-----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, Lr0DKxzdql3tYkUMl2qWcvghZ+tzv/fsyB3I2zDK//1Dyrm6Cssdv6u/il+acBuj IqAqGfu2971L+3SGPm6orQ== 0001036050-98-001448.txt : 19980824 0001036050-98-001448.hdr.sgml : 19980824 ACCESSION NUMBER: 0001036050-98-001448 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19980821 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTH JERSEY GAS CO/NEW CENTRAL INDEX KEY: 0001035216 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS TRANSMISSION & DISTRIBUTION [4923] IRS NUMBER: 210398330 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-62019 FILM NUMBER: 98695773 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 SOUTH JERSEY GAS COMPANY FORM S-3 As filed with the Securities and Exchange Commission on August 21, 1998 REGISTRATION NO. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ______________ SOUTH JERSEY GAS COMPANY (Exact name of Registrant as specified in its Charter) NEW JERSEY 21-0398330 (State of Incorporation) (I.R.S. Employer 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 Registrant's 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 JONATHAN A. KOFF, ESQUIRE DECHERT PRICE & RHOADS CHAPMAN AND CUTLER 4000 BELL ATLANTIC TOWER 111 WEST MONROE 1717 ARCH STREET CHICAGO, ILLINOIS 60603 PHILADELPHIA, PENNSYLVANIA 19103-2793 (312) 845-2978 (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 MAXIMUM SECURITIES TO BE REGISTERED AGGREGATE AMOUNT OF OFFERING PRICE (1) REGISTRATION FEE - ------------------------------------------------------------------------------ Debt Securities.................... $100,000,000 $29,500 ==============================================================================
(1) Estimated solely for the purpose of determining the registration fee pursuant to Rule 457(o). THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. ================================================================================ Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS DATED AUGUST , 1998 $100,000,000 SOUTH JERSEY GAS COMPANY SECURED MEDIUM TERM NOTES, SERIES A ______________________ South Jersey Gas Company (the "Company") intends to offer and sell from time to time its Secured Medium Term Notes, Series A (the "Notes"), in an aggregate principal amount up to $100,000,000 and having maturities ranging from 1 year to 40 years from date of issue. The Notes will be issued only in fully- registered form, in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof. Unless otherwise indicated in the applicable Pricing Supplement (as defined below), interest on each Note will be payable semiannually in arrears on May 1 and November 1 at a fixed rate determined by the Company and agreed upon by the purchaser thereof at or prior to the time of sale. The purchase price, aggregate principal amount, interest rate, stated maturity date, optional redemption provisions and any other material terms not described herein of each issue of Notes will be set forth in an accompanying supplement to this Prospectus (each, a "Pricing Supplement"). See "Description of Notes." Prior to the Substitution Date (as defined herein), the Notes will be serviced and secured as to the payment of the principal thereof and interest thereon by the Company's First Mortgage Bonds, 10% Medium Term Notes Series A (the "Pledged Bond") in an aggregate principal amount equal to $100,000,000 issued and pledged by the Company and delivered to the Note Trustee (as defined herein) in accordance with the provisions of the Note Indenture (as defined herein). The principal amount of the Pledged Bond deemed outstanding will at all times be equal to the outstanding principal amount of the Notes. The Pledged Bond will be deemed to bear interest corresponding to the required payments of interest in respect of the Notes. Payments of principal and interest in respect of the Notes will constitute payments on the Pledged Bond. The Pledged Bond constitutes a separate series of the Company's First Mortgage Bonds, all of which are secured by a lien on substantially all of the property owned by the Company. See "Description of the Pledged Bond." On the Substitution Date, the Pledged Bond will cease to secure the Notes, and, at the option of the Company, the Notes either will become unsecured general obligations of the Company or will be secured by first mortgage bonds issued under a mortgage other than the Company's current mortgage indenture. See "Description of Notes -- Security; Substitution Date." Each Note will be represented by a Global Note (each, a "Global Note") registered in the name of The Depository Trust Company, as depository ("DTC" or the "Depository"), or its nominee, unless otherwise specified in the applicable Pricing Supplement. Beneficial interests in Global Notes will be shown on, and transfers thereof will be effected only through, records maintained by the Depository and its participants. Global Notes will not be issuable in certificate form except under the limited circumstances described herein. See "Description of Notes -- Certificated Notes." ______________________ 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.
================================================================================ Price to Agents' Proceeds to Public (1) Commissions(2) Company(1)(3) - -------------------------------------------------------------------------------- Per Note............... 100.00% - -------------------------------------------------------------------------------- Total.................. $100,000,000 ================================================================================
