of principal of or premium, if any, on the Debentures when the same becomes due and payable, (iii) default for 60 days after receipt by SJG of a "Notice of Default" in the performance of or failure to comply with any other covenant or agreement for the Debentures or in the Indenture or any supplemental indenture under which the Debentures may have been issued, or (iv) certain events of bankruptcy, insolvency or reorganization of SJG. In case a Debenture Event of Default has occurred and is continuing, other than one relating to bankruptcy, insolvency or reorganization of SJG, in which case the principal of, premium, if any, and any interest on, all of the Debentures shall become immediately due and payable, the Debenture Trustee or the holders of at least 25% in aggregate principal amount of the Debentures may declare the principal, together with interest accrued thereon, of all the Debentures to be due and payable; provided, however, that if a Debenture Event of Default has occurred and is continuing with respect to such Debentures and the Debenture Trustee or the holders of at least 25% in aggregate principal amount of such Debentures fail to declare the principal of the Debentures to be immediately due and payable, then, if such Debentures are held by the Issuer, the holders of at least 25% in aggregate liquidation amount of the Preferred Securities shall have such right by written notice to 18 SJG and the Debenture Trustee. The holders of at least a majority in aggregate principal amount of such Debentures, by notice to the Debenture Trustee, may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Debenture Events of Default have been cured or waived except non-payment of principal or interest that has become due solely because of acceleration, provided that if the principal of such Debentures has been declared due and payable by the holders of the Preferred Securities, no rescission of such acceleration will be effective unless consented to by the holders of at least a majority in aggregate liquidation amount of the Preferred Securities. SJG will be required to furnish to the Debenture Trustee annually a statement as to the compliance by SJG with all conditions and covenants under the Indenture and the Debentures and as to any Debenture Event of Default. CONSOLIDATION, MERGER, SALE OR CONVEYANCE SJG may not consolidate with or merge with or into any other person or sell, convey, transfer or lease its properties and assets as an entirety or substantially as an entirety to any person, unless (i) the successor person shall be organized and existing under the laws of the United States or any state thereof or the District of Columbia and shall expressly assume by a supplemental indenture all of the obligations of SJG under the Debentures and the Indenture, (ii) immediately after giving effect to such transaction, no Debenture Event of Default, and no event which after notice or lapse of time or both would become a Debenture Event of Default, has occurred and is continuing, and (iii) certain other conditions prescribed in the Indenture are met. DEFEASANCE AND DISCHARGE Under the terms of the Indenture, SJG will be discharged from any and all obligations in respect of the Debentures if SJG (i) deposits with the Debenture Trustee, in trust, (a) cash and/or (b) United States Government Obligations (as defined in the Indenture), which through the payment of interest thereon and principal thereof in accordance with their terms will provide cash in an amount sufficient to pay all the principal of, premium, if any, and interest on, the Debentures on the dates such payments are due in accordance with the terms of such Debentures and (ii) complies with other provisions described in the Indenture. INFORMATION CONCERNING THE DEBENTURE TRUSTEE Subject to the provisions of the Indenture relating to its duties, the Debenture Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request, order or direction of the holders of any Debentures or the holders of the Preferred Securities, unless such holders shall have offered to the Debenture Trustee reasonable security and indemnity (including reasonable counsel fees). Subject to such provision for indemnification, the holders of at least a majority in aggregate principal amount of Debentures affected or the holders of at least a majority in aggregate liquidation amount of the Preferred Securities, as applicable, will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Debenture Trustee with respect to the Debentures or exercising any trust or power conferred on the Debenture Trustee. The Indenture will contain limitations on the right of the Debenture Trustee, as a creditor of SJG, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. In addition, the Debenture Trustee may be deemed to have a conflicting interest and may be required to resign as Debenture Trustee if at the time of a Debenture Event of Default (i) it is a creditor of SJG or (ii) there is a default under either of the indentures referred to below. The Debenture Trustee is also Indenture Trustee under SJG's Indenture dated October 1, 1947 with respect to SJG's First Mortgage Bonds and SJG's Indenture dated January 31, 1995 with respect to SJG's 8.60% Debenture Notes. GOVERNING LAW The Indenture will be governed by and construed in accordance with the laws of the State of New Jersey. 19 RELATIONSHIP AMONG THE PREFERRED SECURITIES, THE DEBENTURES AND THE GUARANTEE Payments of Distributions and redemption and liquidation payments due on Preferred Securities (to the extent the Issuer has funds available for such payments) will be guaranteed by SJG as and to the extent set forth under "Description of the Guarantee." No single document executed by SJG in connection with the issuance of Preferred Securities will provide for SJG's full, irrevocable and unconditional guarantee of the Preferred Securities. It is only the combined operation of SJG's obligations under the Guarantee, the Trust Agreement, the Debentures and the Indenture that has the effect of providing a full, irrevocable and unconditional guarantee of the Issuer's obligations under the Preferred Securities. A holder of any Preferred Security may institute a legal proceeding directly against SJG to enforce its rights under the Guarantee without first instituting a legal proceeding against the Guarantee Trustee, the Issuer or any other person or entity. As long as SJG makes payments of interest and other payments when due on the Debentures, such payments will be sufficient to cover the payment of Distributions and redemption and liquidation payments due on the Preferred Securities, primarily because (i) the aggregate principal amount of such Debentures will be equal to the sum of the aggregate liquidation amount of the Preferred Securities and Common Securities, (ii) the interest rate and interest and other payment dates on Debentures will match the Distribution rate and Distribution and other payment dates for the Preferred Securities, (iii) the Trust Agreement provides that SJG shall pay for all and any costs, expenses and liabilities of the Issuer of the Preferred Securities except the Issuer's obligations under the Preferred Securities, and (iv) the Trust Agreement provides that the Issuer will not engage in any activity that is inconsistent with the limited purposes of the Issuer. If and to the extent that SJG does not make payments on any Debentures, the Issuer will not have funds available to make payments of Distributions or other amounts due on the corresponding Preferred Securities. A principal difference between the rights of a holder of a Preferred Security (which represents an undivided beneficial interest in the assets of the Issuer) and a holder of a Debenture is that a holder of a Debenture will accrue, and (subject to the permissible extension of the interest payment period) is entitled to receive, interest on the principal amount of Debentures held, while a holder of Preferred Securities is entitled to receive Distributions only if and to the extent the Issuer has funds available for the payment of such Distributions. Upon any voluntary or involuntary termination or liquidation of the Issuer not involving a distribution of the Debentures, the holders of the Preferred Securities will be entitled to receive, out of assets held by the Issuer, the Liquidation Distribution in cash. See "Description of the Preferred Securities--Liquidation Distribution Upon Termination." Upon any voluntary liquidation or bankruptcy of SJG, the Issuer, as holder of the Debentures, would be a creditor of SJG, subordinated in right of payment to all Senior Indebtedness but entitled to receive payment in full of principal, premium, if any, and interest, before any stockholders of SJG receive payments or distributions. Since SJG will be the guarantor under the Guarantee and has agreed to pay for all costs, expenses and liabilities of the Issuer (other than the Issuer's obligations to the holders of its Preferred Securities), the positions of a holder of such Preferred Securities and a holder of such Debentures relative to other creditors and to stockholders of SJG in the event of liquidation or bankruptcy of SJG would be substantially the same. A default or event of default under any Senior Indebtedness would not constitute a Debenture Event of Default. However, in the event of payment defaults under, or acceleration of, Senior Indebtedness, the subordination provisions of the Debentures provide that no payments may be made in respect of the Debentures until such Senior Indebtedness has been paid in full or any payment default thereunder has been cured or waived. Failure to make required payments on any Debentures would constitute a Debenture Event of Default. 20 PROPOSED TAX LAW CHANGES On February 6, 1997, President Clinton proposed certain tax law changes (the "Proposed Legislation") that would, among other things, generally deny interest deductions to corporate issuers if the debt instrument has a term exceeding 15 years and is not reflected as indebtedness on such issuer's consolidated balance sheet. The Proposed Legislation is proposed to be effective for instruments issued on or after the date of "first committee action," which has not yet taken place and may not take place before the Debentures are issued. The term of the Debentures may exceed 15 years. SJG cannot predict what effect, if any, the Proposed Legislation or any other legislative proposals will have on the Debentures; however, if such proposals are adopted and apply to the Debentures, SJG might not be able to deduct interest paid on such Debentures which could, depending on the specific terms of such Debentures and the Preferred Securities, give rise to the right of SJG to redeem such Debentures and thereby cause a mandatory redemption of the Preferred Securities. Federal income tax information and consequences and redemption provisions, if any, relating to the Debentures and Preferred Securities will be discussed as applicable in the accompanying Prospectus Supplement. PLAN OF DISTRIBUTION The Issuer may offer or sell the Preferred Securities offered hereby to one or more underwriters for public offering and sale by them. The Issuer may sell Preferred Securities as soon as practicable after effectiveness of the Registration Statement. Any such underwriter involved in the offer and sale of the Preferred Securities will be named in an accompanying Prospectus Supplement. Underwriters may offer and sell the Preferred Securities at a fixed price or prices, which may be changed, or from time to time at market prices prevailing at the time of sale, at prices relating to such prevailing market prices or at negotiated prices. In connection with the sale of Preferred Securities, underwriters may be deemed to have received compensation from SJG in the form of underwriting, discounts or commissions and may also receive commissions. Underwriters may sell Preferred Securities to or through dealers, and such dealers may receive compensation in the form of discounts, concessions or commissions from such underwriters. Any underwriting compensation paid by SJG on behalf of the Issuer to underwriters in connection with the offering of Preferred Securities, and any discounts, concessions or commissions allowed by underwriters to participating dealers, will be set forth in an accompanying Prospectus Supplement. Underwriters and dealers participating in the distribution of the Preferred Securities may be deemed to be underwriters, and any discounts and commissions received by them and any profit realized by them on resale of the Preferred Securities may be deemed to be underwriting discounts and commissions, under the Securities Act of 1933, as amended (the "Securities Act"). Underwriters and dealers may be entitled, under agreement with SJG and the Issuer, to indemnification against and contribution toward certain civil liabilities, including liabilities under the Securities Act, and to reimbursement by SJG for certain expenses. Underwriters and dealers may engage in transactions with, or perform services for, SJG and/or any of its affiliates in the ordinary course of business. The Preferred Securities will be a new issue of securities and will have no established trading market. Any underwriters to whom Preferred Securities are sold by the Issuer for public offering and sale may make a market in such Preferred Securities but such underwriters will not be obligated to do so and may discontinue any market making at any time without notice. The Preferred Securities may or may not be listed on a national securities exchange. No assurance can be given as to the liquidity of or the existence of trading markets for any Preferred Securities. LEGAL MATTERS Certain legal matters will be passed upon for SJG and the Issuer by Dechert Price & Rhoads, Philadelphia, Pennsylvania, counsel to SJG and the Issuer, and by Richards, Layton & Finger, special Delaware counsel to SJG and the Issuer, and for the underwriters by Cravath, Swaine & Moore, New York, New York, who may rely on the opinion of Dechert Price & Rhoads as to matters of New Jersey law and on the opinion of Richards, Layton & Finger as to matters of Delaware Law. 21 ACCOUNTING TREATMENT The financial statements of the Issuer will be consolidated with SJG's financial statements, with the Preferred Securities issued by the Issuer shown on SJG's consolidated financial statements as company-obligated mandatorily redeemable preferred securities of a subsidiary trust holding solely the Debentures. SJG's financial statements will include a footnote that discloses, among other things, that the sole asset of the Issuer included therein consists of the Debentures and will specify the principal amount, interest rate and maturity date of the Debentures. EXPERTS The financial statements and related financial statement schedules of SJG incorporated by reference in this Prospectus have been audited by Deloitte & Touche LLP, independent auditors, for the periods indicated in their report thereon which is included in SJG's Registration Statement on Form 10. The financial statements and related financial statement schedules audited by Deloitte & Touche LLP have been incorporated herein by reference in reliance on their report given on their authority as experts in accounting and auditing. 22 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUER, SJG OR SJI SINCE THE DATE HEREOF OR THEREOF OR THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION. --------------- TABLE OF CONTENTS PROSPECTUS SUPPLEMENT
PAGE ---- Risk Factors............................................................... S-4 SSG Capital Trust.......................................................... S-6 South Jersey Gas Company................................................... S-7 Use of Proceeds............................................................ S-8 Capitalization............................................................. S-8 Certain Terms of the Preferred Securities.................................. S-9 Certain Terms of the Debentures............................................ S-11 United States Taxation..................................................... S-12 Underwriting............................................................... S-15
PROSPECTUS Statement of Available Information......................................... 2 Incorporation of Certain Documents by Reference............................ 2 The Issuer................................................................. 2 South Jersey Gas Company................................................... 4 Use of Proceeds............................................................ 4 Description of the Preferred Securities.................................... 4 Description of the Guarantee............................................... 13 Description of the Debentures.............................................. 16 Relationship Among the Preferred Securities, the Debentures and the Guarantee................................................................. 20 Proposed Tax Law Changes................................................... 21 Plan of Distribution....................................................... 21 Legal Matters.............................................................. 21 Accounting Treatment....................................................... 22 Experts.................................................................... 22
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- TRUST PREFERRED SECURITIES SJG CAPITAL TRUST % PREFERRED SECURITIES GUARANTEED TO THE EXTENT SJG CAPITAL TRUST HAS AVAILABLE FUNDS AS SET FORTH HEREIN BY SOUTH JERSEY GAS COMPANY LOGO PAINEWEBBER INCORPORATED REPRESENTATIVES OF THE UNDERWRITERS PROSPECTUS SUPPLEMENT - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. SEC Registration Fee.................................. $ 10,606 Legal Fees and Expenses............................... 190,000 Accounting Fees and Expenses.......................... 25,000 Rating Agency Fees.................................... 50,000 Printing and Certificate Engraving.................... 24,500 Stock Exchange Listing Fees........................... 14,750 Miscellaneous (including Blue Sky Fees and Expenses).. 35,144 Total................................................. $350,000 ========
Each amount set forth above, except for the SEC registration fee, is estimated. ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Under Section 14A:3-5 of the New Jersey Business Corporation Act, SJG: (1) has power to indemnify each director and officer of SJG (as well as its employees and agents) against expenses and liabilities in connection with any proceeding involving him by reason of his being or having been such director or officer, other than a proceeding by or in the right of SJG, if (a) such director of officer acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of SJG, and (b) with respect to any criminal proceeding, such director or officer had no reasonable cause to believe his conduct was unlawful; (2) has power to indemnify each director and officer of SJG against expenses in connection with any proceeding by or in the right of SJG to procure a judgment in its favor which involves such director or officer by reason of his being or having been such director or officer, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of SJG; however, in such proceeding no indemnification may be provided in respect to any claim, issue or matter as to which such director or officer shall have been adjudged to be liable to SJG, unless and only to the extent that the court determines that the director or officer is fairly and reasonably entitled to indemnity for such expenses as the court shall deem proper; (3) must indemnify each director and officer against expenses to the extent that he has been successful on the merits or otherwise in any proceeding referred to in (1) and (2) above or in defense of any claim, issue or matter therein; and (4) has power to purchase and maintain insurance on behalf of a director or officer against any expenses incurred in any proceeding and any liabilities asserted against him by reason of his being or having been a director or officer, whether or not SJG would have the power to indemnify him against such expenses and liabilities under the statute. As used in the statute, "expenses" means reasonable costs, disbursements and counsel fees, "liabilities" means amounts paid or incurred in satisfaction of settlements, judgments, fines and penalties, and "proceedings" means any pending, threatened or completed civil, criminal, administrative or arbitrative action, suit or proceeding, and any appeal therein and any inquiry or investigation which could lead to such action, suit or proceeding. Indemnification may be awarded by a court under (1) or (2) as well as under (3) above, notwithstanding a prior determination by SJG that the director or officer has not met the applicable standard of conduct. II-1 Indemnification under the statute does not exclude any other rights to which a director or officer may be entitled under a certificate of incorporation, by-law, or otherwise. Article VII of SJG's Bylaws provides, in pertinent part, as follows: (1) SJG shall indemnify any corporate agent against his expenses and liabilities in connection with any proceedings involving the corporate agent by reason of his being or having been such a corporate agent to the extent that (a) such corporate agent is not otherwise indemnified; and (b) the power to do so has been or may be granted by statute; and for this purpose the Board of Directors of SJG may, and on request of any such corporate agent shall be required to, determine in each case whether or not the applicable standards in any such statute have been met, or such determination shall be made by independent legal counsel if the Board so directs or if the Board is not empowered by statute to make such determination; (2) to the extent that the power to do so has been or may be granted by statute, SJG shall pay expenses incurred by a corporate agent in connection with a proceeding in advance of the final disposition of the proceeding upon receipt of an undertaking by or on behalf of such corporate agent to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified as provided by statute; (3) the indemnification provided in SJG's Bylaws shall not be exclusive of any other rights to which a corporate agent may be entitled, both as to any action in his official capacity or as to any action in another capacity while holding such office, and shall inure to the benefits of the heirs, executors, or administrators of any such corporate agent; and (4) the Board of Directors of SJG shall have the power to (a) purchase and maintain, at SJG's expense, insurance on behalf of SJG and on behalf of others to the extent that power to do so has been or may be granted by statute and (b) give other indemnification to the extent permitted by law. SJG, as sponsor, has agreed to indemnify the Issuer Trustees for, and to hold the Issuer Trustees harmless against, any loss, damage, claims, liability, penalty or expense incurred without negligence or bad faith on the part of any Issuer Trustee, arising out of or in connection with the acceptance or administration of the Trust Agreement, including the costs of expenses of any Issuer Trustee of defending itself against any claim or liability in connection with the exercise and performance of any of its powers or duties under the Trust Agreement. The Company maintains and pays all premiums on directors and officers liability insurance policies with a primary liability limit of $25,000,000. Pursuant to Section 7.06 of the Trust Agreement, SJG has agreed to indemnify and hold harmless each of the Issuer Trustees against any and all loss, damage, claims, liability, penalty or expense, including taxes (other than taxes based on the income of such Issuer Trustee) incurred without its own negligent action, its own negligent failure to act or its own wilful misconduct (or in the case of the Administrative Trustee, incurred without gross negligence or bad faith), arising out of or in connection with the acceptance or administration of the Trust Agreement, including any costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties under the Trust Agreement. ITEM 16. EXHIBITS.
Exhibit No. Exhibit Description - ---------- -------------------------------------------------------------------- 1(a) Form of Underwriting Agreement. 3(a) Certificate of Trust for SJG Capital Trust. 3(b) Trust Agreement of SJG Capital Trust. 3(c) Form of Amended and Restated Trust Agreement for SJG Capital Trust.
II-2 EXHIBIT NO. EXHIBIT DESCRIPTION - ------------ ------------------------------------------------------------------ 4(a) Form of Preferred Security Certificate for SJG Capital Trust. 4(b) Form of Deferrable Interest Subordinated Debenture. 4(c) Form of Deferrable Interest Subordinated Debenture Indenture. 4(d) Form of Guarantee Agreement between South Jersey Gas Company and SJG Capital Trust. 4(e) First Mortgage Indenture dated as of October 1, 1947 between South Jersey Gas Company and Guarantee Bank and Trust Company and succeeded by The Bank of New York, as Trustee, incorporated herein by reference to Exhibit 4(b)(i) to Form 10-K report of South Jersey Industries, Inc. ("SJI") for 1987. 4(f) Sixteenth Supplemental Indenture dated as of April 1, 1988 between South Jersey Gas Company and the Trustee, incorporated herein by reference to Exhibit 4(b)(xv) to Form 10-Q report of SJI for quarter ended March 31, 1988. 4(g) Seventeenth Supplemental Indenture dated as of May 1, 1989 between South Jersey Gas Company and the Trustee, incorporated herein by reference to Exhibit 4(b)(xv) to Form 10-K report of SJI for 1989. 4(h) Eighteenth Supplemental Indenture dated as of March 1, 1990 between South Jersey Gas Company and the Trustee, incorporated herein by reference to Exhibit 4(e) to Form S-3 of SJI, Registration No. 33- 36581. 4(i) Nineteenth Supplemental Indenture dated as of April 1, 1992 between South Jersey Gas Company and the Trustee, incorporated herein by reference to Exhibit 4(b)(xvii) to Form 10-K report of SJI for 1992. 4(j) Twentieth Supplemental Indenture dated as of June 1, 1992 between South Jersey Gas Company and the Trustee, incorporated herein by reference to Exhibit 4(b)(xviii) to Form 10-K report of SJI for 1993. 4(k) Indenture dated as of January 31, 1995 between South Jersey Gas Company and New Jersey National Bank, succeeded by The Bank of New York (NJ), as Trustee, incorporated herein by reference to Exhibit 4(c) to Form 10-K of SJI for 1994. 5(a) Opinion of Dechert Price & Rhoads (see page II-8 hereof). 5(b) Opinion of Richards Layton & Finger, P.A., special Delaware counsel (see page II-9 hereof). 8 Opinion of Dechert Price & Rhoads as to tax matters (included in Exhibit 5(a)). 12(a) Computations of Ratios of Earnings to Fixed Charges. 12(b) Computations of Ratios of Earnings to Combined Fixed Charges plus Preferred Securities Dividend Requirements. 23(a) Consent of Deloitte & Touche LLP (see page II-11 hereof). 23(b) Consent of Dechert Price & Rhoads (included in Exhibit 5(a)). 23(c) Consent of Richards Layton & Finger, P.A. (included in Exhibit 5 (b)). 24 Power of Attorney of Directors and Officers of South Jersey Gas Company (see Page II-6 hereof).
II-3 EXHIBIT NO. EXHIBIT DESCRIPTION - ------------ ------------------------------------------------------------------- 25(a) Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New York, as Indenture Trustee under the Deferrable Interest Subordinated Debenture Indenture. 25(b) Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New York, as Property Trustee under the Amended and Restated Trust Agreement. 25(c) Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New York, as Guarantee Trustee under the Guarantee Agreement.
ITEM 17. UNDERTAKINGS. A. Undertaking required by Item 512(a) of Regulation S-K. ----------------------------------------------------- Each Registrant hereby undertakes: (1) to file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; (2) that, for the purpose of determining any liability under the Securities Act of 1933, as amended, each post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and (3) to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. B. Undertaking required by Item 512(b) of Regulation S-K. ----------------------------------------------------- Each Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of South Jersey Industries, Inc.'s ("SJI") annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in this Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. C. Undertaking required by Item 512(f) of Regulation S-K. ----------------------------------------------------- Each Registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser. D. Undertaking required by Item 512(h) of Regulation S-K. ----------------------------------------------------- Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of each Registrant pursuant to the foregoing provisions, or otherwise, each Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrants of expenses incurred or paid by a director, officer or controlling person of the Registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrants will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the II-4 question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. E. Undertaking required by Item 512(i) of Regulation S-K. ----------------------------------------------------- Each Registrant hereby undertakes that: (1) For purposes of determining the liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrants pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, SJG Capital Trust certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Folsom, New Jersey, on the 26th day of March, 1997. SJG CAPITAL TRUST By: SOUTH JERSEY GAS COMPANY, as Sponsor By: /s/ GEORGE L. BAULIG ---------------------------------- George L. Baulig, Secretary SIGNATURES Pursuant to the requirements of the Securities Act of 1933, South Jersey Gas Company certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Folsom, New Jersey, on the 26th day of March, 1997. SOUTH JERSEY GAS COMPANY By: /s/ GEORGE L. BAULIG --------------------------------- George L. Baulig, Secretary KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears below constitutes and appoints George L. Baulig and David A. Kindlick and each of them such person's true and lawful attorney-in-fact and agent, with full power of substitution and revocation, for such person and in such person's name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to this Registration Statement and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that each said attorney-in-fact and agent or their substitute or substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated. NAME TITLE DATE SIGNATURE ---- ----- ---- --------- W. F. Ryan President, Chief March 21, 1997 /s/ W. F. Ryan -------------- Executive Officer and Chairman of the Board of Directors II-6
NAME TITLE DATE SIGNATURE ---- ----- ---- --------- G. S. Levitt Executive Vice March 21, 1997 /s/ G. S. Levitt -------------- President (Chief Financial Officer) W. J. Smethurst, Jr. Vice President March 21, 1997 /s/ W. J. Smethurst, Jr. ------------------- and Treasurer (Chief Accounting Officer) F. L. Bradley, Jr. Director March 21, 1997 /s/ F.L. Bradley, Jr. ---------------- A. G. Dickson Director March 21, 1997 /s/ A. G. Dickson -------------- R. L. Dunham Director March 21, 1997 /s/ R. L. Dunham -------------- P. M. Mitchell Director March 21, 1997 /s/ P. M. Mitchell -------------- J. Neall Director March 21, 1997 /s/ J. Neall -------------- S. M. Vioni Director March 21, 1997 /s/ S. M. Vioni --------------
II-7 EXHIBIT 5(a) [Letterhead of Dechert Price & Rhoads] March 26, 1997 South Jersey Gas Company Number One South Jersey Plaza, Route 54 Folsom, New Jersey 08037 Dear Sirs: South Jersey Gas Company (the "Company") is filing on the date hereof a registration statement ("Registration Statement") on Form S-3 with the Securities and Exchange Commission relating to an offering of $35,000,000 aggregate principal amount of the Company's Deferrable Interest Subordinated Debentures (the "Debentures") and the Company's Guarantee (the "Guarantee") with respect to Preferred Trust Securities (the "Preferred Securities") of SJG Capital Trust (the "Trust"). The Debentures will be issued under an indenture (the "Indenture") between the Company and The Bank of New York. As such counsel, we have made such legal and factual examinations and inquiries as we have deemed advisable for the purpose of rendering this opinion. Based upon the foregoing, it is our opinion that the Debentures and the Guarantee have been duly authorized by the Company and, when executed and delivered in accordance with the terms of the Indenture and the Guarantee, and upon payment for the Debentures in the manner and at the price to be set forth in the prospectus included in the Registration Statement, such Debentures and Guarantee would constitute legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or similar laws affecting creditors' rights or debtors' obligations generally and to general equity principals. In addition, we confirm to you our opinion as set forth under the heading "United States Taxation" in the prospectus supplement included in the Registration Statement. Our opinions herein relate solely to the federal laws of the United States of America and the laws of the State of New Jersey, and we express no opinion herein concerning the laws of any other jurisdiction. We hereby consent to the filing of this opinion as Exhibit 5 to the Registration Statement and to the reference to us under the caption "Legal Matters" in the prospectus supplement included in the Registration Statement. Very truly yours, /s/ DECHERT PRICE & RHOADS II-8 EXHIBIT 5(B) [Letterhead of Richards, Layton & Finger] March 26, 1997 SJG Capital Trust c/o South Jersey Gas Company Number One South Jersey Plaza, Route 54 Folsom, New Jersey 08037 Re: SJG Capital Trust ----------------- Ladies and Gentlemen: We have acted as special Delaware counsel for South Jersey Gas Company, a New Jersey corporation (the "Company"), and SJG Capital Trust, a Delaware business trust (the "Trust"), in connection with the matters set forth herein. At your request, this opinion is being furnished to you. For purposes of giving the opinions hereinafter set forth, our examination of documents has been limited to the examination of originals or copies of the following: (a) The Certificate of Trust of the Trust, dated as of March 24, 1997 (the "Certificate"), as filed in the office of the Secretary of State of the State of Delaware (the "Secretary of State") on March 24, 1997; (b) The Trust Agreement of the Trust, dated as of March 24, 1997, among the Company, as Depositor, and the trustees of the Trust named therein; (c) The Registration Statement (the "Registration Statement") on Form S-3, including a preliminary prospectus (the "Prospectus") and preliminary prospectus supplement, relating to the __% Preferred Securities of the Trust representing preferred undivided beneficial interests in the assets of the Trust (each, a "Preferred Security" and collectively, the "Preferred Securities"), as proposed to be filed by the Company, the Trust and others as set forth therein with the Securities and Exchange Commission on or about March 26, 1997; (d) A form of Amended and Restated Trust Agreement of the Trust, to be entered into among the Company, as Depositor, the trustees of the Trust named therein, and the holders, from time to time, of undivided beneficial interests in the assets of the Trust (including Exhibits A, C and D thereto) (the "Trust Agreement'), attached as an exhibit to the Registration Statement; and (e) A Certificate of Good Standing for the Trust, dated March 26, 1997, obtained from the Secretary of State. Initially capitalized terms used herein and not otherwise defined are used as defined in the Trust Agreement. For purposes of this opinion, we have not reviewed any documents other than the documents listed in paragraphs (a) through (e) above. In particular, we have not reviewed any document (other than the documents listed in paragraphs (a) through (e) above) that is referred to in or incorporated by reference into the documents reviewed by us. We have assumed that there exists no provision in any document that we have not reviewed that is inconsistent with the opinions stated herein. We have conducted no independent factual investigation of our own but rather have relied solely upon the foregoing documents, the statements and information set forth therein and the additional matters recited or assumed herein, all of which we have assumed to be true, complete and accurate in all material respects. II-9 SJG Capital Trust March 26, 1997 Page 2 With respect to all documents examined by us, we have assumed (i) the authenticity of all documents submitted to us as authentic originals (ii) the conformity with the originals of all documents submitted to us as copies or forms, and (iii) the genuineness of all signatures. For purposes of this opinion, we have assumed (i) that the Trust Agreement and the Certificate are in full force and effect and have not been amended, (ii) except to the extent provided in paragraph 1 below, the due creation or due organization or due formation, as the case may be, and valid existence in good standing of each party to the documents examined by us under the laws of the jurisdiction governing its creation, organization or formation, (iii) the legal capacity of natural persons who are parties to the documents examined by us, (iv) that each of the parties to the documents examined by us has the power and authority to execute and deliver, and to perform its obligations under, such documents, (v) the due authorization, execution and delivery by all parties thereto of all documents examined by us, (vi) the receipt by each Person to whom a preferred Security is to be issued by the Trust (collectively, the "Preferred Security Holders") of a preferred Securities Certificate for such Preferred Security and the payment for the Preferred Security acquired by it, in accordance with the Trust Agreement and the Registration Statement, and (vii) that the Preferred Securities are issued and sold to the Preferred Security Holders in accordance with the Trust Agreement and the Registration Statement. We have not participated in the preparation of the Registration Statement and assume no responsibility for its contents. This opinion is limited to the laws of the State of Delaware (excluding the securities laws of the State of Delaware), and we have not considered and express no opinion on the laws of any other jurisdiction, including federal laws and rules and regulations relating thereto. Our opinions are rendered only with respect to Delaware laws and rules, regulations and orders thereunder which are currently in effect. Based upon the foregoing, and upon our examination of such questions of law and statutes of the State of Delaware as we have considered necessary or appropriate, and subject to the assumptions, qualifications, limitations and exceptions set forth herein, we are of the opinion that: 1. The Trust has been duly created and is validly existing in good standing as a business trust under the Delaware Business Trust Act. 2. The Preferred Securities will represent valid and, subject to the qualifications set forth in paragraph 3 below, fully paid and nonassessable undivided beneficial interests in the assets of the Trust. 3. The Preferred Security Holders, as beneficial owners of the Trust, will be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. We note that the Preferred Security Holders may be obligated to make payments as set forth in the Trust Agreement. We consent to the filing of this opinion with the Securities and Exchange Commission as an exhibit to the Registration Statement. In addition, we hereby consent to the use of our name under the heading "Legal Matters" in the Prospectus. In giving the foregoing consents, we do not thereby admit that we come within the category of Persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. Except as stated above, without our prior written consent, this opinion may not be furnished or quoted to, or relied upon by, any other Person for any purpose. Very truly yours, /s/ RICHARDS, LAYTON & FINGER EAM/lmh II-10 EXHIBIT 23(a) CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in this Registration Statement of SJG Capital Trust and South Jersey Gas Company on Form S-3 of our report dated February 19, 1997 appearing in the Registration Statement on Form 10 of South Jersey Gas Company, and to the reference to us under the heading "Experts" in the Prospectus which is part of this Registration Statement. /s/ DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP Philadelphia, Pennsylvania March 25, 1997 II-11 EXHIBIT INDEX Exhibit Numbers are in accordance with the Exhibit Table in Item 601 of Regulation S-K:
Exhibit No. Exhibit Description Page - ------------ ------------------------------------------------------------------------------- ------- 1(a) Form of Underwriting Agreement................................................. 3(a) Certificate of Trust for SJG Capital Trust..................................... 3(b) Trust Agreement of SJG Capital Trust........................................... 3(c) Form of Amended and Restated Trust Agreement for SJG Capital Trust............. 4(a) Form of Preferred Security Certificate for SJG Capital Trust................... 4(b) Form of Deferrable Interest Subordinated Debenture............................. 4(c) Form of Deferrable Interest Subordinated Debenture Indenture................... 4(d) Form of Guarantee Agreement between South Jersey Gas Company and SJG Capital Trust.................................................................. 4(e) First Mortgage Indenture dated as of October 1, 1947 between South Jersey Gas Company and Guarantee Bank and Trust Company and succeeded by The Bank of New York, as Trustee, incorporated herein by reference to Exhibit 4(b)(i) to Form 10-K report of South Jersey Industries, Inc. ("SJI") for 1987............ * 4(f) Sixteenth Supplemental Indenture dated as of April 1, 1988 between South Jersey Gas Company and the Trustee, incorporated herein by reference to Exhibit 4(b)(xv) to Form 10-Q report of SJI for quarter ended March 31, 1988... * 4(g) Seventeenth Supplemental Indenture dated as of May 1, 1989 between South Jersey Gas Company and the Trustee, incorporated herein by reference to Exhibit 4(b)(xv) to Form 10-K report of SJI for 1989........................... * 4(h) Eighteenth Supplemental Indenture dated as of March 1, 1990 between South Jersey Gas Company and the Trustee, incorporated herein by reference to Exhibit 4(e) to Form S-3 of SJI, Registration No. 33-36581..................... * 4(i) Nineteenth Supplemental Indenture dated as of April 1, 1992 between South Jersey Gas Company and the Trustee, incorporated herein by reference to Exhibit 4(b)(xvii) to Form 10-K report of SJI for 1992......................... * 4(j) Twentieth Supplemental Indenture dated as of June 1, 1992 between South Jersey Gas Company and the Trustee, incorporated herein by reference to Exhibit 4(b)(xviii) to Form 10-K report of SJI for 1993........................ * 4(k) Indenture dated as of January 31, 1995 between South Jersey Gas Company and New Jersey National Bank, succeeded by The Bank of New York (NJ), as Trustee, incorporated herein by reference to Exhibit 4(c) to Form 10-K of SJI * for 1994....................................................................... 5(a) Opinion of Dechert Price & Rhoads (see page II-8 hereof)....................... * 5(b) Opinion of Richards Layton & Finger, P.A., special Delaware counsel (see page II-9 hereof)................................................................... * 8 Opinion of Dechert Price & Rhoads as to tax matters (included in Exhibit 5(a)). *
12(a) Computations of Ratios of Earnings to Fixed Charges............................. 12(b) Computations of Ratios of Earnings to Combined Fixed Charges plus Preferred Securities Dividend Requirements................................................ 23(a) Consent of Deloitte & Touche LLP (see page II-11 hereof)........................ * 23(b) Consent of Dechert Price & Rhoads (included in Exhibit 5(a)).................... * 23(c) Consent of Richards Layton & Finger, P.A. (included in Exhibit 5 (b))........... * 24 Power of Attorney of Directors and Officers of South Jersey Gas Company (see Page II-6 hereof)............................................................... * 25(a) Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New York, as Indenture trustee under the Deferrable Interest Subordinated Debenture Indenture............................................................. 25(b) Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New York, as Property Trustee under the Amended and Restated Trust Agreement....................................................................... 25(c) Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New York, as Guarantee Trustee under the Guarantee Agreement....................
* Not applicable. EX-1.A 2 UNDERWRITING AGREEMENT EXHIBIT 1(a) SJG CAPITAL TRUST [_] Preferred Securities (Liquidation Amount $25 Per Preferred Security) Guaranteed by SOUTH JERSEY GAS COMPANY UNDERWRITING AGREEMENT ---------------------- March [_] , 1997 PAINEWEBBER INCORPORATED as Representative of the several Underwriters c/o PaineWebber Incorporated 1285 Avenue of the Americas New York, New York 10019 Ladies and Gentlemen: SJG Capital Trust (the "Trust"), a statutory business trust organized under the Delaware Business Trust Act (the "Delaware Act") of the State of Delaware (Chapter 38, Title 12, of the Delaware Code, 12 Del. C. (S) 3801 et seq.), and South Jersey Gas Company, a New Jersey corporation proposes, subject to the terms and conditions stated herein, to issue and sell an aggregate of [ ] shares of its [ %] preferred trust securities (the "Preferred Securities"). " The Preferred Securities will be sold to you and to the other underwriters named in Schedule I (collectively, the "Underwriters") for whom you are acting as representative (the "Representative"). The Preferred Securities will be guaranteed, to the extent set forth in the Prospectus (as defined in Section 3(a) hereof), by South Jersey Gas Company, a New Jersey corporation (the "Company"). Capitalized terms used but not separately defined herein are defined in the Prospectus and used herein as so defined. It is understood that substantially contemporaneously with the offering and sale of the Preferred Securities to the Underwriters contemplated hereby, (i) the Trust, its trustees (the "Trustees") and the Company shall take all necessary action to adopt an Amended and Restated Trust Agreement in substantially the form of the Form of Amended and Restated Trust Agreement filed as Exhibit [ ] to the Registration Statement (as defined in Section 3(a) hereof) (as so amended and restated, the "Trust Agreement"), pursuant to which the Trust shall (x) issue and sell the Preferred Securities to the Underwriters pursuant hereto and (y) issue [ ] shares of its [ %] common trust securities (the "Common Securities" and, together with the Preferred Securities, the "Trust Securities") to the Company, in each case with such rights and obligations as shall be set forth in the Trust Agreement, (ii) the Company and The Bank of New York, as property trustee (the "Property Trustee") and The Bank of New York (Delaware) ("Trust Delaware"), a Delaware banking corporation, as Delaware trustee ("Delaware Trustee"), shall enter into an Indenture in substantially the form of the Form of the Junior Subordinated Debt Indenture filed as 2 Exhibit [ ] to the Registration Statement (as supplemented by the Supplemental Indenture substantially in the form filed as Exhibit [ ] to the Registration Statement, the "Indenture") providing for the issuance of up to $[ ] in aggregate principal amount of the Company's [ %] Junior Subordinated Debentures due [ ] (the "Debentures"), (iii) the Company shall sell such Debentures to the Trust in conjunction with the consummation of the sale of the Preferred Securities to the Underwriters contemplated hereby and (iv) the Company, and The Bank of New York, as Guarantee Trustee (the "Guarantee Trustee"), shall enter into a Guarantee Agreement in substantially the form of the Form of Guarantee Agreement with respect to the Preferred Securities filed as Exhibit [ ] to the Registration Statement (the "Guarantee") for the benefit of holders from time to time of the Preferred Securities. The Preferred Securities together with the Guarantee are collectively hereinafter called the "Offered Securities". The Company confirms as follows its agreements with the Representative and the several other Underwriters. 1. Agreement to Sell and Purchase. (a) On the basis of the ------------------------------- representations, warranties and agreements of the Trust and the Company herein contained and subject to all the terms and conditions of this Agreement, the Trust agrees to sell to each Underwriter, severally and not jointly, agrees to purchase from the Trust, at a purchase price of $25.00 per Preferred Security plus accrued and unpaid distributions, if any, on the Preferred Securities as of the Closing Date (as defined below), the number of Preferred Securities set forth opposite the name of such Underwriter in Schedule I, plus such additional number of Preferred Securities which such Underwriter may become obligated to purchase pursuant to Section 8 hereof. (b) As compensation to the Underwriters for their commitment hereunder, and in view of the fact that the proceeds of the sale of the Preferred Securities will be used by the Trust to purchase the Debentures of the Company, the Company hereby agrees to pay at the Closing Date, if applicable, for the account of the several Underwriters, an amount equal to $[ ] per Preferred Security. 2. Delivery and Payment. Except as set forth in the next paragraph, --------------------- the Preferred Securities to be purchased by each Underwriter hereunder will be represented by one or more definitive global Preferred Securities in book entry form which will be deposited by or on behalf of the Trust with The Depository Trust Company ("DTC") or its designated custodian. The Trust will deliver the Preferred Securities to the Representative , for the account of each Underwriter, against payment by or on behalf of such Underwriter of the purchase price therefor by certified or official bank check or checks or fedwire, payable to the order of the Trust in Federal (same day) funds, by causing DTC to credit the Capital Securities to the account of the Representative at DTC. The Trust will cause the certificates representing the Securities to be made available to the Representative for checking at least 24 hours prior to the Closing Date (as defined below) at the office of DTC or its designated custodian (the "Designated Office"). The time and date of such delivery and payment shall be at the offices of Cravath, Swaine & Moore, Worldwide Plaza, 825 Eighth Avenue, New York, New York 10019, at 9:30 a.m., New York time, on March [ ], 1997 or such other time and date as the Representative, the Company and the Trust may agree upon in writing. Such time and date are herein called the "Closing Date". Such Preferred Securities, if any, as the Representative may request upon at least 48 hours' prior notice to the Trust (such request to include the authorized denominations 3 and the names in which they are to be registered), shall be delivered in definitive certificated form, by and on behalf of the Trust to the Representative for the account of certain of the Underwriters, against payment by or on behalf of such Underwriter of the purchase price therefor by fedwire, payable to the order of the Trust in Federal (same day) funds. The Trust will cause the certificates representing the Capital Securities to be made available for checking and packaging at least 24 hours prior to the Time of Delivery at the office of the Trust Company, [ ]. The cost of original issue tax stamps, if any, in connection with the issuance and delivery of the Preferred Securities by the Trust to the respective Underwriters shall be borne by the Trust. The Trust will pay and save each Underwriter and any subsequent holder of the Preferred Securities harmless from any and all liabilities with respect to or resulting from any failure or delay in paying Federal and state stamp and other transfer taxes, if any, which may be payable or determined to be payable in connection with the original issuance or sale to such Underwriter of the Preferred Securities. At the Closing Date the Company will pay, or cause to be paid, the commission payable at such time to the Underwriters under Section l(c) hereof by wire transfer of immediately available funds to a bank account (or bank accounts) designated by the Representative. 3. Representations and Warranties of the Trust and the Company. ------------------------------------------------------------ Each of the Trust and the Company, jointly and severally, represents and warrants to, and agrees with, the several Underwriters that: (a) The Trust and the Company meet the requirements for use of Form S-3 and a registration statement (Registration No. [ ]) on Form S-3 relating to the Offered Securities, including a preliminary prospectus relating to the Offered Securities and such amendments to such registration statement as may have been required to the date of this Agreement, has been prepared by the Company and the Trust under the provisions of the Securities Act of 1933, as amended (the "Act"), and the rules and regulations (collectively referred to as the "Rules and Regulations") of the Securities and Exchange Commission (the "Commission") thereunder, and has been filed with the Commission. Copies of such registration statement and amendments and of each related preliminary prospectus have been delivered to the Representative. The Company will next file with the Commission one of the following: (i) prior to effectiveness of such registration statement, a further amendment to such registration statement, including the form of final prospectus relating to the Offered Securities, (ii) a final prospectus relating to the Offered Securities in accordance with Rule 430A ("Rule 430A") and Rule 424(b)(1) or (4) of the Rules and Regulations, or (iii) a final prospectus relating to the Offered Securities in accordance with Rule 415 ("Rule 415") and Rule 424(b)(2) or (5) of the Rules and Regulations. In the case of clause (ii), the Company has included in such registration statement, as amended at the Effective Date (as defined below), all information required by the Act and the Rules and Regulations to be included in the Prospectus (as defined below) with respect to the Offered Securities and the offering thereof other than the information permitted to be omitted therefrom at the Effective Date by Rule 430A ("Rule 430A Information"). As filed, such amendment and form of final prospectus, or such final prospectus, shall contain all Rule 430A Information, together with all other such required information, with respect to the Offered Securities and the offering thereof and, except to the extent the Representative shall agree in writing 4 to a modification, shall be in all substantive respects in the form furnished to you prior to the time (the "Execution Time") this Agreement is entered into or, to the extent not completed at the Execution Time, shall contain only such specific additional information and other changes (beyond that contained in the latest preliminary prospectus) as the Company has advised you, prior to the Execution Time, will be included or made therein. If the Registration Statement (as defined below) contains the undertaking specified by Regulation S-K Item 512(a), the Registration Statement, at the Execution Time, meets the requirements set forth in Rule 415(a)(1)(x). The term "preliminary prospectus" as used herein means any preliminary prospectus (including the supplement thereto) relating to the Offered Securities referred to above and any preliminary prospectus (including the supplement thereto) relating to the Offered Securities included in the Registration Statement at the Effective Date that omits Rule 430A Information. The term "Registration Statement" means the registration statement referred to above as amended at the time it became effective (the "Effective Date") and, in the event any post-effective amendment thereto becomes effective prior to the Closing Date shall also mean such registration statement as so amended, including financial statements and all exhibits and any information deemed to be included by Rule 430A of the Rules and Regulations after the Execution Time. The term "Prospectus" means the prospectus (including the supplement thereto) relating to the Offered Securities that is first filed with the Commission pursuant to Rule 424(b) ("Rule 424(b)") of the Rules and Regulations after the Execution Time or, if no such filing is required, the form of final prospectus (including the supplement thereto) relating to the Offered Securities included in the Registration Statement at the Effective Date. Any reference herein to the Registration Statement, any preliminary prospectus or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 which were filed under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), on or before the Effective Date or the date of such preliminary prospectus or the Prospectus, as the case may be. Any reference herein to the terms "amend", "amendment" or "supplement" with respect to the Registration Statement, any preliminary prospectus or the Prospectus shall be deemed to refer to and include the filing of any document under the Exchange Act after the Effective Date, or the date of any preliminary prospectus or the Prospectus, as the case may be, and deemed to be incorporated therein by reference. (b) On the Effective Date, at all times subsequent to and including the Closing Date and when any post-effective amendment to the Registration Statement becomes effective, the Registration Statement (as amended or supplemented if the Company and the Trust shall have filed with the Commission any amendment or supplement thereto), including the financial statements included or incorporated by reference in the Prospectus, did or will comply with the applicable provisions of the Act, the Exchange Act, the rules and regulations thereunder (the "Exchange Act Rules and Regulations"), the Trust Indenture Act of 1939, as amended ("Trust Indenture Act"), the rules and regulations thereunder (the "Trust Indenture Act Rules and Regulations") and the Rules and Regulations and will contain all statements required to be stated therein in accordance with the Act, the Exchange Act, the Exchange Act Rules and Regulations and the Rules and Regulations. On the date the Prospectus is first filed with the Commission pursuant to Rule 424(b) (if required), at all times subsequent to and including the Closing Date and when any amendment or supplement to the Prospectus is filed with the Commission, the Prospectus (as amended or supplemented if the Company and the Trust shall have filed with the Commission any amendment or supplement thereto), including the financial statements included or incorporated by reference in the Prospectus, will 5 comply with the applicable provisions of the Act, the Exchange Act, the Trust Indenture Act, the Exchange Act Rules and Regulations, the Trust Indenture Rules and Regulations and the Rules and Regulations and will contain all statements required to be stated therein in accordance with the Act, the Exchange Act, the Exchange Act Rules and Regulations and the Rules and Regulations. On the Effective Date and when any post-effective amendment to the Registration Statement becomes effective, no part of the Registration Statement or any such amendment did or will contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein not misleading. At the Effective Date, the Prospectus, if not filed pursuant to Rule 424(b), did not, and on the date the Prospectus is filed (if required) with the Commission pursuant to Rule 424(b) and on the Closing Date the Prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. The foregoing representations and warranties in this Section 3(b) do not apply to any statements or omission made in reliance on and in conformity with information relating to any Underwriter furnished in writing to the Company by the Representative specifically for inclusion in the Registration Statement or Prospectus or any amendment or supplement thereto. The Company has not distributed any offering material in connection with the offering or sale of the Offered Securities other than the Registration Statement, the preliminary prospectus, the Prospectus or any), other materials, if any, permitted by the Act. On the Effective Date, the date the Prospectus is first filed with the Commission pursuant to Rule 424(b) (if required), and at all subsequent times to and including the ("Closing Date the Indenture will comply with all applicable provisions of the Trust Indenture Act and the Trust Indenture Act Rules and Regulations. (c) The documents which are incorporated by reference in the preliminary prospectus and the Prospectus or from which information is so incorporated by reference, at the time they became effective or were filed with the Commission, as the case may be, complied in all material respects with the requirements of the Act and the Exchange Act, as applicable, the Exchange Act Rules and Regulations and the Rules and Regulations and any documents so filed and incorporated by reference subsequent to the Effective Date shall, when they are filed with the Commission, conform in all material respects with the requirements of the Act and the Exchange Act, as applicable, the Exchange Act Rules and Regulations and the Rules and Regulations. (d) The Company and each of the Company's "significant subsidiaries" as such term is defined in Rule 1-02 of Regulation S-X under the Act (collectively, the "Subsidiaries") is, and at the Closing Date will be, a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation. The Company and each of its Subsidiaries has, and at the Closing Date will have, full power and authority to conduct all the activities conducted by it, to own or lease all the assets owned or leased by it and to conduct its business as described in the Registration Statement and the Prospectus; except where the failure to have such power and authority would not have a Material Adverse Effect (as defined below). The Company and each of its Subsidiaries is, and at the Closing Date will be, duly licensed or qualified to do business and in good standing as a foreign corporation in all jurisdictions in which the nature of the activities conducted by it or the character of the assets owned or leased by it makes such licensing or qualification necessary except for such failures to be licensed or qualified as would not materially and adversely affect the business, properties, business prospects, condition (financial or otherwise) or results of operation of the Trust or of the 6 Company and its subsidiaries considered as one enterprise (a "Material Adverse Effect"). All of the outstanding shares of capital stock of the Subsidiaries have been duly authorized and validly issued and are fully paid and nonassessable and are owned by the Company free and clear of all liens, encumbrances and claims (collectively, "Liens") whatsoever except for such Liens as would not have a Material Adverse Effect. Complete and correct copies of the certificate of incorporation and of the by-laws of the Company and each of its Subsidiaries and all amendments thereto have been delivered to the Representative, and no changes therein will be made subsequent to the date hereof and prior to the Closing Date. (e) The descriptions of the Preferred Securities, the Common Securities, the Guarantee and the Debentures in the Registration Statement at the Effective Date are, and the descriptions in the Prospectus at the date it is first filed under Rule 424(b) and in the Registration Statement and Prospectus at the Closing Date will be, complete and accurate in all material respects. The Indenture conforms to the description thereof contained in the Registration Statement and the Prospectus in all material respects. (f) The financial statements and schedules included or incorporated by reference in the Registration Statement or the Prospectus, and any amendment or supplement thereto, present fairly the consolidated financial condition of the Company as of the respective dates thereof and the consolidated results of operations and cash flows of the Company for the respective periods covered thereby, all in conformity with generally accepted accounting principles applied on a consistent basis throughout the entire period involved, except as otherwise disclosed in the Prospectus. No other financial statements or schedules of the Company are required by the Act, the Exchange Act or the Rules and Regulations to be included in the Registration Statement or the Prospectus. Deloitte & Touche (the "Accountants"), who have reported on such financial statements and schedules, are independent accountants with respect to the Company as required by the Act and the Rules and Regulations. The statements included in the Registration Statement with respect to the Accountants pursuant to Rule 509 of Regulation S-K of the Rules and Regulations are true and correct in all material respects. (g) Each of the Trust and the Company maintains a system of internal accounting control sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (h) Subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus and prior to the Closing Date, except as set forth in or contemplated by the Registration Statement or the Prospectus, (i) there has not been and will not have been any change in the capitalization of the Trust or material change in the capitalization of the Company, or any material adverse change in the business, properties, business prospects, condition (financial or otherwise) or results of operations of the Trust or the Company and its subsidiaries considered as one enterprise, arising for any reason whatsoever, (ii) neither the Trust nor the Company nor any of its Subsidiaries has incurred nor will incur any material liabilities or obligations, direct or 7 contingent, nor have they entered into nor will they enter into any material transactions other than pursuant to this Agreement and the transactions referred to herein or, in the case of the Company and its Subsidiaries, in the ordinary course of business, and (iii) the Trust has not and will not have paid or declared any distributions of any kind on any class of its securities. (i) The Trust has been duly created and is validly existing in good standing as a business trust under the Delaware Act; all filings required under the laws of the State of Delaware with respect to the creation and valid existence of the Trust as a business trust have been made; under the Delaware Act and the Trust Agreement, the Trust has the business trust power and authority to (x) own property and conduct its business, all as described in the Prospectus, (y) enter into and perform its obligations under this Agreement, and (z) issue and perform its obligations under the Preferred Securities and the Common Securities and is not required to be authorized to do business in any jurisdiction other than Delaware; the Trust is not a party to or otherwise bound by any agreement other than those described in the Prospectus; the Trust does not have any consolidated or unconsolidated subsidiaries; and the Trust is and will be treated as a consolidated subsidiary of the Company pursuant to generally accepted accounting principles. (j) The Trust Agreement has been duly and validly authorized by the Company and, when executed and delivered by the Company and the Trustees (as defined in the Trust Agreement) at the Closing Date, and assuming due authorization, execution and delivery thereof by the Property Trustee and the Delaware Trustee (as such terms are defined in the Trust Agreement), will be the valid and binding obligation of the Company and the Trustees in accordance with its terms (subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and other similar laws affecting creditors' rights generally from time to time in effect and to general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, regardless of whether considered in a proceeding in equity or at law) and conforms to the description thereof contained in the Prospectus; and, at the Closing Date, the Trust Agreement will have been duly qualified under the Trust Indenture Act. (k) The execution and delivery by the Trust and the Company of this Agreement and the performance by the Trust and the Company of their respective obligations hereunder, have been duly authorized by all necessary business trust action on the part of the Trust and corporate action on the part of the Company; and this Agreement has been duly executed and delivered by the Trust and the Company. (l) The Common Securities have been duly authorized by the Trust Agreement and, when issued and delivered by the Trust to the Company against payment therefor in accordance with the Trust Agreement, will be validly issued and fully paid and undivided beneficial interests in the assets of the Trust; and under the Delaware Act and the Trust Agreement, the issuance of the Common Securities will not be subject to preemptive or other similar rights. (m) The Preferred Securities have been duly authorized by the Trust Agreement and, when issued and delivered by the Trust in accordance with the Trust Agreement to the Underwriters and paid for in accordance with this Agreement, will be validly issued, and fully paid and nonassessable undivided beneficial interests in the 8 assets of the Trust and will be entitled to the benefits of the Trust Agreement; provided, however, the holders of the Preferred Securities may be obligated, pursuant to the Trust Agreement, (i) to provide indemnity and/or security in connection with and pay taxes or governmental charges arising from transfers or exchanges of Preferred Securities and the issuance of replacement Preferred Securities certificates, and (ii) to provide security or indemnity in connection with requests of or directions to the Property Trustee (as defined in the Trust Agreement) to exercise its rights and powers under the Trust Agreement. The holders of the Preferred Securities, as beneficial owners of the Trust, will be entitled to the same limitation of personal liability as that extended to stockholders of private corporations for profit organized under the General Corporation law, of the State of Delaware; under the Delaware Act and the Trust Agreement, the issuance of the Preferred Securities will not be subject to preemptive or other similar rights; and the Preferred Securities will conform to the description thereof in the Prospectus. (n) At the Closing Date, all of the issued and outstanding Common Securities of the Trust will be directly or indirectly owned by the Company free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity other than any encumbrances created by the terms of such Common Securities in the Trust Agreement or by Section [ ] of the Supplemental Indenture relating to the Debentures. (o) At the Closing Date, the Property Trustee will be the record holder of the Debentures and no security interest, mortgage, pledge, lien, encumbrance, claim or equity will be noted thereon or on the Debenture register maintained by or on behalf of the Company. (p) The Guarantee has been duly and validly authorized by the Company and, when executed and delivered by the Company at the Closing Date, will constitute a valid and legally binding agreement of the Company enforceable in accordance with its terms (subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and other similar laws affecting creditors' rights generally from time to time in effect and to general principles of equity, including, without limitations, concepts of materiality, reasonableness, good faith and fair dealing, regardless of whether considered in a proceeding in equity or at law); at the Closing Date, the Guarantee will have been duly qualified under the Trust Indenture Act; and the Guarantee will conform to the description thereof contained in the Prospectus. (q) The Indenture has been duly and validly authorized by the Company and, when executed and delivered by the Company at the Closing Date and, assuming due authorization, execution and delivery by the Debt Trustee, at such Closing Date will constitute a valid and legally binding agreement of the Company enforceable in accordance with its terms (subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and other similar laws affecting creditors' rights generally from time to time in effect and to general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, regardless of whether considered in a proceeding in equity or at law); at the Closing Date, the Indenture will have been duly qualified under the Trust Indenture Act; and the Indenture will conform to the description thereof contained in the Prospectus. (r) The Debentures have been duly and validly authorized by the Company and, when executed and authenticated in accordance with the terms of the Indenture and delivered to and paid for by the Trust in accordance with the Trust 9 Agreement, will constitute valid and legally binding obligations of the Company enforceable in accordance with their terms (subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and other similar laws affecting creditors' rights generally from time to time in effect and to general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, regardless of whether considered in a proceeding in equity or at law); and the Debentures will be in the form contemplated by, and entitled to the benefits of, the Indenture and will conform to the description thereof contained in the Prospectus. (s) Neither the Commission nor the Blue Sky or securities authority of any jurisdiction has issued an order (a "Stop Order") suspending the effectiveness of the Registration Statement, preventing or suspending the use of any preliminary prospectus, the Prospectus, the Registration Statement or any amendment or supplement thereto, refusing to permit the effectiveness of the Registration Statement, suspending the registration or qualification of the Offered Securities, nor have any such authorities instituted or, to the knowledge of the Trust or the Company, threatened to institute any proceedings with respect to a Stop Order in any jurisdiction in which the Offered Securities are to be sold or in which the Offered Securities may be issued, nor, with respect to accuracy on the Closing Date, has there been any Stop Order instituted or, to the knowledge of the Trust or the Company, threatened on or after the effective date of the Registration Statement in any jurisdiction. (t) The execution, delivery and performance by the Company of this Agreement, the Indenture, the Debentures, the Trust Agreement and the Guarantee and the execution, delivery and performance by the Trust of this Agreement and the Trust Securities, the performance by the Trust of the Trust Agreement and the consummation of the transactions contemplated hereby and thereby and compliance by the Company and the Trust, as the case may be, with the terms hereof and thereof and the application of the net proceeds from the offering and sale of the Trust Securities to be sold by the Trust and the Debentures to be sold by the Company in the manner set forth in the Prospectus under "Use of Proceeds" will not result in the creation or imposition of any lien, charge or encumbrance upon any of the assets of the Trust (other than the creation of a lien on the Debentures in favor) of the holders of the Trust Securities as provided in the Trust Agreement) or the Company or any of the Subsidiaries pursuant to the terms or provisions of, or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or give any other party a right to terminate any of its obligations under, or result in the acceleration of any obligation under, the Trust Agreement, the certificate of incorporation or by-laws of the Company or any of the Subsidiaries, any contract or other agreement to which the Trust or the Company or any of the Subsidiaries is a party or by which the Trust or the Company or any of the Subsidiaries or any of their respective properties is bound or affected, or violate or conflict with any judgment, ruling, decree, order, statute, rule or regulation of any court or governmental agency or body applicable to the business or properties of the Trust or the Company or any of the Subsidiaries except for any of the foregoing which would not have a Material Adverse Effect. (u) No holder of securities of the Company or the Trust has rights to the registration of any securities of the Company or the Trust because of the filing of the Registration Statement. 10 (v) Neither the Trust nor the Company is an "investment company" or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended. (w) Except as set forth in the Registration Statement and the Prospectus, there are no actions, suits or proceedings pending or threatened against or affecting the Trust or the Company or any of its Subsidiaries or any of their respective officers in their capacity as such, before or by any Federal or state court, commission, regulatory body, administrative agency or other governmental body, domestic or foreign, wherein an unfavorable ruling, decision or finding would reasonably be expected to have a Material Adverse Effect. (x) Each of the Trust and the Company and each of its Subsidiaries has, and at the Closing Date will have, (i) all governmental licenses, permits, consents, orders, approvals and other authorizations necessary to carry on its business as contemplated in the Prospectus, (ii) complied in all respects with all laws, regulations and orders applicable to it or its business and (iii) performed all obligations required to be performed by it, and is not, and at the Closing Date will not be, in default, under any indenture, mortgage, deed of trust, voting trust agreement, loan agreement, bond, debenture, note agreement, lease, contract or other agreement or instrument (collectively, a "contract or other agreement") to which it is a party or by which its property is bound or affected, except in the case of (i), (ii) or (iii) above, for such failures to possess, comply or perform as would not have a Material Adverse Effect. To the best knowledge of each of the Trust and the Company and each of its Subsidiaries, no other party under any contract or other agreement to which it is a party is in material default thereunder. None of the Trust, the Company nor any of its Subsidiaries is, nor at the Closing Date will any of them be, in violation of its respective Trust Agreement, charter or by-laws. (y) No consent, approval, authorization or order of, or any filing or declaration with, any court or governmental agency or body is required in connection with the authorization, issuance, transfer, sale or delivery of the Trust Securities by the Trust or the Guarantee and the Debentures by the Company, in connection with the execution, delivery and performance of this Agreement by the Trust and the Company or in connection with the taking by the Trust or the Company of any action contemplated hereby and in the Indenture, the Guarantee, the Preferred Securities and the Common Securities, except such as have been obtained under the Act, the Exchange Act, the Trust Indenture Act and the Exchange Act Rules and Regulations, the Trust Indenture Act Rules and Regulations and the Rules and Regulations and such as may be required under state securities or Blue Sky laws or the by-laws and rules of the National Association of Securities Dealers, Inc. (the "NASD") in connection with the purchase and distribution by the Underwriters of the Preferred Securities. (z) The Company and each of its Subsidiaries has valid, subsisting and enforceable leases for the properties described in the Registration Statement and the Prospectus as leased by it, with such exceptions as are not material and do not materially interfere with the use made and proposed to be made of such properties by the Company and such Subsidiaries. (aa) There is no document or contract of a character required to be described in the Registration Statement or the Prospectus or to be filed as an exhibit to 11 the Registration Statement which is not described or filed as required. All such contracts to which the Trust or the Company or any Subsidiary is a party have been duly authorized, executed and delivered by the Trust or the Company or such Subsidiary, constitute valid and binding agreements of the Trust or the Company or such Subsidiary and are enforceable against the Trust or the Company or such Subsidiary in accordance with the terms thereof (subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and other similar laws affecting creditors' rights generally from time to time in effect and to general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, regardless of whether considered in a proceeding in equity or at law). (ab) No statement, representation, warranty or covenant made by the Trust or the Company in this Agreement, the Indenture or the Trust Agreement or made in any certificate or document required by this Agreement to be delivered to the Representative was or will be, when made, inaccurate, untrue or incorrect in any material respect. (ac) Neither the Company nor the Trust nor any of their respective directors, officers, trustees or controlling persons has taken, directly or indirectly, any action intended, or which might reasonably be expected, to cause or result, under the Act or otherwise, in, or which has constituted, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Preferred Securities. (ad) Neither the Trust, the Company nor any of its Subsidiaries is involved in any material labor dispute nor, to the knowledge of the Trust or the Company, is any such dispute threatened. (ae) The Company and its Subsidiaries own, or are licensed or otherwise have the full right to use, all material trademarks and trade names which are used in or necessary for the conduct of their respective businesses as described in the Prospectus. No claims have been asserted by any person to the use of any such trademarks or trade names or challenging or questioning the validity or effectiveness of any such trademark or trade name except such claims as would not reasonably be expected to leave a Material Adverse Effect. The use, in connection with the business and operations of the Company and its Subsidiaries of such trademarks and trade names does not, to the Company's knowledge, infringe on the rights of any person except such infringements as would not reasonably be expected to have a Material Adverse Effect. (af) Neither the Trust, the Company nor any of its Subsidiaries nor, to the Trust's or the Company's knowledge, any employee or agent of the Trust, the Company or any Subsidiary has made any payment of funds of the Trust, the Company or any Subsidiary or received or retained any funds in violation of any law, rule or regulation or of a character required to be disclosed in the Prospectus. 4. Agreements of the Trust and the Company. The Trust and the ---------------------------------------- Company, jointly and severally, agree with the several Underwriters as follows: (a) The Company and the Trust will not, either prior to the Effective Date or thereafter during such period as a prospectus is required by law to be delivered in connection with sales of the Offered Securities by an Underwriter or dealer, file any amendment or supplement to the Registration Statement or the Prospectus, unless a copy 12 thereof shall first have been submitted to the Representative within a reasonable period of time prior to the filing thereof and the Representative shall not have objected thereto in good faith. (b) The Trust and the Company will use their best efforts to cause the Registration Statement to become effective (if not yet effective), and will notify the Representative promptly, and will confirm such advice in writing, (1) when the Registration Statement has become effective and when any post-effective amendment thereto becomes effective, (2) of any request by the Commission for amendments or supplements to the Registration Statement or the Prospectus or for additional information, (3) of the issuance by the Commission of any Stop Order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose or the threat thereof, (4) of the happening of any event during the period mentioned in the second sentence of Section 4(e) that in the judgment of the Trust or the Company makes any statement made in the Registration Statement or the Prospectus untrue or that requires the making of any changes in the Registration Statement or the Prospectus in order to make the statements therein, in the light of the circumstances in which they are made, not misleading, and (5) of receipt by the Trust or the Company or any representative or attorney of the Trust or the Company of any other communication from the Commission relating to the Trust or the Company, the Registration Statement, any preliminary prospectus or the Prospectus. If at any time the Commission shall issue any order suspending the effectiveness of the Registration Statement, the Trust and the Company will make every reasonable effort to obtain the withdrawal of such order at the earliest possible moment. The Trust and the Company will use their best efforts to comply with the provisions of and make all requisite filings with the Commission pursuant to Rule 430A, if any, and to notify the Representative promptly of all such filings. (c) The Trust or the Company will promptly furnish to the Representative, without charge, two conformed copies of the Registration Statement and of any post-effective amendment thereto, including financial statements and schedules, and all exhibits thereto (including any document filed under the Exchange Act and deemed to be incorporated by reference into the Prospectus) and will furnish to the Representative, without charge, for transmittal to each of the other Underwriter, a copy of the Registration Statement and any post-effective amendment thereto, including financial statements and schedules. (d) The Trust and the Company will comply with all the provisions of any undertakings contained in the Registration Statement. (e) On the Effective Date, and thereafter from time to time, the Company will deliver to each of the Underwriters, without charge, as many copies of the preliminary prospectus and Prospectus and any amendment or supplement thereto, as the Representative may reasonably request. The Company and the Trust consent to the use of the preliminary prospectus or Prospectus and any amendment or supplement thereto, as the case may be, by the several Underwriters and by all dealers to whom the Offered Securities may be sold, both in connection with the offering or sale of the Offered Securities and for any period of time thereafter during which the Prospectus is required by law to be delivered in connection therewith. If during such period of time any event shall occur which in the judgment of the Company or counsel to the Underwriters should be set forth in the Prospectus in order to make any statement therein, in the light of the 13 circumstances under which it was made, not misleading in any material respect, or if it is necessary to supplement or amend the Prospectus to comply with law, the Company will forthwith prepare and duly file with the Commission an appropriate supplement or amendment thereto, and will deliver to each of the Underwriters, without charge, such number of copies hereof as the Representative may reasonably request. The Company shall not file any document under the Exchange Act before the termination of the offering of the Offered Securities by the Underwriters if such document would be deemed to be incorporated by reference into the Prospectus which is not approved by the Representative after reasonable notice thereof. (f) Prior to any public offering of the Offered Securities by the Underwriters, the Trust and the Company will cooperate with the Representative and counsel to the Underwriters in connection with the registration or qualification of the Offered Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions as the Representative may request; provided, that in no event shall the Trust or the Company be obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action which would subject it to general service of process in any jurisdiction where it is not now so subject. (g) During the period of five years commencing on the Effective Date, the Company will furnish to the Representative and each other Underwriter who may so request copies of such financial statements and other periodic and special reports as the Company may, from time to time distribute generally to the holders of any class of its capital ,stock, and will furnish to the Representative and each Underwriter who may so request a copy of each annual or other report it shall be required to file with the Commission. (h) The Company will make generally available to holders of the Preferred Securities and the Representative as soon as may be practicable but in no event later than the last day of the fifteenth full calendar month following the calendar quarter in which the Effective Date falls, an earnings statement (which need not be audited but shall be in reasonable detail) for a period of 12 months ended commencing after the Effective Date, and satisfying the provisions of Section 11(a) of the Act (including Rule 158 of the Rules and Regulations). (i) The Trust will apply the net proceeds from the offering and sale of the Preferred Securities in the manner set forth in the Prospectus under the caption "Use of Proceeds." (j) During a period of 30 days from the date hereof, neither the Trust nor the Company will, without the Representative's prior written consent, directly or indirectly, sell, offer to sell, contract to sell, grant any option for the sale of, or otherwise dispose of, any Preferred Securities, any security convertible into or exchangeable into or exercisable for, Preferred Securities or Debentures or any debt securities substantially similar to the Debentures or any equity securities substantially similar to the Preferred Securities, except for the Debentures and Preferred Securities offered hereby. For the avoidance of doubt, it is acknowledged that debt securities substantially similar to the Debentures would be debt securities that have substantially the same rate, maturity and other provisions as the Debentures. 14 (k) The Trust and the Company will use every reasonable effort to effect and maintain the listing of the Preferred Securities on the New York Stock Exchange (the "NYSE") and to file with the NYSE all documents and notices required by the NYSE of issuers that have securities quoted on such exchange. (1) Whether or not the transactions contemplated by this Agreement are consummated or this Agreement is terminated, the Company will pay or cause to be paid or reimburse if paid by the Representative all costs and expenses incident to the performance of the obligations of the Trust and the Company under this Agreement, including but not limited to costs and expenses of or relating to (1) the preparation, printing and filing of the Registration Statement and exhibits to it, each preliminary prospectus, the Prospectus, any amendment or supplement to the Registration Statement or the Prospectus and the Indenture, (2) the preparation and delivery of certificates representing the Trust Securities, (3) the printing of this Agreement, the Agreement Among Underwriters, any Dealer Agreements and any Underwriters' Questionnaire, (4) furnishing (including cost of shipping, mailing and courier) such copies of the Registration Statement, the Prospectus and any preliminary prospectus, and all amendments and supplements thereto, as may be requested for use in connection with the offering and sale of the Offered Securities by the Underwriters or by dealers to whom Preferred Securities may be sold, (5) the listing of the Preferred Securities on the NYSE, (6) any filings required to be made by the Underwriters with the NASD, and the fees, disbursements and other charges of counsel for the Underwriters in connection therewith, (7) the registration or qualification of the Offered Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions designated pursuant to Section 4(f), including the fees, disbursements and other charges of counsel to the Underwriters in connection therewith, and the preparation and printing of preliminary, supplemental and final Blue Sky memoranda, (8) counsel to the Company and the Trust, (9) the transfer agent and registrar for the Trust Securities, (10) the rating of the Debentures by one or more rating agencies, (10) the Debt Trustee under the Indenture, the Guarantee Trustee under the Guarantee, the Property Trustee, the Delaware Trustee under the Trust Agreement and any agents of such trustees and the fees, disbursements and other charges of counsel for such trustees in connection with the Indenture, the Guarantee, the Trust Agreement and the Debentures and (12) the Accountants. (m) If this Agreement shall be terminated by the Company or the Trust pursuant to any of the provisions hereof (other than pursuant to Section 8) or if for any reason the Company or the Trust shall be unable to perform its obligations hereunder, the Company or the Trust will reimburse the several Underwriters for all out-of-pocket expenses (including the fees, disbursements and other charges of counsel to the Underwriters) reasonably incurred by them in connection herewith. (n) The Company and the Trust will not at any time, directly or indirectly, take any action intended, or which might reasonably be expected, to cause or result in, or which will constitute, stabilization of the price of the Preferred Securities to facilitate the sale or resale of any of the Preferred Securities. (o) The Company will not claim the benefit of any usury law against any holders of Debentures or Preferred Securities. 5. Conditions of the Underwriters. The obligations of each ------------------------------- Underwriter hereunder are subject to the following conditions: 15 (a) Notification that the Registration Statement has become effective shall be or have been received by the Representative not later than 5:00 P.M., New York City time, on the date of this Agreement or at such later date and time as shall be consented to in writing by the Representative and all filings required by Rule 424 of the Rules and Regulations and Rule 430A shall have been made. (b) (i) No Stop Order suspending the effectiveness of the Registration Statement shall have been issued and no proceeding for that purpose shall be pending or threatened by the Commission; (ii) no order suspending the effectiveness of the Registration Statement or the qualification or registration of the Offered Securities under the securities or Blue Sky laws of any jurisdiction shall be in effect and no proceeding for such purpose shall be pending before or threatened or contemplated by the Commission or the authorities of any such jurisdiction, (iii) any request for additional information on the part of the staff of the Commission or any such authorities shall have been complied with to the satisfaction of the staff of the Commission or such authorities and (iv) after the date hereof no amendment or supplement to the Registration Statement or the Prospectus shall have been filed unless a copy thereof was first submitted to the Representative and the Representative did not object thereto in good faith, and the Representative shall have received a certificate dated the Closing Date and signed by the chief executive officer or a vice president and the principal financial or accounting officer of the Company (who may, as to proceedings threatened, rely upon the best of their information and belief), to the effect of clauses (i), (ii) and (iii). (c) Since the respective dates as of which information is given in the Registration Statement and the Prospectus (i) there shall not have been a material adverse change in the general affairs, business, business prospects, properties, management, condition (financial or otherwise) or results of operations of the Company and its subsidiaries, considered as one enterprise, whether or not arising from transactions in the ordinary course of business, in each case other than as set forth in or contemplated by the Registration Statement and the Prospectus, and (ii) neither the Company nor any of its Subsidiaries shall have sustained any material loss or interference with its business or properties from fire, explosion, flood or other casualty, whether or not covered by insurance, or from any labor dispute or any court or legislative or other governmental action, order or decree, which is not set forth in the Registration Statement and the Prospectus, if in the judgment of the Representative any such development makes it impracticable or inadvisable to consummate the sale and delivery of the Offered Securities by the Underwriters in accordance with the terms hereof and thereof. (d) Since the respective dates as of which information is given in the Registration Statement and the Prospectus, there shall have been no litigation or other proceeding instituted against the Trust, the Company or any of its Subsidiaries or any of their respective officers or directors in their capacities as such, before or by any Federal, state or local court, commission, regulatory body, administrative agency or other governmental body, domestic or foreign, in which litigation or proceeding an unfavorable ruling, decision or finding would materially and adversely affect the business, properties, business prospects, condition (financial or otherwise) or results of operations of the Company and its subsidiaries considered as one enterprise. (e) Each of the representations and warranties of the Company and the Trust contained herein shall be true and correct in all material respects on the Closing Date and all covenants and agreements herein contained to be performed on the part of 16 the Trust and the Company and all conditions herein contained to be fulfilled or complied with by the Company or the Trust on or prior to the Closing Date. (f) The Representative shall have received an opinion of Dechert, Price & Rhoads, counsel for the Trust and the Company, dated the Closing Date to the effect set forth in Exhibit A hereto, addressed to the Underwriters. [(g) The Representative shall have received an opinion of [ ], General Counsel of the Company, dated the Closing Date to the effect set forth in Exhibit B hereto, addressed to the Underwriters.] (h) The Representative shall have received an opinion of [Richards, Layton & Finger, special Delaware counsel to the Trust], dated the Closing Date, to the effect set forth in Exhibit C hereto, addressed to the Underwriters. (i) The Representative shall have received an opinion of [ ], counsel to The Bank of New York and The Bank of New York (Delaware), dated the Closing Date to the effect set forth in Exhibit D hereto, addressed to the Underwriters. (j) On the Closing Date, the Representative shall have received a certificate of the Company, in its capacity as Sponsor of the Trust and on its own behalf, and of the Chief Financial Officer, the Controller or the Treasurer of the Company, dated the Closing Date, to the effect that the conditions set forth in this Section 5 have been satisfied, that as of the date hereof and on the Closing Date, the representations and warranties of the Trust and the Company set forth in Section 3 hereof are true and correct in all material respects, and that on the Closing Date, each of the covenants and obligations of the Trust and the Company to be performed hereunder on or prior to the Closing Date have been duly performed in all material respects. In addition, such certificate shall state that the signer of such certificate has carefully examined the Registration Statement and the Prospectus (including the documents incorporated by reference therein) and (A) as of the date of such certificate, such documents are true and correct in all material respects and do not omit to state a material fact required to be stated therein or necessary in order to make the statements therein not untrue or misleading and (B) in the case of the certificate delivered on the Closing Date since the Effective Date no event has occurred as a result of which it is necessary to amend or supplement the Prospectus in order to make the statements therein not untrue or misleading in any material respect and there has been no document required to be filed under the Exchange Act and the rules and regulations thereunder that upon such filing would be deemed to be incorporated by reference into the Prospectus that has not been so filed. (k) Concurrently with the execution and delivery of this Agreement, the Accountants shall have furnished to the Representative a letter, dated the date of its delivery, addressed to the Representative and in form and substance satisfactory to the Representative, confirming that they are independent accountants with respect to the Trust and the Company as required by the Act and the Rules and Regulations and with respect to the financial and other statistical and numerical information contained in the Registration Statement or incorporated by reference therein. On the Closing Date, the Accountants shall have furnished to the Representative a letter, dated the date of its delivery which shall confirm, on the basis of a review in accordance with the procedures set forth in the letter from the Accountants, that nothing has come to their attention 17 during the period from the date of the letter referred to in the prior sentence to a date (specified in the letter) not more than three days prior to the Closing Date, which would require any change in their letter dated the date hereof if it were required to be dated and delivered on the Closing Date. (l) The Representative shall have received an opinion, dated the Closing Date from Cravath, Swaine & Moore, counsel to the Underwriters as to such matters as the Underwriters shall reasonably request. In rendering such opinion, counsel may state that they are passing only on matters of New York and United States Federal law. In rendering such opinion, counsel may rely upon an opinion or opinions, each dated the Closing Date, of other counsel retained by them or the Company as to laws of any jurisdiction other than the United States or the State of New York, provided that (A) such reliance is expressly authorized by each opinion so relied upon and a copy of each such opinion is delivered to the Underwriters, and (B) counsel shall state in their opinion that they and the Underwriters are justified in relying thereon. Insofar as such opinions involve factual matters, such counsel may rely, to the extent such counsel deems proper, upon certificates of officers of the Company, its subsidiaries and the Trust and certificates of public officials. (m) The Offered Securities shall be qualified for sale in such states as the Representative may reasonably request, each such qualification shall be in effect and not subject to any Stop Order or other proceeding on the Closing Date. (n) Prior to the Closing Date, the Preferred Securities shall have been duly authorized for listing by the NYSE upon official notice of issuance. (o) The Trust and the Company shall have furnished to the Representative such certificates, in addition to those specifically mentioned herein, as the Representative may have reasonably requested as to the accuracy and completeness on the Closing Date, of any statement in the Registration Statement or the Prospectus or any documents filed under the Exchange Act and deemed to be incorporated by reference into the Prospectus, as to the accuracy on the Closing Date of the representations and warranties of the Trust and the Company herein, as to the performance by the Trust and the Company of their respective obligations hereunder, or as to the fulfillment of the conditions concurrent and precedent to the obligations hereunder of the Representative. 6. Indemnification. (a) The Trust and the Company, jointly and ---------------- severally, will indemnify and hold harmless each Underwriter, the directors, officers, employees and agents of each Underwriter and each person, if any, who controls each Underwriter within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, from and against any and all losses, claims, liabilities, expenses any damages (including any and all investigative, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding between any of the indemnified parties and any indemnifying parties or between any indemnified party and any third party, or otherwise, or any claim asserted), to which any Underwriter, or any such person, may become subject under the Act, the Exchange Act or other Federal or state statutory law or regulation, at common law, or otherwise, insofar as such losses, claims, liabilities, expenses or damages arise out of or are based on any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus, the Registration Statement or the Prospectus or any amendment 18 or supplement to the Registration Statement or the Prospectus or the omission or alleged omission to state in such document a material fact required to be stated in it or necessary to make the statements in it not misleading, provided that neither the Company nor the Trust will be liable to the extent that such loss, claim, liability, expense or damage arises from the sale of the Offered Securities in the public offering to any person by an Underwriter and is based on an untrue statement or omission or alleged untrue statement or omission made in reliance on and in conformity with information relating to any Underwriter furnished in writing to the Company or the Trust by the Representative on behalf of any Underwriter expressly for inclusion in the Registration Statement, any preliminary prospectus or the Prospectus. This indemnity agreement will be in addition to any liability which the Trust and the Company might otherwise have including under this Agreement. (b) Each Underwriter will indemnify and hold harmless (i) the Trust, the Trustees, its officers who sign the Registration Statement and any person controlling the Trust within the meaning of Section 15 of the Act or Section 20 of the Exchange Act and (ii) the Company, its directors, its officers who shall have signed the Registration Statement, and each other person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, in each case to the same extent as the foregoing indemnity from the Trust and the Company to each Underwriter, but only insofar as losses, liabilities, claims, expenses or damages arise out of or are based upon any untrue statement or omission or alleged untrue statement or omission, made in reliance on and in conformity with written information furnished to the Trust or the Company by the Representative expressly for use in the Registration Statement, any preliminary prospectus or the Prospectus. This indemnity will be in addition to any liability that each Underwriter may otherwise have. (c) Any party that proposes to assert the right to be indemnified under this Section 6 will, promptly after receipt of notice of commencement of any action against such party in respect of which a claim is to be made against an indemnifying party or parties under this Section 6, notify each such indemnifying party of the commencement of such action, enclosing a copy of all papers served, but the omission so to notify such indemnifying party will not relieve it from any liability that it may have to any indemnified party under the foregoing provisions of this Section 6 unless, and only to the extent that, such omission results in the forfeiture of substantive rights or defenses by the indemnifying party. If any such action is brought against any indemnified party and it notifies the indemnifying party of its commencement, the indemnifying party will be entitled to participate in and, to the extent that it elects by delivering written notice to the indemnified party promptly after receiving notice of the commencement of the action from the indemnified party, jointly with any other indemnifying party similarly notified, to assume the defense of the action, with counsel satisfactory to the indemnified party, and after notice from the indemnifying party to the indemnified party of its election to assume the defense, the indemnifying party will not be liable to the indemnified party for any legal or other expenses except as provided below and except for the reasonable costs of investigation subsequently incurred by the indemnified party in connection with the defense. The indemnified party will have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel will be at the expense of such indemnified party unless (1) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (2) the indemnified party has reasonably concluded (based on advice of counsel) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those 19 available to the indemnifying party, (3) a conflict or potential conflict exists (based on advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party), or (4) the indemnifying party has not in fact employed counsel to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel will be at the expense of the indemnifying party or parties. It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm admitted to practice in such jurisdiction at any one time for all such indemnified party or parties. All such fees, disbursements and other charges will be reimbursed by the indemnifying party promptly as they are incurred. An indemnifying party will not be liable for any settlement of any action or claim effected without its written consent (which consent will not be unreasonably withheld). No indemnifying party shall, without the prior written consent of each indemnified party, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding relating to the matters contemplated by this Section 6 (whether or not any indemnified party is a party thereto), unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising or that may arise out of such claim, action or proceeding. (d) In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in the foregoing paragraphs of this Section 6 is applicable in accordance with its terms but for any reason is held to be unavailable from the Trust and the Company or the Underwriters, the Trust, the Company and the Underwriters shall contribute to the aggregate losses, claims, liabilities, expenses and damages (including any investigative, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claims asserted, but after deducting in the case of losses, claims, damages, liabilities and expenses suffered by the Trust or the Company, any contribution received by the Trust or the Company from persons other than the Underwriters, such as persons who control the Trust or the Company within the meaning of the Act and directors and officers of the Company) to which the Trust, the Company and any one or more of the Underwriters may be subject in such proportion as is appropriate to reflect the relative benefits received by the Trust and the Company on the one hand and the Underwriters on the other. The relative benefits received by the Trust and the Company on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses other than underwriting discounts and commissions) received by the Trust and the Company bear to the total underwriting discounts and commissions received by the Underwriters, respectively, in each case as set forth in the table on the cover page of the Prospectus. If, but only if, the allocation provided by the foregoing sentence is not permitted by applicable law, the allocation of contribution shall be made in such proportion as is appropriate to reflect not only the relative benefits referred to in the foregoing sentence but also the relative fault of the Trust and the Company on the one hand and the Underwriters on the other with respect to the statements or omissions which resulted in such loss, claim, liability, expense or damage, or action in respect thereof, as well as any other relevant equitable considerations with respect to such offering. The relative fault of the Trust and the Company on the one hand and of the Underwriters on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue 20 statement of a material fact or the omission or alleged omission to state a material fact related to information supplied by the Trust or the Company or the Underwriters, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The Trust, the Company and the Underwriters agree that it would not be just and equitable if contributions pursuant to this Section 6(d) were to be determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, liability, expense or damage, or action in respect thereof, referred to above in this Section 6(d) shall be deemed to include, for purpose of this Section 6(d), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 6(d), no Underwriter shall be required to contribute any amount in excess of the underwriting discounts and commissions received by it, and no person found guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) will be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations to contribute as provided in this Section 6(d) are several in proportion to their respective underwriting obligations and not joint. For purposes of this Section 6(d), any person who controls a party to this Agreement within the meaning of the Act will have the same rights to contribution as that party, and each officer of the Trust and the Company who signed the Registration Statement will have the same rights to contribution as the Trust and the Company, respectively, subject in each case to the provisions hereof. Any party entitled to contribution, promptly after receipt of notice of commencement of any action against such party in respect of which a claim for contribution may be made under this Section 6(d), will notify any such party or parties from whom contribution may be sought, but the omission so to notify will not relieve the party or parties from whom contribution may be sought from any other obligation it or they may have under this Section 6(d). No party will be liable for contribution with respect to any action or claim settled without its written consent (which consent will not be unreasonably withheld). (e) The indemnity and contribution agreements contained in this Section 6 and the representations and warranties of the Company contained in this Agreement shall remain operative and in full force and effect regardless of (i) any investigation made by or on behalf of the Underwriters, (ii) acceptance of any of the Offered Securities and payment therefor, or (iii) any termination of this Agreement. 