(1) Unless otherwise specified in the applicable Pricing Supplement, Notes will be sold at 100% of the principal amount thereof. (2) The Company will pay to PaineWebber Incorporated, Prudential Securities Incorporated and First Union Capital Markets, as agents (each an "Agent" and collectively, the "Agents"), a commission ranging from ___% to ____% of the principal amount of any Note, depending on its stated maturity, sold through such Agent. The Company may also sell Notes to an Agent, as principal, for resale to one or more investors or other purchasers at a fixed public offering price or at varying prices related to prevailing market prices at the time of resale, as determined by such Agent. Unless otherwise specified in the applicable Pricing Supplement, any Notes sold to an Agent as principal shall be purchased by such Agent at a price equal to 100% of the principal amount thereof less a percentage of the principal amount equal to the commission applicable to an agency sale of a Note of identical maturity. See "Plan of Distribution." (3) Before deduction of expenses payable by the Company, estimated at $614,500. The Company has agreed to indemnify the Agents against certain liabilities, including liabilities under the Securities Act of 1933, as amended. See "Plan of Distribution." _____________ The Notes will be offered on a continuing basis by the Company through the Agents, who have agreed to use their reasonable best efforts to solicit offers to purchase the Notes. The Company also may sell Notes to an Agent, as principal, for resale to one or more investors or other purchasers. The Notes will not be listed on any securities exchange, and there can be no assurance that the Notes will be sold or that there will be a secondary market for the Notes. The Company reserves the right to withdraw, cancel or modify the offer made hereby without notice. The Company or an Agent, if it solicits such offer, may reject any offer to purchase Notes, in whole or in part. See "Plan of Distribution." _____________ PAINEWEBBER INCORPORATED PRUDENTIAL SECURITIES INCORPORATED FIRST UNION CAPITAL MARKETS _____________ The date of this Prospectus is August , 1998. AVAILABLE INFORMATION South Jersey Gas Company (the "Company") is a wholly-owned subsidiary of South Jersey Industries, Inc. ("SJI"). Each of the Company and SJI is subject to the informational reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports and other information with the Securities and Exchange Commission (the "Commission"). Such reports and other information can be inspected and copied at the public reference facilities maintained by the Commission 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 material can also be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549-1004 at prescribed rates. Information regarding the operation of the public reference facilities may be obtained by calling the Commission at (800) SEC-0330. The Commission also maintains an Internet site that contains reports, proxy statements and other information regarding issuers that file electronically with the Commission. The address of the Commission's Internet site is http://www.sec.gov. Such material can also be inspected at the New York Stock Exchange, Inc. where certain of the Company's and SJI's securities are listed. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents heretofore filed by the Company with the Commission are incorporated herein by reference: 1. The Company's Annual Report on Form 10-K for the year ended December 31, 1997, filed pursuant to the Exchange Act. 2. The Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998 and June 30, 1998, filed pursuant to the Exchange Act. All documents subsequently filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of the offering of the Notes shall be deemed to be incorporated by reference in this Prospectus and to be a part hereof from the date of filing of such documents. Any statement contained herein or in a document incorporated or deemed to be incorporated by reference herein shall be modified or superseded for the purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company hereby undertakes to provide without charge to each person, including any beneficial owner, to whom a copy of this Prospectus is delivered, upon written or oral request of such person, a copy of any or all of the documents referred to above which have been or may be incorporated by reference in this Prospectus, other than exhibits to such documents not specifically incorporated by reference herein. Requests for such copies 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. CERTAIN STATEMENTS CONTAINED IN THIS REGISTRATION STATEMENT, INCLUDING THOSE STATEMENTS CONTAINED IN DOCUMENTS INCORPORATED HEREIN BY REFERENCE, THAT ARE NOT RELATED TO HISTORICAL RESULTS ARE FORWARD-LOOKING STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED OR IMPLIED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED UNDER "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS." FURTHER, CERTAIN FORWARD-LOOKING STATEMENTS ARE BASED UPON ASSUMPTIONS AS TO FUTURE EVENTS THAT MAY NOT PROVE TO BE ACCURATE. -2- CERTAIN PERSONS PARTICIPATING IN A PARTICULAR OFFERING OF NOTES HEREUNDER MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN THE NOTES, AND THE IMPOSITION OF A PENALTY BID. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION." -3- THE COMPANY GENERAL The Company is a regulated New Jersey public utility and is the principal subsidiary of SJI. The Company is a gas distribution utility that supplies natural gas to residential, commercial and industrial customers in the southern part of New Jersey. The Company 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, 1997, the Company served approximately 261,000 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 1997 amounted to 73,574,000 Mcf (thousand cubic feet), of which approximately 50,181,000 Mcf was firm sales and transportation, 8,931,000 Mcf was interruptible sales and transportation and 14,462,000 Mcf was off system sales. At December 31, 1997 the breakdown of firm sales includes 39.8% residential, 16.1% commercial, 2.5% cogeneration and electric generation, 1.4% industrial and other and 40.2% transportation. The Company is regulated as to rates and other matters by the New Jersey Board of Public Utilities. The Company'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. RATIO OF EARNINGS TO FIXED CHARGES The Company's ratio of earnings to fixed charges for each of the periods indicated is as follows:
TWELVE MONTHS ENDED YEARS ENDED DECEMBER 31, JUNE 30, - ---------------------------------------------------- ----------------------- 1993 1994 1995 1996 1997 1998 ---- ---- ---- ---- ---- ---- 2.6 2.1 2.3 2.5 2.6 2.4