7. Termination. The obligations of the several Underwriters under ------------ this Agreement may be terminated at any time on or prior to the Closing Date, by notice to the Trust and the Company from the Representative, without liability on the part of any Underwriter to the Trust or the Company, if, prior to delivery and payment for the Preferred Securities, in the sole judgment of the Representative, (i) trading in any of the equity securities of the Company shall have been suspended by the Commission, by an exchange that lists the Preferred Securities or by the Nasdaq Stock Market, (ii) trading in securities generally on the NYSE shall have been suspended or limited or minimum or maximum prices shall have been generally established on such exchange, or additional material governmental restrictions, not in force on the date of this Agreement, shall have been imposed upon trading in securities generally by such exchange or by order of the Commission or any court or other governmental authority, (iii) a general banking moratorium shall have been declared by either Federal or New York State authorities, or 21 (iv) any material adverse change in the financial or securities markets in the United States or in political, financial or economic conditions in the United States or any outbreak or material escalation of hostilities or declaration by the United States of a national emergency or war or other calamity or crisis shall have occurred, the effect of any of which is such as to make it, in the sole judgment of the Representative, impracticable or inadvisable to market the Offered Securities on the terms and in the manner contemplated by the Prospectus. 8. Substitution of Underwriters. If any one or more of the ----------------------------- Underwriters shall fail or refuse to purchase any of the Preferred Securities which it or they have agreed to purchase hereunder, and the aggregate principal amount of Preferred Securities which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase is not more than one-tenth of the aggregate principal amount of Preferred Securities, the other Underwriters shall be obligated, severally, to purchase the Preferred Securities which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase, in the proportions which the principal amount of Preferred Securities which they have respectively agreed to purchase pursuant to Section 1 bears to the aggregate principal amount of Preferred Securities which all such non-defaulting Underwriters have so agreed to purchase, or in such other proportions as the Representative may specify, provided that in no event shall the maximum principal amount of Preferred Securities which any Underwriter has become obligated to purchase pursuant to Section 1 be increased pursuant to this Section 8 by more than one-ninth of the principal amount of Preferred Securities agreed to be purchased by such Underwriter without the prior written consent of such Underwriter. If any Underwriter or Underwriters shall fail or refuse to purchase any Preferred Securities and the aggregate principal amount of Preferred Securities which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase exceeds one-tenth of the aggregate principal amount of the Preferred Securities and arrangements satisfactory to the Representative and the Trust and the Company for the purchase of such Preferred Securities are not made within 48 hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Underwriter or the Trust and the Company for the purchase or sale of any Preferred Securities under this Agreement. In any such case either the Representative or the Trust and the Company shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement and in the Prospectus or in any other documents or arrangements may be effected. Any action taken pursuant to this Section 8 shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement. 9. Miscellaneous. Notice given pursuant to any of the provisions of -------------- this Agreement shall be in writing and, unless otherwise specified, shall be mailed or delivered (a) if to the Trust, at [_], or (b) if to the Company, at the office of the Company, One South Jersey Plaza, Route 54, Folsom, New Jersey 08037, or (c) if to the Underwriters, to the Representative at the offices of PaineWebber Incorporated, 1285 Avenue of the Americas, New York, New York 10019, Attention: Corporate Finance Department. Any such notice shall be effective only upon receipt. Any notice under Section 7 or 8 may be made by facsimile, telex or telephone, but if so made shall be subsequently confirmed in writing. This Agreement has been and is made solely for the benefit of the several Underwriters and the Trust and the Company and of the controlling persons, Trustees, 22 directors and officers referred to in Section 6, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. The term "successors and assigns" as used in this Agreement shall not include a purchaser, as such purchaser, of Offered Securities from any of the several Underwriters. All representations, warranties and agreements of the Trust and the Company contained herein or in certificates or other instruments delivered pursuant hereto, shall remain operative and in full force and effect regardless of any investigation made by or on behalf of any Underwriter or any of their controlling persons and shall survive delivery of and payment for the Preferred Securities hereunder. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES OF SUCH STATE. This Agreement may be signed in two or more counterparts with the same effect as if the signatures thereto and hereto were upon the same instrument. In case any provision in this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. The Trust, the Company and the Underwriters each hereby irrevocably waive any right they may have to trial by jury in respect of any claim based upon or arising out of this Agreement or the transactions contemplated hereby. This Agreement may not be amended or otherwise modified or any provision hereof waived except by an instrument in writing signed by the Representative, the Trust and the Company. Please confirm that the foregoing correctly sets forth the agreement among the Trust, the Company and the several Underwriters. Very truly yours, SJG CAPITAL TRUST a Delaware business trust By:____________________________ Title: SOUTH JERSEY GAS COMPANY By:____________________________ Title: 23 Confirmed as of the date first above mentioned: PAINEWEBBER INCORPORATED Acting on behalf of themselves and as the Representative of the other several Underwriters named in Schedule I hereof. By: PAINEWEBBER INCORPORATED By:_____________________________ Title: SCHEDULE I Underwriters ------------ Number of Firm Securities to be Purchased Name of Underwriters ---------------- - -------------------- PaineWebber Incorporated.................. Total EXHIBIT A The opinion of Dechert, Price & Rhoads special counsel to South Jersey Gas Company to be delivered pursuant to Section 5(f) of the Underwriting Agreement shall be substantially to the effect that: 1. The Underwriting Agreement has been duly authorized, executed and delivered by the Company. 2. The Trust Agreement has been duly authorized, executed and delivered by the Company, and is a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, receivership, readjustment of debt, moratorium, fraudulent conveyance or similar laws relating to or affecting creditors' rights generally, general equity principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. 3. The Guarantee Agreement has been duly authorized, executed and delivered by the Company and is a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, receivership, readjustment of debt, moratorium, fraudulent conveyance or similar laws relating to or affecting creditors' rights generally, general equity principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. 4. The Indenture has been duly authorized, executed and delivered by the Company, has been duly qualified under the Trust Indenture Act, and is a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, receivership, readjustment of debt, moratorium, fraudulent conveyance or similar laws relating to or affecting creditors' rights generally, general equity principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. 5. The Debentures have been duly authorized, executed and delivered by the Company and when duly authenticated in accordance with the Indenture and delivered and paid for in accordance with the Underwriting Agreement, will be valid and binding obligations of the Company, entitled to the benefits of the Indenture and enforceable against the Company in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, receivership, readjustment of debt, moratorium, fraudulent conveyance or similar laws relating to or affecting creditors' rights generally, general equity principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. 6. The Trust is not an "investment company" or an entity "controlled" by an "investment company," as such terms are defined in Investment Company Act of 1940, as amended. 7. The statements set forth in the Registration Statement under the captions "Description of Capital Securities," "Description of Junior Subordinated Debentures," "Description of Guarantee" and "Relationship Among the Capital 2 Securities, the Junior Subordinated Debentures and the Guarantee," insofar as they purport to describe the provisions of the laws and documents referred to therein, fairly summarize the matters described therein. 8. The Registration Statement was declared effective under the Securities Act as of the date and time specified in such opinion and, to the best of such counsel's knowledge and information, no stop order suspending the effectiveness of the Registration Statement has been issued under the Securities Act and no proceedings therefor have been initiated or threatened by the Commission. 9. The statements of law or legal conclusions and opinions set forth in the Registration Statement under the caption "Certain United States Federal Income Tax Consequences," subject to the assumptions and conditions described therein, constitute our opinion. 10. The Registration Statement and the Prospectus (other than the financial statements and other financial and statistical information contained therein and other than documents incorporated therein by reference, as to all of which such counsel need express no opinion) comply as to form in all material respects with the applicable requirements of the Act and the Trust Indenture Act and the respective rules thereunder. 11. Neither the Trust nor South Jersey Gas Company is an "investment company" or an entity "controlled" by an "investment company" required to be registered under the Investment Company Act of 1940, as amended; 12. The statements made in the Prospectus under the caption "United States Taxation", to the extent they constitute matters of law or legal conclusions, have been reviewed by such counsel and are accurate, complete and correct and fairly present the information set forth therein. EXHIBIT B The opinion of [_] General Corporate Counsel, of South Jersey Gas Company delivered pursuant to Section 5(g): (1) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of New Jersey, with due corporate authority to own and operate its properties and conduct its business as described in the Prospectus; (2) The Company is a subsidiary of South Jersey Gas Company, which is a public utility holding company exempt from the provisions of the Public Utility Holding Company Act of 1935 (except Section 9(a)(2) thereof); (3) The Company's Agreements have each been duly authorized, executed and delivered by the Company and constitute valid instruments or obligations, as the case may be, legally binding upon and enforceable against the Company (except as limited by bankruptcy, insolvency or other laws or equitable principles affecting creditors' rights generally); and the Debentures are entitled to the benefits provided by the Indenture; (4) the Trust Agreement, the Indenture and the Guarantee have been duly qualified under the Trust Indenture Act; (5) this Agreement has been duly authorized, executed and delivered by each of the Trust and the Company; (6) all approvals, consents and orders of the Board of Public Utilities of the State of New Jersey legally required for the issuance by the Company of the Guarantee and the Debentures have been obtained and are in full force and effect; any approval, consent or order of any other commission or other governmental authority legally required for the issuance and sale, as the case may be, of the Offered Securities has been obtained (except that such issuance and sale may be subject to the provisions of the securities laws of certain states); and such issuance and sale is in accordance with the approvals, consents and orders obtained; (7) the issuance and sale of the Preferred Securities and the Common Securities by the Trust, the compliance by the Trust with all of the provisions of this Agreement, the purchase of the Debentures by the Trust from the Company; the distribution of the Debentures upon the liquidation of the Trust in the circumstances contemplated by the Trust Agreement and described in the Prospectus, and the consummation of the transactions contemplated herein and in the Trust Agreement, will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any agreement or instrument known to such counsel to which the Trust is a party or by which the Trust is bound or to which any of the property or assets of the Trust is subject, nor will such action result in any violation of the provisions of the Trust Agreement or any statute or any order, rule or regulation known to such counsel of any court or governmental agency or body having jurisdiction over the Trust or any of its properties; 2 (8) the issuance and sale of the Preferred Securities and the Common Securities by the Trust, the issuance by the Company of the Guarantee and the Debentures, the compliance by the Company and the Trust with all of the provisions of this Agreement, the execution, delivery and performance by the Company of the Company Agreements, the distribution of the Debentures upon the liquidation of the Trust in the circumstances contemplated by the Trust Agreement and described in the Prospectus and the consummation of the transactions herein and therein contemplated, will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any agreement or instrument known to such counsel to which the Company is a party or by which the Company is bound or to which any of the property or assets of the Company is subject, nor will such action result in any violation of the provisions of the charter or by- laws of the Company or any statute or any order, rule or regulation known to such counsel of any court or governmental agency or body having jurisdiction over the Company or any of its properties; (x) the Offered Securities conform as to legal matters to the statements concerning them in the Prospectus; and the summaries of the Company Agreements contained in the Prospectus constitute correct summaries thereof for use therein; (xi) the statements set forth in the Prospectus under the captions "Description of the Preferred Securities", "Certain Terms of the Series A Preferred Securities", "Description of the Guarantee", "Description of the Debentures", and "Certain Terms of the Series A Debentures", insofar as they constitute summaries or matters of law or legal conclusions, fairly present the information set forth therein; [(9) the statements made in South Jersey Industries, Inc. Form 10-K under "South Jersey Industries, Inc.-Rate Matters" and "--Environmental Controls" in Item 1--Business and under Item 3--Legal Proceedings fairly present the information set forth therein;] (10) to such counsel's knowledge, there are no legal or governmental proceedings pending to which the Trust is a party or of which any property of the Trust is the subject; and, to such counsel's knowledge, no such proceedings are threatened or contemplated by governmental authorities; (11) the documents incorporated by reference in the Prospectus or any further amendment or supplement thereto made by the Trust or the Company prior to the Time of Delivery (other than the financial statements and related schedules therein, as to which such counsel need express no opinion), when they were filed with the Commission, complied as to form in all material respects with the requirements of the Exchange Act, as applicable, and the rules and regulations of the Commission thereunder; and, on the basis of a general review and discussion with certain officers and employees of the Company but without independent check or verification, such counsel has no reason to believe that any of such documents, when such documents were so filed, contained an untrue statement of a material fact or omitted to state a material fact necessary in order 3 to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (12) the Registration Statement and the Prospectus and any further amendments and supplements thereto made by the Trust or the Company prior to the Time of Delivery (other than the financial statements and related schedules therein, as to which such counsel need express no opinion) comply as to form in all material respects with the requirements of the Act and the Trust Indenture Act and the rules and regulations thereunder; and on the basis of a general review and discussion with certain officers and employees of the Company but without independent check or verification except as indicated in Subsections (x) and (xi) of this Section 5(g), such counsel has no reason to believe that, as of its effective date, the Registration Statement or any further amendment thereto made by the Trust or the Company prior to the Time of Delivery (other than the financial statements and related schedules therein, as to which such counsel need express no opinion) contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that, as of its date or as of the Time of Delivery, the Prospectus or any further amendment or supplement thereto made by the Trust or the Company prior to the Time of Delivery (other than the financial statements and related schedules therein and other financial data therein, as to which such counsel need express no opinion) contained or contains an untrue statement of a material fact or omitted or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; Such counsel may rely as to all matters of New York law and legal conclusions based thereon upon the opinion of such counsel referred to in Section 5(f) hereof and as to all matters of Delaware law and legal conclusions based thereon upon the opinion of such counsel referred to in Section 5(h) hereof. EXHIBIT C The Opinion of Richards, Layton & Finger, special Delaware counsel for the Trust and South Jersey Gas Company ("the Company"), to be delivered pursuant to Section 5(h): (1) The Trust has been duly created and is validly existing in good standing as a business trust under the Delaware Business Trust Act, 12 Del. --- C Section 3801 et seq. (the "Delaware Act") and all filings required under - -- --- the laws of the State of Delaware with respect to the creation and valid existence of the Trust as a business trust have been made; (2) under the Delaware Act and the Trust Agreement, the Trust has the trust power and authority to own property and conduct its business as described in the Registration Statement; (3) under the Delaware Act and the Trust Agreement, the Trust has the trust power and authority (a) to execute and deliver, and to perform its obligations under, this Agreement and (b) to issue and perform its obligations under the Preferred Securities and the Common Securities; (4) under the Delaware Act and the Trust Agreement, the execution and delivery by the Trust of this Agreement, and the performance by the Trust of its obligations hereunder, have been duly authorized by all necessary trust action on the part of the Trust; (5) the Trust Agreement constitutes a valid and binding obligation of the Company and the Trustees, enforceable against the Company and the Trustees, in accordance with its terms, subject, as to enforcement, to the effect upon the Trust Agreement of (a) bankruptcy, insolvency, moratorium, receivership, liquidation, fraudulent conveyance, reorganization and other similar laws relating to or affecting the remedies and rights of creditors, (b) principles of equity (regardless of whether considered or applied in a proceeding in equity or at law) and (c) the effect of applicable public policy on the enforceability of provisions relating to indemnification or contribution; (6) the Preferred Securities have been duly authorized pursuant to the Trust Agreement and are duly and validly issued and, subject to the qualifications set forth herein, fully paid and nonassessable undivided beneficial interests in the assets of the Trust; the holders of the Preferred Securities, as beneficial owners of the Trust (the "Securityholders"), are entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware; and provided that such counsel may note that the Securityholders may be obligated, pursuant to the Trust Agreement, to (a) provide indemnity and/or security in connection with and pay a sum sufficient to cover any taxes or governmental charges arising from transfers or exchanges of Preferred Securities certificates and the issuance of replacement Preferred Securities certificates and (b) provide security and/or indemnity in connection with requests of or directions to the Property Trustee (as defined in the Trust Agreement) to exercise its rights and powers under the Trust Agreement; and under the Delaware Business Trust Act and the Trust Agreement, the issuance of the Preferred Securities is not subject to preemptive or other similar rights; 2 (7) the Common Securities have been duly authorized pursuant to the Trust Agreement and are duly and validly issued and fully paid undivided beneficial interests in the assets of the Trust; and under the Delaware Business Trust Act and the Trust Agreement, the issuance of the Common Securities is not subject to preemptive or other similar rights; (8) the issuance and sale by the Trust of the Preferred Securities and the Common Securities, the execution, delivery and performance by the Trust of this Agreement, the consummation by the Trust of the transactions contemplated herein and the compliance by the Trust with its obligations hereunder do not violate (a) any of the provisions of the Certificate of Trust of the Trust or the Trust Agreement or (b) any applicable Delaware law or Delaware administrative regulation; (9) assuming that the Trust derives no income from or connected with sources within the State of Delaware and has no assets, activities (other than having a Delaware trustee as required by the Delaware Business Trust Act and the filing of documents with the Secretary of State of the State of Delaware) or employees in the State of Delaware, no authorization, approval, consent or order of any Delaware court or Delaware governmental authority or Delaware agency is required to be obtained by the Trust solely as a result of the issuance and sale of the Preferred Securities, the consummation by the Trust of the transactions contemplated herein or the compliance by the Trust of its obligations hereunder; and (10) assuming that the Trust derives no income from or connected with sources within the State of Delaware and has no assets, activities (other than having a Delaware trustee as required by the Delaware Business Trust Act and the filing of documents with the Secretary of State of the State of Delaware) or employees in the State of Delaware, and assuming that the Trust is treated as a grantor trust for federal income tax purposes, the Securityholders (other than those holders of the Preferred Securities who reside or are domiciled in the State of Delaware) will have no liability for income taxes imposed by the State of Delaware solely as a result of their participation in the Trust, and the Trust will not be liable for any income tax imposed by the State of Delaware (in rendering the opinion expressed in this paragraph (x), such counsel need express no opinion concerning the securities laws of the State of Delaware). EXHIBIT D The opinion of counsel to The Bank of New York and Trust Delaware to be delivered pursuant to Section 5(i) of the Underwriting Agreement shall be substantially to the effect that: 1. The Bank of New York is duly incorporated and is validly existing in good standing as a banking corporation with trust powers under the laws of the State of New York. 2. The Delaware Trustee is duly incorporated and is validly existing in good standing as a banking corporation with trust powers under the laws of the State of Delaware. 3. The Indenture Trustee has the requisite power and authority to execute, deliver and perform its obligations under the Indenture, and has taken all necessary corporate action to authorize the execution, delivery and performance by it of the Indenture. 4. The Guarantee Trustee has the requisite power and authority to execute, deliver and perform its obligations under the Guarantee Agreement, and has taken all necessary corporate action to authorize the execution, delivery and performance by it of the Guarantee Agreement. 5. The Property Trustee has the requisite power and authority to execute and deliver the Trust Agreement, and has taken all necessary corporate action to authorize the execution and delivery of the Trust Agreement. 6. The Delaware Trustee has the requisite power and authority to execute and deliver the Trust Agreement, and has taken all necessary corporate action to authorize the execution and delivery of the Trust Agreement. 7. Each of the Indenture and the Guarantee Agreement has been duly executed and delivered by the Indenture Trustee and the Guarantee Trustee, respectively, and constitutes a legal, valid and binding obligation of the Indenture Trustee and the Guarantee Trustee, respectively, enforceable against the Indenture Trustee and the Guarantee Trustee, respectively in accordance with its respective terms, except that certain payment obligations may be enforceable solely against the assets of the Trust and except that such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, liquidation, fraudulent conveyance and transfer or other similar laws applicable to Delaware banking corporations affecting the enforcement of creditors' rights generally, and by general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether such enforceability is considered in a proceeding in equity or at law). 8. The Debentures delivered on the date hereof have been duly authenticated by the Indenture Trustee in accordance with the terms of the Indenture. EX-3.A 3 CERTIFICATE OF TRUST EXHIBIT 3(a) CERTIFICATE OF TRUST OF SJG CAPITAL TRUST THIS Certificate of Trust of SJG Capital Trust (the "Trust") dated March __, 1997, is being duly executed and filed by The Bank of New York (Delaware), The Bank of New York and David A. Kindlick, as trustees, to form a business trust under the Delaware Business Trust Act (12 Del. C. (S) 3801 et ------- -- seq.). - --- 1. Name. The name of the business trust formed hereby is ---- SJG Capital Trust. 2. Delaware Trustee. The name and business address of the trustee ---------------- of the Trust in the State of Delaware is The Bank of New York (Delaware), White Clay Center, Newark, Delaware 19711. 3. Effective Date. This Certificate of Trust shall be effective -------------- upon filing with the Secretary of State. IN WITNESS WHEREOF, the undersigned, being the trustees of the Trust, have executed this Certificate of Trust as of the date first above written. THE BANK OF NEW YORK (DELAWARE), not in its individual capacity but solely as Trustee of the Trust By:________________________________ Name: Title: THE BANK OF NEW YORK, not in its individual capacity but solely as Trustee of the Trust By:________________________________ Name: Title: ___________________________________ DAVID A. KINDLICK, not in his individual capacity but solely as Trustee of the Trust EX-3.B 4 TRUST AGREEMENT EXHIBIT 3(b) TRUST AGREEMENT --------------- This TRUST AGREEMENT, dated as of March __, 1997 (this "Trust Agreement"), among (i) South Jersey Gas Company, a New Jersey corporation (the "Depositor"), (ii) The Bank of New York (Delaware), a Delaware banking corporation, as trustee, (iii) The Bank of New York, a New York banking corporation, as trustee, and (iv) David A. Kindlick, an individual, as trustee (each of such trustees in (ii), (iii) and (iv) a "Trustee" and collectively, the "Trustees"). The Depositor and the Trustees hereby agree as follows: 1. The trust created hereby (the "Trust") shall be known as "SJG Capital Trust" in which name the Trustees, or the Depositor to the extent provided herein, may engage in the transactions contemplated hereby, make and execute contracts, and sue and be sued. 2. The Depositor hereby assigns, transfers conveys and sets over to the Trustees the sum of $10. The Trustees hereby acknowledge receipt of such amount in trust from the Depositor, which amount shall constitute the initial trust estate. The Trustees hereby declare that they will hold the trust estate in trust for the Depositor. It is the intention of the parties hereto that the Trust created hereby constitute a business trust under Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. (S) 3801, et seq. (the "Business Trust Act"), and ------- -- --- that this document constitutes the governing instrument of the Trust. The Trustees are hereby authorized and directed to execute and file a certificate of trust with the Delaware Secretary of State in accordance with the provisions of the Business Trust Act. 3. The Depositor and the Trustees will enter into an amended and restated Trust Agreement, satisfactory to each such party and substantially in the form included as an exhibit to the 1933 Act Registration Statement (as defined below), to provide for the contemplated operation of the Trust created hereby and the issuance of the Preferred Securities and Common Securities referred to therein. Prior to the execution and delivery of such amended and restated Trust Agreement, the Trustees shall not have any duty or obligation hereunder or with respect to the trust estate, except as otherwise required by applicable law or as may be necessary to obtain prior to such execution and delivery of any licenses, consents or approvals required by applicable law or otherwise. 4. The Depositor, as the sponsor of the Trust, is hereby authorized (i) to file with the Securities and Exchange Commission (the "Commission") and execute, in each case on behalf of the Trust, (a) the Registration Statement on Form S-3 (the "1933 Act Registration Statement"), including any pre-effective or post-effective amendments to the 1933 Act Registration Statement, relating to the registration under the Securities Act of 1933, as amended, of the Preferred Securities of the Trust and possibly certain other securities and (b) a Registration Statement on Form 8-A (the "1934 Act Registration Statement") (including all pre-effective and post-effective amendments thereto) relating to the registration of the Preferred Securities of the Trust under the Securities Exchange Act of 1934, as amended; (ii) to file with the New York Stock Exchange or any other national stock exchange or The Nasdaq National Market (each, an "Exchange") and execute on behalf of the Trust one or more listing applications and all other applications, statements, certificates, agreements and other instruments as shall be necessary or desirable to cause the Preferred Securities to be listed on any of the Exchanges; (iii) to file and 1 execute on behalf of the Trust such applications, reports, surety bonds, irrevocable consents, appointments of attorney for service of process and other papers and documents as shall be necessary or desirable to register the Preferred Securities under the securities or blue sky laws of such jurisdictions as the Depositor, on behalf of the Trust, may deem necessary or desirable and (iv) to execute on behalf of the Trust that certain Underwriting Agreement relating to the Preferred Securities, among the Trust, the Depositor and the several Underwriters named therein, substantially in the form included as an exhibit to the 1933 Act Registration Statement. In the event that any filing referred to in clauses (i), (ii) and (iii) above is required by the rules and regulations of the Commission, an Exchange or state securities or blue sky laws, to be executed on behalf of the Trust by one or more of the Trustees, each of the Trustees, in its or his capacity as a Trustee of the Trust, is hereby authorized and directed to join in any such filing and to execute on behalf of the Trust any and all of the foregoing, it being understood that neither The Bank of New York (Delaware) nor The Bank of New York in its capacity as a Trustee of the Trust shall be required to join in any such filing or execute on behalf of the Trust any such document unless required by the rules and regulations of the Commission, the Exchange or state securities or blue sky laws. In connection with the filings referred to above, the Depositor and David A. Kindlick, as a Trustee and not in his individual capacity, hereby constitutes and appoints George L. Baulig and David A. Kindlick, and each of them, as their true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for the Depositor or such Trustee or in the Depositor's or such Trustee's name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to the 1933 Act Registration Statement and the 1934 Act Registration Statement and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Commission, the Exchange and administrators of state securities or blue sky laws, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as the Depositor or such Trustee might or could to in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their respective substitute or substitutes, shall do or cause to be done by virtue hereof. 5. This Trust Agreement may be executed in one or more counterparts. 6. The number of Trustees initially shall be three (3) and thereafter the number of Trustees shall be such number as shall be fixed from time to time by a written instrument signed by the Depositor which may increase or decrease the number of Trustees; provided, however, that to the extent required by the Business Trust Act, one Trustee shall either be a natural person who is a resident of the State of Delaware or, if not a natural person, an entity which has its principal place of business in the State of Delaware and otherwise meets the requirements of applicable Delaware law. Subject to the foregoing, the Depositor is entitled to appoint or remove without cause any Trustee at any time. The Trustees may resign upon thirty (30) days' prior notice to the Depositor. 7. This Trust Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware (without regard to conflict of laws of principles). 2 IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be duly executed as of the day and year first above written. South Jersey Gas Company as Depositor By: _________________________ Name: George L. Baulig Title: Secretary The Bank of New York (Delaware), not in its individual capacity but solely as Trustee of the Trust By: __________________________ Name: Title: The Bank of New York, not in its individual capacity but solely as Trustee of the Trust By: __________________________ Name: Title: _________________________________ David A. Kindlick, not in his individual capacity but solely as Trustee of the Trust 3 EX-3.C 5 AMENDED TRUST AGREEMENT EXHIBIT 3(c) ================================================================================ Amended and Restated Trust Agreement for SJG Capital Trust among SOUTH JERSEY GAS COMPANY (as Depositor), THE BANK OF NEW YORK (as Property Trustee), THE BANK OF NEW YORK (DELAWARE) (as Delaware Trustee) and THE ADMINISTRATIVE TRUSTEE NAMED HEREIN Dated as of March [ ], 1997 ================================================================================ TABLE OF CONTENTS
Page ---- ARTICLE I Defined Terms ------------- Section 1.01. Definitions................................................... 2 ARTICLE II Continuation of the Trust ------------------------- Section 2.01. Name.......................................................... 10 Section 2.02. Office of the Delaware Trustee; Principal Place of Business... 10 Section 2.03. Initial Contribution of Trust Property; Expenses of the Trust.............................................. 11 Section 2.04. Issuance of the Trust Securities.............................. 11 Section 2.05. Purchase of Debentures........................................ 12 Section 2.06. Declaration of Trust.......................................... 12 Section 2.07. Authorization to Enter into Certain Transactions.............. 13 Section 2.08. Assets of Trust............................................... 16 Section 2.09. Title to Trust Property....................................... 16 ARTICLE III Payment Account --------------- Section 3.01. Payment Account............................................... 17 ARTICLE IV Distributions; Redemption ------------------------- Section 4.01. Distributions................................................. 17 Section 4.02. Redemption.................................................... 18 Section 4.03. Subordination of Common Securities............................ 20 Section 4.04. Payment Procedures............................................ 21 Section 4.05. Tax Returns and Reports....................................... 21 Section 4.06. Payments Under Indenture...................................... 22
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Page ---- ARTICLE V Trust Securities Certificates ----------------------------- Section 5.01. Initial Ownership............................................. 22 Section 5.02. The Trust Securities Certificates............................. 22 Section 5.03. Delivery of Trust Securities Certificates..................... 23 Section 5.04. Registration of Transfer and Exchange of Preferred Securities Certificates................................... 23 Section 5.05. Mutilated, Destroyed, Lost or Stolen Trust Securities Certificates.............................................. 24 Section 5.06. Persons Deemed Securityholders................................ 25 Section 5.07. Access to List of Securityholders' Names and Addresses........ 25 Section 5.08. Maintenance of Office or Agency............................... 25 Section 5.09. Appointment of Paying Agent................................... 26 Section 5.10. No Transfer of Common Securities by Depositor................. 26 Section 5.11. Book-Entry Preferred Securities Certificates; Common Securities Certificate............................. 27 Section 5.12. Definitive Preferred Securities Certificates.................. 27 Section 5.13. Rights of Securityholders..................................... 28 ARTICLE VI Acts of Securityholders; Meetings; Voting ----------------------------------------- Section 6.01. Limitations on Voting Rights.................................. 28 Section 6.02. Notice of Meetings............................................ 29 Section 6.03. Meetings of Preferred Securityholders......................... 29 Section 6.04. Voting Rights................................................. 30 Section 6.05. Proxies, etc. ................................................ 30 Section 6.06. Securityholder Action by Written Consent...................... 30 Section 6.07. Record Date for Voting and Other Purposes..................... 31 Section 6.08. Acts of Securityholders....................................... 31 Section 6.09. Inspection of Records......................................... 32
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Page ---- ARTICLE VII The Trustees ------------ Section 7.01. Certain Duties and Responsibilities........................... 32 Section 7.02. Notice of Defaults; Direct Action by Securityholders.......... 33 Section 7.03. Certain Rights of Property Trustee............................ 34 Section 7.04. Not Responsible for Recitals or Issuance of Securities........ 36 Section 7.05. May Hold Securities........................................... 36 Section 7.06. Compensation; Indemnity; Fees................................. 36 Section 7.07. Corporate Property Trustee Required; Eligibility of Trustees............................................... 37 Section 7.08. Conflicting Interests......................................... 37 Section 7.09. Co-Trustees and Separate Trustee.............................. 38 Section 7.10. Resignation and Removal; Appointment of Successor............. 39 Section 7.11. Acceptance of Appointment by Successor........................ 41 Section 7.12. Merger, Conversion, Consolidation or Succession to Business............................................... 42 Section 7.13. Preferential Collection of Claims Against Depositor or Trust........................................ 42 Section 7.14. Reports by Property Trustee................................... 42 Section 7.15. Reports to the Property Trustee............................... 43 Section 7.16. Evidence of Compliance with Conditions Precedent.............. 43 Section 7.17. Statements Required in Officers' Certificate and Opinion of Counsel........................................ 43 Section 7.18. Number of Trustees............................................ 44 Section 7.19. Delegation of Power........................................... 44 Section 7.20. Voting........................................................ 44 ARTICLE VIII Termination and Liquidation --------------------------- Section 8.01. Termination Upon Expiration Date.............................. 45 Section 8.02. Early Termination............................................. 45 Section 8.03. Termination................................................... 45 Section 8.04. Liquidation................................................... 46
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Page ---- ARTICLE IX Mergers, Etc. ------------- Section 9.01. Mergers, Consolidations, Amalgamations or Replacements of the Trust.............................................. 48 ARTICLE X Miscellaneous Provisions ------------------------ Section 10.01. Limitation of Rights of Securityholders....................... 49 Section 10.02. Amendment..................................................... 49 Section 10.03. Severability.................................................. 51 Section 10.04. Governing Law................................................. 51 Section 10.05. Payments Due on Non-Business Day.............................. 51 Section 10.06. Successors and Assigns........................................ 51 Section 10.07. Headings...................................................... 51 Section 10.08. Reports, Notices and Demands.................................. 51 Section 10.09. Agreement Not to Petition..................................... 52 Section 10.10. Trust Indenture Act; Conflict with Trust Indenture Act........ 52 Section 10.11. Acceptance of Terms of Trust Agreement, Guarantee and Indenture............................................. 53
v SJG Capital Trust Certain Sections of this Trust Agreement relating to Sections 310 through 318 of the Trust Indenture Act of 1939.
Trust Indenture Act Section Trust Agreement Section - --------------------------- ----------------------- Sec. 310(a)(1)......................................................... 7.07 (a)(2)............................................................ 7.07 (a)(3)............................................................ 7.09 (a)(4)..................................................... 2.07(a)(ii) (b)............................................................... 7.08 Sec. 311(a)............................................................ 7.13 (b)............................................................... 7.13 Sec. 312(a)............................................................ 5.07 (b)............................................................... 5.07 (c)............................................................... 5.07 Sec. 313(a)............................................................ 7.14 (b)............................................................... 7.14 (c)............................................................... 7.14 (d)............................................................... 7.14 Sec. 314(a)............................................................ 7.15 (b)..................................................... Not Applicable (c)(1)...................................................... 7.16, 7.17 (c)(2)...................................................... 7.16, 7.17 (c)(3).................................................. Not Applicable (d)..................................................... Not Applicable (e)............................................................... 7.17 Sec. 315(a)................................................ 7.01(a), 7.03(a) (b)........................................................ 7.02, 10.08 (c)............................................................ 7.01(a) (d)......................................................... 7.01, 7.03 (e)..................................................... Not Applicable Sec. 316(a).................................................. Not Applicable (a)(1)(A)............................................... Not Applicable (a)(1)(B)............................................... Not Applicable (a)(2).................................................. Not Applicable (b)..................................................... Not Applicable (c)..................................................... Not Applicable Sec. 317(a)(1)............................................... Not Applicable (a)(2).................................................. Not Applicable (b)............................................................... 5.09 Sec. 318(a)........................................................... 10.10
Note: This reconciliation and tie sheet shall not, for any purpose, be deemed to be a part of the Trust Agreement. vi AMENDED AND RESTATED TRUST AGREEMENT of [SJG] Capital Trust (the "Trust"), dated as of March [ ], 1997, among (i) South Jersey Gas Company, a New Jersey corporation (the "Depositor"), (ii) The Bank of New York, a New York banking corporation, as trustee (the "Property Trustee"), (iii) The Bank of New York (Delaware), a Delaware banking corporation, whose address in Delaware is 23 White Clay Center Route 273, Newark, Delaware 19711, as Delaware trustee (the "Delaware Trustee"), (iv) David A. Kindlick, an individual whose address is c/o South Jersey Gas Company, Number One South Jersey Plaza, Route 54, Folsom, New Jersey 08037 (the "Administrative Trustee") (the Property Trustee, the Delaware Trustee and the Administrative Trustee are referred to collectively as the "Trustees"), and (v) the several Holders, as hereinafter defined. WITNESSETH: WHEREAS the Depositor, the Property Trustee, the Delaware Trustee and the Administrative Trustee have heretofore duly declared and established a business trust pursuant to the Delaware Business Trust Act by entering into a Trust Agreement, dated as of March [ ], 1997 (the "Original Trust Agreement"), and by executing and filing with the Secretary of State of the State of Delaware a Certificate of Trust (the "Certificate of Trust") on March [ ], 1997, a form of which is attached hereto as Exhibit A; and WHEREAS the Depositor, the Property Trustee, the Delaware Trustee and the Administrative Trustee desire to amend and restate the Original Trust Agreement in its entirety as set forth herein to provide for, among other things, (i) the issuance of the Common Securities, as hereinafter defined, by the Trust to the Depositor, (ii) the issuance and sale of the Preferred Securities, as hereinafter defined, by the Trust pursuant to the Underwriting Agreement, as hereinafter defined, and (iii) the acquisition by the Trust from the Depositor of the Debentures, as hereinafter defined. NOW, THEREFORE, in consideration of the agreements and obligations set forth herein and for other good and valuable consideration, the sufficiency of which is hereby acknowledged, each party, for the benefit of the other party and for the benefit of the Securityholders, as hereinafter defined, hereby amends and restates the Original Trust Agreement in its entirety and agrees as follows: ARTICLE I Defined Terms ------------- SECTION 1.01. Definitions. For all purposes of this Trust Agreement, ------------ except as otherwise expressly provided or unless the context otherwise requires: (a) each term defined in this Article I has the meaning assigned to it in this Article I and includes the plural as well as the singular; (b) each of the other terms used herein that is defined in the Trust Indenture Act, either directly or by reference therein, has the meaning assigned to it therein; (c) unless the context otherwise requires, any reference to an "Article" or a "Section" refers to an Article or a Section, as the case may be, of this Trust Agreement; and (d) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Trust Agreement as a whole and not to any particular Article, Section or other subdivision. "Act" has the meaning specified in Section 6.08. "Administrative Trustee" means the individual identified as the "Administrative Trustee" in the preamble to this Trust Agreement, solely in his/her capacity as Administrative Trustee of the Trust created and continued hereunder and not in his/her individual capacity, or such Administrative Trustee's successor in interest in such capacity, or any successor trustee appointed as herein provided. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Bankruptcy Event" means, with respect to any Person, the occurrence of any of the following events: (a) Such Person, pursuant to or within the meaning of any Bankruptcy Law: (i) commences a voluntary case or proceeding; (ii) consents to the entry of an order for relief against it in an involuntary case or proceeding; (iii) consents to the appointment of a Custodian, as hereinafter defined, of it or for all or substantially all of its property, and such Custodian is not discharged within 60 days; (iv) makes a general assignment for the benefit of its creditors; or (v) admits in writing its inability to pay its debts generally as they become due; or (b) A court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against such Person in an involuntary case or proceeding; (ii) appoints a Custodian of such Person for all or substantially all of its properties; (iii) orders the liquidation of such Person; (iv) and in each case, the order or decree remains unstayed or undischarged and in effect for 60 days. "Bankruptcy Laws" means Title 11 of the United States Code, or similar federal or state law for the relief of debtors. "Board Resolution" means (i) a copy of a resolution certified by the Secretary or an Assistant Secretary of the Depositor to have been duly adopted by the Depositor's Board of Directors or a committee established thereby and to be in full force and effect on the date of such certification or (ii) a certificate signed by the authorized officer or officers of the Depositor to whom the Depositor's Board of Directors or a committee established thereby has delegated its authority, and in each case, delivered to the Trustees. "Book-Entry Preferred Securities Certificates" means certificates representing Preferred Securities issued in global, fully registered form with the Clearing Agency as described in Section 5.11. "Business Day" means a day other than (a) a Saturday or Sunday, or (b) a day on which banking institutions in The City of New York or the State of New Jersey are required by law or executive order to remain closed. "Certificate Depository Agreement" means the agreement among the Trust, the Property Trustee and The Depository Trust Company, as the initial Clearing Agency, dated as of the Closing Date, relating to the Book-Entry Preferred Securities Certificates, substantially in the form attached hereto as Exhibit B, as the same may be amended and supplemented from time to time. "Clearing Agency" means an organization registered as a "clearing agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. The Depository Trust Company will be the initial Clearing Agency. "Closing Date" means the [Time of Delivery] as defined in the Underwriting Agreement, which date is also the date of execution and delivery of this Trust Agreement. "Code" means the Internal Revenue Code of 1986, as amended. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, as amended, or, if at any time after the execution of this Trust Agreement such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Common Security" means an undivided beneficial interest in the assets of the Trust, having a Liquidation Amount of $25 and having the rights provided therefor in this Trust Agreement, including the right to receive Distributions and a Liquidation Distribution as provided herein. "Common Securities Certificate" means a certificate evidencing ownership of Common Securities, substantially in the form attached hereto as Exhibit C. "Corporate Trust Office" means the principal corporate trust office of the Property Trustee located in the State of New York which at the date hereof is The Bank of New York, 101 Barclay Street-21W, New York, New York 10286. "Creditor" has the meaning specified in Section 2.03. "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator, custodian or similar official under any Bankruptcy Law. "Debenture Event of Default" means an "Event of Default" as defined in the Indenture with respect to the Debentures. "Debenture Redemption Date" means "Redemption Date" as defined in the Indenture with respect to the Debentures. "Debenture Trustee" means The Bank of New York, a New York banking corporation, in its capacity as trustee under the Indenture, or any successor thereto, appointed in accordance with the terms and provisions of the Indenture. "Debentures" means the Depositor's [ ]% Deferrable Interest Subordinated Debentures, issued pursuant to the Indenture. "Definitive Preferred Securities Certificates" means certificates representing Preferred Securities issued in certificated, fully registered form as described in Section 5.12. "Delaware Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. Sec. 3801, et seq., as it may be amended from time to time. "Delaware Trustee" means the entity identified as the "Delaware Trustee" in the preamble to this Trust Agreement solely in its capacity as Delaware Trustee of the Trust created and continued hereunder and not in its individual capacity, or its successor in interest in such capacity, or any successor trustee appointed as herein provided. "Depositor" has the meaning specified in the preamble to this Trust Agreement. "Distribution Date" has the meaning specified in Section 4.01(a). "Distributions" means amounts payable in respect of the Trust Securities as provided in Section 4.01. "Event of Default" means the occurrence of a Debenture Event of Default (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body). "Expiration Date" has the meaning specified in Section 8.01. "Extension Period" means the period or periods in which pursuant to the Indenture payments of interest on the Debentures are deferred by extending the interest payment periods thereof. "Guarantee" means the Guarantee Agreement executed and delivered by the Depositor to The Bank of New York, a New York banking corporation, as trustee thereunder, contemporaneously with the execution and delivery of this Trust Agreement, for the benefit of the Holders of the Preferred Securities, as amended from time to time. "Holder" or "Securityholder" means a Person in whose name a Trust Security or Securities is registered in the Securities Register; any such Person is a beneficial owner within the meaning of the Delaware Business Trust Act. "Indenture" means the Indenture, dated as of March [ ], 1997, between the Depositor and the Debenture Trustee, as trustee thereunder, as amended or supplemented from time to time. "Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of trust, adverse ownership interest, hypothecation, assignment, security interest or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever. "Like Amount" means (a) with respect to a redemption of Trust Securities, Trust Securities having an aggregate Liquidation Amount equal to the principal amount of Debentures to be repaid in accordance with the Indenture and (b) with respect to a distribution of Debentures to Holders of Trust Securities in connection with a termination and liquidation of the Trust, Debentures having a principal amount equal to the aggregate Liquidation Amount of the Trust Securities in exchange for which such Debentures are distributed. "Liquidation Amount" means the stated amount of $25 per Trust Security. "Liquidation Date" means the date on which Debentures are to be distributed to Holders of Trust Securities in connection with a termination and liquidation of the Trust pursuant to Section 8.04(a). "Liquidation Distribution" has the meaning specified in Section 8.04(d). "1940 Act" means the Investment Company Act of 1940, as amended. "Officers' Certificate" means a certificate signed by the Chairman, the President, or any Vice President, and the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of the Depositor. "Opinion of Counsel" means a written opinion of nationally recognized independent counsel, who shall be acceptable to the Property Trustee. "Original Trust Agreement" has the meaning specified in the recitals to this Trust Agreement. "Outstanding", when used with respect to Trust Securities, means, as of the date of determination, all Trust Securities theretofore executed and delivered under this Trust Agreement, except: (a) Trust Securities theretofore canceled by the Administrative Trustee or delivered to the Administrative Trustee for cancellation; (b) Trust Securities for whose redemption money in the necessary amount has been theretofore deposited with the Property Trustee or any Paying Agent for the Holders of such Trust Securities; provided that, if -------- such Trust Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Trust Agreement; (c) Trust Securities which have been paid or in exchange for or in lieu of which other Trust Securities have been executed and delivered pursuant to Section 5.05, other than any such Trust Securities in respect of which there shall have been presented to the Property Trustee proof satisfactory to it that such Trust Securities are held by a bona fide purchaser; and (d) as provided in Section 8.04(c); provided, however, that in -------- ------- determining whether the Holders of the requisite Liquidation Amount of the Outstanding Preferred Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Preferred Securities owned by the Depositor, any Trustee or any Affiliate of the Depositor or any Trustee shall be disregarded and deemed not to be Outstanding, except that (a) in determining whether any Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Preferred Securities which such Trustee actually knows to be so owned shall be so disregarded and (b) the foregoing shall not apply at any time when all of the Outstanding Preferred Securities are owned by the Depositor, one or more of the Trustees and/or any such Affiliate. Preferred Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Administrative Trustee the pledgee's right so to act with respect to such Preferred Securities and that the pledgee is not the Depositor or any Affiliate of the Depositor. "Paying Agent" means the Property Trustee and any copaying agent appointed pursuant to Section 5.09. "Payment Account" means a segregated noninterestbearing corporate trust account maintained by the Property Trustee in its trust department for the benefit of the Securityholders in which all amounts paid to the Property Trustee in respect of the Debentures or the Guarantee will be held and from which the Property Trustee or such other Paying Agent shall make payments to the Securityholders in accordance with Article 4. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, jointstock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Preferred Security" means a [ ]% Preferred Security issued by the Trust, and having an undivided beneficial interest in the assets of the Trust, having a Liquidation Amount of $25 and having rights provided therefor in this Trust Agreement, including the right to receive Distributions and a Liquidation Distribution as provided herein. "Preferred Securities Certificate" means a certificate evidencing ownership of one or more Preferred Securities, substantially in the form attached hereto as Exhibit D. "Property Trustee" means the commercial bank or trust company identified as the "Property Trustee" in the preamble to this Trust Agreement solely in its capacity as Property Trustee of the Trust heretofore created and continued hereunder and not in its individual capacity, or its successor in interest in such capacity, or any successor property trustee appointed as herein provided. "Redemption Date" means, with respect to any Trust Security to be redeemed, the date fixed for such redemption by or pursuant to this Trust Agreement; provided that each Debenture Redemption Date and the stated maturity -------- of the Debentures shall be a Redemption Date for a Like Amount of Trust Securities. "Redemption Price" means, with respect to any Trust Security, the Liquidation Amount of such Trust Security, plus accumulated and unpaid Distributions thereon to the Redemption Date. "Securities Register" and "Securities Registrar" have the respective meanings specified in Section 5.04. "Securityholder" or "Holder" means a Person in whose name a Trust Security or Securities is registered in the Securities Register; any such Person is a beneficial owner within the meaning of the Delaware Business Trust Act. "Successor Securities" has the meaning specified in Section 8.05. "Trust" means the Delaware business trust created and continued hereby and identified on the cover page to this Trust Agreement. "Trust Agreement" means this Amended and Restated Trust Agreement, as the same may be modified, amended or supplemented in accordance with the applicable provisions hereof, including all exhibits hereto, including, for all purposes of this Trust Agreement and any such modification, amendment or supplement, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this Trust Agreement and any such modification, amendment or supplement, respectively. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this Trust Agreement was executed; provided, -------- however, that in the event the Trust Indenture Act of 1939 is amended after such - ------- date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "Trust Property" means (a) the Debentures, (b) any cash on deposit in, or owing to, the Payment Account and (c) all proceeds and rights in respect of the foregoing and any other property and assets for the time being held or deemed to be held by the Property Trustee pursuant to the trusts of this Trust Agreement. "Trust Security" means any one of the Common Securities or the Preferred Securities. "Trust Securities Certificate" means any one of the Common Securities Certificates or the Preferred Securities Certificates. "Underwriting Agreement" means the Underwriting Agreement, dated March [ ], 1997, among the Trust, the Depositor and the Underwriters named therein. ARTICLE II Continuation of the Trust ------------------------- SECTION 2.01. Name. The Trust created and continued hereby shall be ----- known as "SJG Capital Trust" as such name may be modified from time to time by the Administrative Trustee following written notice to the Holders of Trust Securities and the other Trustees, in which name the Trustees may engage in the transactions contemplated hereby, make and execute contracts and other instruments on behalf of the Trust and sue and be sued. SECTION 2.02. Office of the Delaware Trustee; Principal Place of -------------------------------------------------- Business. The address of the Delaware Trustee in the State of Delaware is 23 - --------- White Clay Center Route 273, Newark, Delaware 19711, or such other address in the State of Delaware as the Delaware Trustee may designate by written notice to the Securityholders and the Depositor. The principal place of business of the Trust is Number One South Jersey Plaza, Route 54, Folsom, New Jersey 08037. SECTION 2.03. Initial Contribution of Trust Property; Expenses of the ------------------------------------------------------- Trust. (a) The Property Trustee acknowledges receipt in trust from the - ------ Depositor in connection with the Original Trust Agreement the sum of $10, which constituted the initial Trust Property. (b) The Depositor shall be responsible for and shall pay for all obligations (other than with respect to the Trust Securities) and all costs and expenses of the Trust (including, but not limited to, costs and expenses relating to the organization of the Trust, the issuance and sale of the Preferred Securities, the fees and expenses (including reasonable counsel fees and expenses) of the Trustees as provided in Section 7.06, the costs and expenses of accountants, attorneys, statistical or bookkeeping services, expenses for printing and engraving and computing or accounting equipment, Paying Agent(s), Securities Registrar, duplication, travel and telephone and other telecommunications expenses and costs and expenses incurred in connection with the disposition of Trust assets). (c) The Depositor will pay any and all taxes (other than United States withholding taxes attributable to the Trust or its assets) and all liabilities, costs and expenses with respect to such taxes of the Trust. (d) The Depositor's obligations under this Section 2.03 shall be for the benefit of, and shall be enforceable by, the Property Trustee and any Person to whom any such obligations, costs, expenses and taxes are owed (a "Creditor") whether or not such Creditor has received notice hereof. The Property Trustee and any such Creditor may enforce the Depositor's obligations under this Section 2.03 directly against the Depositor and the Depositor irrevocably waives any right or remedy to require that the Property Trustee or any such Creditor take any action against the Trust or any other Person before proceeding against the Depositor. The Depositor agrees to execute such additional agreements as may be necessary or desirable in order to give full effect to the provisions of this Section 2.03. (e) The Depositor shall make no claim upon the Trust Property for the payment of such expenses. SECTION 2.04. Issuance of the Trust Securities. The Depositor, on --------------------------------- behalf of the Trust and pursuant to the Original Trust Agreement, executed and delivered the Underwriting Agreement. Contemporaneously with the execution and delivery of this Trust Agreement, the Administrative Trustee, on behalf of the Trust, shall execute in accordance with Section 5.02 and deliver to the Underwriters named in the Underwriting Agreement one or more Book-Entry Preferred Securities Certificates, registered in the name of the nominee of the initial Clearing Agency, representing 1,400,000 Preferred Securities having an aggregate Liquidation Amount of $35,000,000, against receipt by the Property Trustee of the aggregate purchase price of such Preferred Securities of $35,000,000, which amount the Administrative Trustee shall promptly deliver to the Property Trustee. Contemporaneously therewith, the Administrative Trustee, on behalf of the Trust, shall execute in accordance with Section 5.02 and deliver to the Depositor a Common Securities Certificate, registered in the name of the Depositor, representing 43,299 Common Securities having an aggregate Liquidation Amount of $1,082,475, and in satisfaction of the purchase price of such Common Securities the Depositor shall deliver to the Property Trustee the sum of $1,082,475. SECTION 2.05. Purchase of Debentures. Contemporaneously with the ----------------------- execution and delivery of this Trust Agreement (i) the Administrative Trustee, on behalf of the Trust, shall purchase [$36,082,475] aggregate principal amount of Debentures from the Depositor, registered in the name of the Trust and (ii) in satisfaction of the purchase price for such Debentures, the Property Trustee, on behalf of the Trust, shall deliver to the Depositor the sum of [$36,082,475]. SECTION 2.06. Declaration of Trust. The exclusive purposes and --------------------- functions of the Trust are (a) to issue and sell Trust Securities and use the proceeds from such sale to acquire the Debentures, (b) to maintain the status of the Trust as a grantor trust for United States Federal income tax purposes, and (c) except as otherwise limited herein, to engage in only those activities necessary, convenient or incidental thereto. The Depositor hereby appoints the Trustees as trustees of the Trust, to have all the rights, powers and duties to the extent set forth herein, and the Trustees hereby accept such appointment. The Property Trustee hereby declares that it will hold the Trust Property in trust upon and subject to the conditions set forth herein for the benefit of the Securityholders. The Administrative Trustee shall have all rights, powers and duties set forth herein. The Delaware Trustee shall not be entitled to exercise any powers, nor shall the Delaware Trustee have any of the duties and responsibilities of the Property Trustee or the Administrative Trustee set forth herein. The Delaware Trustee shall be one of the Trustees of the Trust for the sole and limited purpose of fulfilling the requirements of Section 3807 of the Delaware Business Trust Act. SECTION 2.07. Authorization to Enter into Certain Transactions. (a) ------------------------------------------------- The Trustees shall conduct the affairs of the Trust in accordance with the terms of this Trust Agreement. Subject to the limitations set forth in paragraph (b) of this Section, and in accordance with the following provisions (i) and (ii), the Administrative Trustee shall have the authority to enter into all transactions and agreements determined by the Administrative Trustee to be appropriate in exercising the authority, express or implied, otherwise granted to the Trustees under this Trust Agreement, and to perform all acts in furtherance thereof, including without limitation, the following: (i) As among the Trustees, the Administrative Trustee shall have the power and authority to act on behalf of the Trust with respect to the following matters: (A) executing and delivering the Trust Securities on behalf of the Trust; (B) causing the Trust to enter into, and executing, delivering and performing on behalf of the Trust, the Certificate Depository Agreement and such other agreements as may be necessary or desirable in connection with the purposes and function of the Trust, including the appointment of a successor depositary; (C) assisting in registering the Preferred Securities under the Securities Act of 1933, as amended, and under state securities or blue sky laws, and qualifying this Trust Agreement as a trust indenture under the Trust Indenture Act; (D) assisting in the listing of the Preferred Securities upon such securities exchange or exchanges as the Depositor shall determine and the registration of the Preferred Securities under the Securities Exchange Act of 1934, as amended, and the preparation and filing of all periodic and other reports and other documents pursuant to the foregoing; (E) to the extent provided in this Trust Agreement, terminating and liquidating the Trust and preparing, executing and filing the certificate of cancellation with the Secretary of State of the State of Delaware; (F) sending notices or assisting the Property Trustee in sending notices and other information regarding the Trust Securities and the Debentures to Securityholders in accordance with this Trust Agreement; and (G) taking any action incidental to the foregoing as the Administrative Trustee may from time to time determine is necessary or advisable to give effect to the terms of this Trust Agreement for the benefit of the Securityholders (without consideration of the effect of any such action on any particular Securityholder). (ii) As among the Trustees, the Property Trustee shall have the power, duty and authority to act on behalf of the Trust with respect to the following matters: (A) establishing and maintaining the Payment Account and appointing Paying Agents (subject to Section 5.09); (B) receiving payment of the purchase price of the Trust Securities; (C) receiving and holding the Debentures; (D) collecting interest, premium, if any, and principal payments on the Debentures; (E) making Distributions and other payments to the Securityholders in respect of the Trust Securities; (F) exercising all of the rights, powers and privileges of a holder of the Debentures; (G) sending notices of defaults, redemptions, Extension Periods, liquidations and other information regarding the Trust Securities and the Debentures to the Securityholders in accordance with this Trust Agreement; (H) distributing the Trust Property in accordance with the terms of this Trust Agreement; (I) after an Event of Default, taking any action incidental to the foregoing as the Property Trustee may from time to time determine is necessary or advisable to give effect to the terms of this Trust Agreement and protect and conserve the Trust Property for the benefit of the Securityholders (without consideration of the effect of any such action on any particular Securityholder); and (J) registering transfers and exchanges of the Preferred Securities in accordance with this Trust Agreement (but only if at such time the Property Trustee shall be the Securities Registrar). (b) So long as this Trust Agreement remains in effect, the Trust (or the Trustees acting on behalf of the Trust) shall not undertake any business, activities or transaction except as expressly provided herein or contemplated hereby. In particular, the Trustees acting on behalf of the Trust shall not (i) acquire any assets or investments (other than the Debentures), reinvest the proceeds derived from investments, possess any power or otherwise act in such a way as to vary the Trust Property or engage in any activities not authorized by this Trust Agreement, (ii) sell, assign, transfer, exchange, mortgage, pledge, setoff or otherwise dispose of any of the Trust Property or interests therein, including to Securityholders, except as expressly provided herein, (iii) take any action that would cause the Trust to fail or cease to qualify as a grantor trust for United States Federal income tax purposes, (iv) incur any indebtedness for borrowed money or issue any other debt, (v) issue any securities or other evidences of beneficial ownership of, or beneficial interests in, the Trust other than the Trust Securities, or (vi) take or consent to any action that would result in the placement of a Lien on any of the Trust Property. The Administrative Trustee shall defend all claims and demands of all Persons at any time claiming any Lien on any of the Trust Property adverse to the interest of the Trust or the Securityholders in their capacity as Securityholders. (c) In connection with the issue and sale of the Preferred Securities, the Depositor shall have the right and responsibility to assist the Administrative Trustee with respect to, or effect on behalf of the Trust, the following (and any actions taken by the Depositor in furtherance of the following prior to the date of this Trust Agreement are hereby ratified and confirmed in all respects): (i) preparing for filing with the Commission and executing on behalf of the Trust a registration statement on Form S-3 in relation to the Preferred Securities, including any amendments thereto; (ii) determining the States in which to take appropriate action to qualify or register for sale all or part of the Preferred Securities and doing any and all such acts, other than actions which must be taken by or on behalf of the Trust, and advising the Trustees of actions they must take on behalf of the Trust, and preparing for execution and filing any documents to be executed and filed by the Trust or on behalf of the Trust, as the Depositor deems necessary or advisable in order to comply with the applicable laws of any such States; (iii) preparing for filing and executing on behalf of the Trust an application to the New York Stock Exchange or any other national stock exchange or The Nasdaq National Stock Market for listing upon notice of issuance of any Preferred Securities; (iv) preparing for filing with the Commission and executing on behalf of the Trust a registration statement on Form 8-A relating to the registration of the Preferred Securities under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended, including any amendments thereto; (v) negotiating the terms of, and executing and delivering, the Underwriting Agreement providing for the sale of the Preferred Securities; and (vi) taking any other actions necessary or desirable to carry out any of the foregoing activities. (d) Notwithstanding anything herein to the contrary, the Administrative Trustee is authorized and directed to conduct the affairs of the Trust and to operate the Trust so that (i) the Trust will not be deemed to be an "investment company" required to be registered under the 1940 Act, or taxed as a corporation or a partnership for United States Federal income tax purposes, (ii) the Trust will qualify as a grantor trust for United States Federal income tax purposes and (iii) the Debentures will be treated as indebtedness of the Depositor for United States Federal income tax purposes. In this connection, the Depositor and the Administrative Trustee are authorized to take any action, not inconsistent with applicable law, under the Certificate of Trust, as amended from time to time, or this Trust Agreement, that each of the Depositor and the Administrative Trustee determines in their discretion to be necessary or desirable for such purposes. SECTION 2.08. Assets of Trust. The assets of the Trust shall consist ---------------- of the Trust Property. SECTION 2.09. Title to Trust Property. Legal title to all Trust ------------------------ Property shall be vested at all times in the Property Trustee (in its capacity as such) and shall be held and administered by the Property Trustee for the benefit of the Securityholders in accordance with this Trust Agreement. SECTION 2.10. Tax Status of Trust. The Trust, the Depositor, the ------------------- Property Trustee, the Administrative Trustee, the Delaware Trustee, and the Holders have entered into this Trust Agreement, and the Trust Securities will be issued, with the intention that (i) the Trust will be classified as a grantor trust under subpart E, part I of subchapter J of the Code and not as an association taxable as a corporation or a publicly traded partnership taxable as a corporation for purposes of federal income tax law, and (ii) the Holders will be treated as the owners of a pro rata undivided interest in each asset of the Trust. The Trust, the Depositor, the Property Trustee, the Administrative Trustee, the Delaware Trustee, and each Holder agree to treat and to take no action inconsistent with the treatment of the Trust Securities (or beneficial interest therein) as interests in a grantor trust for purposes of federal, state and local income and franchise taxes. The Trust, the Depositor, the Property Trustee, the Administrative Trustee and the Delaware Trustee agree to take no action with respect to the Trust or any interest therein that would cause the Trust to be treated as an association or publicly traded partnership taxable as a corporation for purposes of federal income tax law. Each Holder, by acquisition of a Trust Security (or a beneficial interest therein), agrees to be bound by the provisions of this Section 2.10. Notwithstanding any other provision in this Trust Agreement to the contrary, the Trustees shall have no power to vary the investment of the Holders within the meaning of Treasury Department Regulation (S) 301.7701-4(c) or to engage in business in its capacity as a Trustee hereunder unless, the Trustees shall have received an Opinion of Counsel that such activity shall not cause the Trust to be an association or a publicly traded partnership taxable as a corporation for federal income tax purposes. The provisions of this Trust Agreement shall be construed in light of the foregoing intended tax treatment. ARTICLE III Payment Account --------------- SECTION 3.01. Payment Account. (a) On or prior to the Closing Date, ---------------- the Property Trustee shall establish the Payment Account. All monies and other property deposited or held from time to time in the Payment Account shall be held by the Property Trustee for the exclusive 19 benefit of the Securityholders. The Property Trustee shall have exclusive control of the Payment Account for the purpose of making deposits in and withdrawals from the Payment Account in accordance with this Trust Agreement; provided that any Paying Agent shall have the right of withdrawal with respect - -------- to the Payment Account solely for the purpose of making the payments contemplated under Article 4. (b) The Property Trustee shall deposit in the Payment Account, promptly upon receipt (i) all payments of principal of, or premium, if any, or interest on the Debentures and (ii) any amounts paid to the Property Trustee pursuant to the Guarantee. Amounts held in the Payment Account shall not be invested pending distribution thereof. ARTICLE IV Distributions; Redemption ------------------------- SECTION 4.01. Distributions. (a) Distributions on the Trust -------------- Securities shall be cumulative, and will accumulate whether or not there are funds of the Trust available for the payment of Distributions. Distributions shall accumulate from the date hereof, and, except during an Extension Period for the Debentures pursuant to the Indenture, shall be payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, commencing on [June 30, 1997.]. If any date on which Distributions are otherwise payable on the Trust Securities is not a Business Day, then the payment of such Distributions shall be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, payment of such Distributions shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date (each date on which Distributions are payable in accordance with this Section 4.01(a) is referred to as a "Distribution Date"). Within five Business Days after receipt by the Property Trustee of notice of an Extension Period pursuant to Section 4.01 of the Indenture, the Property Trustee shall give notice thereof to the Securityholders by first class mail, postage prepaid. (b) The Trust Securities represent undivided beneficial interests in the Trust Property, and, subject to Sections 4.03 and 4.06 hereof, all Distributions will be made pro rata on each of the Trust Securities. Distributions on the Trust Securities shall be payable at a 20 rate of [ ]% per annum of the Liquidation Amount of the Trust Securities. The amount of Distributions payable for any full quarterly period shall be computed on the basis of a 360-day year of twelve 30-day months and, for any period shorter than a full month, shall be computed on the basis of the actual number of days elapsed in such period based on 30-day months. During an Extension Period for the Debentures, the rate per annum at which Distributions on the Trust Securities accumulate shall be increased by an amount such that the aggregate amount of Distributions that accumulate on all Trust Securities during any such Extension Period is equal to the aggregate amount of interest (including interest payable on unpaid interest at the rate per annum set forth above, compounded quarterly) that accrues during any such Extension Period on the Debentures. (c) Distributions on the Trust Securities shall be made from the Payment Account by the Property Trustee or any Paying Agent and shall be payable on each Distribution Date only to the extent that the Trust has funds then available in the Payment Account for the payment of such Distributions. (d) Distributions on the Trust Securities on each Distribution Date shall be payable to the Holders thereof as they appear on the Securities Register for the Trust Securities on the relevant record date, which shall be one Business Day prior to such Distribution Date; provided, however, that in the -------- ------- event that the Preferred Securities are not in book-entry-only form, the relevant record date shall be the 15th day of the last month of each calendar quarter, whether or not a Business Day. SECTION 4.02. Redemption. (a) Upon receipt by the Trust of a notice ----------- of redemption of Debentures, the Trust will call for redemption a Like Amount of Trust Securities at the Redemption Price on the Debenture Redemption Date and will call for redemption all Outstanding Trust Securities on the stated maturity date of the Debentures. (b) Following receipt of the notice to the Property Trustee contemplated by (S) 3.01 of Indenture, notice of redemption shall be given by the Property Trustee by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date to each Holder of Trust Securities to be redeemed, at such Holder's address appearing in the Securities Register. All notices of redemption shall state: (i) the Redemption Date; (ii) the Redemption Price; 21 (iii) the CUSIP number; (iv) the place or places where Trust Securities Certificates are to be surrendered for payment of the Redemption Price; (v) that on the Redemption Date the Redemption Price will become payable upon each such Trust Security to be redeemed and that Distributions thereon will cease to accumulate on and after such date; (vi) if less than all of the Outstanding Trust Securities are to be redeemed, the identification and total Liquidation Amount of the particular Trust Securities to be redeemed; and (vii) that Redemption is conditioned upon receipt by the Property Trustee of the Redemption Price. (c) The Trust Securities redeemed on each Redemption Date shall be redeemed at the Redemption Price with the proceeds from the contemporaneous redemption or payment at maturity of Debentures. Redemptions of the Trust Securities shall be made and the Redemption Price shall be payable on each Redemption Date only to the extent that the Trust has funds then available in the Payment Account for the payment of such Redemption Price. (d) If the Trust, by action of the Property Trustee, gives a notice of redemption in respect of any Preferred Securities, then, on the Redemption Date, subject to Section 4.02(c), the Property Trustee will irrevocably deposit with the Paying Agent funds sufficient to pay the Redemption Price for the Preferred Securities being redeemed on such date and will give the Paying Agent irrevocable instructions and authority to pay the Redemption Price to the Holders of such Preferred Securities upon surrender of their Preferred Securities Certificates. Notwithstanding the foregoing, Distributions payable on or prior to the Redemption Date for any Trust Securities called for redemption shall be payable to the Holders of such Trust Securities as they appear on the Securities Register for the Trust Securities on the record dates for the related Distribution Dates. If notice of redemption shall have been given and funds irrevocably deposited as required, then upon the date of such distribution, all rights of Securityholders holding Trust Securities so called for redemption will cease, except the right of such Securityholders to receive the Redemption Price, but without interest, and such Trust Securities will cease to be Outstanding. In the event that any date on which any Redemption Price is payable is not a Business Day, then 22 payment of the Redemption Price payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment will be made on the immediately preceding Business Day, in each case, with the same force and effect as if made on such date. In the event that payment of the Redemption Price in respect of any Trust Securities called for redemption is improperly withheld or refused, and not paid either by the Trust or by the Depositor pursuant to the Guarantee, Distributions on such Trust Securities will continue to accumulate, at the then applicable rate, from the Redemption Date originally established by the Trust for such Trust Securities to the date such Redemption Price is actually paid, in which case the actual payment date will be the date fixed for redemption for purposes of calculating the Redemption Price. (e) If less than all the Outstanding Trust Securities are to be redeemed on a Redemption Date, then the aggregate Liquidation Amount of Trust Securities to be redeemed shall be allocated 3% to the Common Securities and 97% to the Preferred Securities. The particular Preferred Securities to be redeemed shall be selected by the Property Trustee from the Outstanding Preferred Securities not previously called for redemption, by such method as the Property Trustee shall deem fair and appropriate. The Property Trustee shall promptly notify the Securities Registrar in writing of the Preferred Securities selected for redemption. If fewer than all of the Trust Securities represented by a Trust Securities Certificate are redeemed, the Administrative Trustee shall execute for the Holder a new Trust Securities Certificate representing the unredeemed Trust Securities. For all purposes of this Trust Agreement, unless the context otherwise requires, all provisions relating to the redemption of Preferred Securities shall relate, in the case of any Preferred Securities redeemed or to be redeemed only in part, to the portion of the Liquidation Amount of Preferred Securities which has been or is to be redeemed. SECTION 4.03. Subordination of Common Securities. (a) Payment of ----------------------------------- Distributions on, and the Redemption Price of, the Trust Securities, as applicable, shall be made pro rata based on the Liquidation Amount of the Trust Securities; provided, however, that if on any Distribution Date or Redemption -------- ------- Date, a Debenture Event of Default shall have occurred and be continuing, no payment of any Distribution on, or Redemption Price of, any Common Security, and no other payment on account of the liquidation of Common Securities, shall be made unless payment in full in cash of all accumulated and unpaid Distributions on all Outstanding Preferred Securities for all distribution periods terminating on or prior thereto, or in the case of payment of the Redemption Price, the full amount of such Redemption Price, on all Outstanding Preferred Securities then being redeemed, shall have been made or provided for, and all funds immediately available to the Property Trustee shall first be applied to the payment in full in cash of all 23 Distributions on, or the Redemption Price of, Preferred Securities then due and payable. (b) In the case of the occurrence of any Debenture Event of Default, the Holder of Common Securities will be deemed to have waived any right to act with respect to any related Event of Default under this Trust Agreement and such Debenture Event of Default until the effect of such related Event of Default and such Debenture Event of Default has been cured, waived or otherwise eliminated. Until any such Event of Default under this Trust Agreement and such Debenture Event of Default has been so cured, waived or otherwise eliminated, the Property Trustee shall act solely on behalf of the Holders of the Preferred Securities and not the Holder of the Common Securities, and only the Holders of the Preferred Securities will have the right to direct the Property Trustee to act on their behalf. SECTION 4.04. Payment Procedures. Payments of Distributions pursuant ------------------- to Section 4.01 in respect of the Preferred Securities shall be made by check mailed to the address of the Holder thereof as such address shall appear on the Securities Register or, if the Preferred Securities are held by a Clearing Agency, such Distributions shall be made to the Clearing Agency by wire transfer in immediately available funds. Payments of Distributions pursuant to Section 4.01 in respect of the Common Securities shall be made in such manner as shall be mutually agreed between the Property Trustee and the Holder of the Common Securities. Payment of the Redemption Price or Liquidation Distribution of the Trust Securities shall be made in immediately available funds upon surrender of the Preferred Securities Certificate and Common Securities Certificates representing such Trust Securities at the Corporate Trust Office of the Property Trustee. SECTION 4.05. Tax Returns and Reports. The Administrative Trustee ------------------------ shall prepare (or cause to be prepared), at the Depositor's expense, and file all Federal, State and local tax and information returns and reports required to be filed by or in respect of the Trust. In this regard, the Administrative Trustee shall (a) prepare and file (or cause to be prepared or filed) the appropriate Internal Revenue Service Form required to be filed in respect of the Trust in each taxable year of the Trust and (b) prepare and furnish (or cause to be prepared and furnished) to each Securityholder the related Internal Revenue Service Form 1099 OID, or any successor form or the information required to be provided on such form. The Administrative Trustee shall provide the Depositor and the Property Trustee with a copy of all such returns, reports and schedules promptly after such filing or furnishing. The 24 Trustees shall comply with United States Federal withholding and backup withholding tax laws and information reporting requirements with respect to any payments to Securityholders under the Trust Securities. SECTION 4.06. Payments Under Indenture. Any amount payable hereunder ------------------------- to any Holder of Preferred Securities shall be reduced by the amount of any corresponding payment such Holder has directly received pursuant to Section 6.07 of the Indenture or pursuant to the Guarantee. Notwithstanding the provisions hereunder to the contrary, Securityholders acknowledge that any Holder of Preferred Securities that receives payment under Section 6.07 of the Indenture may receive amounts greater than the amount such Holder may be entitled to receive pursuant to the other provisions of this Trust Agreement. ARTICLE V Trust Securities Certificates ----------------------------- SECTION 5.01. Initial Ownership. Upon the creation of the Trust and ------------------ the contribution by the Depositor pursuant to Section 2.03 and until the issuance of the Trust Securities, and at any time during which no Trust Securities are outstanding, the Depositor shall be the sole beneficial owner of the Trust. SECTION 5.02. The Trust Securities Certificates. The Preferred ---------------------------------- Securities Certificates shall be issued representing one or more Preferred Securities. The Common Securities Certificates shall be issued representing one or more Common Securities. Preferred Securities Certificates representing fractional interests shall not be issued. The Trust Securities Certificates shall be executed on behalf of the Trust by manual signature of the Administrative Trustee or by a facsimile signature of the Administrative Trustee and authenticated by the Property Trustee. Trust Securities Certificates bearing the manual signatures of individuals who were, at the time when such signatures shall have been affixed, authorized to sign on behalf of the Trust, shall be validly issued and entitled to the benefits of this Trust Agreement, notwithstanding that such individuals or any of them shall have ceased to be so authorized prior to the delivery of such Trust Securities Certificates or did not hold such offices at the date of delivery of such Trust Securities Certificates. A transferee of a Trust Securities Certificate shall become a Securityholder, and shall be entitled to the rights and subject to the obligations of a Securityholder hereunder, upon due registration of such 25 Trust Securities Certificate in such transferee's name pursuant to Section 5.04. SECTION 5.03. Delivery of Trust Securities Certificates. On the ------------------------------------------ Closing Date, the Administrative Trustee shall cause Trust Securities Certificates, in an aggregate Liquidation Amount as provided in Sections 2.04 and 2.05, to be executed on behalf of the Trust as provided in Section 5.02 and delivered to or upon a written order of the Depositor signed by its Chairman of the Board, its President, any Vice President or the Treasurer, without further corporate action by the Depositor, in authorized denominations. The written order of the Depositor shall be accompanied by an Officers' Certificate and an Opinion of Counsel. SECTION 5.04. Registration of Transfer and Exchange of Preferred -------------------------------------------------- Securities Certificates. A registrar appointed by the Depositor (the - ------------------------ "Securities Registrar") shall keep or cause to be kept, at the office or agency maintained pursuant to Section 5.08, a register (the "Securities Register") in which, subject to such reasonable regulations as it may prescribe, the Securities Registrar shall provide for the registration of Trust Securities Certificates (subject to Section 5.10 in the case of the Common Securities Certificates) and registration of transfers and exchanges of Preferred Securities Certificates as herein provided. The Property Trustee shall be the initial Securities Registrar; any successor Securities Registrar shall be appointed by the Administrative Trustee. Upon surrender for registration of transfer of any Preferred Securities Certificate at the office or agency maintained pursuant to Section 5.08, the Administrative Trustee shall execute and deliver, in the name of the designated transferee or transferees, one or more new Preferred Securities Certificates representing the same number of Preferred Securities dated the date of execution by the Administrative Trustee. At the option of a Holder, Preferred Securities Certificates may be exchanged for other Preferred Securities Certificates upon surrender of the Preferred Securities Certificates to be exchanged at the office or agency maintained pursuant to Section 5.08. The Securities Registrar shall not be required to register the transfer of any Preferred Securities that have been called for redemption or after the Liquidation Date. Preferred Securities presented or surrendered for registration of transfer or exchange shall be accompanied by a written instrument of transfer in form satisfactory to the Administrative Trustee and the Securities Registrar duly executed by the Holder or such Holder's attorney duly 26 authorized in writing. Each Preferred Securities Certificate surrendered for registration of transfer or exchange shall be canceled and subsequently disposed of by the Property Trustee in accordance with its customary practice but shall not be required to destroy such canceled securities. No service charge shall be made for any registration of transfer or exchange of Preferred Securities, but the Securities Registrar may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Preferred Securities. SECTION 5.05. Mutilated, Destroyed, Lost or Stolen Trust Securities ----------------------------------------------------- Certificates. If (a) any mutilated Trust Securities Certificate shall be - ------------- surrendered to the Securities Registrar, or if the Securities Registrar shall receive evidence to its satisfaction of the destruction, loss or theft of any Trust Securities Certificate, and (b) there shall be delivered to the Securities Registrar and the Administrative Trustee such security or indemnity as may be required by them to hold the Securities Registrar and the Trust harmless, then in the absence of notice that such Trust Securities Certificate shall have been acquired by a bona fide purchaser, the Administrative Trustee, on behalf of the Trust shall execute and make available for delivery, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Trust Securities Certificate, a new Trust Securities Certificate of like tenor. In connection with the issuance of any new Trust Securities Certificate under this Section, the Administrative Trustee or the Securities Registrar may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Any duplicate Trust Securities Certificate issued pursuant to this Section shall constitute conclusive evidence of an undivided beneficial interest in the assets of the Trust, as if originally issued, whether or not the lost, stolen or destroyed Trust Securities Certificate shall be found at any time. SECTION 5.06. Persons Deemed Securityholders. Prior to due ------------------------------- presentation of a Trust Security Certificate for registration of transfer, the Administrative Trustee or the Securities Registrar shall treat the Person in whose name any Trust Securities Certificate shall be registered in the Securities Register as the owner and Holder of such Trust Securities Certificate for the purpose of receiving Distributions and for all other purposes whatsoever, and neither the Trustees nor the Securities Registrar shall be bound by any notice to the contrary. 27 SECTION 5.07. Access to List of Securityholders' Names and Addresses. ------------------------------------------------------- In the event that the Property Trustee is no longer the Securities Registrar, the Administrative Trustee or the Depositor shall furnish or cause to be furnished (a) to the Property Trustee, quarterly not later than 10 days prior to a Distribution Date, a list, in such form as the Property Trustee may reasonably require, of the names and addresses of the Securityholders as of the most recent record date and (b) to the Property Trustee, promptly after receipt by the Administrative Trustee or the Depositor of a request therefor from the Property Trustee in order to enable the Paying Agent to pay Distributions in accordance with Section 4.01 hereof, in each case to the extent such information is in the possession or control of the Administrative Trustee or the Depositor and is not identical to a previously supplied list or has not otherwise been received by the Property Trustee. The rights of Securityholders to communicate with other Securityholders with respect to their rights under this Trust Agreement or under the Trust Securities, and the corresponding rights of the Property Trustee shall be as provided in the Trust Indenture Act. Each Holder, by receiving and holding a Trust Securities Certificate, shall be deemed to have agreed not to hold the Depositor, the Property Trustee, the Administrative Trustee or the Delaware Trustee accountable by reason of the disclosure of its name and address, regardless of the source from which such information was derived. SECTION 5.08. Maintenance of Office or Agency. The Property Trustee -------------------------------- shall maintain in New York, New York, an office or offices or agency or agencies where Preferred Securities may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Trustees in respect of the Trust Securities Certificates may be served. The Property Trustee shall give prompt written notice to the Depositor and to the Securityholders of any change in the location of the Securities Register or any such office or agency, which shall initially be at the Corporate Trust Office of the Property Trustee. SECTION 5.09. Appointment of Paying Agent. The Paying Agent shall ---------------------------- make Distributions to Securityholders and shall report the amounts of such Distributions to the Property Trustee and the Administrative Trustee. Any Paying Agent shall have the revocable power to withdraw funds from the Payment Account for the purpose of making Distributions. The Administrative Trustee may revoke such power and remove the Paying Agent, provided that such revocation and -------- removal with respect to the sole Paying Agent shall not become effective until the appointment of a successor. The Paying Agent shall initially be the Property Trustee, and any 28 copaying agent chosen by the Property Trustee and acceptable to the Administrative Trustee and the Depositor. Any Person acting as Paying Agent shall be permitted to resign as Paying Agent upon 30 days' written notice to the Administrative Trustee and the Depositor, and, if applicable, the Property Trustee, provided that such resignation with respect to the sole Paying Agent -------- shall not become effective until the appointment of a successor. In the event that the Property Trustee shall no longer be the Paying Agent or a successor Paying Agent shall resign or its authority to act be revoked, the Administrative Trustee shall appoint a successor that is acceptable to the Property Trustee (in the case of any other Paying Agent) and the Depositor to act as Paying Agent (which shall be a bank or trust company and have a combined capital and surplus of at least $50,000,000). The Administrative Trustee shall cause such successor Paying Agent or any additional Paying Agent appointed by the Administrative Trustee to execute and deliver to the Trustees an instrument in which such successor Paying Agent or additional Paying Agent shall agree with the Trustees that as Paying Agent, such successor Paying Agent or additional Paying Agent will hold all sums, if any, held by it for payment to the Securityholders in trust for the benefit of the Securityholders entitled thereto until such sums shall be paid to such Securityholders. The Paying Agent shall return all of such sums remaining unclaimed to the Property Trustee and upon removal of a Paying Agent such Paying Agent shall also return such sums in its possession to the Property Trustee. The provisions of Sections 7.01, 7.03 and 7.06 shall apply to the Property Trustee also in its role as Paying Agent, for so long as the Property Trustee shall act as Paying Agent and, to the extent applicable, to any other Paying Agent appointed hereunder. Any reference in this Trust Agreement to the Paying Agent shall include any copaying agent unless the context requires otherwise. SECTION 5.10. No Transfer of Common Securities by Depositor. To the ---------------------------------------------- fullest extent permitted by law, any attempted transfer of the Common Securities shall be void. The Administrative Trustee shall cause each Common Securities Certificate issued to the Depositor to contain a legend stating "THIS CERTIFICATE IS NOT TRANSFERABLE". By execution of this Trust Agreement, the Depositor agrees to the foregoing provisions. SECTION 5.11. Book-Entry Preferred Securities Certificates; Common ---------------------------------------------------- Securities Certificate. (a) The Preferred Securities, upon original issuance - ----------------------- on the Closing Date, will not be engraved but will be issued in the form of one or more printed or typewritten Book-Entry Preferred Securities Certificates, to be delivered to The Depository 29 Trust Company, the initial Clearing Agency, by, or on behalf of, the Trust or held by the Property Trustee as custodian. Such Book-Entry Preferred Securities Certificate or Certificates shall initially be registered on the Securities Register in the name of Cede & Co., the nominee of the initial Clearing Agency. (b) A single Common Securities Certificate representing the Common Securities shall be issued to the Depositor in the form of a definitive Common Securities Certificate. SECTION 5.12. Definitive Preferred Securities Certificates. If (a) --------------------------------------------- the Depositor advises the Trustees in writing that the Clearing Agency is no longer willing or able to properly discharge its responsibilities with respect to the Preferred Securities Certificates or the Clearing Agency is no longer registered or in good standing under the Securities Exchange Act of 1934, as amended, or other applicable statute or regulation, and the Depositor is unable to locate a qualified successor, (b) the Depositor at its option advises the Trustees in writing that it elects to terminate the book-entry system through the Clearing Agency or (c) an Event of Default occurs and is continuing, then the Administrative Trustee shall issue Definitive Preferred Securities Certificates. Upon surrender to the Administrative Trustee of the Book Entry Preferred Securities Certificates by the Clearing Agency, accompanied by registration instructions, the Administrative Trustee shall execute and deliver the Definitive Preferred Securities Certificates in accordance with the instructions of the Clearing Agency. Neither the Securities Registrar nor the Trustees shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions. The Definitive Preferred Securities Certificates shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Administrative Trustee, as evidenced by the execution thereof by the Administrative Trustee. SECTION 5.13. Rights of Securityholders. The Securityholders shall -------------------------- not have any right or title to the Trust Property other than the undivided beneficial interest in the assets of the Trust conferred by their Trust Securities and they shall have no right to call for any partition or division of property, profits or rights of the Trust except as described below. The Trust Securities shall be personal property giving only the rights specifically set forth therein and in this Trust Agreement. The Trust Securities shall have no preemptive or similar rights and when issued and delivered to Securityholders against payment 30 of the purchase price therefor will be fully paid and nonassessable by the Trust. The Holders of the Trust Securities, in their capacities as such, shall be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. ARTICLE VI Acts of Securityholders; Meetings; Voting ----------------------------------------- SECTION 6.01. Limitations on Voting Rights. (a) Except as provided ----------------------------- herein and in the Indenture and as otherwise required by law, no Holder of Trust Securities shall have any right to vote or in any manner otherwise control the administration, operation and management of the Trust or the obligations of the parties hereto, nor shall anything herein set forth, or contained in the terms of the Trust Securities Certificates, be construed so as to constitute the Securityholders from time to time as partners or members of an association. (b) The Trustees shall not (i) direct the time, method and place of conducting any proceeding for any remedy available to the Debenture Trustee or executing any trust or power conferred on the Debenture Trustee with respect to such Debentures, (ii) waive any past default which may be waived under Section 6.04 of the Indenture, (iii) exercise any right to rescind or annul an acceleration of the principal of all the Debentures or (iv) consent to any amendment or modification of the Indenture, where such consent shall be required, without, in each case, obtaining the prior consent of the Holders of at least a majority in aggregate Liquidation Amount of all Outstanding Preferred Securities; provided, however, that where such consent under the Indenture would -------- ------- require the consent of each holder of Debentures affected thereby, no such consent shall be given by the Property Trustee without the prior written consent of each Holder of Outstanding Preferred Securities. The Trustees shall not revoke any action previously authorized or approved by a vote of the Holders of Preferred Securities, except by a subsequent vote of the Holders of Preferred Securities. The Property Trustee shall notify all Holders of the Preferred Securities of any notice received from the Debenture Trustee as a result of the Trust being the holder of the Debentures. In addition to obtaining the consent of the Holders of the Preferred Securities, prior to taking any of the foregoing actions, the Trustees shall, at the expense of the Depositor, obtain an Opinion of Counsel experienced in such matters to the effect that the Trust 31 will not be classified as an association taxable as a corporation or partnership for United States Federal income tax purposes on account of such action and will continue to be classified as a grantor trust for United States Federal income tax purposes. (c) Subject to Section 10.02(c) hereof, if any proposed amendment to the Trust Agreement provides for, or the Trustees otherwise propose to effect, (i) any action that would adversely affect in any material respect the powers, preferences or special rights of the Preferred Securities, whether by way of amendment to this Trust Agreement or otherwise, or (ii) the termination or liquidation of the Trust, other than pursuant to the terms of this Trust Agreement, then the Holders of Outstanding Preferred Securities will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of the Holders of at least a majority in aggregate Liquidation Amount of the Outstanding Preferred Securities. SECTION 6.02. Notice of Meetings. Notice of all meetings of the ------------------- Preferred Securityholders, stating the time, place and purpose of the meeting, shall be given by the Property Trustee following notice to it by the Administrative Trustee pursuant to Section 10.08 to each Preferred Securityholder of record, at his/her registered address, at least 15 days and not more than 90 days before the meeting. At any such meeting, any business properly before the meeting pursuant to Section 6.01 may be so considered whether or not stated in the notice of the meeting. Any adjourned meeting may be held as adjourned without further notice. SECTION 6.03. Meetings of Preferred Securityholders. No annual -------------------------------------- meeting of Securityholders is required to be held. The Administrative Trustee, however, shall call a meeting of Securityholders to vote on any matter upon the written request of the Holders of at least 25% of the aggregate Liquidation Amount of the Outstanding Preferred Securities and the Administrative Trustee or the Property Trustee may, at any time in their discretion, call a meeting of Preferred Securityholders to vote on any matters as to which the Preferred Securityholders are entitled to vote. Holders of at least 50% of the aggregate Liquidation Amount of the Outstanding Preferred Securities, present in person or by proxy, shall constitute a quorum at any meeting of Securityholders. 32 If a quorum is present at a meeting, an affirmative vote of the Holders of at least a majority of the aggregate Liquidation Amount of the Outstanding Preferred Securities present, either in person or by proxy, at such meeting shall constitute the action of the Securityholders, unless this Trust Agreement requires a greater number of affirmative votes. SECTION 6.04. Voting Rights. A Securityholder shall be entitled to -------------- one vote for each Trust Security in respect of any matter as to which such Securityholder is entitled to vote. SECTION 6.05. Proxies, etc. At any meeting of Securityholders, any ------------- Securityholder entitled to vote thereat may vote by proxy, provided that no -------- proxy shall be voted at any meeting unless it shall have been placed on file with the Administrative Trustee, or with such other officer or agent of the Trust as the Administrative Trustee may direct, for verification prior to the time at which such vote shall be taken. Pursuant to a resolution of the Administrative Trustee, proxies may be solicited in the name of the Administrative Trustee or one or more officers of the Administrative Trustee. Only Securityholders of record shall be entitled to vote. When Trust Securities are held jointly by several Persons, any one of them may vote at any meeting in person or by proxy in respect of such Trust Securities, but if more than one of them shall be present at such meeting in person or by proxy, and such joint owners or their proxies so present disagree as to any vote to be cast, such vote shall not be received in respect of such Trust Securities. A proxy purporting to be executed by or on behalf of a Securityholder shall be deemed valid unless challenged at or prior to its exercise, and the burden of proving invalidity shall rest on the challenger. No proxy shall be valid more than three years after its date of execution. SECTION 6.06. Securityholder Action by Written Consent. Any action ----------------------------------------- which may be taken by Securityholders at a meeting may be taken without a meeting if Holders of the proportion of the Outstanding Preferred Securities required to approve such action shall consent to the action in writing. SECTION 6.07. Record Date for Voting and Other Purposes. For the ------------------------------------------ purposes of determining the Securityholders who are entitled to notice of and to vote at any meeting or by written consent, or for the purpose of any other action, the Administrative Trustee may from time to time fix a date, not more than 90 days prior to the date of any meeting of Securityholders, as a record date for the 33 determination of the identity of the Securityholders for such purposes. SECTION 6.08. Acts of Securityholders. Any request, demand, ------------------------ authorization, direction, notice, consent, waiver or other action provided or permitted by this Trust Agreement to be given, made or taken by Securityholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Securityholders in person or by an agent duly appointed in writing; and, except as otherwise expressly provided herein, such action shall become effective when such instrument or instruments are delivered to the Administrative Trustee. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Securityholders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Trust Agreement and (subject to Section 7.02) conclusive, if made in the manner provided in this Section. The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him/her the execution thereof. Where such execution is by a signer acting in a capacity other than his/her individual capacity, such certificate or affidavit shall also constitute sufficient proof of his/her authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which any Trustee receiving the same deems sufficient. The ownership of Preferred Securities shall be proved by the Securities Register. Any request, demand, authorization, direction, notice, consent, waiver or other act of the Securityholder of any Trust Security shall bind every future Securityholder of the same Trust Security and the Securityholder of every Trust Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustees or the Trust in reliance thereon, whether or not notation of such action is made upon such Trust Security. 34 Without limiting the foregoing, a Securityholder entitled hereunder to take any action hereunder with regard to any particular Trust Security may do so with regard to all or any part of the Liquidation Amount of such Trust Security or by one or more duly appointed agents, each of which may do so pursuant to such appointment with regard to all or any part of such Liquidation Amount. If any dispute shall arise between the Securityholders and the Administrative Trustee or among such Securityholders or Trustees with respect to the authenticity, validity or binding nature of any request, demand, authorization, direction, consent, waiver or other Act of such Securityholder or Trustee under this Article VI, then the determination of such matter by the Property Trustee shall be conclusive with respect to such matter. SECTION 6.09. Inspection of Records. Upon reasonable notice to the ---------------------- Administrative Trustee and the Property Trustee, the records of the Trust shall be open to inspection by Securityholders during normal business hours for any purpose reasonably related to such Securityholder's interest as a Securityholder. ARTICLE VII The Trustees ------------ SECTION 7.01. Certain Duties and Responsibilities. (a) The duties ------------------------------------ and responsibilities of the Trustees shall be as provided by this Trust Agreement and, in the case of the Property Trustee, also by the Trust Indenture Act. The Property Trustee, other than during the occurrence and continuance of an Event of Default, undertakes to perform only such duties as are specifically set forth in this Trust Agreement and, upon an Event of Default, must exercise the same degree of care and skill as a prudent person would exercise or use in the conduct of his/her own affairs. The Trustees shall have all the privileges, rights and immunities provided by the Delaware Business Trust Act. Notwithstanding the foregoing, no provision of this Trust Agreement shall require the Trustees to expend or risk their own funds or otherwise incur any financial liability in the performance of any of their duties hereunder, or in the exercise of any of their rights or powers, if they shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Whether or not therein expressly so provided, every provision of this Trust Agreement relating to the conduct or 35 affecting the liability of or affording protection to the Trustees shall be subject to the provisions of this Section. Nothing in this Trust Agreement shall be construed to release any of the Trustees from liability for such Trustee's own grossly negligent action, such Trustee's own grossly negligent failure to act, or such Trustee's own willful misconduct. To the extent that, at law or in equity, any of Trustees have duties (including fiduciary duties) and liabilities relating thereto to the Trust or to the Securityholders, such Trustee shall not be liable to the Trust or to any Securityholder for such Trustee's good faith reliance on the provisions of this Trust Agreement. The provisions of this Trust Agreement, to the extent that they restrict the duties and liabilities of the Trustees otherwise existing at law or in equity, are agreed by the Depositor and the Securityholders to replace such other duties and liabilities of the Trustees. (b) All payments made by the Property Trustee or any other Paying Agent in respect of the Trust Securities shall be made only from the income and proceeds from the Trust Property. Each Securityholder, by its acceptance of a Trust Security, agrees that (i) it will look solely to the income and proceeds from the Trust Property to the extent available for distribution to it as herein provided and (ii) the Trustees are not personally liable to it for any amount distributable in respect of any Trust Security or for any other liability in respect of any Trust Security. This Section 7.01(b) does not limit the liability of the Trustees expressly set forth elsewhere in this Trust Agreement or, in the case of the Property Trustee, in the Trust Indenture Act. SECTION 7.02. Notice of Defaults; Direct Action by Securityholders. ----------------------------------------------------- Within 90 days after the occurrence of any Event of Default actually known to the Property Trustee, the Property Trustee shall transmit, in the manner and to the extent provided in Section 10.08, notice of such Event of Default to the Securityholders, the Administrative Trustee and the Depositor, unless such Event of Default shall have been cured or waived. If the Property Trustee has failed to enforce its rights under this Trust Agreement or the Indenture to the fullest extent permitted by law and subject to the terms of this Trust Agreement and the Indenture, upon an Event of Default specified in Section 6.01(1) of the Indenture, any Securityholder shall have the right to institute a proceeding directly against the Depositor, pursuant to Section 6.07 of the Indenture, for enforcement of payment to such Securityholder of the principal amount of or interest on the Debentures having an aggregate principal amount equal to the aggregate Liquidation Amount of the Preferred Securities of such 36 Securityholder. Except as set forth in Section 6.07 of the Indenture, the Securityholders shall have no right to exercise directly any right or remedy available to the holders of, or in respect of the Debentures. Any amount payable hereunder to any Securityholder shall be reduced by the amount of any corresponding payment such Securityholder has directly received pursuant to Section 6.07 of the Indenture. SECTION 7.03. Certain Rights of Property Trustee. ----------------------------------- Subject to the provisions of Section 7.01: (a) the Property Trustee may rely and shall be protected in acting or refraining from acting in good faith upon any resolution, Opinion of Counsel, certificate, written representation of a Holder or transferee, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, appraisal, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) if, other than during the occurrence and continuance of an Event of Default, (i) in performing its duties under this Trust Agreement, the Property Trustee is required to decide between alternative courses of action or (ii) in construing any of the provisions in this Trust Agreement, the Property Trustee finds the same ambiguous or inconsistent with any other provisions contained herein or (iii) the Property Trustee is unsure of the application of any provision of this Trust Agreement, then, except as to any matter as to which the Preferred Securityholders are entitled to vote under the terms of this Trust Agreement, the Property Trustee shall deliver a notice to the Depositor requesting written instructions of the Depositor as to the course of action to be taken. The Property Trustee shall take such action, or refrain from taking such action, as the Property Trustee shall be instructed in writing to take, or to refrain from taking, by the Depositor; provided, however, that if the Property Trustee does not -------- ------- receive such instructions of the Depositor within ten Business Days after it has delivered such notice, or such reasonably shorter period of time set forth in such notice (which to the extent practicable shall not be less than two Business Days), it may, but shall be under no duty to, take or refrain from taking such action not inconsistent with this Trust Agreement as it shall deem advisable and in 37 the best interests of the Securityholders, in which event the Property Trustee shall have no liability except for its own negligent action, its own negligent failure to act or its own willful misconduct; (c) the Property Trustee may consult with counsel or other experts of its selection and the advice or opinion of such counsel or other experts with respect to legal matters or advice within the scope of such experts' area of expertise shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (d) the Property Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Trust Agreement at the request or direction of any of the Securityholders pursuant to this Trust Agreement, unless such Securityholders shall have offered to the Property Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (e) the Property Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, approval, bond, debenture, note or other evidence of indebtedness or other paper or document, but the Property Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit; and (f) the Property Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through its agents or attorneys and the Property Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. SECTION 7.04. Not Responsible for Recitals or Issuance of Securities. ------------------------------------------------------- The recitals contained herein and in the Trust Securities Certificates shall be taken as the statements of the Trust, and the Trustees do not assume any responsibility for their correctness. The Trustees shall not be accountable for the use or application by the Depositor of the proceeds of the Debentures. SECTION 7.05. May Hold Securities. Any Trustee or any other agent of -------------------- any Trustee or the Trust, in its 38 individual or any other capacity, may become the owner or pledgee of Trust Securities and, subject to Sections 7.08 and 7.13 and, except as provided in the definition of the term Outstanding in Article I, may otherwise deal with the Trust with the same rights it would have if it were not a Trustee or such other agent. SECTION 7.06. Compensation; Indemnity; Fees. The Depositor agrees: ------------------------------ (a) to pay to the Trustees from time to time such compensation as shall have been agreed in writing with the Depositor for all services rendered by them hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) except as otherwise expressly provided herein, to reimburse the Trustees upon request for all reasonable expenses, disbursements and advances incurred or made by the Trustees in accordance with any provision of this Trust Agreement (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its own grossly negligent action, its own grossly negligent failure to act or its own wilful misconduct; and (c) to indemnify each of the Trustees or any predecessor Trustee for, and to hold the Trustees harmless against, any and all loss, damage, claims, liability, penalty or expense including taxes (other than taxes based on the income of such Trustee) incurred without its own negligent action, its own negligent failure to act or its wilful misconduct (or, in the case of the Administrative Trustees, incurred without gross negligence or bad faith), arising out of or in connection with the acceptance or administration of this Trust Agreement, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. No Trustee may claim any Lien or charge on any Trust Property as a result of any amount due pursuant to this Section 7.06. The provisions of this Section 7.06 shall survive the termination of this Trust Agreement and the resignation or removal of each Trustee. 