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 the Company, excluding the cumulative effect of an accounting change. Fixed charges consist of interest charges and an interest factor in rentals. USE OF PROCEEDS Unless otherwise specified in the applicable Pricing Supplement, the net proceeds from the sale of the Notes will be used by the Company to retire short- term debt and to fund capital expenditure requirements. At June 30, 1998, the Company had $72.3 million of short-term debt outstanding with a weighted-average interest cost of 5.8%, with maturities not exceeding one month. DESCRIPTION OF SECURITIES The Notes may be issued in one or more series (i) secured by the Company's first mortgage bonds issued under the Company's current mortgage indenture or (ii) following the Substitution Date (as defined below), as either unsecured notes or as notes secured by the Company's first mortgage bonds issued under a mortgage indenture other than the Company's current mortgage indenture. On the Substitution Date, any outstanding Notes secured by the Company's first mortgage bonds when issued will cease to be secured by first mortgage bonds issued under the Company's current mortgage indenture and, at the Company's option, either (a) will become unsecured general -4- obligations of the Company or (b) will be secured by the Company's first mortgage bonds issued under a mortgage indenture other than the Company's current mortgage indenture. The Notes will be issued under an indenture (the "Note Indenture"), the form of which is an exhibit to the Registration Statement of which this Prospectus is a part, between the Company and The Bank of New York, as trustee (the "Note Trustee"), and are described below under the caption "Description of Notes." Prior to the Substitution Date, a Series of first mortgage bonds designated as "South Jersey Gas Company First Mortgage Bonds, 10% Medium Term Notes Series A" (the "Pledged Bond") will be issued under the Indenture of First Mortgage, dated October 1, 1947, as heretofore supplemented and amended by supplemental indentures and a new Twenty-Second Supplemental Indenture (the "New Supplement") (such Indenture of First Mortgage, as supplemented, is herein referred to as the "Mortgage"), all from the Company to The Bank of New York, as successor trustee to Guaranty Bank (the "Mortgage Trustee") and pledged to the Note Trustee under the Note Indenture to secure the Notes. The Pledged Bond to be issued under the Mortgage is described below under the caption "Description of the Pledged Bond." There is no requirement, under either the Note Indenture, or the Mortgage (collectively, the "Indentures"), that future issues of debt securities of the Company be issued under the Indenture, and, subject to certain restrictions following the Substitution Date which are described in "Description of Notes- Limitations on Liens" the Company will be free to employ other indentures or documentation, containing provisions different from those included in the Indenture or applicable to one or more issues of Notes, in connection with future issues of such other debt securities. DESCRIPTION OF NOTES GENERAL The following summaries of certain provisions of the Note Indenture do not purport to be complete and are subject to, and qualified in their entirety by, all of the provisions of the Note Indenture which is incorporated herein by reference and the form of which is an exhibit to the Registration Statement of which this Prospectus is a part. References to Section numbers under this caption are references to the Section numbers of the Note Indenture. Until the Substitution Date (as defined below), the Notes will be secured by the Pledged Bond issued under the Mortgage and delivered by the Company to the Note Trustee. See "Security; Substitution Date." ON THE SUBSTITUTION DATE (AS DEFINED BELOW), THE NOTES WILL CEASE TO BE SECURED BY THE PLEDGED BOND AND, AT THE COMPANY'S OPTION, EITHER (I) WILL BECOME UNSECURED GENERAL OBLIGATIONS OF THE COMPANY OR (II) WILL BE SECURED BY THE COMPANY'S FIRST MORTGAGE BONDS (THE "SUBSTITUTED PLEDGED BONDS") ISSUED UNDER A MORTGAGE INDENTURE OTHER THAN THE MORTGAGE (A "SUBSTITUTED MORTGAGE"). The Note Indenture provides that, in addition to the Notes offered hereby, additional notes may be issued thereunder, without limitation as to aggregate principal amount, provided that, prior to the Substitution Date, the amount of Notes that may be issued cannot exceed the aggregate principal amount of first mortgage bonds that the Company is able to issue under the Mortgage. See "Description of the Pledged Bond--Issuance of Additional Bonds." The Note Indenture provides that the Notes will be issued in one or more series, may be issued at various times, may have differing maturity dates and may bear interest at differing rates; provided that Notes which are secured by the Pledged Bond will bear interest at a rate not to exceed 10%, the stated interest rate of the Pledged Bond. The Pricing Supplement applicable to each series and issue of Notes will set forth any variation in the terms and provisions of such Notes from those described in this Prospectus. Unless otherwise indicated in the applicable Pricing Supplement, the Notes will be denominated in United States currency in minimum denominations of $1,000 and integral multiples thereof. Unless otherwise indicated in the applicable Pricing Supplement, there are no provisions in the Note Indenture or the Notes that require the Company to redeem, or permit the holders to cause a redemption of, the Notes or that otherwise protect the holders in the event that the Company incurs substantial additional indebtedness (except for certain restrictions on the Company's ability to create, assume or incur certain liens after the Substitution Date, as described in "Limitations on Liens") whether or not in connection with a change in control of the Company. However, under current law, any change in control transaction that involves the incurrence of additional long-term -5- indebtedness (as notes, first mortgage bonds or otherwise) by the Company would require approval of state utility regulatory authorities and, possibly, of federal utility regulatory authorities. REGISTRATION, TRANSFER AND EXCHANGE Notes of any series will be exchangeable for one or more Notes of the same series and issue of any authorized denominations and of a like aggregate principal amount and tenor. (Section 2.6). Unless otherwise indicated in the applicable Pricing Supplement, Notes may be presented for registration of transfer (duly endorsed or accompanied by a duly executed written instrument of transfer), at the office of the Note Trustee maintained for such purpose with respect to any series of Notes and referred to in the applicable Pricing Supplement, without service charge but upon the payment of any taxes and other governmental charges as described in the Note Indenture. Such transfer or exchange will be effected upon being satisfied with the documents of title and indemnity of the person making the request. (Sections 2.6 and 2.7). In the event of any redemption of Notes of any series, the Note Trustee will not be required to exchange or register a transfer of any Notes of such series selected, called or being called for redemption except, in the case of any Note to be redeemed in part, the portion thereof not to be so redeemed. (Section 2.6). See "Book-Entry System." CERTIFICATED NOTES Each Note will be represented by a Global Note registered in the name of the Depository, or its nominee, unless otherwise specified in the applicable Pricing Supplement. The Notes represented by the Global Note are exchangeable for certificated Notes in definitive form of like tenor as such Notes in denominations of U.S.