39 SECTION 7.07. Corporate Property Trustee Required; Eligibility of --------------------------------------------------- Trustees. (a) There shall at all times be a Property Trustee hereunder. The - --------- Property Trustee shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000. If any such Person publishes reports of condition at least annually, pursuant to law or to the requirements of its supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Property Trustee with respect to the Trust Securities shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. (b) There shall at all times be one or more Administrative Trustees hereunder. Each Administrative Trustee shall be either a natural person who is at least 21 years of age or a legal entity that shall act through one or more persons authorized to bind that entity. (c) There shall at all times be a Delaware Trustee. The Delaware Trustee shall either be (i) a natural person who is at least 21 years of age and a resident of the State of Delaware or (ii) a legal entity with its principal place of business in the State of Delaware and that otherwise meets the requirements of applicable Delaware law that shall act through one or more persons authorized to bind such entity. SECTION 7.08. Conflicting Interests. If the Property Trustee has or ---------------------- shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Property Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Trust Agreement. SECTION 7.09. Co-Trustees and Separate Trustee. Unless an Event of --------------------------------- Default shall have occurred and be continuing, at any time or times, for the purpose of meeting the legal requirements of the Trust Indenture Act or of any jurisdiction in which any part of the Trust Property may at the time be located, the Depositor and the Administrative Trustee (and if more than one Administrative Trustee, by agreed action of the majority of such Trustees) shall have power (i) to appoint, and upon the written request of the Administrative Trustee, the Depositor shall for such purpose join with the Administrative Trustee in the execution, 40 delivery, and performance of all instruments and agreements necessary or proper to appoint one or more Persons approved by the Property Trustee either to act as co-trustee, jointly with the Property Trustee, of all or any part of such Trust Property, or to the extent required by law to act as separate trustee of any such property, in either case with such powers as may be provided in the instrument of appointment, and (ii) to vest in such Person or Persons in the capacity aforesaid, any property, title, right or power deemed necessary or desirable, subject to the other provisions of this Section. If the Depositor does not join in such appointment within 15 days after the receipt by it of a request to do so, or in case a Debenture Event of Default has occurred and is continuing, the Property Trustee alone shall have power to make such appointment. Any co-trustee or separate trustee appointed pursuant to this Section shall either be (i) a natural person who is at least 21 years of age and a resident of the United States or (ii) a legal entity with its principal place of business in the United States that shall act through one or more persons authorized to bind such entity. Should any written instrument from the Depositor be required by any co-trustee or separate trustee so appointed for more fully confirming to such co-trustee or separate trustee such property, title, right, or power, any and all such instruments shall, on request, be executed, acknowledged, and delivered by the Depositor. Every co-trustee or separate trustee shall, to the extent permitted by law, but to such extent only, be appointed subject to the following terms, namely: (a) The Trust Securities shall be executed and delivered and all rights, powers, duties, and obligations hereunder in respect of the custody of securities, cash and other personal property held by, or required to be deposited or pledged with, the Trustees specified hereunder, shall be exercised, solely by such Trustees and not by such co-trustee or separate trustee. (b) The rights, powers, duties, and obligations hereby conferred or imposed upon the Property Trustee in respect of any property covered by such appointment shall be conferred or imposed upon and exercised or performed by the Property Trustee or by the Property Trustee and such co-trustee or separate trustee jointly, as shall be provided in the instrument appointing such co- trustee or separate trustee, except to the extent that under any law of any jurisdiction in which any particular act is to be performed, the Property Trustee shall be incompetent or unqualified to perform such act, in which event such rights, powers, duties 41 and obligations shall be exercised and performed by such co-trustee or separate trustee. (c) The Property Trustee at any time, by an instrument in writing executed by it, with the written concurrence of the Depositor, may accept the resignation of or remove any co-trustee or separate trustee appointed under this Section, and, in case an Event of Default under the Indenture has occurred and is continuing, the Property Trustee shall have power to accept the resignation of, or remove, any such co-trustee or separate trustee without the concurrence of the Depositor. Upon the written request of the Property Trustee, the Depositor shall join with the Property Trustee in the execution, delivery, and performance of all instruments and agreements necessary or proper to effectuate such resignation or removal. A successor to any co-trustee or separate trustee so resigned or removed may be appointed in the manner provided in this Section. (d) No co-trustee or separate trustee hereunder shall be personally liable by reason of any act or omission of the Property Trustee, or any other trustee hereunder. (e) The Property Trustee shall not be liable by reason of any act of a co-trustee or separate trustee. (f) Any Act of Holders delivered to the Property Trustee shall be deemed to have been delivered to each such co-trustee and separate trustee. SECTION 7.10. Resignation and Removal; Appointment of Successor. No -------------------------------------------------- resignation or removal of any Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 7.11. Subject to the immediately preceding paragraph, any Trustee may resign at any time with respect to the Trust Securities by giving written notice thereof to the Depositor. Unless an Event of Default shall have occurred and be continuing, any Trustee may be removed at any time by the Depositor. Notwithstanding the foregoing, Depositor covenants to make all payments due to the Trustee hereunder prior to any such removal. If an Event of Default shall have occurred and be continuing, the Property Trustee or the Delaware Trustee, or both of them, may be removed at such time only by Act of the Holders of at least a majority in Liquidation Amount of the Outstanding Preferred Securities, delivered to such Trustee (in its individual capacity and on 42 behalf of the Trust). The Administrative Trustee may only be removed by the Depositor at any time. If the instrument of acceptance by the successor Trustee required by Section 7.11 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation or removal, the Trustee may petition, at the expense of the Depositor, any court of competent jurisdiction for the appointment of a successor Trustee. If any Trustee shall resign, be removed or become incapable of acting as Trustee, or if a vacancy shall occur in the office of any Trustee for any cause, at a time when no Event of Default shall have occurred and be continuing, the Depositor shall promptly appoint a successor Trustee or Trustees and the Trust, and the retiring Trustee shall comply with the applicable requirements of Section 7.11. If the Property Trustee or the Delaware Trustee shall resign, be removed or become incapable of continuing to act as the Property Trustee or the Delaware Trustee, as the case may be, at a time when an Event of Default has occurred and is continuing, the Holders of Preferred Securities, by Act of the Securityholders of at least a majority in Liquidation Amount of the Outstanding Preferred Securities delivered to the retiring Trustee, shall promptly appoint a successor Trustee or Trustees, and such successor Trustee shall comply with the applicable requirements of Section 7.11. If any Administrative Trustee shall resign, be removed or become incapable of acting as Administrative Trustee at a time when an Event of Default shall have occurred and be continuing, the Depositor shall appoint a successor Administrative Trustee. If no successor Trustee shall have been so appointed by the Depositor or the Holders of Preferred Securities and accepted appointment in the manner required by Section 7.11, any Securityholder who has been a Securityholder of Trust Securities for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. The Property Trustee shall give notice of each resignation and each removal of a Trustee and each appointment of a successor Trustee to all Securityholders in the manner provided in Section 10.08 and shall give notice to the Depositor. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office if it is the Property Trustee. Notwithstanding the foregoing or any other provision of this Trust Agreement, in the event any Administrative Trustee or Delaware Trustee who is a natural 43 person dies or becomes, in the opinion of the Depositor, incompetent or incapacitated, the vacancy created by such death, incompetence or incapacity may be filled by (a) the unanimous act of the remaining Administrative Trustees if there are at least two of them or (b) otherwise by the Depositor (with the successor in each case being a Person who satisfies the eligibility requirements for Administrative Trustee or for the Delaware Trustee, as the case may be, set forth in Section 7.07). SECTION 7.11. Acceptance of Appointment by Successor. In case of the --------------------------------------- appointment hereunder of a successor Trustee, the retiring Trustee and each successor Trustee shall execute and deliver to the Trust and the retiring Trustee a written instrument wherein each successor Trustee shall accept such appointment and containing such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee and upon the execution and delivery of such instrument the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee and the Trust; but, on request of the Trust or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all Trust Property, all proceeds thereof and money held by such retiring Trustee hereunder. Upon request of any such successor Trustee, the Trust shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in the first or second preceding paragraph, as the case may be. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. SECTION 7.12. Merger, Conversion, Consolidation or Succession to -------------------------------------------------- Business. Any Person into which any of the Trustees may be merged or converted - --------- or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which such Trustee shall be a party, or any Person succeeding to all or substantially all the corporate trust business of such Trustee, shall be the successor of such Trustee hereunder, provided such -------- Person shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. 44 SECTION 7.13. Preferential Collection of Claims Against Depositor or ------------------------------------------------------ Trust. If and when the Property Trustee or the Delaware Trustee shall be or - ------ become a creditor (whether directly or indirectly, secured or unsecured) of the Depositor or the Trust (or any other obligor upon the Debentures or the Trust Securities), including under the terms of Section 7.05 hereof, the Property Trustee or the Delaware Trustee, as the case may be, shall be subject to and shall take all actions necessary in order to comply with the provisions of the Trust Indenture Act regarding the collection of claims against the Depositor or Trust (or any such other obligor). SECTION 7.14. Reports by Property Trustee. The Property Trustee ---------------------------- shall transmit to Holders such reports concerning the Property Trustee and its actions under this Trust Agreement as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. If required by Section 313(a) of the Trust Indenture Act, the Property Trustee shall, within 60 days after each April 30 following the date of this Trust Agreement deliver to Holders a brief report, dated as of such April 30, which complies with the provisions of such Section 313(a). A copy of each such report shall, at the time of such transmission to Holders, be filed by the Property Trustee with each stock exchange upon which any Preferred Securities are then listed, with the Commission and with the Trust. The Trust will promptly notify the Property Trustee when any Preferred Securities are listed on any stock exchange. SECTION 7.15. Reports to the Property Trustee. The Depositor and the -------------------------------- Administrative Trustee on behalf of the Trust shall provide to the Property Trustee such documents, reports and information as required by Section 314 of the Trust Indenture Act (if any) and the compliance certificate required by Section 314(a) of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. SECTION 7.16. Evidence of Compliance with Conditions Precedent. The ------------------------------------------------- Depositor and the Administrative Trustee on behalf of the Trust shall provide to the Property Trustee evidence of compliance with the conditions precedent, if any, provided for in this Trust Agreement that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. SECTION 7.17. Statements Required in Officers' Certificate and ------------------------------------------------ Opinion of Counsel. - ------------------- 45 Each Officers' Certificate and Opinion of Counsel with respect to compliance with a covenant or condition provided for in this Trust Agreement shall include: (1) a statement that each Person making such Officers' Certificate or Opinion of Counsel has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such Officers' Certificate or Opinion of Counsel are based; (3) a statement that, in the opinion of each such Person, such Person has made such examination or investigation as is necessary to enable such Person to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement that, in the opinion of such Person, such covenant or condition has been complied with; provided, however, that with respect to -------- ------- matters of fact not involving any legal conclusion, an Opinion of Counsel may rely on an Officers' Certificate or certificates of public officials. SECTION 7.18. Number of Trustees. (a) The number of Trustees shall ------------------- be three, provided that the Holder of all of the Common Securities by written instrument may increase and, if increased, may decrease the number of Administrative Trustees. (b) If a Trustee ceases to hold office for any reason and the number of Administrative Trustees is not reduced pursuant to Section 7.18(a), or if the number of Trustees is increased pursuant to Section 7.18(a), a vacancy shall occur. The vacancy shall be filled with a Trustee appointed in accordance with Section 7.10. (c) The death, resignation, retirement, removal, bankruptcy, incompetence or incapacity to perform the duties of a Trustee shall not operate to annul the Trust. Whenever a vacancy shall occur, until such vacancy is filled by the appointment of an Administrative Trustee in accordance with Section 7.10, the Administrative Trustees in office, regardless of their number (and notwithstanding any other provision of this Trust Agreement), shall have all the powers granted to the Administrative Trustee and shall discharge all the duties imposed upon the Administrative Trustees by this Trust Agreement. 46 SECTION 7.19. Delegation of Power. (a) Any Administrative Trustee -------------------- may, by power of attorney consistent with applicable law, delegate to any natural person over the age of 21 his/her power for the purpose of executing any documents contemplated in Section 2.07(a), including any registration statement or amendment thereto filed with the Commission, or making any other governmental filing; and (b) the Administrative Trustees shall have the power to delegate from time to time to such of their number, if there is more than one Administrative Trustee, or to the Depositor the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Administrative Trustees or otherwise as the Administrative Trustees may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of the Trust, as set forth herein. SECTION 7.20. Voting. Except as otherwise provided in this Trust ------- Agreement, the consent or vote of the Trustees shall be approved by not less than a majority of the Administrative Trustees. ARTICLE VIII Termination and Liquidation --------------------------- SECTION 8.01. Termination Upon Expiration Date. Unless earlier --------------------------------- terminated, the Trust shall automatically dissolve on [ ], 2038 (the "Expiration Date"), following the distribution of the Trust Property in accordance with Section 8.04. SECTION 8.02. Early Termination. The earliest to occur of any of the ------------------ following events is an "Early Termination Event": (a) the occurrence of a Bankruptcy Event in respect of, or the dissolution or liquidation of the Depositor or an acceleration of the maturity of the Debentures pursuant to Section 6.02 of the Indenture; (b) upon the election of the Depositor to liquidate the Trust and cause the distribution of a Like Amount of Debentures to the Holders of the Trust Securities; (c) the redemption of all of the Trust Securities; and 47 (d) an order for dissolution of the Trust shall have been entered by a court of competent jurisdiction. The election of the Depositor pursuant to Section 8.02(b) shall be made by the Depositor giving written notice to the Trustees not less than 30 days prior to the date of distribution of the Debentures. Such notice shall specify the date of distribution of the Debentures and shall be accompanied by an Opinion of Counsel that such event will not be a taxable event to the Holders of the Trust Securities for Federal income tax purposes. SECTION 8.03. Termination. The respective obligations and ------------ responsibilities of the Trustees and the Trust created and continued hereby shall terminate upon the latest to occur of the following: (a) the distribution by the Property Trustee to Securityholders upon the liquidation of the Trust pursuant to Section 8.04, or upon the redemption of all of the Trust Securities pursuant to Section 4.02, of all amounts required to be distributed hereunder upon the final payment of the Trust Securities; (b) the payment of any expenses owed by the Trust and satisfaction of all liabilities of the Trust in accordance with the law; (c) the discharge of all administrative duties of the Administrative Trustee, including the performance of any tax reporting obligations with respect to the Trust or the Securityholders and (d) the filing by the Administrative Trustee of a certificate of cancellation in accordance with Section 3810 of the Delaware Business Trust Act. SECTION 8.04. Liquidation. (a) If an Early Termination Event ------------ specified in clause (a), (c) or (d) of Section 8.02 occurs or upon the Expiration Date, the Trust shall be liquidated by the Administrative Trustee as expeditiously as the Trustees determine to be possible by distributing, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, to each Securityholder a Like Amount of Debentures, subject to Section 8.04(d). If an Early Termination Event specified in clause (b) occurs, the Trust shall be liquidated by the Trustee on the date of distribution of the Debentures specified by the Depositor in its notice delivered pursuant to Section 8.02. Notice of liquidation shall be given by the Property Trustee by first-class mail, postage prepaid, mailed not later than 30 nor more than 60 days prior to the Liquidation Date to each Holder of Trust Securities at such Holder's address appearing in the Securities Register. All notices of liquidation shall: (i) state the Liquidation Date; 48 (ii) state that from and after the Liquidation Date, the Trust Securities will no longer be deemed to be Outstanding and any Trust Securities Certificates not surrendered for exchange will be deemed to represent a Like Amount of Debentures; and (iii) provide such information with respect to the mechanics by which Holders may exchange Trust Securities Certificates for certificates evidencing Debentures, or, if Section 8.04(d) applies, receive a Liquidation Distribution, as the Administrative Trustee or the Property Trustee shall deem appropriate. (b) In order to effect the liquidation of the Trust and distribution of the Debentures to Securityholders, the Property Trustee, either itself acting as exchange agent or through the appointment of a separate exchange agent, shall establish such procedures as it shall deem appropriate to effect the distribution of Debentures in exchange for the Outstanding Trust Securities Certificates. (c) Except where Section 8.02(c) or 8.04(d) applies, on or after the Liquidation Date, (i) the Trust Securities will no longer be deemed to be Outstanding, (ii) certificates representing a Like Amount of Debentures will be issued to Holders of Trust Securities Certificates, upon surrender of such certificates to the Administrative Trustee or its agent for exchange, (iii) the Depositor shall use its best efforts to have the Debentures listed on the New York Stock Exchange or such other exchange as the Preferred Securities are then listed and shall take any reasonable action necessary to effect the distribution of the Debentures, (iv) any Trust Securities Certificates not so surrendered for exchange will be deemed to represent a Like Amount of Debentures, accruing interest at the rate provided for in the Debentures from the last Distribution Date on which a Distribution was made on such Trust Certificates until such certificates are so surrendered (and until such certificates are so surrendered, no payments or interest or principal will be made to Holders of Trust Securities Certificates with respect to such Debentures) and (v) all rights of Securityholders holding Trust Securities will cease, except the right of such Securityholders to receive Debentures upon surrender of Trust Securities Certificates. (d) In the event that, notwithstanding the other provisions of this Section 8.04, whether because of an order for termination entered by a court of competent jurisdiction or otherwise, distribution of the Debentures in the manner provided herein is determined by the Property Trustee not to be practical, the Trust Property shall be liquidated, and the Trust shall be terminated, by the Administrative Trustee 49 in such manner as the Administrative Trustee determines. In such event, on the date of the termination of the Trust, Securityholders will be entitled to receive out of the assets of the Trust available for distribution to Securityholders, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, an amount equal to the Liquidation Amount per Trust Security plus accumulated and unpaid Distributions thereon to the date of payment (such amount being the "Liquidation Distribution"). If, upon any such termination, the Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then, subject to the next succeeding sentence, the amounts payable by the Trust on the Trust Securities shall be paid on a pro rata basis (based upon Liquidation Amounts). The Holder of the Common Securities will be entitled to receive Liquidation Distributions upon any such termination pro rata (determined as aforesaid) with Holders of Preferred Securities, except that, if a Debenture Event of Default has occurred and is continuing, the Preferred Securities shall have a priority over the Common Securities, and no Liquidation Distribution will be paid to the Holders of the Common Securities unless and until receipt by all Holders of the Preferred Securities of the entire Liquidation Distribution payable in respect thereof. ARTICLE IX Mergers, Etc. ------------- SECTION 9.01. Mergers, Consolidations, Amalgamations or Replacements ------------------------------------------------------ of the Trust. The Trust may not merge with or into, consolidate, amalgamate, or - ------------- be replaced by, or convey, transfer or lease its properties and assets as an entirety or substantially as an entirety to any corporation or other entity, except as described below. The Trust may, at the request of the Depositor, with the consent of the Administrative Trustee and without the consent of the Holders of the Preferred Securities, merge with or into, consolidate, amalgamate, or be replaced by, a trust organized as such under the laws of any State; provided, that (i) such successor entity either (a) expressly assumes all of the obligations of the Trust with respect to the Preferred Securities or (b) substitutes for the Preferred Securities other securities having substantially the same terms as the Preferred Securities (the "Successor Securities") so long as the Successor Securities rank the same as the Preferred Securities rank with respect to the payment of Distributions and payments upon liquidation and 50 redemption, (ii) the Depositor expressly appoints a trustee of such successor entity possessing the same powers and duties as the Property Trustee as the holder of the Debentures, (iii) the Successor Securities are listed, or any Successor Securities will be listed upon notification of issuance, on any national securities exchange or other organization on which the Preferred Securities are then listed, (iv) such merger, consolidation, amalgamation or replacement does not cause the Preferred Securities (including any Successor Securities) to be downgraded by any nationally recognized statistical rating organization, (v) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of the Preferred Securities (including any Successor Securities) in any material respect, (vi) such successor entity has a purpose substantially similar to that of the Trust, (vii) prior to such merger, consolidation, amalgamation or replacement, the Depositor has received an Opinion of Counsel to the effect that (a) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of the Preferred Securities (including any Successor Securities) in any material respect, and (b) following such merger, consolidation, amalgamation or replacement, neither the Trust nor such successor entity will be required to register as an investment company under the 1940 Act and (viii) the Depositor or any permitted successor assignee owns all of the common securities of such successor entity and guarantees the obligations of such successor entity under the Successor Securities at least to the extent provided by the Guarantee and this Trust Agreement. Notwithstanding the foregoing, the Trust shall not, except with the consent of all Holders of the Preferred Securities, merge with or into, consolidate, amalgamate, or be replaced by, any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger or replacement would cause the Trust or the successor entity not to be classified as a grantor trust for United States Federal income tax purposes. ARTICLE X Miscellaneous Provisions ------------------------ SECTION 10.01. Limitation of Rights of Securityholders. The death or ---------------------------------------- incapacity of any Person having an interest, beneficial or otherwise, in Trust Securities shall not operate to terminate this Trust 51 Agreement, nor entitle the legal representatives or heirs of such Person or any Securityholder for such Person, to claim an accounting, take any action or bring any proceeding in any court for a partition or winding-up of the arrangements contemplated hereby, nor otherwise affect the rights, obligations and liabilities of the parties hereto or any of them. SECTION 10.02. Amendment. (a) This Trust Agreement may be amended ---------- from time to time by each Trustee subject to Section 10.02(e) and 10.02(g) and the Depositor, without the consent of any other Trustee or the Securityholders, to cure any ambiguity, defect or inconsistency or make any other change which does not adversely affect in any material respect the interests of any Holder of Preferred Securities. Any amendments of this Trust Agreement pursuant to Section 10.02(a) shall become effective when notice thereof is given to the Securityholders. (b) Except as provided in Section 10.02(a) and 10.02(c) hereof, any provision of this Trust Agreement may be amended by the Trustees and the Depositor with the consent of Holders of at least a majority of the aggregate Liquidation Amount of the Outstanding Preferred Securities. (c) In addition to and notwithstanding any other provision in this Trust Agreement, without the consent of each affected Securityholder (such consent being obtained in accordance with Section 6.03 or 6.06 hereof), this Trust Agreement may not be amended to (i) change the amount, timing or currency of any Distribution or Liquidation Distribution on the Trust Securities or otherwise adversely affect the method of payment of any Distribution or Liquidation Distribution required to be made in respect of the Trust Securities as of a specified date; (ii) change the redemption provisions of the Trust Securities; (iii) restrict the right of a Securityholder to institute suit for the enforcement of any such payment contemplated in (i) or (ii) above on or after the related date; (iv) modify the first sentence of Section 2.06 hereof; (v) authorize or issue any beneficial interest in the Trust other than as contemplated by this Trust Agreement as of the date hereof; (vi) change the conditions precedent for the Depositor to elect to terminate the Trust and distribute the Debentures to Holders of Preferred Securities as set forth in Section 8.02; or (vii) affect the limited liability of any Holder of Preferred Securities, and, notwithstanding any other provision herein, without the unanimous consent of the Securityholders (such consent being obtained in accordance with Section 6.03 or 6.06 hereof), paragraphs (b) and (c) of this Section 10.02 may not be amended. 52 (d) Notwithstanding any other provisions of this Trust Agreement, no amendment to this Trust Agreement shall be made without receipt by the Trust of an Opinion of Counsel experienced in such matters to the effect that such amendment will not affect the Trust's status as a grantor trust for United States Federal income tax purposes or its exemption from regulation as an "investment company" under the 1940 Act. (e) Notwithstanding anything in this Trust Agreement to the contrary, without the consent of the Property Trustee or the Delaware Trustee, this Trust Agreement may not be amended in a manner which imposes any additional obligation on the Property Trustee or the Delaware Trustee. (f) In the event that any amendment to this Trust Agreement is made, the Administrative Trustee shall promptly provide to the Property Trustee or the Delaware Trustee a copy of such amendment. (g) In executing any amendment to the Trust Agreement, the Property Trustee and the Delaware Trustee shall be entitled to receive, and (subject to Section 8.01) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by this Trust Agreement. Except as contemplated by Section 7.11, the Trustee may, but shall not be obligated to, enter into any amendment to this Trust Agreement which affects the Trustee's own rights, duties or immunities under this Trust Agreement or otherwise. SECTION 10.03. Severability. In case any provision in this Trust ------------- Agreement or in the Trust Securities Certificates shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 10.04. GOVERNING LAW. THIS TRUST AGREEMENT AND THE RIGHTS -------------- AND OBLIGATIONS OF EACH OF THE SECURITYHOLDERS, THE TRUST AND THE TRUSTEES WITH RESPECT TO THIS TRUST AGREEMENT AND THE TRUST SECURITIES SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES. SECTION 10.05. Payments Due on Non-Business Day. If the date fixed --------------------------------- for any payment on any Trust Security shall be a day which is not a Business Day, then such payment need not be made on such date but may be made on the next succeeding day which is a Business Day, except that if such Business day is in the next succeeding calendar year, 53 payment of such Distributions shall be made on the immediately preceding Business Day, (except as otherwise provided therein, with the same force and effect as though made on the date fixed for such payment), and no interest shall accumulate thereon for the period after such date to the date of payment on such succeeding day. SECTION 10.06. Successors and Assigns. This Trust Agreement shall be ----------------------- binding upon and shall inure to the benefit of any successor to the Trust or successor Trustee or both, including any successor by operation of law. Except in connection with a consolidation, merger or sale involving the Depositor that is permitted under Article V of the Indenture and pursuant to which the assignee agrees in writing to perform the Depositor's obligations hereunder, the Depositor shall not assign its obligations hereunder. SECTION 10.07. Headings. The Article and Section headings are for --------- convenience only and shall not affect the construction of this Trust Agreement. SECTION 10.08. Reports, Notices and Demands. Any report, notice, ----------------------------- demand or other communication which by any provision of this Trust Agreement is required or permitted to be given or served to or upon any Securityholder or the Depositor may be given or served in writing by deposit thereof, first-class postage prepaid in the United States mail, hand delivery or facsimile transmission, in each case, addressed, (a) in the case of a Holder of a Preferred Security, to such Holder of a Preferred Security as such Securityholder's name and address may appear on the Securities Register; and (b) in the case of the Holder of a Common Security or the Depositor, to South Jersey Gas Company, Number One South Jersey Plaza, Route 54, Folsom, New Jersey 08037, Attention: Treasurer, facsimile no.: 609-561-8225. Such notice, demand or other communication to or upon a Securityholder shall be deemed to have been sufficiently given or made, for all purposes, upon hand delivery, mailing or transmission. Any notice, demand or other communication which by any provision of this Trust Agreement is required or permitted to be given or served to or upon the Trust, the Property Trustee or the Administrative Trustee shall be given in writing addressed (until another address is published by the Trust) as follows: (a) with respect to the Property Trustee to The Bank of New York, 101 Barclay Street-21W, New York, New York 10286, Attention: Corporate Trust Office; (b) with respect to the Delaware Trustee, to 23 White Clay Center Route 273 Newark, Delaware 19711, Attention: Corporate Trust Department; and (c) with respect to the Administrative Trustee, to the address above for 54 notices to the Depositor, marked "Attention: Administrative Trustee of SJG Capital Trust, c/o Treasurer." Such notice, demand or other communication to or upon the Trust or the Property Trustee shall be deemed to have been sufficiently given or made only upon actual receipt of the writing by the Trust or the Property Trustee. SECTION 10.09. Agreement Not to Petition. Each of the Trustees and -------------------------- the Depositor agree for the benefit of the Securityholders that, until at least one year and one day after the Trust has been terminated in accordance with Article VIII, they shall not file, or join in the filing of, a petition against the Trust under any Bankruptcy Laws or otherwise join in the commencement of any proceeding against the Trust under any Bankruptcy Law. In the event the Depositor or any of the Trustees takes action in violation of this Section 10.09, the Property Trustee agrees, for the benefit of Securityholders, that at the expense of the Depositor, it shall file an answer with the bankruptcy court or otherwise properly contest the filing of such petition by the Depositor or any of the Trustees, as applicable, against the Trust or the commencement of such action and raise the defense that the Depositor has agreed in writing not to take such action and should be stopped and precluded therefrom and such other defenses, if any, as counsel for the Property Trustee or the Trust may assert. The provisions of this Section 10.09 shall survive the termination of this Trust Agreement. SECTION 10.10. Trust Indenture Act; Conflict with Trust Indenture -------------------------------------------------- Act. (a) This Trust Agreement is subject to the provisions of the Trust - ---- Indenture Act that are required to be part of this Trust Agreement and shall, to the extent applicable, be governed by such provisions. (b) The Property Trustee shall be the only Trustee which is a trustee for the purposes of the Trust Indenture Act. (c) If any provision hereof limits, qualifies or conflicts with another provision hereof which is required to be included in this Trust Agreement by any of the provisions of the Trust Indenture Act, such required provision shall control. If any provision of this Trust Agreement modifies or excludes any provision of the Trust Indenture Act which may be so modified or excluded, the latter provision shall be deemed to apply to this Trust Agreement as so modified or excluded, as the case may be. (d) The application of the Trust Indenture Act to this Trust Agreement shall not affect the nature of the Trust Securities as equity securities representing undivided beneficial interests in the assets of the Trust. 55 SECTION 10.11. ACCEPTANCE OF TERMS OF TRUST AGREEMENT, GUARANTEE AND ----------------------------------------------------- INDENTURE. THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST - ---------- THEREIN BY OR ON BEHALF OF A SECURITYHOLDER OR ANY BENEFICIAL OWNER, WITHOUT ANY SIGNATURE OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE UNCONDITIONAL ACCEPTANCE BY THE SECURITYHOLDER AND ALL OTHERS HAVING A BENEFICIAL INTEREST IN SUCH TRUST SECURITY OF ALL THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT AND AGREEMENT TO THE SUBORDINATION PROVISIONS AND OTHER TERMS OF THE GUARANTEE AND THE INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT OF THE TRUST, SUCH SECURITYHOLDER AND SUCH OTHERS THAT THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT SHALL BE BINDING, OPERATIVE AND EFFECTIVE AS BETWEEN THE TRUST AND SUCH SECURITYHOLDER AND SUCH OTHERS. SOUTH JERSEY GAS COMPANY, as Depositor, by _______________________________ Name: Title: THE BANK OF NEW YORK, as Property Trustee, by _______________________________ Name: Title: THE BANK OF NEW YORK (DELAWARE), as Delaware Trustee, by _______________________________ Name: Title: _______________________________ as Administrative Trustee EXHIBIT A CERTIFICATE OF TRUST OF SJG CAPITAL TRUST THIS CERTIFICATE OF TRUST of SJG Capital Trust (the "Trust"), dated February [ ], 1997, is being duly executed and filed by the undersigned, as trustees, to form a business trust under the Delaware Business Trust Act (12 Del. C. Sec. 3801 et seq.). (i) Name. The name of the business trust being formed hereby is SJG ----- Capital Trust. (ii) Delaware Trustee. The name and business address of the trustee ----------------- of the Trust in the State of Delaware are The Bank of New York (Delaware), 23 White Clay Center, Route 273, Newark, Delaware 19711, Attention: Corporate Trust Department. (iii) Counterparts. This Certificate of Trust may be executed in one ------------- or more counterparts, all of which together shall constitute one and the same instrument. (iv) Effective Date. This Certificate of Trust shall be effective as --------------- of its filing. IN WITNESS WHEREOF, the undersigned, being the trustees of the Trust, have executed this Certificate of Trust as of the date first above written. THE BANK OF NEW YORK, as Trustee, by _______________________________ Name: Title: 2 THE BANK OF NEW YORK (DELAWARE), as Trustee, by _______________________________ Name: Title: by _______________________________ Name: Title: Administrative Trustee EXHIBIT B February [ ], 1997 The Depository Trust Company 55 Water Street, 49th Floor New York, New York 10041-0099 Attention: General Counsel's Office Re: SJG Capital Trust Preferred Securities Ladies and Gentlemen: The purpose of this letter is to set forth certain matters relating to the issuance and deposit with The Depository Trust Company ("DTC") of the SJG Capital Trust [ ]% Preferred Securities (the "Preferred Securities"), of SJG Capital Trust, a Delaware business trust (the "Issuer"), created pursuant to a Trust Agreement between South Jersey Gas Company ("SJGC"), The Bank of New York, as Property Trustee, the Delaware Trustee named therein and the Administrative Trustee named therein. The payment of distributions on the Preferred Securities and payments due upon liquidation of the Issuer or redemption of the Preferred Securities are guaranteed by SJGC, to the extent the Issuer has funds available for the payment thereof and to the extent set forth in a Guarantee Agreement dated March [ ], 1997 by SJGC and backup undertakings relating thereto with respect to the Preferred Securities. The Issuer proposes to sell the Preferred Securities to certain Underwriters (the "Underwriters") pursuant to an Underwriting Agreement dated March [ ], 1997 by and among the Underwriters, the Issuer and SJGC and the Underwriters wish to take delivery of the Preferred Securities through DTC. The Bank of New York is acting as transfer agent and registrar with respect to the Preferred Securities (the "Transfer Agent and Registrar"). To induce DTC to accept the Preferred Securities as eligible for deposit at DTC, and to act in accordance with DTC's Rules with respect to the Preferred Securities, the Issuer and the Transfer Agent and Registrar make the following representations to DTC: 1. Prior to the closing of the sale of the Preferred Securities to the Underwriters, which is expected to occur on or about [ ], 1997, there shall be deposited with DTC one or more global certificates (individually and collectively, the "Global Certificate") registered in the name of DTC's nominee, Cede & Co., representing an aggregate of 1,400,000 Preferred Securities and bearing the following legend: 2 Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment hereon is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. 2. The Amended and Restated Trust Agreement of the Issuer provides for the voting by holders of the Preferred Securities under certain limited circumstances. The Issuer shall establish a record date for such purposes and shall, to the extent possible, give DTC notice of such record date not less than 15 calendar days in advance of such record date. 3. In the event of a stock split, conversion, recapitalization, reorganization or any other similar transaction resulting in the cancellation of all or any part of the Preferred Securities outstanding, the Issuer or the Transfer Agent and Registrar shall send DTC a notice of such event at least 5 business days prior to the effective date of such event. 4. In the event of distribution on, or an offering or issuance of rights with respect to, the Preferred Securities outstanding, the Issuer or the Transfer Agent and Registrar shall send DTC a notice specifying: (a) the amount of and conditions, if any, applicable to the payment of any such distribution or any such offering or issuance of rights; (b) any applicable expiration or deadline date or any date by which any action on the part of the holders of Preferred Securities is required; and (c) the date any required notice is to be mailed by or on behalf of the Issuer to holders of Preferred Securities or published by or on behalf of the Issuer (whether by mail or publication, the "Publication Date"). Such notice shall be sent to DTC by a secure means (e.g., legible telecopy, registered or certified mail, overnight delivery) in a timely manner designed to assure that such notice is in DTC's possession no later than the close of business on the business day before the Publication Date. The Issuer or the Transfer Agent and Registrar will forward such notice either in a separate secure transmission for each CUSIP number or in a secure transmission of multiple CUSIP numbers (if applicable) that includes a manifest or list of each CUSIP number submitted in that transmission. (The party sending 3 such notice shall have a method to verify subsequently the use of such means and the timeliness of such notice.) The Publication Date shall be not less than 20 calendar days nor more than 90 calendar days prior to the payment of any such distribution or any such offering or issuance of rights with respect to the Preferred Securities. After establishing the amount of payment to be made on the Preferred Securities, the Issuer or the Transfer Agent and Registrar will notify DTC's Dividend Department of such payment 5 business days prior to payment date. Notices to DTC's Dividend Department by telecopy shall be sent to (212) 709- 1723. Such notices by mail or by any other means shall be sent to: Manager, Announcements Dividend Department The Depository Trust Company 7 Hanover Square, 22nd Floor New York, New York 10004-2695 The Issuer or the Transfer Agent and Registrar shall confirm DTC's receipt of such telecopy by telephoning the Dividend Department at (212) 709- 1270. 5. In the event of a redemption by the Issuer of the Preferred Securities, notice specifying the terms of the redemption and the Publication Date of such notice shall be sent by the Issuer or the Transfer Agent and Registrar to DTC not less than 30 calendar days prior to such event by a secure means in the manner set forth in paragraph 4. Such redemption notice shall be sent to DTC's Call Notification Department at (516) 227-4164 or (516) 227-4190, and receipt of such notice shall be confirmed by telephoning (516) 227-4070. Notice by mail or by any other means shall be sent to: Call Notification Department The Depository Trust Company 711 Stewart Avenue Garden City, New York 11530-4719 6. In the event of any invitation to tender the Preferred Securities, notice specifying the terms of the tender and the Publication Date of such notice shall be sent by the Issuer or the Transfer Agent and Registrar to DTC by a secure means and in a timely manner as described in paragraph 4. Notices to DTC pursuant to this paragraph and notices of other corporate actions (including mandatory tenders, exchanges and capital changes) shall be sent, unless notification to another department is expressly provided for herein, by telecopy to DTC's Reorganization Department at (212) 709-1093 or (212) 709-1094 and receipt 4 of such notice shall be confirmed by telephoning (212) 709-6884, or by mail or any other means to: Manager, Reorganization Department Reorganization Window The Depository Trust Company 7 Hanover Square, 23rd Floor New York, New York 10004-2695 7. All notices and payment advances sent to DTC shall contain the CUSIP number or numbers of the Preferred Securities and the accompanying designation of the Preferred Securities, which, as of the date of this letter, is "SJG Capital Trust [ ]% Preferred Securities". 8. Distribution payments or other cash payments with respect to the Preferred Securities evidenced by the Global Certificate shall be received by Cede & Co., as nominee of DTC, or its registered assigns in same day funds on each payment date (or in accordance with existing arrangements between the Issuer or the Transfer Agent and Registrar and DTC). Such payments shall be made payable to the order of Cede & Co., and shall be addressed as follows: NDFS Redemption Department The Depository Trust Company 7 Hanover Square, 23rd Floor New York, New York 10004-2695 9. DTC may by prior written notice direct the Issuer and the Transfer Agent and Registrar to use any other telecopy number or address of DTC as the number or address to which notices or payments may be sent. 10. In the event of a conversion, redemption, or any other similar transaction (e.g., tender made and accepted in response to the Issuer's or the Transfer Agent and Registrar's invitation) necessitating a reduction in the aggregate number of Preferred Securities outstanding evidenced by a global certificate, DTC, in its discretion: (a) may request the Issuer or the Transfer Agent and Registrar to issue and countersign a new global certificate; or (b) may make an appropriate notation on such global certificate indicating the date and amount of such reduction. 11. DTC may discontinue its services as a securities depositary with respect to the Preferred Securities at any time by giving reasonable prior written notice to the Issuer and the Transfer Agent and Registrar (at which time DTC will confirm with the Issuer or the Transfer Agent and Registrar the aggregate number of 5 Preferred Securities deposited with it) and discharging its responsibilities with respect thereto under applicable law. Under such circumstances, the Issuer may determine to make alternative arrangements for book-entry settlement for the Preferred Securities, make available one or more separate global certificates evidencing Preferred Securities to any Participant having Preferred Securities credited to its DTC account, or issue definitive Preferred Securities to the beneficial owners thereof, and in any such case, DTC agrees to cooperate fully with the Issuer and the Transfer Agent and Registrar and to return the global certificates duly endorsed for transfer as directed by the Issuer or the Transfer Agent and Registrar, together with any other documents of transfer reasonably requested by the Issuer or the Transfer Agent and Registrar. 12. In the event that the Issuer determines that beneficial owners of the global certificate(s) evidencing Preferred Securities shall be able to obtain definitive Preferred Securities, the Issuer or the Transfer Agent and Registrar shall notify DTC of the availability of such definitive Preferred Securities. In such event, the Issuer or the Transfer Agent and Registrar shall issue, transfer and exchange definitive Preferred Securities in appropriate amounts, as required by DTC and others, and DTC agrees to cooperate fully with the Issuer and the Transfer Agent and Registrar and to return the global certificate(s), duly endorsed for transfer as directed by the Issuer or the Transfer Agent and Registrar, together with any other documents of transfer reasonably requested by the Issuer or the Transfer Agent and Registrar. 13. This letter may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 6 Nothing herein shall be deemed to require the Transfer Agent and Registrar to advance funds on behalf of the Issuer. Very truly yours, SJG CAPITAL TRUST, as Issuer, By _______________________________ Name: Title: Administrative Trustee THE BANK OF NEW YORK, as Transfer Agent and Registrar, By _______________________________ Name: Title: RECEIVED AND ACCEPTED: THE DEPOSITORY TRUST COMPANY By _______________________________ Name: Title: EXHIBIT C THIS CERTIFICATE IS NOT TRANSFERABLE Certificate Number C. Number of Common Securities [43,289] Certificate Evidencing Common Securities of SJG Capital Trust [ ]% Common Securities (liquidation amount $25 per Common Security) SJG Capital Trust, a statutory business trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that South Jersey Gas Company (the "Holder") is the registered owner of [Forty-Three Thousand Two Hundred and Ninety-Nine] ([43,299]) common securities of the Trust representing undivided beneficial interests in the assets of the Trust and designated as the [ ]% Common Securities (liquidation amount $25 per Common Security) (the "Common Securities"). In accordance with Section 5.10 of the Trust Agreement (as defined below), the Common Securities are not transferable and any attempted transfer hereof shall be void. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities are set forth in, and this certificate and the Common Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Trust Agreement of the Trust dated as of March [ ], 1997, as the same may be amended from time to time (the "Trust Agreement"). The Trust will furnish a copy of the Trust Agreement to the Holder without charge upon written request to the Trust at its principal place of business or registered office. 2 Upon receipt of this certificate, the Holder is bound by the Trust Agreement and is entitled to the benefits thereunder. IN WITNESS WHEREOF, the Administrative Trustee of the Trust has executed this certificate this [ ] day of March, 1997. SJG CAPITAL TRUST, By ________________________________ Name: Title: Administrative Trustee EXHIBIT D Certificate Number P1 Number of Preferred Securities CUSIP NO. [ ] Certificate Evidencing Preferred Securities of SJG Capital Trust [ ]% Preferred Securities (liquidation amount $25 per Preferred Security) SJG Capital Trust, a statutory business trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that Cede & Co. (the "Holder") is the registered owner of [One Million Four Hundred Thousand] ([1,400,000]) preferred securities of the Trust representing an undivided beneficial interest in the assets of the Trust and designated the SJG Capital Trust [ ]% Preferred Securities (liquidation amount $25 per Preferred Security) (the "Preferred Securities"). The Preferred Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer as provided in Section 5.04 of the Trust Agreement (as defined below). The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Preferred Securities are set forth in, and this certificate and the Preferred Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Trust Agreement of the Trust dated as of March [ ], 1997, as the same may be amended from time to time (the "Trust Agreement"). The Holder is entitled to the benefits of the Guarantee Agreement entered into by South Jersey Gas Company, a New Jersey corporation, and The Bank of New York, as guarantee trustee, dated as of March [ ], 1997 (the "Guarantee") to the extent provided therein, together with the obligations of South Jersey Gas Company under the Trust Agreement, its Deferrable Interest Subordinated Debentures and the Indenture related to such Deferrable Interest Subordinated Debentures. The Trust will furnish a copy of the Trust Agreement, the Indenture and the Guarantee to the Holder without charge upon written request to the Trust at its principal place of business or registered office. By acceptance of the Preferred Securities, the Holder thereof agrees to treat and take no action (i) inconsistent with the treatment of the Preferred Securities (or beneficial 2 interests therein) as an interest in a Grantor Trust for purposes of federal, state and local, income and franchise taxes and (ii) with respect to the Trust or any interest therein that would cause the Trust to be treated as an association or publicly traded partnership taxable as a corporation for purposes of federal income tax law. Upon receipt of this certificate, the Holder is bound by the Trust Agreement and is entitled to the benefits thereunder. IN WITNESS WHEREOF, the Administrative Trustee of the Trust has executed this certificate this [ ] day of March, 1997. SJG CAPITAL TRUST, By _______________________________ Name: Title: Administrative Trustee 3 [To be included in Book-Entry Preferred Securities Certificate] This Preferred Security is a Book-Entry Preferred Securities Certificate within the meaning of the Trust Agreement previously referred to and is registered in the name of The Depository Trust Company (the "Depository") or a nominee of the Depository. This Preferred Security is exchangeable for Preferred Securities registered in the name of a person other than the Depository or its nominee only in the limited circumstances described in the Trust Agreement and no transfer of this Preferred Security (other than a transfer of this Preferred Security as a whole by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository) may be registered except in limited circumstances. Unless this Preferred Security is presented by an authorized representative of The Depository Trust Company, a New York corporation, (55 Water Street, New York) to SJG Capital Trust or its agent for registration of transfer, exchange or payment, and any Preferred Security issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment hereon is made to Cede & Co. or to such other entity as is requested by an authorized representative of The Depository Trust Company, ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers to: [Insert assignee's social security or tax identification number] [Insert address and zip code of assignee] Preferred Securities represented by this Preferred Securities Certificate and irrevocably appoints agent to 4 transfer said Preferred Securities on the books of the Trust. The agent may substitute another to act for him or her. Date:___________________ Signature:_________________________ (Sign exactly as your name appears on the other side of this Preferred Security Certificate) EX-4.A 6 CERTIFICATE P1 EXHIBIT 4(a) Certificate Number P1 Number of Preferred Securities CUSIP NO. [ ] Certificate Evidencing Preferred Securities of SJG Capital Trust [ ]% Preferred Securities (liquidation amount $25 per Preferred Security) SJG Capital Trust, a statutory business trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that Cede & Co. (the "Holder") is the registered owner of [One Million Four Hundred Thousand] ([1,400,000]) preferred securities of the Trust representing an undivided beneficial interest in the assets of the Trust and designated the SJG Capital Trust [ ]% Preferred Securities (liquidation amount $25 per Preferred Security) (the "Preferred Securities"). The Preferred Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer as provided in Section 5.04 of the Trust Agreement (as defined below). The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Preferred Securities are set forth in, and this certificate and the Preferred Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Trust Agreement of the Trust dated as of March [ ], 1997, as the same may be amended from time to time (the "Trust Agreement"). The Holder is entitled to the benefits of the Guarantee Agreement entered into by South Jersey Gas Company, a New Jersey corporation, and The Bank of New York, as guarantee trustee, dated as of March [ ], 1997 (the "Guarantee") to the extent provided therein, together with the obligations of South Jersey Gas Company under the Trust Agreement, its Deferrable Interest Subordinated Debentures and the Indenture related to such Deferrable Interest Subordinated Debentures. The Trust will furnish a copy of the Trust Agreement, the Indenture and the Guarantee to the Holder without charge upon written request to the Trust at its principal place of business or registered office. By acceptance of the Preferred Securities, the Holder thereof agrees to treat and take no action (i) inconsistent with the treatment of the Preferred Securities (or beneficial 2 interests therein) as an interest in a Grantor Trust for purposes of federal, state and local, income and franchise taxes and (ii) with respect to the Trust or any interest therein that would cause the Trust to be treated as an association or publicly traded partnership taxable as a corporation for purposes of federal income tax law. Upon receipt of this certificate, the Holder is bound by the Trust Agreement and is entitled to the benefits thereunder. IN WITNESS WHEREOF, the Administrative Trustee of the Trust has executed this certificate this [ ] day of March, 1997. SJG CAPITAL TRUST, By _______________________________ Name: Title: Administrative Trustee 3 [To be included in Book-Entry Preferred Securities Certificate] This Preferred Security is a Book-Entry Preferred Securities Certificate within the meaning of the Trust Agreement previously referred to and is registered in the name of The Depository Trust Company (the "Depository") or a nominee of the Depository. This Preferred Security is exchangeable for Preferred Securities registered in the name of a person other than the Depository or its nominee only in the limited circumstances described in the Trust Agreement and no transfer of this Preferred Security (other than a transfer of this Preferred Security as a whole by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository) may be registered except in limited circumstances. Unless this Preferred Security is presented by an authorized representative of The Depository Trust Company, a New York corporation, (55 Water Street, New York) to SJG Capital Trust or its agent for registration of transfer, exchange or payment, and any Preferred Security issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment hereon is made to Cede & Co. or to such other entity as is requested by an authorized representative of The Depository Trust Company, ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers to: [Insert assignee's social security or tax identification number] [Insert address and zip code of assignee] Preferred Securities represented by this Preferred Securities Certificate and irrevocably appoints agent to 4 transfer said Preferred Securities on the books of the Trust. The agent may substitute another to act for him or her. Date:___________________ Signature:_________________________ (Sign exactly as your name appears on the other side of this Preferred Security Certificate) EX-4.B 7 DEFERRABLE INTEREST DEBENTURE EXHIBIT 4(b) South Jersey Gas Company _% Deferrable Interest Subordinated Debenture, No. __ South Jersey Gas Company, a New Jersey corporation (the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to ____________________ or registered assigns, the principal sum of __________ Dollars on __________, ____, and to pay interest on said principal sum from __________, ____ or from the most recent Interest Payment Date (as defined below) to which interest has been paid or duly provided for, quarterly in arrears on March 31, June 30, September 30 and December 31, commencing [ ] (each, an "Interest Payment Date") at the rate of ___% per annum until the principal hereof shall have become due and payable, and on any overdue principal and (to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the same rate per annum. The amount of interest payable on any Interest Payment Date shall be computed on the basis of a 360-day year of twelve 30-day months, and for any period shorter than thirty days, interest will be