$1,000 and integral multiples thereof if (i) the Depository notifies the Company that it is unwilling or unable to continue as Depository for the Global Note or if at any time the Depository ceases to be a clearing agency registered under the Exchange Act or (ii) the Company in its discretion, at any time, determines not to have all of the Notes represented by the Global Note. Any Note that is exchangeable pursuant to the preceding sentence is exchangeable for certificated Notes issuable in authorized denominations and registered in such names as the Depository shall direct. Subject to the foregoing, the Global Note is not exchangeable, except for a Global Note of the same aggregate denomination to be registered in the name of the Depository or its nominee. PAYMENT AND PAYING AGENTS Principal of and interest on Notes issued in the form of Global Notes will be paid in the manner described below under the caption "Book-Entry System." Unless otherwise indicated in the applicable Pricing Supplement, interest on Notes that are in the form of certificated securities will be paid by wire transfer of clearinghouse funds or by check mailed to the person entitled thereto at such person's address as it appears in the register for the Notes maintained by the Note Trustee; however, a holder of Notes of one or more series under the Note Indenture in the aggregate principal amount of $10,000,000 or more having the same interest payment dates will be entitled to request to receive payments of interest on such series by wire transfer of immediately available funds to a bank located within the continental United States if an appropriate request including wire transfer instructions has been received by the Note Trustee on or prior to the applicable regular record date in accordance with the Note Indenture. Unless otherwise indicated in the applicable Pricing Supplement, the principal of, and interest at maturity on Notes in the form of certificated Notes will be payable in immediately available funds at the office of the Note Trustee upon proper presentment and surrender thereof. (Section 2.12). All moneys paid by the Company to a paying agent for the payment of principal of, or interest, on any Note which remain unclaimed at the end of one year after such principal or interest shall have become due and payable will be repaid to the Company and the holder of such Note will thereafter look only to the Company for payment thereof (Section 5.4). -6- SECURITY; SUBSTITUTION DATE Until the Substitution Date (as defined below), the Notes will be secured by the Pledged Bond issued and delivered by the Company to the Note Trustee. See "Description of the Pledged Bond." THE "SUBSTITUTION DATE" WILL BE THE DATE THAT ALL FIRST MORTGAGE BONDS OF THE COMPANY ISSUED AND OUTSTANDING UNDER THE MORTGAGE OTHER THAN THE PLEDGED BOND (THE "FIRST MORTGAGE BONDS") HAVE BEEN RETIRED (AT, BEFORE OR AFTER THE MATURITY THEREOF) THROUGH PAYMENT, REDEMPTION OR OTHERWISE (INCLUDING THOSE FIRST MORTGAGE BONDS DEEMED TO BE PAID WITHIN THE MEANING OF THE MORTGAGE). ON THE SUBSTITUTION DATE, THE NOTE TRUSTEE WILL DELIVER TO THE COMPANY FOR CANCELLATION THE PLEDGED BOND, AND THE COMPANY WILL CAUSE THE NOTE TRUSTEE TO PROVIDE NOTICE TO ALL HOLDERS OF NOTES OF THE OCCURRENCE OF THE SUBSTITUTION DATE. AS A RESULT, ON THE SUBSTITUTION DATE, THE PLEDGED BOND WILL CEASE TO SECURE THE NOTES, AND, AT THE OPTION OF THE COMPANY, THE NOTES EITHER (I) WILL BECOME UNSECURED GENERAL OBLIGATIONS OF THE COMPANY OR (II) WILL BE SECURED BY SUBSTITUTED PLEDGED BONDS (Section 4.11). LIMITATIONS ON LIENS Following the Substitution Date, the Company shall cause the Mortgage to be closed and the Company shall not issue any additional Bonds under the Mortgage. In addition, following the Substitution Date, except as described below and unless Substituted Pledged Bonds are issued to secure the Notes, the Company may not create, assume or incur any mortgage, pledge, lien or security interest (collectively referred to in this context as "mortgages") upon any real property interest or other depreciable asset which is used in the Company's gas utility business, whether owned at the Substitution Date or thereafter acquired, to secure any indebtedness for money borrowed other than indebtedness with maturities of twelve months or less ("Debt"), without effectively securing all Notes (other than such Notes, if any, which shall by their terms be expressly excluded from such provision) equally and ratably with such Debt; provided, however, that this restriction will not apply to: (a) mortgages on any property existing at the time of the property's acquisition, including acquisition by means of merger or consolidation (but excluding any extension of or addition to such property unless the terms of the mortgage as of the date of acquisition of such property provide that such mortgage shall be secured by such extensions or additions); (b) mortgages to secure the payment of all or part of the purchase price of property or to secure any Debt incurred prior to, at the time of or within 180 days after the acquisition of such property for the purpose of financing all or part of the purchase price of such property; (d) mortgages existing as of the Substitution Date; (e) Permitted Encumbrances (as defined below); (f) any extension, refinancing, renewal or replacement (or successive extensions, refinancings, renewals or replacements), in whole or in part, of any mortgage referred to in clauses (a) through (e); provided, however, that the principal amount of Debt secured thereby may not exceed the principal amount of Debt (plus any premium or fee payable in connection with such extension, renewal or replacement) so secured at the time of such extension, refinancing, renewal or replacement; and provided, further, that such mortgage must be limited to all or such part of the property which was subject to the mortgage so extended, refinanced, renewed or replaced (plus improvements on such property); (g) mortgages in favor of the United States, any State thereof, any other country or any political subdivision of any of the foregoing, to secure partial, progress, advance or other payments under any contract or statute; or (h) mortgages securing industrial development, pollution control or similar revenue bonds. Notwithstanding the foregoing restriction, the Company may create, assume or incur any mortgage not excepted above without equally and ratably securing the Notes if the aggregate amount of all Debt then outstanding and secured by such mortgage or any other mortgage not excepted above does not exceed 10% of the total -7- consolidated capitalization of the Company as shown on the audited consolidated balance sheet contained in the latest annual report of the Company as filed with the Commission. For the purposes of this provision, any mortgage in favor of the United States of America or any States thereof, or any other country, or any political subdivision of any of the foregoing, to secure partial, progress, advance or other payments pursuant to the provisions of any contract or statute, or any mortgage securing industrial development, pollution control or similar revenue bonds shall not be deemed to create a mortgage to secure any Debt. For the purposes of this provision, the term "Permitted Encumbrance" means (a) Liens for taxes, assessments or governmental charges or levies for the then current year and taxes, assessments or governmental charges or levies not then delinquent or which thereafter can be paid without penalty or are being contested in good faith; liens for worker's compensation awards and similar obligations not then delinquent or which thereafter can be paid without penalty or are being contested in good faith; liens imposed by law, such as carriers', warehousemen's, landlords', suppliers', mechanics', laborers', materialmen's and other similar liens not then delinquent or which are being contested in good faith; (b) Liens and charges incidental to construction or current operation which have not at such time been filed or asserted or the payment of which has been adequately secured or which are insignificant in amount; (c) Liens securing obligations not assumed by the Company and on account of which it has not customarily paid and does not expect to pay interest and existing upon real estate over or in respect of which the Company has a right of way or other easement or right for pipelines, rights of way, transmission, distribution or similar purposes; provided that the loss of all such easements would not materially adversely affect the operations of the Company; (d) Any right which the United States of America or any municipal or governmental body or agency may have by virtue of any franchise, license, contract or statute to recapture or to purchase, or designate a purchaser of or order the sale of, any property of the Company upon payment of reasonable compensation therefor, or upon reasonable compensation or conditions to terminate any franchise, license or other rights before the expiration date thereof or to regulate the property and business of the Company; (e) Liens of judgments covered by insurance, or upon appeal or other proceeding for review, or not exceeding at any one time $10 million in aggregate amount; (f) Easements or reservations in respect of any property of the Company for the purpose of transmission or distribution lines or other rights- of-way, including overhead and underground transmission and distribution lines and pipelines, or similar purposes, zoning ordinances, regulations, reservations, survey exceptions, building restrictions, covenants, party wall agreements, conditions of records and such other encumbrances or charges against real property as are of a nature generally existing with respect to properties of a similar character; (g) Liens on the property of the Company incurred in the ordinary course of business to secure performance of obligations with respect to statutory or regulatory requirements, performance or return-of-money bonds, surety bonds or other obligations of a like nature, in each case which are not incurred in connection with the borrowing of money, the obtaining of advances or credit or the payment of the deferred purchase price of property; (h) Pledges or deposits by the Company under workmen's compensation laws, unemployment insurance laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Debt) or leases to which the Company is a party, or deposits to secure public or statutory obligations of the Company, or deposits of cash or United States government bonds to secure surety or appeals bonds obtained in the ordinary course of business to which the Company is a party, or deposits as security for taxes (that shall not at the time be delinquent or thereafter can be paid without penalty or are being -8- contested in good faith) or import duties incurred in the ordinary course of business, or deposits for the payment of rent or performance of other obligations under a lease, in each case incurred in the ordinary course of business; (i) Rights reserved to or vested in any municipality or public authority by the terms of any franchise, grant, license, or governmental consent or permit, or by any provision of law, to acquire, purchase, or recapture at fair value, or to designate a purchaser of such property; (j) Rights reserved to or vested in any municipality or public authority to use or control or regulate such property; (k) Any obligations or duties, affecting such property, to any municipality or public authority with respect to any franchise, grant, license or permit; (l) Exceptions or reservations therefrom of minerals, precious metals, gas, oil, petroleum, hydrocarbons, or any other substances, which exceptions or reservations exist at the time of acquisition by the Company of the property and which do not materially and adversely affect the use made or proposed to be made by it of such property; or (m) Liens existing on the Substitution Date not otherwise described in clauses (a) through (l) above. REDEMPTION The Pricing Supplement relating to each Note will indicate that such Note cannot be redeemed prior to its stated maturity or that such Note will be redeemable at the option of the Company in whole or in part, on any date on or after the date specified