computed on the basis of the actual number of days elapsed in such period based on a 30-day month. In the event that any Interest Payment Date is not a Business Day, then interest will be payable on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Debenture is registered at the close of business on the Regular Record Date for such interest installment, which shall be the 15th day (whether or not a Business Day) of the last month of each quarter, provided that if all of the Debentures (as defined below) are then held by SJG Capital Trust (the "Trust") or the Debentures are held in book-entry-only form, the Regular Record Date shall be the close of business on the Business Day next preceding such Interest Payment Date. Any such interest installment not punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date, and may be paid to the Person in whose name this Debenture is registered at the close of business on a Special Record Date to be fixed by the Trustee (as defined below) for the payment of such defaulted A-1 interest, notice whereof shall be given to the Holders of the Debentures not less than 7 days prior to such Special Record Date, as more fully provided in the Indenture. Payment of the principal of and interest on this Debenture will be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. Payments of interest on an Interest Payment Date will be made by check mailed to the Holder hereof at the address shown in the Register or, at the option of the Holder hereof, to such other place in the United States of America as the Holder hereof shall designate to the Trustee in writing. At the request of a Holder of at least $10,000,000 aggregate principal amount of Debentures, interest on such Debentures will be payable by wire transfer within the continental United States in immediately available funds to the bank account number specified in writing by such Holder to the Registrar prior to the Regular Record Date. The principal amount hereof and any interest due on the Stated Maturity Date or a Redemption Date (other than an Interest Payment Date) will be paid only upon surrender of this Debenture at the principal corporate office of The Bank of New York, Paying Agent in New York, or at such other office or agency of the Paying Agent as the Company shall designate by written notice to the Holder of this Debenture. The indebtedness evidenced by this Debenture is, to the extent provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness, and this Debenture is issued subject to the provisions of the Indenture with respect thereto. The Holder of this Debenture, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination so provided and (c) appoints the Trustee his attorney-in-fact for any and all such purposes. The Holder of this Debenture, by his acceptance hereof, hereby waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions. This Debenture is one of the duly authorized Debentures of the Company (herein sometimes referred to as the "Debentures"), specified in the Indenture, limited in aggregate principal amount to [$36,082,475], issued under A-2 and pursuant to an Indenture dated as [ ], 1997 (the "Indenture") executed and delivered between the Company and The Bank of New York, as trustee (the "Trustee"). The Debentures are initially being issued to the Trust, to be held on behalf of the Trust by its property trustee (the "Property Trustee"). Concurrently with the issuance of the Debentures, the Trust is issuing its trust securities, representing undivided beneficial interests in the assets of the Trust and having an aggregate liquidation amount equal to the principal amount of the Debentures, including the Trust's [ ]% Preferred Securities (the "Preferred Securities"). Reference is made to the Indenture for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and Holders of the Debentures. Each term used in this Debenture which is defined in the Indenture and not defined herein shall have the meaning assigned to it in the Indenture. At the option of the Company, the Debentures are redeemable prior to maturity (i) at any time on or after __________, [2002], in whole or in part, and (ii) if a Special Event shall occur and be continuing, in whole (but not in part) within 90 days following the occurrence of such Special Event, in each case at 100% of the principal amount thereof plus accrued interest to the Redemption Date. A "Special Event" shall mean either a "Tax Event" or an "Investment Company Event." "Tax Event" shall mean that the Company shall have received an opinion of nationally recognized independent tax counsel (which must be acceptable to the Property Trustee of the Trust) experienced in such matters to the effect that, as a result of any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein affecting taxation, or as a result of any official administrative pronouncement, administrative action, or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which pronouncement, administrative action or decision is announced or taken on or after the date of original issuance of Preferred Securities, there is more than an insubstantial risk that (i) the Trust is, or will be within 90 days of the date thereof, subject to United States Federal income tax with respect to interest received on the Debentures, (ii) interest payable by the Company to the Trust on the Debentures is not or will not be within 90 days of the date thereof deductible for United States Federal income tax purposes or (iii) the Trust is, or will be within 90 days of the date thereof, subject to more than a de minimis amount of other taxes, duties, assessments or other governmental charges. "Investment Company Event" shall mean A-3 the occurrence of a change in law or regulation or a change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law") to the effect that the Trust is or will be considered an "investment company" that is required to be registered under the Investment Company Act of 1940, as amended, which Change in 1940 Act Law becomes effective on or after the date of original issuance of the Preferred Securities. At least 30 days but not more than 60 days before the Redemption Date, the Trustee shall mail or caused to be mailed a notice of redemption by first- class mail, postage prepaid, to each Holder of Debentures to be redeemed. In the event of redemption of this Debenture in part only, a new Debenture or Debentures for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancelation hereof. In case an Event of Default with respect to the Debentures occurs and is continuing, the principal of and interest on the Debentures may (and, in certain circumstances, shall) be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions for defeasance at any time of the entire indebtedness of this Debenture upon compliance by the Company with certain conditions set forth therein. Subject to certain exceptions in the Indenture which require the consent of every Holder, the Company and the Trustee may amend the Indenture or may waive future compliance by the Company with any provisions of the Indenture, with the consent of the Holders of at least a majority in aggregate principal amount of the Debentures, provided that if the Debentures are held by the Trust, no such amendment or waiver that adversely affects the holders of the Preferred Securities shall be effective without the prior consent of the holders of at least a majority in aggregate liquidation amount of the outstanding Preferred Securities. Subject to certain exceptions in the Indenture, without the consent of any Debentureholder, the Company and the Trustee may amend the Indenture to cure any ambiguity, defect or inconsistency, to bind a successor to the obligations of the Indenture, to provide for uncertificated Debentures in addition to certificated Debentures, to comply with any requirements of the Debentures and the Securities and Exchange Commission in connection with the qualification of the Indenture under the TIA, or to make any change that, A-4 in the reasonable judgment of the Company, does not adversely affect the rights of any Debentureholder. Amendments bind all Holders and subsequent Holders. No reference herein to the Indenture and no provision of this Debenture or the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and interest on this Debenture at the time and place and at the rate and in the money herein prescribed. So long as no Event of Default with respect to the Debentures has occurred and is continuing, the Company shall have the right at any time and from time to time to extend the interest payment period of the Debentures for up to 20 consecutive quarters (the "Extension Period"), provided that no Extension Period shall extend beyond the Stated Maturity Date or Redemption Date of any Debenture. At the end of the Extension Period, the Company shall pay all interest then accrued and unpaid (together with interest thereon at the rate specified for the Debentures, compounded quarterly, to the extent that payment of such interest is enforceable under applicable law). During such Extension Period, the Company may not declare or pay any dividend on, redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock. Prior to the termination of any such Extension Period, the Company may further extend such Extension Period, provided that such Extension Period, together with all such previous and further extensions, shall not exceed 20 consecutive quarters and shall not extend beyond the Stated Maturity Date or Redemption Date of any Debenture. At the termination of any such Extension Period and upon the payment of all amounts then due, the Company may elect to begin a new Extension Period, subject to the foregoing restrictions. Debentures are issuable only in registered form without coupons in denominations of $25 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, this Debenture is exchangeable for a like aggregate principal amount of Debentures of a different authorized denomination, as requested by the Holder surrendering the same. As provided in the Indenture and subject to certain limitations therein set forth, this Debenture is transferable by the Holder hereof upon surrender of this Debenture for registration of transfer at the office or agency of the Registrar accompanied by a written instrument or instruments of transfer inform satisfactory to the Registrar duly executed by the Holder hereof or his attorney A-5 duly authorized in writing, and thereupon one or more new Debentures of authorized denominations and for the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be made for any such transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in relation thereto. Prior to presentment for registration of transfer of this Debenture, the Company, the Trustee, any Paying Agent and any Registrar may deem and treat the Holder hereof as the absolute owner hereof (whether or not this Debenture shall be overdue and notwithstanding any notice of ownership or writing hereon made by anyone other than the Registrar) for the purpose of receiving payment of or on account of the principal hereof and interest due hereon and for all other purposes, and neither the Company nor the Trustee nor any Paying Agent nor any Registrar shall be affected by any notice to the contrary. No recourse shall be had for the payment of the principal of or the interest on this Debenture, or for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Indenture, against any incorporator, stockholder officer or director, past, present or future, as such, of the Company or of any predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issuance hereof, expressly waived and released. This Debenture shall not be valid until an authorized signatory of the Trustee manually signs and dates the Trustee's Certificate of Authentication below. IN WITNESS WHEREOF, the Company has caused this Debenture to be signed manually or by facsimile by its duly A-6 authorized officers and a facsimile of its corporate seal to be affixed hereto or imprinted hereon. SOUTH JERSEY GAS COMPANY, [SEAL] by___________________________ Name: Title: Attest:___________________________ (Assistant) Secretary A-7 TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Debentures referred to in the within-mentioned Indenture. The Bank of New York, as Trustee By:__________________________ Authorized Signatory Dated:_______________________ A-8 ASSIGNMENT FORM To assign this Debenture, fill in the form below: (I) or (we) assign and transfer this Debenture to: ________________________________________________________________________________ (Insert assignee's social security or tax I.D. number) ________________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint ____________________ agent to transfer this Debenture on the books of the Register. The agent may substitute another to act for him. Dated:_________________________ Signature:_____________________ (Sign exactly as your name appears on the other side of this Debenture) Signature Guaranty: ____________________ A-9 EX-4.C 8 INDENTURE EXHIBIT 4(C) ================================================================================ INDENTURE between SOUTH JERSEY GAS COMPANY and THE BANK OF NEW YORK, as Trustee Dated as of March [ ], 1997 Providing for the Issuance of [ ]% Deferrable Interest Subordinated Debentures ================================================================================ TABLE OF CONTENTS
PAGE ---- ARTICLE I Definitions ----------- SECTION 1.01. Definitions..................................... 3 SECTION 1.02. Other Definitions............................... 8 SECTION 1.03. Incorporation by Reference of Trust Indenture Act.................................. 8 SECTION 1.04. Rules of Construction........................... 9 SECTION 1.05. Acts of Holders and Holders of Preferred Securities........................... 9 ARTICLE II The Debentures -------------- SECTION 2.01. Issue of Debentures Generally................... 10 SECTION 2.02. Terms and Form of the Debentures................ 11 SECTION 2.03. Payment of Principal and Interest............... 12 SECTION 2.04. Execution, Authentication and Delivery....................................... 14 SECTION 2.05. Registrar and Paying Agent...................... 16 SECTION 2.06. Paying Agent to Hold Money in Trust....................................... 17 SECTION 2.07. Debentureholder Lists........................... 17 SECTION 2.08. Transfer and Exchange........................... 18 SECTION 2.09. Replacement Debentures.......................... 18 SECTION 2.10. Outstanding Debentures; Determinations of Holders' Action.............. 19 SECTION 2.11. Temporary Debentures............................ 20 SECTION 2.12. Book-Entry System............................... 20 SECTION 2.13. Cancelation..................................... 22 ARTICLE III Redemption ---------- SECTION 3.01. Redemption: Notice of Trustee................... 23 SECTION 3.02. Selection of Debentures to be Redeemed....................................... 23 SECTION 3.03. Notice of Redemption............................ 23 SECTION 3.04. Effect of Notice of Redemption.................. 24
PAGE ---- SECTION 3.05. Deposit of Redemption Price..................... 24 SECTION 3.06. Debentures Redeemed in Part..................... 25 ARTICLE IV Covenants --------- SECTION 4.01. Payment of Debentures........................... 25 SECTION 4.02. Prohibition Against Dividends, etc.............. 26 SECTION 4.03. SEC Reports..................................... 26 SECTION 4.04. Compliance Certificates......................... 27 SECTION 4.05. Further Instruments and Acts.................... 27 SECTION 4.06. Payments for Consents........................... 27 SECTION 4.07. Payment of Expenses of Trust.................... 27 ARTICLE V Successor Corporation --------------------- SECTION 5.01. When the Company May Merge, etc................. 28 ARTICLE VI Defaults and Remedies --------------------- SECTION 6.01 Events of Default............................... 29 SECTION 6.02. Acceleration.................................... 30 SECTION 6.03. Other Remedies.................................. 31 SECTION 6.04. Waiver of Past Defaults......................... 31 SECTION 6.05. Control by Majority............................. 32 SECTION 6.06. Limitation on Suits............................. 32 SECTION 6.07. Rights of Holders to Receive Payment........................................ 33 SECTION 6.08. Collection Suit by the Trustee.................. 33 SECTION 6.09. The Trustee May File Proofs of Claim....................................... 33 SECTION 6.10. Priorities...................................... 34 SECTION 6.11. Undertaking for Costs........................... 34 SECTION 6.12. Waiver of Stay; Extension or Usury Laws........................................... 35
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PAGE ---- ARTICLE VII The Trustee ----------- SECTION 7.01. Duties of the Trustee............................. 35 SECTION 7.02. Rights of the Trustee............................. 36 SECTION 7.03. Individual Rights of the Trustee.................. 37 SECTION 7.04. The Trustee's Disclaimer.......................... 37 SECTION 7.05. Notice of Defaults................................ 37 SECTION 7.06. Reports by Trustee to Holders..................... 38 SECTION 7.07. Compensation and Indemnity........................ 38 SECTION 7.08. Replacement of Trustee............................ 39 SECTION 7.09. Successor Trustee by Merger....................... 40 SECTION 7.10. Eligibility: Disqualification..................... 40 SECTION 7.11. Preferential Collection of Claims Against the Company....................... 40 ARTICLE VIII Satisfaction and Discharge of Indenture; ---------------------------------------- Defeasance of Certain Obligations; Unclaimed Moneys --------------------------------------------------- SECTION 8.01. Satisfaction and Discharge of Indenture..................................... 41 SECTION 8.02. Application by Trustee of Funds Deposited for Payment of Debentures....................................... 42 SECTION 8.03. Repayment of Moneys Held by Paying Agent............................................ 42 SECTION 8.04. Return of Moneys Held by the Trustee and Paying Agent Unclaimed for Three Years........................ 43 ARTICLE IX Amendments ----------- SECTION 9.01. Without Consent of Holders........................ 43 SECTION 9.02. With Consent of Holders........................... 43 SECTION 9.03. Compliance with Trust Indenture Act.............................................. 45 SECTION 9.04. Revocation and Effect of Consents; Waivers and Actions.............................. 45
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PAGE ---- SECTION 9.05. Notation on or Exchange of Debentures...................................... 46 SECTION 9.06. Trustee to Execute Supplemental Indentures...................................... 46 SECTION 9.07. Effect of Supplemental Indentures...................................... 46 ARTICLE X Subordination ------------- SECTION 10.01. Debentures Subordinated to Senior Indebtedness.................................... 46 SECTION 10.02. Priority and Payment of Proceeds in Certain Events: Remedies Standstill.......... 47 SECTION 10.03. Payments which May Be Made Prior to Notice................................. 48 SECTION 10.04. Rights of Holders of Senior Indebtedness Not to Be Impaired........................................ 48 SECTION 10.05. Trustee May Take Action to Effectuate Subordination........................ 49 SECTION 10.06. Subrogation...................................... 49 SECTION 10.07. Obligations of Company Unconditional; Reinstatement.................... 50 SECTION 10.08. Trustee Entitled to Assume Payments Not Prohibited in Absence of Notice............................... 50 SECTION 10.09. Right of Trustee to Hold Senior Indebtedness.................................... 51 ARTICLE XI Miscellaneous ------------- SECTION 11.01. Trust Indenture Act Controls..................... 52 SECTION 11.02. Notices.......................................... 52 SECTION 11.03. Communication by Holders with Other Holders................................... 53 SECTION 11.04. Certificate and Opinion as to Conditions Precedent............................ 53 SECTION 11.05. Statements Required in Certificate or Opinion...................................... 53 SECTION 11.06. Severability Clause.............................. 54 SECTION 11.07. Rules by Trustee, Paying Agent and Registrar................................... 54 SECTION 11.08. Legal Holidays................................... 54 SECTION 11.09. Governing Law.................................... 54 SECTION 11.10. No Recourse Against Others....................... 54 SECTION 11.11. Successors....................................... 54
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PAGE ---- SECTION 11.12. Multiple Original Copies of this Indenture...................... 55 SECTION 11.13. No Adverse Interpretation of Other Agreements.................... 55 SECTION 11.14. Table of Contents: Headings, etc................................. 55 SECTION 11.15. Benefits of the Indenture............ 55
South Jersey Gas Company Indenture Certain Sections of this Indenture relating to Sections 310 through 318 of the Trust Indenture Act of 1939
Trust Indenture Indenture Act Section Section - ----------- ------- Sec. 310 (a) (1) ........................ 7.10 (a)(2) ........................ 7.10 (a)(3) ........................ Not Applicable (a)(4) ........................ Not Applicable (a)(5) ........................ Not Applicable (b) ........................ Not Applicable (c) ........................ 7.08; 7.10; 11.01 Sec. 311(a) ........................ Not Applicable (b) ........................ 7.11 (c) ........................ Not Applicable Sec. 312(a) ........................ 2.07 (b) ........................ 11.03 (c) ........................ 11.03 Sec. 313(a) ........................ 7.06 (b)(1) ........................ Not Applicable (b)(2) ........................ 7.06 (c) ........................ 7.06; 11.02 (d) ........................ 7.06 Sec. 314(a) ........................ 4.03; 11.02 (b) ........................ Not Applicable (c)(1) ........................ 2.02; 11.04; 11.05 (c)(2) ........................ 2.02; 11.04; 11.05 (c)(3) ........................ Not Applicable (d) ........................ Not Applicable (e) ........................ 11.05 (f) ........................ Not Applicable Sec. 315(a) ........................ 7.01(b) (b) ........................ 7.05, 11.02 (c) ........................ 7.01(a) (d) ........................ 7.01(c) (e) ........................ 6.11 Sec. 316(a)(1)(A) ........................ 6.05 (a)(1)(B) ........................ 6.04 (a)(2) ........................ Not Applicable (a)(last sentence) ........................ 2.10 (b) ........................ 6.07 (c) ........................ 1.05 Sec. 317(a)(1) ........................ 6.08 (a)(2) ........................ 6.09 (b) ........................ 2.06 Sec. 318(a) ........................ 11.01 (b) ........................ Not Applicable (c) ........................ 11.01 ______________________
v Note: This reconciliation and tie sheet shall not, for any purpose, be deemed to be a part of the Indenture. INDENTURE, dated as of March [ ], 1997, by and between South Jersey Gas Company, a New Jersey corporation duly organized and existing under the laws of the State of New Jersey (the "Company"), and The Bank of New York, a New York banking corporation duly organized and existing under the laws of the United States of America, as trustee (the "Trustee"). WHEREAS, the Company may from time to time create or establish one or more statutory business trusts for the purpose of issuing undivided beneficial interests in the assets thereof (the "Trust Securities") and using the proceeds thereof to acquire the Company's Deferrable Interest Subordinated Debentures. WHEREAS, pursuant to an Amended and Restated Trust Agreement dated as of March [ ], 1997 (the "Trust Agreement") among the Company, as depositor, The Bank of New York, as Property Trustee (the "Property Trustee"), the Delaware Trustee named therein and the Administrative Trustee named therein, there has been declared and established SJG Capital Trust, a Delaware business trust (the "Trust"). WHEREAS, the Trust intends to issue its Trust Securities, including its [ ]% Preferred Securities, representing undivided beneficial interests in the assets of the Trust, having a liquidation amount of $25 per security and having rights provided therefor in the Trust Agreement (the "Preferred Securities"). WHEREAS, the Company has authorized the issuance of its [ ]% Deferrable Interest Subordinated Debentures (the "Debentures") to be purchased by the Trust with the proceeds from the issuance and sale of its Trust Securities, and to provide therefor, the Company has duly authorized the execution and delivery of this Indenture. WHEREAS, all things necessary to make the securities issued hereunder, when duly issued and executed by the Company and authenticated and delivered hereunder, the valid obligations of the Company, and to make this Indenture a valid and binding agreement of the Company, enforceable in accordance with its terms, have been done. NOW, THEREFORE, Each of the Company and the Trustee, intending to be legally bound hereby, agrees as follows for the benefit of the other party and for the equal 2 and ratable benefit of the Holders (as hereinafter defined) of the securities issued hereunder, including the Debentures: ARTICLE I Definitions and Incorporation by Reference ------------------------------------------ SECTION 1.01. Definitions. ------------ "Affiliate" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. When used with respect to any Person, "control" means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Board of Directors" means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of such Board. "Board Resolution" means (i) a copy of a resolution certified by the Secretary or the Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification and delivered to the Trustee or (ii) a certificate signed by the authorized officer or officers to whom the Board of Directors has delegated its authority, and in each case, delivered to the Trustee. "Business Day" means any day that is not a Saturday, a Sunday or a day on which banking institutions in The City of New York or the State of New Jersey are authorized or required by law or executive order to close. "Capital Lease Obligations" of a Person means any obligation which is required to be classified and accounted for as a capital lease on the face of a balance sheet of such Person prepared in accordance with GAAP. "Capital Stock" means any and all shares, interests, rights to purchase, warrants, options, participation or other equivalents of or interests in (however designated) corporate stock. "Company" means South Jersey Gas Company, a New Jersey corporation, or any successor thereto. 3 "Company Order" means a written request or order signed in the name of the Company by an Officer of the Company and delivered to the Trustee. "Debentureholder" or "Holder" means a Person in whose name a Debenture is registered on the Registrar's books. "Debentures" means any of the Company's [ ]% Deferrable Interest Subordinated Debentures issued, authenticated and delivered under this Indenture. "Default" means any event which is, or after notice or passage of time, or both, would be, an Event of Default pursuant to Section 6.01 hereof. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Extension Period", with respect to the Debentures, means the period during which the Company may elect to extend the interest payment period of the Debentures pursuant to Section 4.01(b) hereof; provided that no Extension Period shall extend beyond the Stated Maturity Date or the Redemption Date of any Debenture. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board as applied by the Company on a consistent basis. "Guarantee Agreement" means the Guarantee Agreement dated as of March [ ], 1997 from the Company, as guarantor, to The Bank of New York, as guarantee trustee, with respect to the Preferred Securities. "Indebtedness" means, without duplication, (i) the principal of and premium (if any) in respect of (A) indebtedness of the Company for money borrowed and (B) indebtedness evidenced by securities, debentures, bonds or other similar instruments issued by the Company; (ii) all Capital Lease Obligations of the Company; (iii) all obligations of the Company issued or assumed as the deferred purchase price of property, all conditional sale obligations of the Company and all obligations of the Company under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business); (iv) all obligations of the Company for the reimbursement of any obligation, any letter of credit, banker's acceptance, 4 security purchase facility or similar credit transaction (other than obligations with respect to letters of credit securing obligations (other than obligations described in (i) through (iii) above) entered into in the ordinary course of business by the Company to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the third business day following receipt by the Company of a demand for reimbursement following payment on the applicable letter of credit); (v) all obligations of the type referred to in clauses (i) through (iv) of other Persons and all dividends of other Persons (other than the Preferred Securities or similar securities) for the payment of which, in either case, the Company is responsible or liable as obligor, guarantor or otherwise (other than the Guarantee Agreement or obligations ranking pari passu with the Guarantee Agreement); and (vi) all obligations of the type referred to in clauses (i) through (v) of other Persons secured by any lien on any property or asset of the Company (whether or not such obligation is assumed by the Company), the amount of such obligation being deemed to be the lesser of the value of such property or assets or the amount of the obligation so secured; provided, however, that Indebtedness will not include endorsements of negotiable instruments for collection in the ordinary course of business. "Indenture" means this indenture, as amended or supplemented from time to time in accordance with the terms hereof, including the provisions of the TIA that are deemed to be a part hereof. "Interest Payment Date", when used with respect to the Debentures, means the stated maturity of any installment of interest on the Debentures. "Issue Date", with respect to the Debentures, means the date on which the Debentures are originally issued. "Officer" means, with respect to any corporation, the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of such corporation. "Officer's Certificate" means a written certificate containing the applicable information specified in Sections 11.04 and 11.05 hereof, signed in the name of the Company by any one of its Officers, and delivered to the Trustee. 5 "Opinion of Counsel" means a written opinion containing the applicable information specified in Sections 11.04 and 11.05 hereof, by the Company's counsel or other legal counsel who is reasonably acceptable to the Trustee. "Paying Agent" means any Person authorized by the Company to pay the principal of and premium, if any, and interest on the Debentures on behalf of the Company. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Predecessor Debentures" of any particular Debenture means every previous Debenture evidencing all or a portion of the same debt as that evidenced by such particular Debenture; and for purposes of this definition, any Debenture authenticated and delivered under Section 2.09 hereof in exchange for or in lieu of a mutilated, destroyed, lost or stolen Debenture shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Debenture. "Preferred Securities" means the [ ]% Preferred Securities of the Trust, representing undivided beneficial interests in the assets of the Trust, having a liquidation amount of $25 per security and having rights provided therefor in the Trust Agreement. "Property Trustee" means The Bank of New York and its successors and assigns, as property trustee under the Trust Agreement. "Record Date", with respect to the Debentures, means the Regular Record Date, the Special Record Date or any date set to determine the Holders of Debentures entitled to vote, consent, make a request or exercise any other right associated with such Debentures. "Redemption Date", with respect to the Debentures to be redeemed, means the date specified for the redemption thereof in accordance with the terms thereof and pursuant to Article 3 of this Indenture. "Redemption Price", with respect to the Debentures to be redeemed, means the price at which such Debenture is to be redeemed in accordance with the terms thereof and pursuant to Article 3 of this Indenture. 6 "Regular Record Date", with respect to an interest payment on the Debentures, means the date set forth in this Indenture for the determination of Holders entitled to receive payment of interest on the next succeeding Interest Payment Date. "SEC" or "Commission" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, amended. "Senior Indebtedness" means all Indebtedness, except for Indebtedness that is by its terms subordinated to or pari passu with the Debentures. ---- ----- "Special Record Date" for the payment of any Defaulted Interest on the Debentures means the date determined pursuant to Section 2.03 hereof. "Stated Maturity Date", with respect to any Debenture, means the date specified for such Debenture as the fixed date on which the principal of such Debenture is due and payable. "Subsidiary" means any corporation, association, partnership, trust or other business entity of which more than 50% of the total voting power of shares of Capital Stock or other interests (including partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by (i) the Company, (ii) the Company and one or more Subsidiaries, or (iii) one or more Subsidiaries. "TIA" means the Trust Indenture Act of 1939, as amended and as in effect on the date of this Indenture; provided, however, that if the TIA is amended after such date, TIA means, to the extent required by any such amendment, the TIA as so amended. "Trust" means SJG Capital Trust, a Delaware statutory business trust created under the Delaware Business Trust Act, Chapter 38 of Title 12 Del. C. Sec. 3801, et seq. -- --- "Trust Agreement" means the Amended and Restated Trust Agreement dated as of May [ ], 1997, among the Company, as Depositor, The Bank of New York, as Property Trustee, the Delaware Trustee named 7 therein and the Administrative Trustee named therein, as the same may be amended and modified from time to time. "Trust Officer", when used with respect to the Trustee, means any Senior Vice President, any Vice President, any Assistant Vice President, any Trust Officer, or Assistant Trust Officer or any other officer of the Corporate Trust Department of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Trust Securities" means the undivided beneficial interests in the assets of the Trust. "Trustee" means The Bank of New York, until a successor replaces it pursuant to the applicable provisions of this Indenture and, thereafter, shall mean such successor. "U.S. Government Obligations" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable at the issuer's option. "Wholly Owned Subsidiary" means a Subsidiary all the Capital Stock of which (other than directors' qualifying shares) is owned by the Company or another Wholly Owned Subsidiary. SECTION 1.02. Other Definitions. ------------------
TERM DEFINED IN SECTION ---- ------------------ "Act"....................... 1.05 "Bankruptcy Law"............ 6.01 "Custodian"................. 6.01 "Defaulted Interest"........ 2.03 "Depositary"................ 2.12 "global Debenture".......... 2.12 "Legal Holiday"............. 11.08 "Notice of Default"......... 6.01 "Register".................. 2.05 "Registrar"................. 2.05 "Successor"................. 5.01
8 SECTION 1.03. Incorporation by Reference of Trust Indenture Act. -------------------------------------------------- Whenever this Indenture refers to a provision of the TIA, such provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Debentures. "indenture security holder" means a Debentureholder or Holder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Company and any other obligor on the Debentures. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions. SECTION 1.04. Rules of Construction. Unless the context otherwise ---------------------- requires: (1) Each capitalized term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) "including" means including, without limitation; (5) words in the singular include the plural, and words in the plural include the singular; and (6) "herein," "hereof" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. SECTION 1.05. Acts of Holders and Holders of Preferred Securities. ---------------------------------------------------- (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders or by holders of Preferred Securities may be embodied in and evidenced by one or more instruments of 9 substantially similar tenor signed by such Holders or holders of Preferred Securities, as applicable, in person or by an agent duly appointed in writing and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of Holders or holders of Preferred Securities signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved in any manner which the Trustee deems sufficient. (c) The ownership of Debentures shall be proved by the Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Debenture shall bind every future Holder of the same Debenture and the Holder of every Debenture issued upon the registration or transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Debenture. (e) If the Company solicits from the Holders any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, by or pursuant to a resolution of its Board of Directors, fix in advance a Record Date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. If such a Record Date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such Record Date, but only Holders of record at the close of business on such Record Date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of outstanding Debentures have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the outstanding Debentures shall be computed as of such Record Date. 10 ARTICLE II The Debentures -------------- SECTION 2.01. Issue of Debentures Generally. The aggregate principal ------------------------------ amount of Debentures which may be authenticated and delivered under this Indenture is limited to the aggregate liquidation amount of the Trust Securities of the Trust. The Debentures and the Trustee's Certificate of Authentication shall be substantially in the forms to be attached as exhibits to the Indenture. SECTION 2.02. Terms and Form of the Debentures. (a) The Debentures --------------------------------- shall be designated "South Jersey Gas Company, [ ]% Deferrable Interest Subordinated Debentures." The Debentures and the Trustee's Certificate of Authentication shall be substantially in the form of Exhibit A attached hereto. The Debentures shall initially be issued as global Debentures in accordance with the provisions of Section 2.12 of this Indenture, with The Depository Trust Company as Depositary. The terms and provisions contained in the Debentures shall constitute, and are hereby expressly made, a part of this Indenture. The Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. (b) The aggregate principal amount of Debentures outstanding at any time may not exceed $36,082,475 except as provided in Section 2.09 hereof. The Debentures shall be authenticated and delivered upon delivery to the Trustee of items specified in Section 2.04(d) hereof. (c) The Stated Maturity Date of the Debentures is April 30. (d) The interest rate of the Debentures is [ ]% per annum. The Interest Payment Dates for the Debentures are March 31, June 30, September 30 and December 31 of each year, commencing June 30, 1997. In the event that any date on which interest is payable on the Debentures is not a Business Day, then payment of interest payable on such date will be made on the next day which is a Business Day (and without any interest or other payment in respect of any such delay), except that if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. The Regular Record Date for each Interest Payment Date for the 11 Debentures shall be the 15th day (whether or not a Business Day) of the last month of each calendar quarter, provided that if the Trust is the sole Holder of the Debentures or the Debentures are issued in book-entry only form, the Regular Record Date shall be the close of business on the Business Day immediately preceding such Interest Payment Date. Each Debenture shall bear interest from its Issue Date or from the most recent Interest Payment Date to which interest has been paid or duly provided for with respect to such Debenture; except that, so long as there is no existing Defaulted Interest (as defined in Section 2.03 hereof) or Extension Period on the Debentures, any Debenture authenticated by the Trustee between the Regular Record Date for any Interest Payment Date and such Interest Payment Date shall bear interest from such Interest Payment Date. Overdue principal of and interest on any Debenture and interest which has been deferred pursuant to Section 4.01(b) hereof shall bear interest (to the extent that the payment of such interest shall be legally enforceable) at a rate per annum equal to the interest rate per annum payable on such Debenture. (e) The Debentures shall be issuable only in registered form without coupons and only in denominations of $25 and any integral multiple thereof. (f) The maximum Extension Period for the Debentures shall be 20 consecutive quarters. SECTION 2.03. Payment of Principal and Interest. Unless otherwise ---------------------------------- specified pursuant to Section 2.01(d), interest on the Debentures shall be computed on the basis of a 360-day year composed of twelve 30-day months, and for any period shorter than thirty days, interest will be computed on the basis of the actual number of days elapsed in such period based on 30-day months. Unless otherwise provided, (i) the principal and Redemption Price of and interest on each Debenture shall be payable in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts; (ii) the principal and Redemption Price of any Debenture and interest payable on the Stated Maturity Date (if other than an Interest Payment Date) or 12 Redemption Date shall be payable upon surrender of such Debenture at the office or agency of any Paying Agent therefor; and (iii) interest on any Debenture shall be paid on each Interest Payment Date therefor to the Holder thereof at the close of business on the Record Date therefor, such interest to be payable by check mailed to the address of the Person entitled thereto as such address appears on the Register; provided however, that (1) at the written request of the Holder of at least $10,000,000 aggregate principal amount of Debentures received by the Registrar not later than the Regular Record Date for such Interest Payment Date, interest accrued on such Debenture will be payable by wire transfer within the continental United States in immediately available funds to the bank account number of such Holder specified in such request and entered on the Register by the Registrar and (2) payments made in respect of global Debentures shall be made in immediately available funds to the Depositary. Except as specified pursuant to Section 2.01 or Section 4.01(b) hereof, interest on any Debenture which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Debenture (or one or more Predecessor Debentures) is registered at the close of business on the Regular Record Date for such interest. Any interest on any Debenture which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in Clause (1) and (2) below. (1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Debentures (or their respective Predecessor Debentures) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall, not less than 15 Business Days prior to the date of the proposed payment, notify the Trustee and the Paying Agent in writing of the amount of Defaulted Interest proposed to be paid on each Debenture and the date of the proposed payment, and at the same time the Company shall deposit with the Paying Agent an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Paying Agent for 13 such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Clause provided. The Special Record Date for the payment of such Defaulted Interest shall be the close of business on the tenth calendar day prior to the date of the proposed payment. The Trustee shall, in the name and at the expense of the Company, cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be given to the Holders thereof, not less than 7 calendar days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been given, such Defaulted Interest shall be paid to the Persons in whose names the Debentures (or their respective Predecessor Debentures) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following Clause (2). (2) The Company may make payment of any Defaulted Interest on the Debentures in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Debentures may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee and the Paying Agent of the proposed payment pursuant to this Clause, such manner of payment shall be deemed practicable by the Paying Agent. Subject to the foregoing provisions of this Section, each Debenture delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Debenture shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Debenture. SECTION 2.04. Execution, Authentication and Delivery. (a) The --------------------------------------- Debentures shall be executed on behalf of the Company by its Chairman, its President or one of its Vice Presidents, under its corporate seal imprinted or reproduced thereon and attested by its Secretary or one of its Assistant Secretaries. The signature of any such Officer on the Debentures may be manual or facsimile. (b) Debentures bearing the manual or facsimile signatures of individuals who were at any time the proper Officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Debentures or did not hold such offices at the date of such Debentures. 14 (c) No Debenture shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Debenture a Certificate of Authentication duly executed by the Trustee by manual signature of an authorized signatory, and such Certificate of Authentication upon any Debenture shall be conclusive evidence, and the only evidence, that such Debenture has been duly authenticated and made available for delivery hereunder. (d) The Trustee shall authenticate and deliver the Debentures, for original issue, at one time or from time to time in accordance with the Company Order referred to below, upon receipt by the Trustee of: (1) a Board Resolution approving the form or forms and terms of such Debentures; (2) a Company Order requesting the authentication and delivery of such Debentures and stating the identity of the Trust and the aggregate liquidation amount of the Trust Securities to be issued concurrently with such Debentures; (3) unless previously delivered, this Indenture setting forth the form of such Debentures and establishing the terms thereof; (4) the Debentures, executed on behalf of the Company in accordance with Section 2.04(a) hereof; (5) an Opinion of Counsel to the effect that: (i) the form or forms of such Debentures have been duly authorized by the Company and have been established in conformity with the provisions of this Indenture; and (ii) such Debentures, when authenticated and delivered by the Trustee and issued and delivered by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will have been duly issued under this Indenture and will constitute valid and legally binding obligations of the Company, entitled to the benefits provided by this Indenture, and enforceable in accordance with their terms, subject, as to enforcement to laws relating to or affecting generally the enforcement of creditors' rights, including, without limitation, bankruptcy and insolvency laws and to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); and 15 (iii) that this Indenture has been duly authorized, executed and delivered by the Company and is a valid instrument legally binding upon the Company, enforceable in accordance with its terms, subject as to enforcement to laws relating to or affecting creditors' rights, including, without limitation, bankruptcy and insolvency laws and to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); and (iv) that all consents, approvals and orders of any commission, governmental authority or agency required in connection with the issuance and delivery of such Debentures have been obtained. (e) an Officer's Certificate certifying that no Default or Event of Default has occurred and is continuing. (f) The Trustee shall act as the initial authenticating agent. Thereafter, the Trustee may appoint an authenticating agent. An authenticating agent may authenticate Debentures whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. The Trustee shall pay any authenticating agent appointed by the Trustee reasonable compensation for its services and the Trustee shall be reimbursed for such payment by the Company pursuant to Section 7.07 hereof. The provisions set forth in Section 7.02, Section 7.03, Section 7.04 and Section 7.07 hereof shall be applicable to any authenticating agent. SECTION 2.05. Registrar and Paying Agent. The Company shall --------------------------- maintain or cause to be maintained, within or outside the State of New York, an office or agency where the Debentures may be presented for registration of transfer or for exchange ("Registrar"), a Paying Agent at whose office the Debentures may be presented or surrendered for payment, and an office or agency where notices and demands to or upon the Company in respect of the Debentures and this Indenture may be served. The Registrar shall keep a register (the "Register") of the Debentures and of their transfer and exchange. The Company may have one or more co-Registrars and one or more additional Paying Agents. The term Registrar includes any additional registrar and the term Paying Agent includes any additional paying agent. The corporate office of the Trustee in New York, shall initially be the Registrar for the Debentures and agent for service of notice or demands on the Company, and the Trustee shall initially be the Paying Agent for the Debentures. 16 The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent or co-Registrar (if not the Company or the Trustee or an affiliate of the Trustee). The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall give prompt written- notice to the Trustee and to the Holders of any change of location of such office or agency. If at any time the Company shall fail to maintain or cause to be maintained any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 11.02 hereof. The Company shall notify the Trustee of the name and address of any such agent. If the Company fails to maintain a Registrar, Paying Agent or agent for service of notices or demands, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.07 hereof. The Company or any Affiliate of the Company may act Paying Agent, Registrar or co-Registrar or agent for service of notices and demands. The Company may also from time to time designate one or more other offices or agencies where the Debentures may be presented or surrendered for any or all such purposes and may from time to time rescind such designations. The Company will give prompt written notice to the Trustee and to the Holders of any such designation or rescission and of any change in location of any such other office or agency. SECTION 2.06. Paying Agent to Hold Money in Trust. Except as ------------------------------------ otherwise provided herein, prior to or on each due date of the principal of and premium (if any) and interest on any Debenture, the Company shall deposit with the Paying Agent a sum of money sufficient to pay such principal, premium (if any) and interest so becoming due. The Company shall require each Paying Agent (other than the Trustee or the Company) to agree in writing that such Paying Agent shall hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal of and premium (if any) and interest on the Debentures and shall notify the Trustee of any Default by the Company in making any such payment. At any time during the continuance of any such Default, the Paying Agent shall, upon the request of the Trustee, forthwith pay to the Trustee all money so held in trust and account for any money disbursed by it. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any money disbursed by it. Upon doing so, the Paying Agent shall have no further liability for the money so paid over to the Trustee. If the Company, a Subsidiary or an Affiliate of either of them acts as Paying Agent, it 17 shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. SECTION 2.07. Debentureholder Lists. The Trustee shall preserve in ---------------------- as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Debentureholders. If the Trustee is not the Registrar, the Company shall cause to be furnished to the Trustee on or before the Record Date for each Interest Payment Date and at such other times as the Trustee may request in writing, within five Business Days of such request, a list, in such form as the Trustee may reasonably require of the names and addresses of Debentureholders. SECTION 2.08. Transfer and Exchange. When Debentures are presented ---------------------- to the Registrar or a Co-Registrar with a request to register the transfer or to exchange them for an equal principal amount of Debentures of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if its reasonable requirements for such transactions are met. To permit registrations of transfer and exchanges, the Company shall execute and the Trustee shall authenticate Debentures, all at the Registrar's request. Every Debenture presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Registrar) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Registrar duly executed by the Holder or his attorney duly authorized in writing. The Company shall not require payment of a service charge for any registration of transfer or exchange of Debentures, but the Company may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges that may be imposed in connection with the registration of the transfer or exchange of Debentures from the Debentureholder requesting such transfer or exchange (other than any exchange of a temporary Debenture for a definitive Debenture not involving any change in ownership). The Company shall not be required to make, and the Registrar need not register, transfers or exchanges of (a) any Debenture for a period beginning at the opening of business 15 days before the mailing of a notice of redemption of Debentures and ending at the close of business on the day of such mailing or (b) any Debenture selected, called or being called for redemption, except, in the case 18 of any Debenture to be redeemed in part, the portion thereof not to be redeemed. SECTION 2.09. Replacement Debentures. If (a) any mutilated Debenture ----------------------- is surrendered to the Company or the Trustee, or (b) the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Debenture, and there is delivered to the Company and the Trustee such Debenture or indemnity as may be required by them to save each of them harmless, then, in the absence of notice to the Company or the Trustee that such Debenture has been acquired by a bona fide purchaser, the Company shall execute in exchange for any such mutilated Debenture or in lieu of any such destroyed, lost or stolen Debenture, a new Debenture of like tenor and principal amount, bearing a number not contemporaneously outstanding, and the Trustee shall authenticate and make such new Debenture available for delivery. In case any such mutilated, destroyed, lost or stolen Debenture has become or is about to become due and payable, or is about to be redeemed by the Company pursuant to Article 3 hereof, the Company in its discretion may, instead of issuing a new Debenture, pay or purchase such Debenture, as the case may be. Upon the issuance of any new Debentures under this Section 2.09, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) in connection therewith. Every new Debenture issued pursuant to this Section 2.09 in lieu of any mutilated, destroyed, lost or stolen Debenture shall constitute an original additional contractual obligation of the Company (whether or not the mutilated, destroyed, lost or stolen Debenture shall be at any time enforceable) and shall be entitled to all benefits of this Indenture equally and ratably with any and all other Debentures duly issued hereunder. The provisions of this Section 2.09 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Debentures. SECTION 2.10. Outstanding Debentures; Determinations of Holders' -------------------------------------------------- Action. Debentures outstanding at any time are all the Debentures - ------- authenticated by the Trustee except for those canceled by it, those delivered to it for cancelation, those mutilated, destroyed, lost or stolen Debentures referred to in Section 2.09 hereof, those redeemed by the Company pursuant to Article 3 hereof, and those 19 described in this Section 2.10 as not outstanding. A Debenture does not cease to be outstanding because the Company or a Subsidiary or Affiliate thereof holds the Debenture; provided, however, that in determining whether the Holders of the requisite principal amount of Debentures have given or concurred in any request, demand, authorization, direction, notice, consent or waiver hereunder, Debentures owned by the Company or a Subsidiary or Affiliate (other than the Trust so long as any of the Preferred Securities of the Trust are outstanding) shall be disregarded and deemed not to be outstanding. Subject to the foregoing, only Debentures outstanding at the time of such determination shall be considered in any such determination (including determinations pursuant to Articles 3, 6 and 9). If a Debenture is replaced pursuant to Section 2.09 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Debenture is held by a bona fide purchaser. If the Paying Agent (other than the Company) holds, in accordance with this Indenture, at the Stated Maturity Date or on a Redemption Date, money sufficient to pay the Debentures payable on that date, then immediately on the Stated Maturity Date or such Redemption Date, as the case may be, such Debentures shall cease to be outstanding, and interest, if any, on such Debentures shall cease to accrue. SECTION 2.11. Temporary Debentures. The Company may execute --------------------- temporary Debentures, and upon the Company's Order, the Trustee shall authenticate and make such temporary Debentures available for delivery. Temporary Debentures shall be printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, in the same principal amount and of like tenor as the definitive Debentures in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the Officers of the Company executing such Debentures may determine, as conclusively evidenced by their execution of such Debentures. After the preparation of definitive Debentures, the temporary Debentures shall be exchangeable for definitive Debentures upon surrender of the temporary Debentures at the office or agency of the Company designated for such purpose pursuant to Section 2.05 hereof, without 20 charge to the Holders thereof. Upon surrender for cancelation of any one or more temporary Debentures, the Company shall execute a like principal amount of definitive Debentures of authorized denominations, and the Trustee, upon receipt of a Company Order, shall authenticate and make such Debentures available for delivery in exchange therefor. Until so exchanged, the temporary Debentures shall in all respects be entitled to the same benefits under this Indenture as definitive Debentures. SECTION 2.12 Book-Entry System. In order to utilize a book-entry- ------------------ only system for all or any portion of the Debentures, all or a portion of the Debentures may be issued in the form of one or more fully registered Debentures for the aggregate principal amount of such Debentures of each Issue Date, interest rate and Stated Maturity Date (a "global Debenture"), which global Debenture shall be registered in the name of the depositary (the "Depositary") selected by the Company or in the name of such Depositary's nominee. Each global Debenture shall be delivered by the Trustee to the Depositary or pursuant to the Depositary's instruction and shall bear a legend substantially to the following effect: "Except as otherwise provided in Section 2.12 of the Indenture, this Debenture may be transferred, in whole but not in part, only to another nominee of the Depositary or to a successor Depositary or to a nominee of such successor Depositary." Notwithstanding any other provision of this Section 2.12 or of Section 2.08 hereof, a global Debenture may be transferred in whole but not in part and in the manner provided in Section 2.08 hereof, only by a nominee of the Depositary, or by the Depositary or any such nominee of a successor Depositary selected or approved by the Company or to a nominee of such successor Depositary. If (i) at any time the Depositary for global Debentures notifies the Company that it is unwilling or unable to continue as Depositary for such global Debentures or if at any time the Depositary for such global Debentures shall no longer be registered or in good standing under the Exchange Act or other applicable statute or regulation, and a successor Depositary for such global Debentures is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such condition, as the case may be, (ii) the Company determines in its sole discretion, that the Debentures shall no longer be represented by one or more global Debentures and delivers to the Trustee an Officer's Certificate evidencing such determination or (iii) an Event of Default occurs and is continuing, then the provisions of this Section 2.12 shall 21 no longer apply to the Debentures. In such event, the Company will execute and the Trustee, upon receipt of an Officer's Certificate evidencing such determination by the Company, will authenticate and deliver Debentures of like tenor in definitive registered form, in authorized denominations, and in aggregate principal amount equal to the principal amount of the global Debentures in exchange for such global Debentures. Upon the exchange of global Debentures for such Debentures in definitive registered form without coupons, in authorized denominations, the global Debentures shall be canceled by the Trustee. Such Debentures in definitive registered form issued in exchange for global Debentures pursuant to this Section 2.12 shall be registered in such names and in such authorized denominations as the Depositary, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. The Trustee shall deliver such Debentures to the Persons in whose names such Debentures are so registered. Except as provided above, owners of beneficial interests in a global Debenture shall not be entitled to receive physical delivery of Debentures in definitive form and will not be considered the Holders thereof for any purpose under this Indenture. Members of or participants in the Depositary shall have no rights under this Indenture with respect to any global Debenture held on their behalf by the Depositary, and such Depositary or its nominee, as the case may be, may be treated by the Company, the Trustee, and any agent of the Company or the Trustee as the Holder of such global Debentures for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee, or any agent of the Company or the Trustee, from giving effect to any written certification proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its members or participants, the operation of customary practices governing exercise of the rights of a Holder of any Debenture, including without limitation the granting of proxies or other authorization of participants to give or take any request, demand, authorization, direction, notice, consent, waiver or other action which a Holder is entitled to give or take under this Indenture. SECTION 2.13. Cancelation. All Debentures surrendered for payment ------------ or redemption to the Company pursuant to Article 3 hereof or registration of transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly 22 canceled by the Trustee. The Company may at any time deliver to the Trustee for cancelation any Debentures previously authenticated and made available for delivery hereunder which the Company may have acquired in any manner whatsoever, and all Debentures so delivered shall be promptly canceled by the Trustee. The Company may not reissue or issue new Debentures to replace Debentures it has paid or delivered to the Trustee for cancelation. No Debentures shall be authenticated in lieu of or in exchange for any Debentures canceled as provided in this Section 2.13, except as expressly permitted by this Indenture. All canceled Debentures held by the Trustee shall be disposed of as directed by a Company Order provided, however, that the Trustee may, but shall not, be required to destroy such canceled securities. ARTICLE III Redemption ---------- SECTION 3.01. Redemption; Notice of Trustee. (a) The Debentures are ------------------------------ subject to redemption prior to maturity as provided therein. (b) If any or all of the Debentures are to be redeemed pursuant to Section 3.01 (a) hereof, the Company shall deliver to the Trustee at least 60 days prior to the Redemption Date a Company Order specifying the principal amount of Debentures to be redeemed and the Redemption Date and Redemption Price for such Debentures. Such Company Order shall be accompanied by a Board Resolution authorizing such redemption. If the Debentures are held by the Trust, the Company shall also deliver a copy of such Company Order to the Property Trustee for the Trust. SECTION 3.02. Selection of Debentures to be Redeemed. If less than --------------------------------------- all the outstanding Debentures are to be redeemed at any time, the Trustee shall select the Debentures to be redeemed by lot or by any other method the Trustee considers fair and appropriate. The Trustee shall make the selection at least 30 but not more than 60 days before the Redemption Date from outstanding Debentures not previously called for redemption. Provisions of this Indenture that apply to Debentures called for redemption also apply to portions of Debentures called for redemption. The Trustee shall notify the Company promptly of the Debentures or portions of Debentures to be redeemed. SECTION 3.03. Notice of Redemption. At least 30 days but not more --------------------- than 60 days before the Redemption Date, 23 the Trustee, in the Company's name and at the Company's expense, shall mail or cause to be mailed a notice of redemption by first-class mail, postage prepaid, to each Holder of Debentures to be redeemed at such Holder's last address as it appears in the Register. The notice of redemption shall identify the Debentures to be redeemed, the provision of the Debentures or this Indenture pursuant to which the Debentures called for redemption are being redeemed and shall state: (1) the Redemption Date; (2) the Redemption Price; (3) the name and address of the Paying Agent; (4) that payment of the Redemption Price of Debentures called for redemption will be made only upon surrender of such Debentures to the Paying Agent; (5) if fewer than all the outstanding Debentures are to be redeemed, the identification and principal amounts of the particular Debentures to be redeemed and that, on and after the Redemption Date, upon surrender of such Debentures, a new Debenture or Debentures of like tenor and in a principal amount equal to the unredeemed portion thereof will be issued; (6) that, unless the Company defaults in paying the Redemption Price of the Debentures called for redemption, plus accrued interest thereon to the Redemption Date, interest will cease to accrue on such Debentures on and after the Redemption Date; (7) the CUSIP number; and (8) that Redemption is conditioned upon receipt by the Property Trustee of the Redemption Price. Any notice of redemption given in the manner provided herein shall be conclusively presumed to have been given, whether or not such notice is actually received. Failure to mail any notice or defect in the mailed notice or the mailing thereof in respect of any Debenture shall not affect the validity of the redemption of any other Debenture. SECTION 3.04 Effect of Notice of Redemption. After notice of ------------------------------- redemption has been given, Debentures called for redemption shall become due and payable on the 24 Redemption Date and at the Redemption Price and from and after the Redemption Date (unless the Company shall default in the payment of the Redemption Price and accrued interest), such Debentures shall cease to bear interest. Upon the later of the Redemption Date and the date such Debentures are surrendered to the Paying Agent, such Debentures shall be paid at the Redemption Price, plus accrued interest to the Redemption Date, provided that installments of interest on Debentures with an Interest Payment Date which is on or prior to the Redemption Date shall be payable to the Holders of such Debentures, or one or more Predecessor Debentures, registered as such at the close of business on the Regular Record Dates therefor according to their terms and provisions. SECTION 3.05 Deposit of Redemption Price. On or prior to the ---------------------------- Redemption Date, the Company shall deposit with the Paying Agent (or if the Company or an Affiliate is the Paying Agent, shall segregate and hold in trust or cause such Affiliate to segregate and hold in trust) money sufficient to pay the Redemption Price of, and accrued interest on, all Debentures to be redeemed on that Redemption Date. The Paying Agent shall return to the Company any money in excess of the amount sufficient to pay the Redemption Price of, and accrued interest on, all Debentures to be redeemed and any interest accrued on the amount deposited pursuant to this Section 3.05. SECTION 3.06 Debentures Redeemed in Part. Upon surrender of a ---------------------------- Debenture that is redeemed in part, the Trustee shall authenticate for the Holder a new Debenture in a principal amount equal to the unredeemed portion of such Debenture. ARTICLE IV Covenants --------- SECTION 4.01. Payment of Debentures. (a) The Company shall pay the ---------------------- principal of and premium, if any, and interest (including interest accruing during an Extension Period and/or on or after the filing of a petition in bankruptcy or reorganization relating to the Company, whether or not a claim for post-filing interest is allowed in such proceeding) on the Debentures on or prior to the dates and in the manner provided in such Debentures or pursuant to this Indenture. An installment of principal, premium, if any, or interest shall be considered paid on the applicable due date if on such date the Trustee or the Paying Agent holds, in accordance with this Indenture, money 25 sufficient to pay all of such installment then due. With respect to any Debenture, the Company shall pay interest on overdue principal and interest on overdue installments of interest (including interest accruing during an Extension Period and/or on or after the filing of a petition in bankruptcy or reorganization relating to the Company, whether or not a claim for post-filing interest is allowed in such proceeding), to the extent lawful, at the rate per annum borne by such Debenture, compounded quarterly. Interest on overdue interest shall accrue from the date such amount became overdue. (b) Notwithstanding the provisions of Section 4.01(a) hereof or any other provision herein to the contrary, the Company shall have the right in its sole and absolute discretion at any time and from time to time while the Debentures are outstanding, so long as no Event of Default with respect to such Debentures has occurred and is continuing, to defer payments of interest by extending the interest payment period for such Debentures for the Extension Period, if any, for such Debentures, provided that such Extension Period shall not extend beyond the Stated Maturity Date or Redemption Date of any Debenture, and provided further that at the end of each Extension Period the Company shall pay all interest then accrued and unpaid (together with interest thereon to the extent permitted by applicable law at the rate per annum borne by such Debentures). Prior to the termination of an Extension Period, the Company may shorten or may further extend the interest payment period for such Debentures, provided that such Extension Period together with all such previous and further extensions may not exceed the maximum duration of the Extension Period for such Debentures or extend beyond the Stated Maturity Date or Redemption Date of any Debenture. The Company shall give the Trustee notice of the Company's election to begin an Extension Period for any Debentures and any shortening or extension thereof at least five Business Days prior to the date the notice of the record or payment date of the related distribution on the Preferred Securities issued by the Trust which is the Holder of the Debentures or the date payment of interest on such Debentures is required to be given to any national securities exchange on which such Preferred Securities or Debentures are then listed or other applicable self-regulatory organization, but in any event not less than five Business Days prior to the Record Date fixed by the Company for the payment of such interest. The Company shall give or cause the Trustee to give notice (a form of which shall be provided by the Company to the Trustee) of the Company's election to begin an Extension Period to the Holders by first class mail, postage prepaid. 