in such Pricing Supplement, at prices declining from a specified premium, if any, to par, together with accrued interest to the date of redemption. In addition, the Notes shall be subject to redemption upon payment of the principal amount thereof, either as a whole or in part, from time to time, through the application of proceeds available under the Mortgage upon redemption of the Pledged Bond from the condemnation of property subject to the lien of the Mortgage, or proceeds of sale of such property to a governmental body or agency having the power of eminent domain made as a result of the threat (evidenced in writing by such body or agency) of condemnation of such property together with accrued interest to the date fixed for redemption in accordance with the terms of the Mortgage. See "Description of the Pledged Bond-- Redemption" EVENTS OF DEFAULT The following constitute events of default under the Note Indenture: (a) default in the payment of principal or premium, if any, on any Note when due and payable and continuance of such default for five days; (b) default in the payment of interest on any Note when due which continues for 30 days; (c) default in the performance or breach of any other covenant or warranty of the Company in the Note Indenture and the continuation thereof for 90 days after written notice to the Company as provided in the Note Indenture; (d) prior to the Substitution Date, the occurrence of a default under the Mortgage, of which default the Mortgage Trustee or the holders of a majority in aggregate principal amount of the outstanding Notes have given written notice to the Note Trustee; (e) if any Substituted Pledged Bonds are outstanding, the occurrence of a default under the Substituted Mortgage, of which default the trustee under such Substituted Mortgage or the holders of a majority in aggregate principal amount of the outstanding Notes have given written notice to the Note Trustee; and -9- (f) certain events of bankruptcy, insolvency or reorganization of the Company. (Section 8.1). If an Event of Default, other than one relating to an event of default under the Mortgage or the Substituted Mortgage, as applicable, and the acceleration of the principal of the First Mortgage Bonds or any Substituted Pledged Bonds in accordance with the Mortgage or the Substituted Mortgage, as applicable, occurs and is continuing, either the Note Trustee or the registered holders of a majority in aggregate principal amount of the outstanding Notes of such series may declare the principal amount of all Notes of such series to be due and payable immediately. At any time after an acceleration of the Notes of such series has been declared, but before a judgment or decree for the immediate payment of the principal amount of such Notes has been obtained and so long as all of the Company's first mortgage bonds have not been accelerated, the registered holders of a majority in aggregate principal amount of the outstanding Notes of such series may, under certain circumstances, rescind and annul such acceleration and its consequences. If an Event of Default relating to an event of default under the Mortgage or the Substituted Mortgage, as applicable, and the acceleration of the principal of the first mortgage bonds issued under either the Mortgage or the Substituted Mortgage, as the case may be, in accordance with the Mortgage or the Substituted Mortgage, as applicable, occurs (see "Description of the Pledged Bond--Defaults and Notice Thereof"), the principal of all of the Notes, together with interest accrued thereon, shall become due and payable immediately without the necessity of any action by the Note Trustee or the registered holders of any Notes; provided, however, that a rescission and annulment of the declaration that the Company's first mortgage bonds outstanding under the Mortgage or the Substituted Mortgage, as applicable, be due and payable prior to their stated maturities shall constitute a waiver of such Event of Default under the Note Indenture and of its consequences (Section 8.1). The Note Indenture provides that the Note Trustee generally will be under no obligation to exercise any of its rights or powers under the Note Indenture at the request or direction of any of the holders unless such holders have offered to the Note Trustee reasonable security or indemnity against the liabilities and costs which may be incurred by such exercise. (Section 9.2). The holders of a majority in principal amount of the outstanding Notes generally will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Note Trustee, or of exercising any trust or power conferred on the Note Trustee, with respect to the Notes. (Section 8.7). Each holder of any Note has the right to institute a proceeding with respect to the Note Indenture, but such right is subject to certain conditions precedent specified in the Note Indenture. (Section 8.4). The Note Indenture provides that the Note Trustee, within 90 days after the occurrence of a default with respect to the Notes, is required to give the holders of the Notes notice of such default, unless cured or waived, but, except in the case of default in the payment of principal of, or premium, if any, or interest on any Notes, the Note Trustee may withhold such notice if it determines in good faith that it is in the interest of such holders to do so. (Section 8.8). The Company is required to deliver to the Note Trustee each year a certificate as to whether or not, to the knowledge of the officers signing such certificate, the Company is in compliance with the conditions and covenants under the Note Indenture (Section 6.6). MODIFICATION Modification and amendment of the Note Indenture may be effected by the Company and the Note Trustee with the consent of the holders of a majority in principal amount of the outstanding Notes affected thereby, provided that no such modification or amendment may, without the consent of the holder of each outstanding Note affected thereby, (a) change the maturity date of any Note; (b) reduce the rate or extend the time of payment of interest on any Note; (c) reduce the principal amount of, or premium payable on, any Note; (d) change the coin or currency of any payment of principal of, or any premium or interest on, any Note; (e) change the date on which any Note may be redeemed or adversely affect the rights of a holder to institute suit for the enforcement of any payment on or with respect to any Note; (f) impair the interest of the Note