26 SECTION 4.02. Prohibition Against Dividends, etc. The Company shall ----------------------------------- not declare or pay any dividend on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its Capital Stock (i) during an Extension Period, (ii) if at such time there shall have occurred and is continuing any Default or Event of Default, or (iii) if the Company shall be in default with respect to its payment or other obligations under the Guarantee Agreement. SECTION 4.03. SEC Reports. The Company shall file with the Trustee, ------------ within 15 days after it files them with the SEC, copies of its annual report and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which the Company is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. If the Company is not subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company shall file with the Trustee such information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which are specified in Sections 13 or 15(d) of the Exchange Act. The Company shall also comply with the provisions of Section 314(a) of the TIA. SECTION 4.04. Compliance Certificates. (a) The Company shall ------------------------ deliver to the Trustee, within 90 days after the end of each of the Company's fiscal years, an Officer's Certificate stating whether or not the signer knows of any Default or Event of Default. Such certificate shall contain a certification from the principal executive officer, principal financial officer or principal accounting officer of the Company as to his or her knowledge of the Company's compliance with all conditions and covenants under this Indenture. For purposes of this Section 4.04(a), such compliance shall be determined without regard to any period of grace or requirement of notice provided under this Indenture. If such Officer does know of such a Default or Event of Default, the Officer's Certificate shall describe any such Default or Event of Default, and its status. Such Officer's Certificate need not comply with Sections 11.04 and 11.05 hereof. (b) The Company shall deliver to the Trustee any information reasonably requested by the Trustee in connection with the compliance by the Trustee or the Company with the TIA. SECTION 4.05. Further Instruments and Acts. Upon request of the ----------------------------- Trustee, the Company shall execute and deliver such further instruments and do such further acts as 27 may be reasonably necessary or proper to carry out more effectively the purposes of this Indenture. SECTION 4.06. Payments for Consents. Neither the Company nor any ---------------------- Subsidiary shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder of any Debentures for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Debentures unless such consideration is offered to be paid or agreed to be paid to all Holders of the Debentures who so consent, waive or agree to amend in the time frame set forth in the documents soliciting such consent, waiver or agreement. SECTION 4.07. Payment of Expenses of Trust. The Company covenants ----------------------------- for the benefit of the Holders of the Debentures to pay all of the obligations, costs and expenses of the Trust in accordance with Section 2.03(b) of the Trust Agreement and to pay the taxes of the Trust in accordance with Section 2.03(c) of the Trust Agreement in order to permit the Trust to make distributions on and redemptions of the Preferred Securities in accordance with Article IV of the Trust Agreement. ARTICLE V Successor Corporation --------------------- SECTION 5.01. When the Company May Merge, etc. The Company may not -------------------------------- consolidate with or merge with or into, or sell, convey, transfer or lease its properties and assets as an entirety or substantially as an entirety (either in one transaction or a series of transactions) to, any Person unless: (1) the Person formed by or surviving such consolidation or merger or to which such sale, conveyance, transfer or lease shall have been made (the "Successor") if other than the Company, (a) is organized and existing under the laws of the United States of America or any State thereof or the District of Columbia, and (b) shall expressly assume by a supplemental indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Debentures and the Indenture; (2) immediately prior to and after giving effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Person or any 28 Subsidiary as a result of such transaction as having been incurred by such Person or such Subsidiary at the time of such transaction), no Default or Event of Default shall have occurred and be continuing; and (3) the Company delivers to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that such consolidation, merger, sale, conveyance, transfer or lease and such supplemental indenture comply with this Indenture. The Successor will be the successor to the Company, and will be substituted for, and may exercise every right and power and become the obligor on the Debentures with the same effect as if the Successor had been named as the Company herein but, in the case of a sale, conveyance, transfer or lease of all or substantially all of the assets of the Company, the predecessor Company will not be released from its obligation to pay the principal of and premium, if any, and interest on the Debentures. ARTICLE VI Defaults and Remedies --------------------- SECTION 6.01. Events of Default. An "Event of Default" occurs with ------------------ respect to the Debentures if one of the following shall have occurred and be continuing: (1) The Company defaults in the payment, when due and payable, of (a) interest on any Debenture and the default continues for a period of 30 days; provided, that during an Extension Period for the Debentures, failure to pay interest on the Debentures shall not constitute a Default or Event of Default hereunder, or (b) the principal of or premium, if any, on any Debentures when the same becomes due and payable on the Stated Maturity Date thereof, upon acceleration, on any Redemption Date, or otherwise; (2) The Company defaults in the performance of or fails to comply with any of its other covenants or agreements in the Debentures or this Indenture and such failure continues for 60 days after receipt by the Company of a "Notice of Default"; (3) The Company, pursuant to or within the meaning of any Bankruptcy Law: (a) commences a voluntary case or proceeding; 29 (b) consents to the entry of an order for relief against it in an involuntary case or proceeding; (c) consents to the appointment of a Custodian of it or for all or substantially all of its property, and such Custodian is not discharged within 60 days; (d) makes a general assignment for the benefit of its creditors; or (e) admits in writing its inability to pay its debts generally as they become due; or (4) A court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (a) is for relief against the Company in an involuntary case or proceeding; (b) appoints a Custodian of the Company for all or substantially all of its properties; (c) orders the liquidation of the Company; (d) and in each case the order or decree remains unstayed or undischarged and in effect for 60 days. The foregoing will constitute an Event of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. The term "Bankruptcy Law" means Title 11 of the United States Code, or any similar federal or state law for the relief of debtors. "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator, custodian or similar official under any Bankruptcy Law. A Default under clause (2) above is not an Event of Default until (i) the Trustee provides a "Notice of Default" to the Company or the Holders of at least 25% in aggregate principal amount of the Debentures at the time outstanding or, if the Debentures are held by the Trust, the holders of at least 25% in aggregate liquidation amount of the outstanding Preferred Securities of that Trust provide a "Notice of Default" to the Company and the Trustee and (ii) the Company does not cure such Default within the time 30 specified in clause (2) above after receipt of such notice. Any such notice must specify the Default, demand that it be remedied and state that such notice is a "Notice of Default." SECTION 6.02. Acceleration. If any Event of Default with respect to ------------- the Debentures other than an Event of Default under clause (3) or (4) of Section 6.01 hereof occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the Debentures then outstanding may declare the principal of all the Debentures due and payable, provided that in the case of Debentures then held by the Trust, if upon an Event of Default with respect to the Debentures, the Trustee has or the Holders of at least 25% in aggregate principal amount of the Debentures have failed to declare the principal of the Debentures to be immediately due and payable, the holders of at least 25% in aggregate liquidation amount of the outstanding Preferred Securities of the Trust shall have such right by a notice in writing to the Company and the Trustee. If an Event of Default specified in clause (3) or (4) of Section 6.01 hereof occurs, the principal of and interest on all the Debentures shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Debentureholders. Upon such an acceleration, such principal, together with all interest accrued thereon, shall be due and payable immediately. The Holders of at least a majority in aggregate principal amount of the Debentures at the time outstanding, in each case, by notice to the Trustee, may rescind such an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default with respect to such Debentures have been cured or waived except nonpayment of principal or interest that has become due solely because of acceleration, provided that if the principal of the Debentures has been declared due and payable by the holders of the Preferred Securities of the Trust, no rescission of acceleration will be effective unless consented to by the holders of at least a majority in aggregate liquidation amount of the Preferred Securities of the Trust. No such rescission shall affect any subsequent Default or impair any right consequent thereto. SECTION 6.03 Other Remedies. If an Event of Default occurs and is --------------- continuing, the Trustee may, in its own name or as trustee of an express trust, institute, pursue and prosecute any proceeding, including, without limitation, any action at law or suit in equity or other 31 judicial or administrative proceeding to collect the payment of principal of or premium, if any, or interest on the Debentures that is in default, to enforce the performance of any provision of the Debentures or this Indenture or to obtain any other available remedy. The Trustee may maintain a proceeding even if it does not possess any of the Debentures or does not produce any of the Debentures in the proceeding. A delay or omission by the Trustee, any Debentureholder or the holders of Preferred Securities in exercising any right or remedy accruing upon an Event of Default shall not impair such right or remedy or constitute a waiver of, or acquiescence in, such Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. SECTION 6.04 Waiver of Past Defaults. If a Default or Event of ------------------------ Default with respect to the Debentures has occurred and is continuing, the Holders of at least a majority in aggregate principal amount of the Debentures at the time outstanding, or, if Debentures are held by the Trust, the holders of at least a majority in aggregate liquidation amount of the Preferred Securities of the Trust, in each case by notice to the Trustee and the Company, may waive an existing Default or Event of Default and its consequences except a Default or Event of Default in the payment of the principal of or premium, if any, or interest on any Debenture. When a Default or Event of Default is waived, it is deemed cured and shall cease to exist, but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any consequent right. SECTION 6.05 Control by Majority. The Holders of at least a majority -------------------- in aggregate principal amount of the Debentures or, if the Debentures are held by the Trust, the holders of at least a majority in aggregate liquidation amount of the Preferred Securities of the Trust, may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or that the Trustee determines in good faith is unduly prejudicial to the rights of other Debentureholders or may involve the Trustee in personal liability. The Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction, including withholding notice to the Holders of the Debentures of continuing default (except in the payment of the principal of (other than any mandatory sinking fund payment) or premium, if any, or interest on any Debentures) if the Trustee considers it in the interest of the Holders of the Debentures to do so. 32 SECTION 6.06 Limitation on Suits. Except as provided in Section 6.07 -------------------- hereof, no holder of Debentures or holder of Preferred Securities of the Trust which is the Holder of Debentures may pursue any remedy with respect to this Indenture or the Debentures unless: (1) the Holders of Debentures or the holders of such Preferred Securities give to the Trustee written notice stating that an Event of Default with respect to the corresponding Debentures is continuing; (2) the Holders of at least 25% in aggregate principal amount of the Debentures or the holders of at least 25% in aggregate liquidation amount of such Preferred Securities make a written request to the Trustee to pursue a remedy; (3) the Holders of Debentures or the holders of such Preferred Securities provide to the Trustee reasonable security and indemnity against any loss, liability or expense satisfactory to the Trustee; (4) the Trustee does not comply with the request within 60 days after receipt of the notice, the request and the offer of security and indemnity; and (5) during such 60 day period, the Holders of at least a majority in aggregate principal amount of the Debentures or the holders of at least a majority in aggregate liquidation amount of such Preferred Securities do not give the Trustee a direction inconsistent with the request. A Holder of Debentures or a holder of Preferred Securities may not use this Indenture to prejudice the rights of another Debentureholder or a holder of Preferred Securities or to obtain a preference or priority over another Debentureholder or holder of Preferred Securities. SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding ------------------------------------- any other provision of this Indenture, the right of any Holder to receive payment of the principal of and premium (if any) or interest on the Debentures held by such Holder, on or after the respective due dates expressed in the Debentures (in the case of interest, as the same may be extended pursuant to Section 4.01(b) hereof) or any Redemption Date, is absolute and unconditional and such right and the right to bring suit for the enforcement of any such payment on or after such respective dates shall not be impaired or affected adversely without the consent of such Holder. If the Debentures are 33 then held by a Trust, each holder of Preferred Securities of such Trust shall have the right to bring suit for the enforcement of payment of Debentures in a principal amount equal to the aggregate liquidation amount of the Preferred Securities of such holder. SECTION 6.08. Collection Suit by the Trustee. If an Event of Default ------------------------------- described in Section 6.01(1) hereof occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company or any obligor on the Debentures for the whole amount owing with respect to the Debentures and the amounts provided for in Section 7.07 hereof. SECTION 6.09. The Trustee May File Proofs of Claim. In case of the ------------------------------------- pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or its properties or assets, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise: (1) to file and prove a claim for the whole amount of the principal of and premium, if any, and interest on the Debentures and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding; and (2) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Debentures or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 6.10. Priorities. If the Trustee collects any money pursuant ----------- to this Article 6, it shall, 34 subject to Article 10 hereof, pay out the money in the following order: FIRST: to the Trustee for amounts due under Section 7.07 hereof; SECOND: to Holders of Debentures in respect of which or for the benefit of which such money has been collected for amounts due and unpaid on such Debentures for the principal amount, Redemption Price or interest, if any, as the case may be, ratably, without preference or priority of any kind, according to such amounts due and payable on such Debentures; and THIRD: the balance, if any, to the Company. Except as otherwise set forth in the Debentures, the Trustee may fix a Record Date and payment date for any payment to Debentureholders pursuant to this Section 6.10. SECTION 6.11. Undertaking for Costs. In any suit for the enforcement ---------------------- of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant (other than the Trustee) in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder of Debentures or holder of Preferred Securities pursuant to Section 6.07 hereof or a suit by Holders of Debentures of more than 10% in aggregate principal amount of the Debentures or, if the Debentures are held by the Trust, the holders of more than 10% in aggregate liquidation amount of the Preferred Securities of the Trust. SECTION 6.12. Waiver of Stay; Extension or Usury Laws. The Company ---------------------------------------- covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury or other law wherever enacted, now or at any time hereafter in force, that would prohibit or forgive the Company from paying all or any portion of the principal of or premium, if any, or interest on the Debentures as contemplated herein or affect the covenants or the performance by the Company of its obligations under this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly 35 waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE VII The Trustee ----------- SECTION 7.01. Duties of the Trustee. (a) If an Event of Default ---------------------- occurs and is continuing with respect to the Debentures, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default with respect to the Debentures, (i) the Trustee need perform only those duties that are specifically set forth in this Indenture or the TIA and no others; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, in the case of any certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liability for its own gross negligent action, its own gross negligent failure to act or its own willful misconduct, except that: (i) this Section 7.01(c) does not limit the effect of Section 7.01(b) hereof; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. 36 (d) Every provision of this Indenture that in any way relates to the Trustee is subject to Section 7.01(a), (b), (c) and (e) and Section 7.02 hereof. (e) The Trustee may refuse to perform any duty or exercise any right or power or extend or risk its own funds or otherwise incur any financial liability unless it receives security and indemnity reasonably satisfactory to it against any loss, liability or expense (including reasonable counsel fees). (f) Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. Except as otherwise provided in Section 3.05 and Section 8.01 hereof, the Trustee shall not be liable for interest on any money held by it hereunder. SECTION 7.02. Rights of the Trustee. (a) The Trustee may rely on ---------------------- any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officer's Certificate and, if appropriate, an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officer's Certificate and Opinion of Counsel. (c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it reasonably believes to be authorized or within its rights or powers. (e) The Trustee may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security and indemnity 37 against the costs, expenses and liabilities (including reasonable counsel fees) which might be incurred by it in compliance with such request or direction. SECTION 7.03. Individual Rights of the Trustee. The Trustee in its --------------------------------- individual or any other capacity may become the owner or pledgee of Debentures and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar or co- registrar may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11 hereof. SECTION 7.04. The Trustee's Disclaimer. The Trustee makes no ------------------------- representation as to the validity or adequacy of this Indenture or the Debentures. The Trustee shall not be accountable for the Company's use of the proceeds from the Debentures, and the Trustee shall not be responsible for any statement in this Indenture or the Debentures or any report or certificate issued by the Company hereunder or any registration statement relating to the Debentures (other than the Trustee's Certificate of Authentication and the Trustee's Statement of Eligibility on Form T-1), or the determination as to which beneficial owners are entitled to receive any notices hereunder. SECTION 7.05. Notice of Defaults. If a Default occurs and is ------------------- continuing with respect to the Debentures and if it is known to the Trustee, the Trustee shall mail to each Holder of a Debenture notice of the Default within 90 days after it becomes actually known to the Trustee unless such Default shall have been cured or waived. Except in the case of a Default described in Section 6.01(1) hereof, the Trustee may withhold such notice if and so long as a committee of Trust Officers in good faith determines that the withholding of such notice is in the interests of the Holders of the Debentures. The Trustee shall not be charged with knowledge of any Default (except in the case of a Default under Section 6.01(1) hereof) unless a responsible Trust Officer assigned to the Corporate Trust Department of the Trustee shall have actual knowledge of the Default. The second sentence of this Section 7.05 shall be in lieu of the proviso to TIA Section 315(b). Said proviso is hereby expressly excluded from this Indenture, as permitted by the TIA. SECTION 7.06. Reports by Trustee to Holders. Within 60 days after ------------------------------ each April 30, beginning with the April 30 next following the date of this Indenture, the Trustee shall mail to each Debentureholder, and such other holders that have submitted their names to the Trustee for 38 such purpose, a brief report dated as of such April 30 in accordance with and to the extent required under TIA Section 313. A copy of each report at the time of its mailing to Debentureholders shall be filed with the Company, the SEC and any securities exchange on which the Debentures are listed. The Company agrees to promptly notify the Trustee whenever the Debentures become listed on any securities exchange and of any delisting thereof. SECTION 7.07. Compensation and Indemnity. The Company agrees: --------------------------- (1) to pay to the Trustee from time to time such compensation as shall be agreed between the Company and the Trustee for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) to reimburse the Trustee upon its request for reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses, and advances of its agents and counsel, provided that prior to any Event of Default, the Trustee shall only have one counsel), including all reasonable expenses and advances incurred or made by the Trustee in connection with any Event of Default or any membership on any creditors' committee, except any such expense or advance as may be attributable to its negligence or bad faith; and (3) to indemnify the Trustee, its officers, directors and shareholders, for, and to hold it harmless against, any and all loss, damage, claim liability or expense, incurred without negligence or willful misconduct on its part, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. Before, after or during an Event of Default with respect to the Debentures, the Trustee shall have a claim and lien prior to the Debentures as to all property and funds held by it hereunder for any amount owing it for its fees and expenses or any predecessor Trustee pursuant to this Section 7.07, except with respect to funds held by the Trustee or any Paying Agent in trust for the payment of principal of or premium, if any, or interest on particular Debentures pursuant to Section 2.06 or Section 8.01 hereof. 39 The Company's payment obligations pursuant to this Section 7.07 are not subject to Article 10 of this Indenture and shall survive the discharge of this Indenture and the resignation or removal of the Trustee. When the Trustee renders services or incurs expenses after the occurrence of a Default specified in Section 6.01 hereof, the compensation for services and expenses are intended to constitute expenses of administration under any Bankruptcy Law. SECTION 7.08. Replacement of Trustee. The Trustee may resign at any ----------------------- time, by so notifying the Company in writing at least 30 days prior to the date of the proposed resignation; provided, however, no such resignation shall be effective until a successor Trustee has accepted its appointment pursuant to this Section 7.08. The Holders of at least a majority in aggregate principal amount of the Debentures at the time outstanding may remove the Trustee by so notifying the Trustee in writing and may appoint a successor Trustee, which shall be subject to the consent of the Company unless an Event of Default has occurred and is continuing. The Trustee shall resign if: (1) the Trustee fails to comply with Section 7.10 hereof; (2) the Trustee is adjudged bankrupt or insolvent; (3) a receiver or public officer takes charge of the Trustee or its property; or (4) the Trustee otherwise becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Debentureholders. Subject to payment of all amounts owing to the Trustee under Section 7.07 hereof and subject further to its lien under Section 7.07, the retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee. If a successor Trustee does not take office within 30 days after the retiring Trustee resigns or is removed, the Company or the Holders of 40 at least a majority in aggregate principal amount of the Debentures at the time outstanding may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10 hereof, any Debentureholder may petition any court of competent jurisdiction for its removal and the appointment of a successor Trustee. SECTION 7.09. Successor Trustee by Merger. If the Trustee ---------------------------- consolidates with, merges or converts into, or transfers or sells all or substantially all its corporate trust business or assets to another corporation, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee. SECTION 7.10. Eligibility: Disqualification. The Trustee shall at ------------------------------ all times satisfy the requirements of TIA Sections 310(a)(1) and 310(a)(2). The Trustee (or any Affiliate thereof which has unconditionally guaranteed the obligations of the Trustee hereunder) shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recently published annual report of condition. The Trustee shall comply with TIA Section 310(b). In determining whether the Trustee has conflicting interests as defined in TIA Section 310(b)(1), the provisions contained in the proviso to TIA Section 310(b)(1) and the Trustee's Statement of Eligibility on Form T-1 shall be deemed incorporated herein. SECTION 7.11. Preferential Collection of Claims Against the Company. ------------------------------------------------------ If and when the Trustee shall be or become a creditor of the Company, the Trustee shall be subject to the provisions of the TIA regarding the collection of claims against the Company. ARTICLE VIII Satisfaction and Discharge of Indenture; ---------------------------------------- Defeasance of Certain Obligations; Unclaimed Moneys --------------------------------------------------- SECTION 8.01. Satisfaction and Discharge of Indenture. The Company ---------------------------------------- shall be deemed to have paid and discharged the entire indebtedness on the Debentures outstanding on the date the Company has irrevocably deposited or caused to be irrevocably deposited with the Trustee or any Paying Agent as trust funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of the Debentures (1) cash 41 (which may be held in an interest bearing account insured by the Federal Deposit Insurance Corporation) in an amount, or (2) U.S. Government Obligations, maturing as to principal and interest at such times and in such amounts as will ensure the availability of cash, or (3) a combination thereof, sufficient to pay the principal of and premium, if any, and interest on all Debentures then outstanding, provided that in the case of redemption, notice of redemption shall have been given or the Company shall have irrevocably instructed the Trustee to give such notice; and further provided that the following conditions shall have been met: (A) no Default or Event of Default with respect to the Debentures has occurred and is continuing on the date of such deposit or occurs as a result of such deposit; (B) the Company has delivered to the Trustee an Officer's Certificate certifying that there does not exist (i) a default in the payment of all or any portion of any Senior Indebtedness or (ii) any other default affecting Senior Indebtedness permitting its acceleration as the result of which the maturity of Senior Indebtedness has been accelerated; (C) the Company has delivered to the Trustee (i) either a private Internal Revenue Service ruling or an Opinion of Counsel to the effect that the Holders of the Debentures will not recognize income, gain or loss for federal income tax purposes as a result of such deposit, defeasance and discharge and will be subject to federal income tax on the same amount and in the manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred, and an Opinion of Counsel to the effect that (A) the deposit shall not result in the Company, the Trustee or, if the Debentures are held by the Trust, the Trust being deemed to be an "investment company" under the Investment Company Act of 1940, as amended, and (B) such deposit creates a valid trust in which the Holders of the Debentures have the sole beneficial interest or that the Holders of the Debentures have a nonavoidable first priority security interest in such trust; and (D) the Company has delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent relating to the defeasance contemplated by this provision have been complied with. 42 Upon such deposit, provisions of this Indenture with respect to the Debentures shall no longer be in effect except as to (1) the rights of registration of transfer and exchange of the Debentures, (2) the replacement of apparently mutilated, defaced, destroyed, lost or stolen Debentures, (3) the rights of the Holders of the Debentures to receive payments of the principal thereof and premium, if any, and interest thereon, (4) the rights of the Holders of the Debentures as beneficiaries hereof with respect to the property so deposited with the Trustee payable to all or any of them, (5) the obligation of the Company to maintain an office or agency for payments on and registration of transfer of the Debentures, (6) the rights, obligations and immunities of the Trustee hereunder, and (7) the obligations of the Company to the Trustee for compensation and indemnity under Section 7.07 hereof; and the Trustee shall, at the request and expense of the Company, execute proper instruments acknowledging the same. SECTION 8.02. Application by Trustee of Funds Deposited for Payment ----------------------------------------------------- of Debentures. Subject to Section 8.04 hereof, all moneys deposited with the - -------------- Trustee pursuant to Section 8.01 hereof shall be held in trust and applied by it to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent), to the Holders of the Debentures for the payment or redemption of which such moneys have been deposited with the Trustee, of all sums due and to become due thereon for principal and interest; but such money need not be segregated from other funds except to the extent required by law. SECTION 8.03. Repayment of Moneys Held by Paying Agent. In ----------------------------------------- connection with the satisfaction and discharge of this Indenture, all moneys then held by any Paying Agent under this Indenture shall, upon demand of the Company, be repaid to it or paid to the Trustee, and thereupon such Paying Agent shall be released from all further liability with respect to such moneys. SECTION 8.04. Return of Moneys Held by the Trustee and Paying Agent ----------------------------------------------------- Unclaimed for Three Years. Any moneys deposited with or paid to the Trustee or - -------------------------- any Paying Agent for the payment of the principal of and premium, if any, or interest on the Debentures and not applied but remaining unclaimed for three years after the date when such principal, premium, if any, or interest shall have become due and payable shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property law, be repaid to the Company by the Trustee or such Paying Agent, and the Holders of such 43 Debentures shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property laws, thereafter look only to the Company for any payment which such Holder may be entitled to collect, and all liability of the Trustee or any Paying Agent with respect to such moneys shall thereupon cease. ARTICLE IX Amendments ---------- SECTION 9.01 Without Consent of Holders. From time to time, when --------------------------- authorized by a resolution of the Board of Directors, the Company and the Trustee, without notice to or the consent of any Holders of the Debentures, may amend or supplement this Indenture: (1) to cure any ambiguity, defect or inconsistency; (2) to comply with Article 5 hereof; (3) to provide for uncertificated Debentures in addition to or in place of certificated Debentures; (4) to make any other change that does not in the reasonable judgment of the Company adversely affect the rights of any Debentureholder; or (5) to comply with any requirement of the SEC in connection with the qualification of this Indenture under the TIA. SECTION 9.02. With Consent of Holders. The Company and the Trustee ------------------------ may amend this Indenture in any manner not permitted by Section 9.01 or may waive future compliance by the Company with any provisions of this Indenture with the consent of the Holders of at least a majority in aggregate principal amount of the Debentures. Such an amendment or waiver may not, without the consent of each Holder of the Debentures: (1) reduce the principal amount of such Debentures; (2) reduce the principal amount of such Debentures the Holders of which must consent to an amendment of this Indenture or a waiver; 44 (3) change the stated maturity of the principal of or the interest on or rate of interest of such Debentures; (4) change adversely to the Holders the redemption provisions of Article 3 hereof; (5) change the currency in respect of which the payments on such Debentures are to be made; (6) make any change in Article 10 hereof that adversely affects the rights of the Holders of the Debentures or any change to any other Section hereof that adversely affects their rights under Article 10 hereof; or (7) change Section 6.07 hereof; provided that, in the case of the outstanding Debentures then held by the Trust, no such amendment shall be made that adversely affects the holders of the Preferred Securities of the Trust, and no waiver of any Event of Default with respect to the Debentures or compliance with any covenant under this Indenture shall be effective, without the prior consent of the holders of at least a majority of the aggregate liquidation amount of the outstanding Preferred Securities of the Trust or the holder of each such Preferred Security, as applicable. It shall not be necessary for the consent of the Holders of Debentures or holders of Preferred Securities under this Section 9.02 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof. If certain Holders agree to defer or waive certain obligations of the Company hereunder with respect to Debentures held by them, such deferral or waiver shall not affect the rights of any other Holder to receive the payment or performance required hereunder in a timely manner. After an amendment or waiver under this Section 9.02 becomes effective, the Company shall mail to each Holder a notice briefly describing the amendment or waiver. Any failure of the Company to mail such notices, or any defect therein, shall not, however, in any way impair or affect the validity of such amendment or waiver. 45 SECTION 9.03. Compliance with Trust Indenture Act. Every ------------------------------------ supplemental indenture executed pursuant to this Article 9 shall comply with the TIA. SECTION 9.04 Revocation and Effect of Consents; Waivers and Actions. ------------------------------------------------------- Until an amendment, waiver or other action by Holders becomes effective, a consent to it or any other action by a Holder of a Debenture hereunder is a continuing consent by the Holder and every subsequent Holder of that Debenture or portion of the Debenture that evidences the same obligation as the consenting Holder's Debenture, even if notation of the consent, waiver or action is not made on such Debenture. However, any such Holder or subsequent Holder may revoke the consent, waiver or action as to such Holder's Debenture or portion of the Debenture if the Trustee receives the notice of revocation before the consent of the requisite aggregate principal amount of such Debentures then outstanding has been obtained and not revoked. After an amendment, waiver or action becomes effective, it shall bind every Holder of the Debentures, except as provided in Section 9.02 hereof. The Company may, but shall not be obligated to, fix a Record Date for the purpose of determining the Persons entitled to consent to any amendment or waiver. If a Record Date is fixed, then, notwithstanding the first two sentences of the immediately preceding paragraph, only Holders of Debentures or holders of Preferred Securities, as applicable, on such Record Date or their duly designated proxies, and only those Persons, shall be entitled to consent to such amendment, supplement or waiver or to revoke any consent previously given, whether or not such Persons continue to be such after such Record Date. No such consent shall be valid or effective for more than 90 days after such Record Date. SECTION 9.05. Notation on or Exchange of Debentures. Debentures -------------------------------------- authenticated and made available for delivery after the execution of any supplemental indenture pursuant to this Article 9 may, and shall, if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Debentures so modified as to conform, in the opinion of the Trustee and the Board of Directors, to any such supplemental indenture may be prepared and executed by the Company and authenticated and made available for delivery by the Trustee in exchange for outstanding Debentures. SECTION 9.06. Trustee to Execute Supplemental Indentures. The ------------------------------------------- Trustee shall execute any supplemental 46 indenture authorized pursuant to this Article 9 if the supplemental indenture does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may, but need not, execute it. In executing such supplemental indenture the Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Officer's Certificate and Opinion of Counsel stating that such supplemental indenture is authorized or permitted by this Indenture. SECTION 9.07 Effect of Supplemental Indentures. Upon the execution ---------------------------------- of any supplemental indenture under this Article 9, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes and every Holder of Debentures theretofore or thereafter authenticated and made available for delivery hereunder shall be bound thereby. ARTICLE X Subordination ------------- SECTION 10.01. Debentures Subordinated to Senior Indebtedness. ----------------------------------------------- Notwithstanding the provisions of Section 6.10 hereof or any other provision herein or in any Debenture, the Company and the Trustee and, by their acceptance thereof, the Holders of the Debentures (a) covenants and agrees that all payments by the Company of the principal of and premium, if any, and interest on the Debentures (other than Debentures which have been discharged pursuant to Article 8) shall be subordinated in accordance with the provisions of this Article 10 to the prior payment in full, in cash or cash equivalents, of all amounts payable on, under or in connection with Senior Indebtedness, and (b) acknowledges that holders of Senior Indebtedness are or shall be relying on this Article 10. SECTION 10.02. Priority and Payment of Proceeds in Certain Events: ---------------------------------------------------- Remedies Standstill. (a) Upon any payment or distribution of assets or - -------------------- securities of the Company, as the case may be, of any kind or character, whether in cash, property or securities, upon any dissolution or winding up or total or partial liquidation or reorganization of the Company, whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or other proceedings, all amounts payable on, under or in connection with Senior Indebtedness (including any interest accruing on such Senior Indebtedness subsequent to the commencement of a bankruptcy, insolvency or similar proceeding) shall first be paid in full in cash, or payment provided for in cash or cash equivalents, before the Holders or the Trustee on behalf of the Holders 47 or the Trustee on behalf of the Holders or the holders of Preferred Securities shall be entitled to receive from the Company any payment of principal of or premium, if any, or interest on the Debentures or distribution of any assets or securities. (b) No direct or indirect payment by or on behalf of the Company of principal of or premium, if any, or interest on the Debentures (other than Debentures which have been discharged pursuant to Article 8), whether pursuant to the terms of the Debentures or upon acceleration or otherwise, shall be made if, any the time of such payment, there exists (i) a default in the payment of all or any portion of any Senior Indebtedness and the Trustee has received written notice thereof from the Company, from holders of Senior Indebtedness or from any trustee, representative or agent therefor, or (ii) any other default affecting Senior Indebtedness, as a result of which the maturity of Senior Indebtedness has been accelerated and the Trustee has received written notice from the Company, from holders of Senior Indebtedness or from any trustee, representative or agent therefor, and such default shall not have been cured or waived by or on behalf of the holders of such Senior Indebtedness. (c) If, notwithstanding the foregoing provisions prohibiting such payment or distribution, the Trustee or any Holder shall have received any payment on account of the principal of or premium, if any, or interest on the Debentures when such payment is prohibited by this Section 10.02 and before all amounts payable on, under or in connection with Senior Indebtedness are paid in full in cash or cash equivalents, then and in such event (subject to the provisions of Section 10.08 hereof) such payment or distribution shall be received and held in trust for the holders of Senior Indebtedness and, at the written direction of the trustee, representative or agent for the holders of the Senior Indebtedness, shall be paid to the holders of the Senior Indebtedness remaining unpaid to the extent necessary to pay such Senior Indebtedness in full in cash or cash equivalents. Upon any payment or distribution of assets or securities referred to in this Article 10, the Trustee and the Holders shall be entitled to rely upon any order or decree of a court of competent jurisdiction in which such dissolution, winding up, liquidation or reorganization proceedings are pending, and upon a certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making any such payment or distribution, delivered to the Trustee for the purpose of ascertaining the 48 Persons entitled to participate in such distribution, the holders of Senior Indebtedness and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 10. SECTION 10.03. Payments which May Be Made Prior to Notice. Nothing ------------------------------------------- in this Article 10 or elsewhere in this Indenture shall prevent (i) the Company, except under the conditions described in Section 10.02 hereof, from making payments of principal of or premium, if any, or interest on the Debentures or from depositing with the Trustee any monies for such payments, or (ii) the application by the Trustee of any monies deposited with it for the purpose of making such payments of principal of or premium, if any, or interest on the Debentures, to the Holders entitled thereto, unless at least one Business Day prior to the date when such payment would otherwise (except for the prohibitions contained in Section 10.02 hereof) become due and payable the Trustee shall have received the written notice provided for in Section 10.02(b)(i) or (ii) hereof. SECTION 10.04. Rights of Holders of Senior Indebtedness Not to Be -------------------------------------------------- Impaired. No right of any present or future holder of any Senior Indebtedness - --------- to enforce subordination as herein provided shall at any time or in any way be prejudiced or impaired by any act or failure to act in good faith by any such holder, or by any noncompliance by the Company with the terms and provisions and covenants herein regardless of any knowledge thereof any such holder may have or otherwise be charged with. The provisions of this Article 10 are intended to be for the benefit of, and shall be enforceable directly by, the holders of Senior Indebtedness. Notwithstanding anything to the contrary in this Article 10, to the extent any Holders or the Trustee have paid over or delivered to any holder of Senior Indebtedness any payment or distribution received on account of the principal of or premium (if any) or interest on the Debentures to which any other holder of Senior Indebtedness shall be entitled to share in accordance with Section 10.02 hereof, no holder of Senior Indebtedness shall have a claim or right against any Holders or the Trustee with respect to any such payment or distribution or as a result of the failure to make payments or distributions to such other holder of Senior Indebtedness. SECTION 10.05. Trustee May Take Action to Effectuate Subordination. ---------------------------------------------------- Each Holder of a Debenture, by his acceptance thereof, authorizes and directs the Trustee on his behalf to take such action as may be required by the 49 trustee, representative or agent for holders of Senior Indebtedness or by the Company to effectuate, as between the holders of Senior Indebtedness and the Holders, the subordination as provided in this Article 10 and appoints the Trustee his attorney-in-fact for any and all such purposes. SECTION 10.06. Subrogation. Upon the payment in full, in cash or ------------ cash equivalents, of all Senior Indebtedness, any Holder shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments or distributions of assets of the Company made on such Senior Indebtedness until the Debentures shall be paid in full; and for the purposes of such subrogation, no payments or distributions to holders of such Senior Indebtedness of any cash property or securities to which such Holders of the Debentures would be entitled except for this Article 10, and no payment pursuant to this Article 10 to holders of such Senior Indebtedness by such Holders of the Debentures, shall, as between the Company, its creditors other than holders of such Senior Indebtedness and such Holders of the Debentures, be deemed to be a payment by the Company to or on account of such Senior Indebtedness, it being understood that the provisions of this Article 10 are solely for the purpose of defining the relative rights of the holders of such Senior Indebtedness, on the one hand, and such Holders of the Debentures, on the other hand. If any payment or distribution to which Holders of Debentures would otherwise have been entitled but for the provisions of this Article 10 shall have been applied, pursuant to this Article 10, to the payment of all Senior Indebtedness then and in such case such Holders of the Debentures shall be entitled to receive from the holders of such Senior Indebtedness at the time outstanding any payments or distributions received by such holders of Senior Indebtedness in excess of the amount sufficient to pay, in cash or cash equivalents, all such Senior Indebtedness in full. SECTION 10.07. Obligations of Company Unconditional; Reinstatement. ---------------------------------------------------- Nothing in this Article 10 or elsewhere in this Indenture or in any Debenture is intended to or shall impair, as between the Company and Holders of the Debentures, the obligations of the Company, which are absolute and unconditional, to pay to such Holders the principal of and premium, if any, and interest on the Debentures as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of such Holders of the Debentures and creditors of the Company other than the holders of the Senior Indebtedness, nor shall anything herein or therein 50 prevent the Trustee or any Holder of Debentures or holder of Preferred Securities, as applicable, from exercising all remedies otherwise permitted by applicable law under this Indenture, subject to the rights, if any, under this Article 10 of the holders of such Senior Indebtedness in respect of cash, property or securities of the Company received upon the exercise of any such remedy. The failure to make a scheduled payment of principal of or premium, if any, or interest on the Debentures by reason of Section 10.02 shall not be construed as preventing the occurrence of an Event of Default under Section 6.01 hereof; provided, however, that if (i) the conditions preventing the making of such payment no longer exist, and (ii) such Holders of the Debentures are made whole with respect to such omitted payments, the Event of Default relating thereto (including any failure to pay any accelerated amounts) shall be automatically waived, and the provisions of the Indenture shall be reinstated as if no such Event of Default had occurred. SECTION 10.08. Trustee Entitled to Assume Payments Not Prohibited in ----------------------------------------------------- Absence of Notice. The Trustee or Paying Agent shall not be charged with the - ------------------ knowledge of the existence of any default in the payment of all or a portion of any Senior Indebtedness or any other default affecting Senior Indebtedness, as a result of which the maturity of the Senior Indebtedness has been accelerated, unless and until the Trustee or Paying Agent shall have received written notice thereof from the Company or one or more holders of Senior Indebtedness or from any trustee, representative or agent therefor or unless the Trustee or Paying Agent otherwise had actual knowledge thereof; and, prior to the receipt of any such written notice or actual knowledge of a responsible Trust Officer in the Corporate Trust Department of the Trustee or Paying Agent, the Trustee or Paying Agent may conclusively assume that no such facts exist. Unless at least one Business Day prior to the date when by the terms of this Indenture any monies are to be deposited by the Company with the Trustee or any Paying Agent for any purpose (including, without limitation, the payment of the principal of or premium, if any, or interest on any Debenture), the Trustee or Paying Agent shall have received with respect to such monies the notice provided for in Section 10.02 or a responsible Trust Officer in the Corporate Trust Department of the Trustee or Paying Agent shall have actual knowledge of default in the payment of all or a portion of any Senior Indebtedness or any other default affecting Senior Indebtedness as the result of which the 51 maturity of the Senior Indebtedness has been accelerated, the Trustee or Paying Agent shall have full power and authority to receive and apply such monies to the purpose for which they were received. Neither of them shall be affected by any notice to the contrary, which may be received by either on or after such date. The foregoing shall not apply to the Paying Agent if the Company is acting as Paying Agent. Nothing in this Section 10.08 shall limit the right of the holders of Senior Indebtedness to recover payments as contemplated by Section 10.02 hereof. The Trustee or Paying Agent shall be entitled to rely on the delivery to it of a written notice by a Person representing himself or itself to be a holder of such Senior Indebtedness (or a trustee, representative or agent on behalf of such holder) to establish that such notice has been given by a holder of such Senior Indebtedness or a trustee, representative or agent on behalf of any such holder. The Trustee shall not be deemed to have any duty to the holders (and shall be fully protected in relying upon such notice) of Senior Indebtedness. SECTION 10.09. Right of Trustee to Hold Senior Indebtedness. The --------------------------------------------- Trustee and any Paying Agent shall be entitled to all of the rights set forth in this Article 10 in respect of any Senior Indebtedness at any time held by them to the same extent as any other holder of such Senior Indebtedness, and nothing in this Indenture shall be construed to deprive the Trustee or any Paying Agent of any of its rights as such holder. ARTICLE XI Miscellaneous ------------- SECTION 11.01. Trust Indenture Act Controls. If any provision of ----------------------------- this Indenture limits, qualifies or conflicts with the duties imposed by operation of subsection (c) of Section 318 of the TIA, the imposed duties shall control. The provisions of Sections 310 to 317, inclusive, of the TIA that impose duties on any Person (including provisions automatically deemed included in an indenture unless the indenture provides that such provisions are excluded) are a part of and govern this Indenture, except as, and to the extent, they are expressly excluded from this Indenture, as permitted by the TIA. SECTION 11.02 Notices. Any notice, request or other communication -------- required or permitted to be given 52 hereunder shall be in writing and delivered, telecopied or mailed by first-class mail, postage prepaid, addressed as follows: if to the Company: South Jersey Gas Company One South Jersey Plaza, Route 54 Folsom, New Jersey Facsimile No.: [(609)561-9000] Attention of [Treasurer] if to the Trustee: The Bank of New York 101 Barclay Street-21W New York, New York 10286 Facsimile: (212) 815-5595 or 5596 Attention: Corporate Finance Unit The Company or the Trustee, by giving notice to the other, may designate additional or different addresses for subsequent notices of communications. The Company shall notify the holder, if any, of Senior Indebtedness of any such additional or different addresses of which the Company receives notice from the Trustee. Any notice or communication given to a Debentureholder shall be mailed or delivered to the Debentureholder at the Debentureholder's address as it appears on the Register of the Registrar and shall be sufficiently given if mailed within the time prescribed. Failure to mail a notice or communication to a Debentureholder or any defect in it shall not affect its sufficiency with respect to other Debentureholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not received by the addressee. If the Company mails a notice or communication to the Debentureholders, it shall mail a copy to the Trustee and each Registrar, Paying Agent or co-Registrar. SECTION 11.03. Communication by Holders with Other Holders. -------------------------------------------- Debentureholders may communicate, pursuant to TIA Section 312(b), with other Debentureholders with respect to their rights under this Indenture or the Debentures. The Company, the Trustee, the Registrar, the Paying Agent and anyone else shall have the protection of TIA Section 312(c). 53 SECTION 11.04. Certificate and Opinion as to Conditions Precedent. --------------------------------------------------- Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officer's Certificate (complying with Section 11.05 hereof) stating that, in the opinion of such Officer, all conditions precedent to the taking of such action have been complied with; and (2) if appropriate, an Opinion of Counsel (complying with Section 11.05 hereof) stating that, in the opinion of such counsel all such conditions precedent to the taking of such action have been complied with. SECTION 11.05 Statements Required in Certificate or Opinion. Each ---------------------------------------------- Officer's Certificate and Opinion of Counsel with respect to compliance with a covenant or condition provided for in this Indenture shall include: (1) a statement that each Person making such Officer's Certificate or Opinion of Counsel has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such Officer's Certificate or Opinion of Counsel are based; (3) a statement that, in the opinion of each such Person, such Person has made such examination or investigation as is necessary to enable such Person to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement that, in the opinion of such Person, such covenant or condition has been complied with; provided, however, that with respect to matters of fact not involving any legal conclusion, an Opinion of Counsel may rely on an Officer's Certificate or certificates of public officials. SECTION 11.06. Severability Clause. If any provision in this -------------------- Indenture or in the Debentures shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 11.07. Rules by Trustee, Paying Agent and Registrar. The --------------------------------------------- Trustee may make reasonable rules for action 54 by or a meeting of Debentureholders. The Registrar and Paying Agent may make reasonable rules for their functions. SECTION 11.08. Legal Holidays. A "Legal Holiday" is any day other --------------- than a Business Day. If any specified date (including a date for giving notice) is a Legal Holiday, the action to be taken on such date shall be taken on the next succeeding day that is not a Legal Holiday, and if such action is a payment in respect of the Debentures, unless otherwise specified pursuant to Section 2.01 hereof no principal, premium (if any) or interest installment shall accrue for the intervening period; except that if any interest payment is due on a Legal Holiday and the next succeeding day is in the next succeeding calendar year, such payment shall be made on the Business Day immediately preceding such Legal Holiday. SECTION 11.09. Governing Law. This Indenture and the Debentures -------------- shall be governed by and construed in accordance with the laws of the State of New Jersey as applied to contracts made and performed within the State of New Jersey, without regard to its principles of conflicts of laws. SECTION 11.10. No Recourse Against Others. No director, officer, --------------------------- employee or stockholder, as such, of the Company shall have any liability for any obligations of the Company under the Debentures or this Indenture or for any claim based on, in respect of or by reason of such obligations their creation. By accepting a Debenture, each Debentureholder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Debentures. SECTION 11.11. Successors. All agreements of the Company in this ----------- Indenture and Debentures shall bind its successors and assigns. All agreements of the Trustee in this Indenture shall bind its successors and assigns. SECTION 11.12 Multiple Original Copies of this Indenture. The ------------------------------------------- parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. Any signed copy shall be sufficient proof of this Indenture. SECTION 11.13. No Adverse Interpretation of Other Agreements. This ---------------------------------------------- Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or any subsidiary. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. 55 SECTION 11.14. Table of Contents: Headings, Etc. The Table of --------------------------------- Contents, Cross-Reference Table, and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof. SECTION 11.15. Benefits of the Indenture. Except as otherwise -------------------------- expressly provided herein with respect to holders of Senior Indebtedness and holders of Preferred Securities, nothing in this Indenture or in the Debentures, express or implied, shall give to any person, other than the 56 parties hereto and their successors hereunder and the Holders of the Debentures, any benefit or any legal or equitable right, remedy or claim under this Indenture. IN WITNESS WHEREOF, the undersigned, being duly authorized, have executed this Indenture on behalf of the respective parties hereto as of the date first above written. SOUTH JERSEY GAS COMPANY, by_________________________ Name: Title: THE BANK OF NEW YORK, as Trustee, by_________________________ Name: Title: EXHIBIT A South Jersey Gas Company _% Deferrable Interest Subordinated Debenture, No. __ South Jersey Gas Company, a New Jersey corporation (the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to ____________________ or registered assigns, the principal sum of __________ Dollars on __________, ____, and to pay interest on said principal sum from __________, ____ or from the most recent Interest Payment Date (as defined below) to which interest has been paid or duly provided for, quarterly in arrears on March 31, June 30, September 30 and December 31, commencing [ ] (each, an "Interest Payment Date") at the rate of ___% per annum until the principal hereof shall have become due and payable, and on any overdue principal and (to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the same rate per annum. The amount of interest payable on any Interest Payment Date shall be computed on the basis of a 360-day year of twelve 30-day months, and for any period shorter than thirty days, interest will be computed on the basis of the actual number of days elapsed in such period based on a 30-day month. In the event that any Interest Payment Date is not a Business Day, then interest will be payable on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Debenture is registered at the close of business on the Regular Record Date for such interest installment, which shall be the 15th day (whether or not a Business Day) of the last month of each quarter, provided that if all of the Debentures (as defined below) are then held by SJG Capital Trust (the "Trust") or the Debentures are held in book-entry-only form, the Regular Record Date shall be the close of business on the Business Day next preceding such Interest Payment Date. Any such interest installment not punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date, and may be paid to the Person in whose name this Debenture is registered at the close of business on a Special Record Date to be fixed by the Trustee (as defined below) for the payment of such defaulted A-1 interest, notice whereof shall be given to the Holders of the Debentures not less than 7 days prior to such Special Record Date, as more fully provided in the Indenture. Payment of the principal of and interest on this Debenture will be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. Payments of interest on an Interest Payment Date will be made by check mailed to the Holder hereof at the address shown in the Register or, at the option of the Holder hereof, to such other place in the United States of America as the Holder hereof shall designate to the Trustee in writing. At the request of a Holder of at least $10,000,000 aggregate principal amount of Debentures, interest on such Debentures will be payable by wire transfer within the continental United States in immediately available funds to the bank account number specified in writing by such Holder to the Registrar prior to the Regular Record Date. The principal amount hereof and any interest due on the Stated Maturity Date or a Redemption Date (other than an Interest Payment Date) will be paid only upon surrender of this Debenture at the principal corporate office of The Bank of New York, Paying Agent in New York, or at such other office or agency of the Paying Agent as the Company shall designate by written notice to the Holder of this Debenture. The indebtedness evidenced by this Debenture is, to the extent provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness, and this Debenture is issued subject to the provisions of the Indenture with respect thereto. The Holder of this Debenture, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination so provided and (c) appoints the Trustee his attorney-in-fact for any and all such purposes. The Holder of this Debenture, by his acceptance hereof, hereby waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions. This Debenture is one of the duly authorized Debentures of the Company (herein sometimes referred to as the "Debentures"), specified in the Indenture, limited in aggregate principal amount to [$36,082,475], issued under A-2 and pursuant to an Indenture dated as [ ], 1997 (the "Indenture") executed and delivered between the Company and The Bank of New York, as trustee (the "Trustee"). The Debentures are initially being issued to the Trust, to be held on behalf of the Trust by its property trustee (the "Property Trustee"). Concurrently with the issuance of the Debentures, the Trust is issuing its trust securities, representing undivided beneficial interests in the assets of the Trust and having an aggregate liquidation amount equal to the principal amount of the Debentures, including the Trust's [ ]% Preferred Securities (the "Preferred Securities"). Reference is made to the Indenture for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and Holders of the Debentures. Each term used in this Debenture which is defined in the Indenture and not defined herein shall have the meaning assigned to it in the Indenture. At the option of the Company, the Debentures are redeemable prior to maturity (i) at any time on or after __________, [2002], in whole or in part, and (ii) if a Special Event shall occur and be continuing, in whole (but not in part) within 90 days following the occurrence of such Special Event, in each case at 100% of the principal amount thereof plus accrued interest to the Redemption Date. A "Special Event" shall mean either a "Tax Event" or an "Investment Company Event." "Tax Event" shall mean that the Company shall have received an opinion of nationally recognized independent tax counsel (which must be acceptable to the Property Trustee of the Trust) experienced in such matters to the effect that, as a result of any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein affecting taxation, or as a result of any official administrative pronouncement, administrative action, or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which pronouncement, administrative action or decision is announced or taken on or after the date of original issuance of Preferred Securities, there is more than an insubstantial risk that (i) the Trust is, or will be within 90 days of the date thereof, subject to United States Federal income tax with respect to interest received on the Debentures, (ii) interest payable by the Company to the Trust on the Debentures is not or will not be within 90 days of the date thereof deductible for United States Federal income tax purposes or (iii) the Trust is, or will be within 90 days of the date thereof, subject to more than a de minimis amount of other taxes, duties, assessments or other governmental charges. "Investment Company Event" shall mean A-3 the occurrence of a change in law or regulation or a change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law") to the effect that the Trust is or will be considered an "investment company" that is required to be registered under the Investment Company Act of 1940, as amended, which Change in 1940 Act Law becomes effective on or after the date of original issuance of the Preferred Securities. At least 30 days but not more than 60 days before the Redemption Date, the Trustee shall mail or caused to be mailed a notice of redemption by first- class mail, postage prepaid, to each Holder of Debentures to be redeemed. In the event of redemption of this Debenture in part only, a new Debenture or Debentures for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancelation hereof. In case an Event of Default with respect to the Debentures occurs and is continuing, the principal of and interest on the Debentures may (and, in certain circumstances, shall) be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions for defeasance at any time of the entire indebtedness of this Debenture upon compliance by the Company with certain conditions set forth therein. Subject to certain exceptions in the Indenture which require the consent of every Holder, the Company and the Trustee may amend the Indenture or may waive future compliance by the Company with any provisions of the Indenture, with the consent of the Holders of at least a majority in aggregate principal amount of the Debentures, provided that if the Debentures are held by the Trust, no such amendment or waiver that adversely affects the holders of the Preferred Securities shall be effective without the prior consent of the holders of at least a majority in aggregate liquidation amount of the outstanding Preferred Securities. Subject to certain exceptions in the Indenture, without the consent of any Debentureholder, the Company and the Trustee may amend the Indenture to cure any ambiguity, defect or inconsistency, to bind a successor to the obligations of the Indenture, to provide for uncertificated Debentures in addition to certificated Debentures, to comply with any requirements of the Debentures and the Securities and Exchange Commission in connection with the qualification of the Indenture under the TIA, or to make any change that, A-4 in the reasonable judgment of the Company, does not adversely affect the rights of any Debentureholder. Amendments bind all Holders and subsequent Holders. No reference herein to the Indenture and no provision of this Debenture or the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and interest on this Debenture at the time and place and at the rate and in the money herein prescribed. So long as no Event of Default with respect to the Debentures has occurred and is continuing, the Company shall have the right at any time and from time to time to extend the interest payment period of the Debentures for up to 20 consecutive quarters (the "Extension Period"), provided that no Extension Period shall extend beyond the Stated Maturity Date or Redemption Date of any Debenture. At the end of the Extension Period, the Company shall pay all interest then accrued and unpaid (together with interest thereon at the rate specified for the Debentures, compounded quarterly, to the extent that payment of such interest is enforceable under applicable law). During such Extension Period, the Company may not declare or pay any dividend on, redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock. Prior to the termination of any such Extension Period, the Company may further extend such Extension Period, provided that such Extension Period, together with all such previous and further extensions, shall not exceed 20 consecutive quarters and shall not extend beyond the Stated Maturity Date or Redemption Date of any Debenture. At the termination of any such Extension Period and upon the payment of all amounts then due, the Company may elect to begin a new Extension Period, subject to the foregoing restrictions. Debentures are issuable only in registered form without coupons in denominations of $25 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, this Debenture is exchangeable for a like aggregate principal amount of Debentures of a different authorized denomination, as requested by the Holder surrendering the same. As provided in the Indenture and subject to certain limitations therein set forth, this Debenture is transferable by the Holder hereof upon surrender of this Debenture for registration of transfer at the office or agency of the Registrar accompanied by a written instrument or instruments of transfer inform satisfactory to the Registrar duly executed by the Holder hereof or his attorney A-5 duly authorized in writing, and thereupon one or more new Debentures of authorized denominations and for the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be made for any such transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in relation thereto. Prior to presentment for registration of transfer of this Debenture, the Company, the Trustee, any Paying Agent and any Registrar may deem and treat the Holder hereof as the absolute owner hereof (whether or not this Debenture shall be overdue and notwithstanding any notice of ownership or writing hereon made by anyone other than the Registrar) for the purpose of receiving payment of or on account of the principal hereof and interest due hereon and for all other purposes, and neither the Company nor the Trustee nor any Paying Agent nor any Registrar shall be affected by any notice to the contrary. No recourse shall be had for the payment of the principal of or the interest on this Debenture, or for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Indenture, against any incorporator, stockholder officer or director, past, present or future, as such, of the Company or of any predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issuance hereof, expressly waived and released. This Debenture shall not be valid until an authorized signatory of the Trustee manually signs and dates the Trustee's Certificate of Authentication below. IN WITNESS WHEREOF, the Company has caused this Debenture to be signed manually or by facsimile by its duly A-6 authorized officers and a facsimile of its corporate seal to be affixed hereto or imprinted hereon. SOUTH JERSEY GAS COMPANY, [SEAL] by___________________________ Name: Title: Attest:___________________________ (Assistant) Secretary A-7 TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Debentures referred to in the within-mentioned Indenture. The Bank of New York, as Trustee By:__________________________ Authorized Signatory Dated:_______________________ A-8 ASSIGNMENT FORM To assign this Debenture, fill in the form below: (I) or (we) assign and transfer this Debenture to: ________________________________________________________________________________ (Insert assignee's social security or tax I.D. number) ________________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint ____________________ agent to transfer this Debenture on the books of the Register. The agent may substitute another to act for him. Dated:_________________________ Signature:_____________________ (Sign exactly as your name appears on the other side of this Debenture) Signature Guaranty: ____________________ A-9 EX-4.D 9 GUARANTEE AGREEMENT EXHIBIT 4(d) ================================================================================ GUARANTEE AGREEMENT between SOUTH JERSEY GAS COMPANY (as Guarantor) and THE BANK OF NEW YORK (as Guarantee Trustee) Dated as of March [ ], 1997 ================================================================================ TABLE OF CONTENTS ARTICLE I Definitions ----------- [CAPTION] Page ---- SECTION 1.01. Definitions............................................... 2 ARTICLE II Trust Indenture Act ------------------- SECTION 2.01. Trust Indenture Act; Application.......................... 4 SECTION 2.02. List of Holders........................................... 4 SECTION 2.03. Reports by the Guarantee Trustee.......................... 5 SECTION 2.04. Periodic Reports to Guarantee Trustee..................... 5 SECTION 2.05. Evidence of Compliance with Conditions Precedent.......... 5 SECTION 2.06. Events of Default; Waiver................................. 6 SECTION 2.07. Events of Default; Notice................................. 6 SECTION 2.08. Conflicting Interests..................................... 6 SECTION 2.09. Disclosure of Information................................. 6 SECTION 2.10. Guarantee Trustee May File Proofs of Claim................ 7 ARTICLE III Powers, Duties and Rights of the -------------------------------- Guarantee Trustee ----------------- SECTION 3.01. Powers and Duties of the Guarantee Trustee................ 7 SECTION 3.02. Certain Rights of Guarantee Trustee....................... 9 SECTION 3.03. Indemnity................................................. 11 ARTICLE IV ---------- Guarantee Trustee ----------------- SECTION 4.01. Guarantee Trustee; Eligibility............................ 11 SECTION 4.02. Appointment, Removal and Resignation of the Guarantee Trustee................................................. 12
i ARTICLE V Guarantee --------- SECTION 5.01. Guarantee................................................. 13 SECTION 5.02. Waiver of Notice and Demand............................... 13 SECTION 5.03. Obligations Not Affected.................................. 13 SECTION 5.04. Rights of Holders......................................... 14 SECTION 5.05. Guarantee of Payment...................................... 14 SECTION 5.06. Subrogation............................................... 15 SECTION 5.07. Independent Obligations................................... 15 ARTICLE VI Covenants and Subordination --------------------------- SECTION 6.01. Subordination............................................. 15 SECTION 6.02. Pari Passu Guarantees..................................... 15 ARTICLE VII Termination ----------- SECTION 7.01. Termination................................................ 16 ARTICLE VIII Miscellaneous ------------- SECTION 8.01. Successors and Assigns.................................... 16 SECTION 8.02. Amendments................................................ 16 SECTION 8.03. Notices................................................... 17 SECTION 8.04. Benefit................................................... 17 SECTION 8.05. Interpretation............................................ 18 SECTION 8.06. Governing Law............................................. 18
ii CROSS-REFERENCE TABLE*
Section of Trust Section of Indenture Act of Guarantee 1939, as amended Agreement 310(a) .......................................... 4.01(a) 310(b) .......................................... 4.01(c), 2.08 310(c) .......................................... Inapplicable 311(a) .......................................... 2.02(b) 311(b) .......................................... 2.02(b) 311(c) .......................................... Inapplicable 312(a) .......................................... 2.02(a) 312(b) .......................................... 2.02(b) 313 .......................................... 2.03 314(a) .......................................... 2.04 314(b) .......................................... Inapplicable 314(c) .......................................... 2.05 314(d) .......................................... Inapplicable 314(e) .......................................... 1.01, 2.05, 3.02 314(f) .......................................... 2.01, 3.02 315(a) .......................................... 3.01(d) 315(b) .......................................... 2.07 315(c) .......................................... 3.01 315(d) .......................................... 3.01(d) 316(a) .......................................... 1.01, 2.06, 5.04 316(b) .......................................... 5.03 316(c) .......................................... 8.02 317(a) .......................................... Inapplicable 317(b) .......................................... Inapplicable 318(a) .......................................... 2.01(b) 318(b) .......................................... 2.01 318(c) .......................................... 2.01(a)
__________________ * This Cross-Reference Table does not constitute part of the Guarantee Agreement and shall not affect the interpretation of any of its terms or provisions. GUARANTEE AGREEMENT, dated as of March [ ], 1997, is executed and delivered by SOUTH JERSEY GAS COMPANY, a New Jersey corporation (the "Guarantor"), to THE BANK OF NEW YORK, a New York banking corporation duly organized and existing under the laws of the United States of America, as trustee (the "Guarantee Trustee"), for the benefit of the Holders (as defined herein) from time to time of the Preferred Securities (as defined herein) of SJG CAPITAL TRUST, a Delaware statutory business trust (the "Issuer"). WHEREAS, pursuant to an Amended and Restated Trust Agreement for SJG Capital Trust (the "Trust Agreement"), dated as of March [ ], 1997, among the Trustees named therein, the Guarantor, as Depositor, and the Holders from time to time of undivided beneficial interests in the assets of the Issuer, the Issuer is issuing $35,000,000 aggregate liquidation amount of its [ ]% Preferred Securities (liquidation amount of $25 per preferred security) (the "Preferred Securities") representing undivided beneficial interests in the assets of the Issuer and having the terms set forth in the Trust Agreement; WHEREAS the Preferred Securities will be issued by the Issuer and the proceeds thereof, together with the proceeds from the sale by the Issuer of its Common Securities will be used to purchase the Debentures (as defined in the Trust Agreement) of the Guarantor which will be deposited with The Bank of New York, as Property Trustee under the Trust Agreement, as Trust Property (as defined in the Trust Agreement); and WHEREAS as incentive for the Holders to purchase Preferred Securities, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth herein, to pay to the Holders of the Preferred Securities the Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the purchase by each Holder of Preferred Securities, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee Agreement for 2 the benefit of the Holders from time to time of the Preferred Securities: ARTICLE I Definitions ----------- SECTION 1.01. Definitions. As used in this Guarantee Agreement, each ------------ of the terms set forth below shall, unless the context otherwise requires, have the following meaning. Each capitalized or otherwise defined term used but not otherwise defined herein shall have the meaning assigned to such term in the Trust Agreement as in effect on the date hereof. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Common Securities" means the common securities representing undivided beneficial interests in the assets of the Issuer and having the rights provided therefor in the Trust Agreement. "Event of Default" means a default by the Guarantor on any of its payment or other obligations under this Guarantee Agreement; provided that, -------- except with respect to a default resulting from a failure to pay any Guarantee Payment, the Guarantor shall have received notice of default and shall not have cured such default within 60 days after receipt of such notice. "Guarantee Payments" means the following payments or Distributions (as defined in the Trust Agreement), without duplication, with respect to the Preferred Securities, to the extent not paid or made by or on behalf of the Issuer pursuant to the Trust Agreement: (i) any accumulated and unpaid Distributions required to be paid on the Preferred Securities, to the extent the Issuer shall have funds available therefor, (ii) the redemption price, including all accumulated and unpaid Distributions to the date of redemption (the "Redemption Price"), with respect to the Preferred Securities called for redemption by the Issuer, to the extent the Issuer shall have funds available therefor, and (iii) upon a voluntary or involuntary 3 termination, winding-up or liquidation of the Issuer, unless Debentures (as defined in the Trust Agreement) are distributed to the Holders, the lesser of (a) the aggregate of the liquidation amount of $25 per Preferred Security plus accumulated and unpaid Distributions on the Preferred Securities to the date of payment, to the extent the Issuer shall have funds available therefor, and (b) the amount of assets of the Issuer remaining available for distribution to Holders upon a termination and liquidation of the Issuer (in either case, the "Liquidation Distribution"). "Guarantee Trustee" means The Bank of New York, until a Successor Guarantee Trustee (as defined below) has been appointed and has accepted such appointment pursuant to the terms of this Guarantee Agreement and thereafter means each such Successor Guarantee Trustee. "Holder" means a Person in whose name a Preferred Security is registered in the Securities Register; provided, however, that in determining -------- ------- whether the holders of the requisite percentage of Preferred Securities have given any request, notice, consent or waiver hereunder, "Holder" shall not include the Guarantor, the Guarantee Trustee or any Affiliate of the Guarantor or the Guarantee Trustee. "Indenture" means the Indenture dated as of March [ ], 1997, between South Jersey Gas Company and The Bank of New York, as trustee thereunder. "List of Holders" has the meaning specified in Section 2.02(a). "Majority in liquidation amount of the Preferred Securities" means, except as provided by the Trust Indenture Act, a vote by the Holders of more than 50% of the aggregate liquidation amount of all then outstanding Preferred Securities issued by the Issuer. "Officers' Certificate" means a certificate signed by (i) the Chairman, the President, any Vice President, the Treasurer, or any Assistant Treasurer, and (ii) the Secretary or any Assistant Secretary of the Guarantor. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Responsible Officer" means, with respect to the Guarantee Trustee, any Vice President, any Assistant Vice President, any Trust Officer or Assistant Trust Officer or any other officer of the Corporate Trust Department of the 4 Guarantee Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Senior Indebtedness" means Senior Indebtedness as defined in the Indenture. "Successor Guarantee Trustee" means a successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 4.01. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed; provided, however, -------- ------- that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939, as so amended. ARTICLE II Trust Indenture Act ------------------- SECTION 2.01. Trust Indenture Act; Application. (a) This Guarantee --------------------------------- Agreement is subject to the provisions of the Trust Indenture Act that are required to be part of this Guarantee Agreement and shall, to the extent applicable, be governed by such provisions. (b) If and to the extent that any provision of this Guarantee Agreement limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. SECTION 2.02. List of Holders. (a) The Guarantor shall furnish or ---------------- cause to be furnished to the Guarantee Trustee (a) semiannually, on or before April 30 and October 31 of each year, a list, in such form as the Guarantee Trustee may reasonably require, of the names and addresses of the Holders ("List of Holders") as of a date not more than 15 days prior to the delivery thereof, and (b) at such other times as the Guarantee Trustee may request in writing, within 5 days after the receipt by the Guarantor of any such request, a List of Holders as of a date not more than 15 days prior to the time such list is furnished, in each case to the extent such information is in the possession or control of the Guarantor and is not identical to a previously supplied List of Holders or has not otherwise been received by the Guarantee Trustee in its 5 capacity as such. The Guarantee Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. (b) The Guarantee Trustee shall comply with its obligations under Sections 311(a), Section 311(b) and Section 312(b) of the Trust Indenture Act. SECTION 2.03. Reports by the Guarantee Trustee. Within 60 days after --------------------------------- [April 30] of each year, the Guarantee Trustee shall provide to the Holders such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Guarantee Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. SECTION 2.04. Periodic Reports to Guarantee Trustee. The Guarantor -------------------------------------- shall provide to the Guarantee Trustee, the Securities and Exchange Commission and the Holders such documents, reports and information, if any, as required by Section 314 of the Trust Indenture Act and the compliance certificate required by Section 314 of the Trust Indenture Act in the form and manner and at the times required by Section 314 of the Trust Indenture Act. SECTION 2.05. Evidence of Compliance with Conditions Precedent. The ------------------------------------------------- Guarantor shall provide to the Guarantee Trustee such evidence of compliance with such conditions precedent, if any, provided for in this Guarantee Agreement that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Each Officers' Certificate and Opinion of Counsel delivered with respect to compliance with a condition or covenant provided for in this Guarantee Agreement shall include: (a) a statement that each officer signing the Officers' Certificate or Opinion of Counsel has read the covenant or condition and the definition relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Officers' Certificate or Opinion of Counsel and upon which the statements contained therein are based; (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and 6 (d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. SECTION 2.06. Events of Default; Waiver. The Holders of a Majority -------------------------- in liquidation amount of the Preferred Securities may, by vote, on behalf of the Holders, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Guarantee Agreement, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent therefrom. SECTION 2.07. Events of Default; Notice. (a) The Guarantee Trustee -------------------------- shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders, notice of all Events of Default known to the Guarantee Trustee, unless such defaults have been cured before the giving of such notice, provided that, except in the case of a default -------- in the payment of a Guarantee Payment, the Guarantee Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders. (b) The Guarantee Trustee shall not be deemed to have knowledge of any Event of Default unless the Guarantee Trustee shall have received written notice, or a Responsible Officer charged with the administration of the Trust Agreement shall have obtained written notice, of such Event of Default. SECTION 2.08. Conflicting Interests. The Trust Agreement shall be ---------------------- deemed to be specifically described in this Guarantee Agreement for the purposes of clause (i) of the first provision contained in Section 310(b) of the Trust Indenture Act. SECTION 2.09. Disclosure of Information. The disclosure of -------------------------- information as to the names and addresses of the Holders in accordance with Section 312 of the Trust Indenture Act, regardless of the source from which such information was derived, shall not be deemed to be a violation of any existing law, or any law hereafter enacted which does not specifically refer to Section 312 of the Trust Indenture Act, nor shall the Guarantee Trustee be held accountable by reason of mailing any material pursuant to a 7 request made under Section 312(b) of the Trust Indenture Act. SECTION 2.10. Guarantee Trustee May File Proofs of Claim. Upon the ------------------------------------------- occurrence of an Event of Default, the Guarantee Trustee is hereby authorized to (a) recover judgment, in its own name and as trustee of an express trust, against the Guarantor for the whole amount of any Guarantee Payments remaining unpaid and (b) file such proof of claim and other papers or documents as may be necessary or advisable in order to have its claims and those of the Holders allowed in any judicial proceedings relative to the Guarantor, its creditors or its property. ARTICLE III Powers, Duties and Rights of the -------------------------------- Guarantee Trustee ----------------- SECTION 3.01. Powers and Duties of the Guarantee Trustee. (a) This ------------------------------------------- Guarantee Agreement shall be held by the Guarantee Trustee for the benefit of the Holders, and the Guarantee Trustee shall not transfer this Guarantee Agreement to any Person except a Holder exercising his or her rights pursuant to Section 5.04(iv) or to a Successor Guarantee Trustee on acceptance by such Successor Guarantee Trustee of its appointment to act as Successor Guarantee Trustee. The right, title and interest of the Guarantee Trustee shall automatically vest in any Successor Guarantee Trustee upon acceptance by such Successor Guarantee Trustee of its appointment hereunder and such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Guarantee Trustee. (b) If an Event of Default has occurred and is continuing, the Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of the Holders. (c) The Guarantee Trustee, before the occurrence of any Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Guarantee Agreement, and no implied covenants shall be read into this Guarantee Agreement against the Guarantee Trustee. In case an Event of Default has occurred and is continuing (and has not been cured or waived pursuant to Section 2.06), the Guarantee Trustee shall exercise such of the rights and powers vested in it by this Guarantee Agreement, and use the same degree of care and skill in its exercise thereof, as a prudent person would exercise or use in the conduct of his or her own affairs. 8 (d) No provision of this Guarantee Agreement shall be construed to relieve the Guarantee Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (i) prior to the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Guarantee Trustee shall be determined solely by the express provisions of this Guarantee Agreement, and the Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Guarantee Agreement; and (B) in the absence of bad faith on the part of the Guarantee Trustee, the Guarantee Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Guarantee Trustee and conforming to the requirements of this Guarantee Agreement; but in the case of any such certificates or opinions that by any provision hereof or of the Trust Indenture Act are specifically required to be furnished to the Guarantee Trustee, the Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Guarantee Agreement; (ii) the Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Guarantee Trustee, unless it shall be proved that the Guarantee Trustee was negligent in ascertaining the pertinent facts upon which such judgment was made; (iii) the Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a Majority in liquidation amount of the Preferred Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee, or exercising any trust or power conferred upon the Guarantee Trustee under this Guarantee Agreement; and (iv) no provision of this Guarantee Agreement shall require the Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability 9 in the performance of any of its duties or in the exercise of any of its rights or powers, if the Guarantee Trustee shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Guarantee Agreement or reasonable indemnity against such risk or liability is not reasonably assured to it. SECTION 3.02. Certain Rights of Guarantee Trustee. (a) Subject to ------------------------------------ the provisions of Section 3.01: (i) The Guarantee Trustee may rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties. (ii) Any direction or act of the Guarantor contemplated by this Guarantee Agreement shall be sufficiently evidenced by an Officers' Certificate unless otherwise prescribed herein. (iii) Whenever, in the administration of this Guarantee Agreement, the Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting to take any action hereunder, the Guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and rely upon an Officers' Certificate which, upon receipt of such request from the Guarantee Trustee, shall be promptly delivered by the Guarantor. (iv) The Guarantee Trustee may consult with legal counsel, and the advice or Opinion of Counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such advice or opinion. Such legal counsel may be legal counsel to the Guarantor or any of its Affiliates and may be one of its employees. The Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Guarantee Agreement from any court of competent jurisdiction. (v) The Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Guarantee Agreement at the request or direction of any Holder, unless such Holder shall 10 have provided to the Guarantee Trustee such reasonable indemnity as would satisfy a reasonable person in the position of the Guarantee Trustee, against the costs, expenses (including attorneys' fees and expenses) and liabilities that might be incurred by it in complying with such request or direction; provided that, nothing contained in this Section 3.02(a)(v) -------- shall be taken to relieve the Guarantee Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Guarantee Agreement. (vi) The Guarantee Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit. (vii) The Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through its agents or attorneys, and the Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed with due care by it hereunder. (viii) Whenever in the administration of this Guarantee Agreement, the Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Guarantee Trustee (A) may request instructions from the Holders, (B) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (C) shall be protected in acting in accordance with such instructions. (ix) The Guarantee Trustee shall have no duty to see to any recording, filing, or registration of any instrument (or any recording, refiling or registration thereof). (b) No provision of this Guarantee Agreement shall be deemed to impose any duty or obligation on the Guarantee Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it in any jurisdiction in which it shall be illegal, or in which the Guarantee Trustee shall be unqualified or incompetent in accordance with applicable law, to perform 11 any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Guarantee Trustee shall be construed to be a duty to act in accordance with such power and authority. SECTION 3.03. Indemnity. The Guarantor agrees to indemnify the ---------- Guarantee Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or willful misconduct on the part of the Guarantee Trustee, arising out of or in connection with the acceptance or administration of this Guarantee Agreement, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The Guarantee Trustee will not claim or exact any lien or charge on any Guarantee Payments as a result of any amount due to it under this Guarantee Agreement. The provisions of this Section 3.03 shall survive the resignation and removal of the Guarantee Trustee and the termination of this Guarantee Agreement. ARTICLE IV Guarantee Trustee ----------------- SECTION 4.01. Guarantee Trustee; Eligibility. (a) There shall at all ------------------------------- times be a Guarantee Trustee which shall: (i) not be an Affiliate of the Guarantor; and (ii) be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least fifty million U.S. dollars ($50,000,000), and shall be a corporation meeting the requirements of Section 310(a) of the Trust Indenture Act. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority, then, for the purposes of this Section and to the extent permitted by the Trust Indenture Act, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If at any time, the Guarantee Trustee shall cease to be eligible to so act under Section 4.01(a), the Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 4.02(c). 12 (c) If the Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Guarantee Trustee and Guarantor shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. In determining whether the Guarantee Trustee has a "conflicting interest" within the meaning of Section 310(b)(1) of the Trust Indenture Act, the provisions contained in the proviso to Section 310(b)(1) of the Trust Indenture Act and the Guarantee Trustee's Statement of Eligibility on Form T-1 shall be deemed incorporated herein. SECTION 4.02. Appointment, Removal and Resignation of the Guarantee ----------------------------------------------------- Trustee. (a) Subject to Section 4.02(b), the Guarantee Trustee may be - -------- appointed or removed without cause at any time by the Guarantor. (b) The Guarantee Trustee shall not be removed until a new, eligible guarantee trustee has been appointed (a "Successor Guarantee Trustee") and has accepted such appointment and assumed the applicable obligations hereunder by written instrument executed by such Successor Guarantee Trustee and delivered to the Guarantor. (c) The Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Guarantee Trustee has been appointed and has accepted such appointment by instrument in writing executed by such Successor Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee Trustee. (d) If no Successor Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 4.02 within 60 days after delivery to the Guarantor of an instrument of resignation, the resigning Guarantee Trustee may petition, at the expense of the Guarantor, any court of competent jurisdiction for appointment of a Successor Guarantee Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Guarantee Trustee. (e) The Guarantee Trustee shall not be liable for the acts or omissions to act of any Successor Guarantee Trustee. (f) Upon termination of this Guarantee Agreement or removal or resignation of the Guarantee Trustee pursuant to this Section 4.02, the Guarantor shall pay to the Guarantee Trustee all amounts owing for fees and 13 reimbursement of expenses which have accrued hereunder to the date of such termination, removal or resignation. (g) The Guarantor shall promptly notify the Holders of the resignation, removal or appointment of a Guarantee Trustee. ARTICLE V Guarantee --------- SECTION 5.01. Guarantee. The Guarantor irrevocably and ---------- unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by or on behalf of the Issuer pursuant to the Trust Agreement or by the Guarantor pursuant to the Indenture), as and when due, regardless of any defense, right of set-off or counterclaim which the Issuer may have or assert. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such amounts to the Holders. SECTION 5.02. Waiver of Notice and Demand. The Guarantor hereby ---------------------------- waives notice of acceptance of the Guarantee Agreement and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Guarantee Trustee, the Issuer or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. SECTION 5.03. Obligations Not Affected. The obligations, covenants, ------------------------- agreements and duties of the Guarantor under this Guarantee Agreement shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer of any express or implied agreement, covenant, term or condition relating to the Preferred Securities to be performed or observed by the Issuer; (b) the extension of time for the payment by the Issuer of all or any portion of the Distributions (other than an extension of time for payment of Distributions that results from an Extension Period on the Debentures as so provided in the Indenture), Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Preferred 14 Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Preferred Securities; (c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Preferred Securities, or any action on the part of the Issuer granting indulgence or extension of any kind; (d) the voluntary or involuntary liquidation, termination, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer or any of the assets of the Issuer; (e) any invalidity of, or defect or deficiency in, the Preferred Securities; (f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or (g) to the extent permitted by law, any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 5.03 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances. There shall be no obligation of the Holders to give notice to, or obtain the consent of, the Guarantor with respect to the happening of any of the foregoing. SECTION 5.04. Rights of Holders. The Guarantor expressly ------------------ acknowledges that: (i) this Guarantee Agreement will be deposited with the Guarantee Trustee to be held for the benefit of the Holders; (ii) the Guarantee Trustee has the right to enforce this Guarantee Agreement on behalf of the Holders; (iii) the Holders of a Majority in liquidation amount of the Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee in respect of this Guarantee Agreement or exercise or direct the exercise of any trust or power conferred upon the Guarantee Trustee under this Guarantee Agreement; and (iv) any Holder may institute a legal proceeding directly against the Guarantor to enforce its rights under this Guarantee Agreement, without first instituting a legal proceeding against the Guarantee Trustee, the Issuer or any other Person. 15 SECTION 5.05. Guarantee of Payment. This Guarantee Agreement creates --------------------- a guarantee of payment and not of collection. This Guarantee Agreement will not be discharged except by payment of the Guarantee Payments in full (without duplication of amounts theretofore paid by or on behalf of the Issuer pursuant to the Trust Agreement or by the Guarantor pursuant to the Indenture) or upon distribution of Debentures to Holders as provided in the Trust Agreement. SECTION 5.06. Subrogation. The Guarantor shall be subrogated to all ------------ rights (if any) of the Holders against the Issuer in respect of any amounts paid to the Holders by the Guarantor under this Guarantee Agreement and shall have the right to waive payment by the Issuer pursuant to Section 5.01; provided, -------- however, that the Guarantor shall not (except to the extent required by - ------- mandatory provisions of law) be entitled to enforce or exercise any rights which it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Guarantee Agreement, if, at the time of any such payment, any amounts are due and unpaid under this Guarantee Agreement. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders. SECTION 5.07. Independent Obligations. The Guarantor acknowledges ------------------------ that its obligations hereunder are independent of the obligations of the Issuer with respect to the Preferred Securities and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Guarantee Agreement notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 5.03 hereof. ARTICLE VI Covenants and Subordination --------------------------- SECTION 6.01. Subordination. This Guarantee Agreement shall -------------- constitute an unsecured obligation of the Guarantor and shall rank subordinate and junior in right of payment to all general liabilities of the Guarantor. SECTION 6.02. Pari Passu Guarantees. This Guarantee Agreement shall ---------------------- rank pari passu with any similar guarantee agreements issued by the Guarantor on ---- ----- behalf of the holders of preferred or capital securities issued by the Issuer and with any other security, guarantee or other obligation that is expressly stated to rank pari passu with ---- ----- 16 the obligations of the Guarantor under this Guarantee Agreement. ARTICLE VII Termination ----------- SECTION 7.01. Termination. This Guarantee Agreement shall terminate ------------ and be of no further force and effect upon (i) full payment by the Issuer or the Guarantor, as the case may be, of the Redemption Price for all Preferred Securities, (ii) the distribution of the Debentures to the Holders in exchange for all of the Preferred Securities or (iii) full payment by the Issuer or the Guarantor, as the case may be, of the amounts payable in accordance with Article VIII of the Trust Agreement upon liquidation of the Issuer. Notwithstanding the foregoing, this Guarantee Agreement will continue to be effective or will be reinstated, as the case may be, if at any time any Holder must restore payment of any sums paid with respect to Preferred Securities or this Guarantee Agreement. ARTICLE VIII Miscellaneous ------------- SECTION 8.01. Successors and Assigns. All guarantees and agreements ----------------------- contained in this Guarantee Agreement shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Preferred Securities then outstanding. The Guarantor may not consolidate with or merge with or into, or sell, convey, transfer or lease its properties and assets as an entirety or substantially as an entirety (either in one transaction or a series of transactions) to, any Person unless permitted under Article Five of the Indenture. In connection with a consolidation, merger or sale involving the Guarantor that is permitted under Article Five of the Indenture, the Person formed by or surviving such consolidation or merger or to which such sale, conveyance, transfer or lease shall have been made, if other than the Guarantor, shall expressly assume all of the obligations of the Guarantor hereunder and under the Trust Agreement. SECTION 8.02. Amendments. Except with respect to any changes which ----------- do not adversely affect the rights of the Holders in any material respect (in which case no consent of the Holders will be required), this Guarantee Agreement may only be amended with the prior approval of the Holders of a Majority in liquidation amount of the Preferred Securities 17 (excluding any Preferred Securities held by the Guarantor or any affiliate thereof). The provisions of Article VI of the Trust Agreement concerning meetings of the Holders shall apply to the giving of such approval. SECTION 8.03. Notices. Any notice, request or other communication -------- required or permitted to be given hereunder shall be in writing and delivered, telecopied or mailed by first class mail, postage prepaid, as follows: (a) if given to the Guarantor, to the address set forth below or such other address as the Guarantor may give notice of to the Holders: South Jersey Gas Company Number One South Jersey Plaza Route 54 Folsom, NJ 08037 Facsimile No: 609-561-8225 Attention of Assistant Secretary (b) if given to the Issuer, in care of the Guarantee Trustee, at the Issuer's (and the Guarantee Trustee's) address set forth below or such other address as the Guarantee Trustee on behalf of the Issuer may give notice to the Holders: SJG Capital Trust Number One South Jersey Plaza Route 54 Folsom, NJ 08037 Facsimile No: 609-561-8225 Attention of Assistant Secretary with a copy to: The Bank of New York 101 Barclay Street 21W New York, NY 10286 Facsimile No:(212) 815-5595 or (212) 815-5596 Attention of Corporate Finance Unit (c) if given to any Holder, at the address set forth in the Securities Register. All notices hereunder shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be 18 deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 8.04. Benefit. This Guarantee Agreement is solely for the -------- benefit of the Holders and is not separately transferable from the Preferred Securities. SECTION 8.05. Interpretation. In this Guarantee Agreement, unless --------------- the context otherwise requires: (a) all references to "the Guarantee Agreement" or "this Guarantee Agreement" are to this Guarantee Agreement as modified, supplemented or amended from time to time; (b) all references in this Guarantee Agreement to Articles and Sections are to Articles and Sections of this Guarantee Agreement unless otherwise specified; (c) a term defined in the Trust Indenture Act has the same meaning when used in this Guarantee Agreement unless otherwise defined in this Guarantee Agreement or unless the context otherwise requires; (d) a reference to the singular includes the plural and vice versa; and (e) the masculine, feminine or neuter genders used herein shall include the masculine, feminine and neuter genders. SECTION 8.06. GOVERNING LAW. THIS GUARANTEE AGREEMENT SHALL BE -------------- GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW JERSEY AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW JERSEY WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF. 19 This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. THIS GUARANTEE AGREEMENT is executed as of the day and year first above written. SOUTH JERSEY GAS COMPANY, as Guarantor, by ____________________________ Name: Title: THE BANK OF NEW YORK, as Guarantee Trustee, by ____________________________ Name: Title: EX-12.A 10 CALCULATION OF EARNINGS TO FIXED CHARGES EXHIBIT 12(a) SOUTH JERSEY GAS COMPANY Calculation of Ratio of Earnings to Fixed Charges (IN THOUSANDS)
Fiscal Year Ended December 31, 1992 1993 1994 1995 1996 -------------------------------------------------------------------------- Net Income * $15,579 $15,619 $11,200 $15,991 $19,389 Federal Income Taxes, Net 7,789 7,832 5,881 9,278 10,627 Fixed Charges ** 14,233 14,127 14,648 19,545 19,574 Capitalized Interest (193) (191) (120) (98) (114) -------------------------------------------------------------------------- Total Available for Coverage $37,408 $37,387 $31,609 $44,716 $49,476 ========================================================================== Total Available 2.6x 2.7x 2.2x 2.3x 2.5x - --------------- Fixed Charges
* Net income before Preferred Dividends and a Cumulative Effect of a Change in Accounting Principal. ** Fixed charges consist of interest charges (rentals are not material). EX-12.B 11 CALC. OF EARNINGS TO FIXED CHARGES PLUS PREF. SEC. DIV. EXHIBIT 12(b) SOUTH JERSEY GAS COMPANY Calculation of Ratio of Earnings to Fixed Charges Plus Preferred Securities Dividend Requirements (IN THOUSANDS)
Fiscal Year Ended December 31, 1992 1993 1994 1995 1996 ------------------------------------------- Net Income* $15,387 $15,432 $11,017 $15,813 $19,215 Federal Income Taxes, Net 7,789 7,832 5,881 9,278 10,627 Fixed Charges** 14,233 14,127 14,648 19,545 19,574 Preferred Securities Dividends 192 187 183 178 174 ------------------------------------------- Sub-Total 14,425 14,314 14,831 19,723 19,748 Capitalized Interest (193) (191) (120) (98) (114) ------------------------------------------- Total Available for Coverage $37,408 $37,387 $31,609 $44,716 $49,476 =========================================== Total Available 2.6x 2.6x 2.1x 2.3x 2.5x - --------------------- Fixed Charges and Preferred Securities Requirements
* Net Income before a Cumulative Effect of a Change in Accounting Principal (1993). ** Fixed charges consist of interest charges (rentals are not material). EX-25.A 12 FORM T-1 EXHIBIT 25(a) ============================================================================== FORM T-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) [___] ___________________ THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (State of incorporation (I.R.S. Employer if not a U.S. national bank) Identification no.) 48 Wall Street, New York, NY 10286 (Address of principal executive offices) (Zip code) __________________ SOUTH JERSEY GAS COMPANY (Exact name of obligor as specified in its charter) New Jersey 21-0398330 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Number One South Jersey Plaza, Route 54 Folsom, New Jersey 08037 (Address of principal executive offices) (Zip Code) ___________________ ___% Deferrable Interest Subordinated Debentures (Title of the indenture securities) ============================================================================== 1. General information. Furnish the following information as to the Trustee: (a) Name and address of each examining or supervising authority to which it is subject. - -------------------------------------------------------------------------------- Name Address - -------------------------------------------------------------------------------- Superintendent of Banks of the State 2 Rector Street, New York, of New York N.Y. 10006, and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza New York, N.Y. 10045 Federal Deposit Insurance Corporation Washington, D.C. 20429 New York Clearing House Association New York, New York 10005 (b) Whether it is authorized to exercise corporate trust powers. Yes. 2. Affiliations with Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None. 16. List of Exhibits. Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a- 29 under the Trust Indenture Act of 1939 (the "Act") and Rule 24 of the Commission's Rules of Practice. 1. A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.) 6. The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33- 44051.) 7. A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. (Exhibit 7 to Form T-1 filed with Registration Statement No. 333-20757.) -2- SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 24th day of March, 1997. THE BANK OF NEW YORK By: /s/ Lucille Firrincieli ----------------------------- Name: Lucille Firrincieli Title: Assistant Vice President -3- EX-25.B 13 FORM T-1 EXHIBIT 25(b) ================================================================================ FORM T-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) [___] ___________________ THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (State of incorporation (I.R.S. Employer if not a U.S. national bank) Identification no.) 48 Wall Street, New York, NY 10286 (Address of principal executive offices) (Zip code) __________________ SJG CAPITAL TRUST (Exact name of obligor as specified in its charter) Delaware 22-6720144 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Number One South Jersey Plaza, Route 54 Folson, NJ 03037 (Address of principal executive offices) (Zip code) ___________________ Preferred Trust Securities (Title of the indenture securities) ============================================================================== 1. General information. Furnish the following information as to the Trustee: (a) Name and address of each examining or supervising authority to which it is subject. - -------------------------------------------------------------------------------- Name Address - -------------------------------------------------------------------------------- Superintendent of Banks of the State 2 Rector Street, New York, of New York N.Y. 10006, and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza New York, N.Y. 10045 Federal Deposit Insurance Corporation Washington, D.C. 20429 New York Clearing House Association New York, New York 10005 (b) Whether it is authorized to exercise corporate trust powers. Yes. 2. Affiliations with Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None. 16. List of Exhibits. Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a- 29 under the Trust Indenture Act of 1939 (the "Act") and Rule 24 of the Commission's Rules of Practice. 1. A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.) 6. The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33- 44051.) 7. A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. (Exhibit 7 to Form T-1 filed with Registration Statement No. 333-20757.) -2- SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 24th day of March, 1997. THE BANK OF NEW YORK By:/s/ Lucille Firrincieli -------------------------------- Name: Lucille Firrincieli Title: Assistant Vice President -3- EX-25.C 14 FORM T-1 EXHIBIT 25(C) ============================================================================== FORM T-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) [_] ___________________ THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (State of incorporation (I.R.S. Employer if not a U.S. national bank) Identification no.) 48 Wall Street, New York, NY 10286 (Address of principal executive offices) (Zip code) __________________ SOUTH JERSEY GAS COMPANY (Exact name of obligor as specified in its charter) New Jersey 21-0398330 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Number One South Jersey Plaza, Route 54 Folsom, New Jersey 08037 (Address of principal executive offices) (Zip Code) ___________________ Guarantee of SJG Capital Trust Preferred Trust Securities (Title of the indenture securities) ============================================================================== 1. General information. Furnish the following information as to the Trustee: (a) Name and address of each examining or supervising authority to which it is subject. - -------------------------------------------------------------------------------- Name Address - -------------------------------------------------------------------------------- Superintendent of Banks of the State 2 Rector Street, New York, of New York N.Y. 10006, and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza New York, N.Y. 10045 Federal Deposit Insurance Corporation Washington, D.C. 20429 New York Clearing House Association New York, New York 10005 (b) Whether it is authorized to exercise corporate trust powers. Yes. 2. Affiliations with Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None. 16. List of Exhibits. Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a- 29 under the Trust Indenture Act of 1939 (the "Act") and Rule 24 of the Commission's Rules of Practice. 1. A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.) 6. The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33- 44051.) 7. A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. (Exhibit 7 to Form T-1 filed with Registration Statement No. 333-20757.) -2- SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 24th day of March, 1997. THE BANK OF NEW YORK By:/s/ Lucille Firrincieli ------------------------- Name: Lucille Firrincieli Title: Assistant Vice President -3- EX-27 15 FINANCIAL DATA SCHEDULE
UT 0001035216 SOUTH JERSEY GAS COMPANY 1,000 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 PER-BOOK 421,622 0 85,650 90,655 1,999 599,926 5,848 77,194 51,522 134,564 0 2,314 149,736 108,300 0 0 6,603 0 0 0 198,409 599,926 330,335 10,627 280,859 291,486 38,849 0 38,849 19,460 19,389 174 19,215 15,057 13,636 41,050 8.21 8.21
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