Trustee in the Pledged Bond or Substituted Pledged Bonds held by it or, prior to the Substitution Date, reduce the principal amount of the Pledged Bond or Substituted Pledged Bonds securing the Notes to an amount less than the principal amount of the related issue of Notes or alter the payment provisions of such Pledged Bond or Substituted Pledged Bonds in a manner adverse to the holders of the Notes; or (g) modify the foregoing requirements or reduce the percentage of outstanding Notes necessary to modify or amend the Note Indenture or to waive any past default to less than a majority. Modification and amendment of the Note Indenture may be effected by the Company and the Note Trustee without the consent -10- of the holders (a) to add to the covenants of the Company for the benefit of the holders or to surrender a right conferred on the Company in the Note Indenture; (b) to add further security for the Notes; (c) to make certain other modifications, generally of a ministerial or immaterial nature; or (d) to make certain other modifications which are not prejudicial to the interests of the holders of the Notes (Sections 13.1 and 13.2). DEFEASANCE AND DISCHARGE The Note Indenture provides that the Company will be discharged from any and all obligations in respect to the Notes and the Note Indenture (except for certain obligations such as obligations to register the transfer or exchange of Notes, replace stolen, lost or mutilated Notes and maintain paying agencies) if, among other things, the Company irrevocably deposits with the Note Trustee, in trust for the benefit of holders of Notes, money or certain United States government obligations, or any combination thereof, which through the payment of interest thereon and principal thereof in accordance with their terms will provide money in an amount sufficient, without reinvestment, to make all payments of principal of, and any premium and interest on, the Notes on the dates such payments are due in accordance with the terms of the Note Indenture and the Notes. Thereafter, the holders of Notes must look only to such deposit for payment of the principal of, and interest and any premium on, the Notes (Section 5.1). CONSOLIDATION, MERGER AND SALE OR DISPOSITION OF ASSETS The Company will not consolidate with or merge into any other corporation or sell, transfer or otherwise dispose of all or substantially all its assets unless the successor or transferee corporation assumes by supplemental indenture the due and punctual payment of the principal of and premium and interest on all the Notes and the performance of every covenant of the Note Indenture to be performed or observed by the Company and (i) if such transaction occurs prior to the Substitution Date, unless the successor or transferee corporation assumes the Company's obligations under the Mortgage with respect to the Pledged Bond, or (ii) if such transaction occurs on or after the Substitution Date and Substituted Pledged Bonds are outstanding, unless the successor or transferee corporation assumes the Company's obligations under the Substituted Mortgage with respect to the Substituted Pledged Bonds. Upon any such consolidation, merger, sale, transfer or other disposition of all or substantially all of the assets of the Company, the successor corporation formed by such consolidation or into which the Company is merged or to which such transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under the Note Indenture with the same effect as if such successor corporation had been named as the Company therein and the Company will be released from all obligations under the Note Indenture. The Note Indenture defines "all or substantially all" of the assets of the Company as being 50% or more of the total assets of the Company as shown on the balance sheet of the Company as of the end of the prior year and specifically permits any such sale, transfer or other disposition during a calendar year of less than 50% of total assets without the consent of the holders of the Notes and without the assumption by the transferee of the Company's obligations on the Notes and covenants contained in the Note Indenture. (Sections 12.1 and 12.2). VOTING OF THE PLEDGED BOND HELD BY NOTE TRUSTEE The Note Trustee, as a holder of the Pledged Bond, may attend any meeting of bondholders under the Mortgage to which it receives due notice, or, at its option, may deliver its proxy in connection therewith. Either at such meeting, or where any action, amendment, modification, waiver or consent to or in respect of the Mortgage or Bonds issued under the Mortgage is sought without a meeting (a "proposed action"), the Note Trustee will vote the Pledged Bond held by it, or will consent with respect thereto, as described below. The Note Trustee may agree to any proposed action without the consent of or notice to holders of the Notes where such proposed action would not adversely affect the holders of the Notes. In the event that the proposed action would adversely affect the holders of the Notes, the Note Trustee shall not vote the Pledged Bond without notice to and the approval of holders of at least a majority in aggregate principal amount of Notes then outstanding. (Section 4.3). -11- RESIGNATION OR REMOVAL OF NOTE TRUSTEE The Note Trustee may resign at any time upon written notice to the Company specifying the day upon which the resignation is to take effect and such resignation will take effect immediately upon the later of the appointment of a successor Note Trustee and such specified day. (Section 9.10). The Note Trustee may be removed at any time by an instrument or concurrent instruments in writing filed with the Note Trustee and signed by the holders, or their attorneys-in-fact, of at least a majority in principal amount of the then outstanding Notes. In addition, so long as no event of default or event which, with the giving of notice or lapse of time or both, would become an event of default has occurred and is continuing, the Company may remove the Note Trustee upon notice to the holder of each Note outstanding and the Note Trustee, and appointment of a successor Note Trustee (Section 9.10). BOOK-ENTRY SYSTEM Each issue of Notes may be issued in the form of one or more Global Notes representing all or part of such issue of Notes and which will be deposited with or on behalf of the Depository and registered in the name of the Depository or a nominee of the Depository. The following is based solely on information furnished by the Depository: Unless otherwise specified in the Pricing Supplement, DTC will act as Depository for those Notes issued as Global Notes. The Global Notes will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee). 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 Securities Exchange Act of 1934. 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. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., 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 a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The rules applicable to DTC and its Participants are on file with the Commission. Purchases of the Notes under the DTC system must be made by or through Direct Participants, which will receive a credit for the Notes on DTC's records. The ownership interest of each actual purchaser of each Note ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmation providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Notes 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 the Notes, except in the event that use of the book-entry system for the Notes is discontinued. To facilitate subsequent transfers, all securities deposited by Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. The deposit of the Notes with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Notes; DTC's records reflect only the identity of the Direct Participants to whose accounts such Notes are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of the holdings on behalf of their customers. -12- Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct 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. If the Global Notes are redeemable, redemption notices shall be sent to Cede & Co. If less than all of the Global Notes are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. will consent or vote with respect to the Notes. Under its usual procedures, DTC mails an Omnibus Proxy to the Company 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 the Notes are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal, interest and any premium payments on the Notes will be made to DTC. DTC's practice is to credit Direct Participant's accounts on payable date in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payment on payable date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as in the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the applicable Trustee or the Company, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, interest and any premium to DTC is the responsibility of the Company or the applicable Trustee, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to a series of Notes at any time by giving reasonable notice to the Company or the Note Trustee. Under such circumstances, if a successor securities depository is not obtained, certificates for such series of Notes are required to be printed and delivered. The Company may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository) for any series of Notes. In that event, certificates for such series of Notes will be printed and delivered. The information in this section concerning DTC and DTC's book-entry system has been obtained from DTC, and the Company and any underwriters, dealers or agents take no responsibility for the accuracy thereof. The underwriters, dealers or agents of any Notes may be Direct Participants of DTC. NONE OF THE COMPANY, THE NOTE TRUSTEE, THE MORTGAGE TRUSTEE, OR ANY AGENT FOR PAYMENT ON OR REGISTRATION OF TRANSFER OR EXCHANGE OF THE GLOBAL NOTE WILL HAVE ANY RESPONSIBILITY OR LIABILITY FOR ANY ASPECT OF THE RECORDS RELATING TO OR PAYMENTS MADE ON ACCOUNT OF BENEFICIAL INTERESTS IN SUCH GLOBAL NOTE OR FOR MAINTAINING, SUPERVISING OR REVIEWING ANY RECORDS RELATING TO SUCH BENEFICIAL INTERESTS. CONCERNING THE NOTE TRUSTEE The Bank of New York is the Note Trustee under the Note Indenture. The Note Trustee also acts as trustee for the Company's first mortgage bonds. The Company also currently maintains other banking relationships with the Note Trustee in the ordinary course of business. DESCRIPTION OF THE PLEDGED BOND GENERAL The Pledged Bond is to be issued under and secured by the Mortgage and the New Supplement providing for the Pledged Bond. The Pledged Bond constitutes the series of the Company's First Mortgage Bonds designated as South Jersey Gas Company First Mortgage Bonds, 10% Medium Term Notes Series A, which is limited to the aggregate principal amount of $100,000,000. The following statement includes brief summaries of certain provisions of the Mortgage. For a complete statement of such provisions, reference is made to the actual provisions -13- of the Mortgage. First Mortgage Bonds issued or issuable under the Mortgage are hereinafter sometimes called "Bonds." A copy of the Mortgage including a proposed New Supplement may be inspected at the office of the Mortgage Trustee at 101 Barclay Street, Floor 21 West, New York, New York 10286 or at the office of the Commission, 450 Fifth Street, N.W., Washington, D.C. References to articles and sections under this caption are reference to articles and sections of the Mortgage. The Pledged Bond will be issued initially to the Note Trustee and will be issuable only in fully registered form in any denomination authorized by the Company. The Pledged Bond will be transferable and the several denominations thereof will be exchangeable for Bonds of other authorized denominations but of the same series and aggregate principal amount, upon compliance with the applicable provisions of the Mortgage and the Note Indenture. No service charge will be made for any such transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto. The Pledged Bond has not been registered under the Securities Act of 1933, as amended. INTEREST, MATURITY AND PAYMENT Interest on the Pledged Bond shall accrue at the rate of 10% per annum computed on the basis of a 360-day year of twelve 30-day months and shall be payable semi-annually in arrears on May 1 and November 1 of each year, payable initially on May 1, 1999, subject to receipt of certain credits against principal and interest and such obligations as set forth below. In addition to any other credit, payment or satisfaction to which the Company is entitled with respect to the Pledged Bond, the Company shall be entitled to credits against amounts otherwise payable in respect of the Pledged Bond in an amount corresponding to (i) the principal amount of any of the Notes issued under the Note Indenture secured thereby surrendered to the Note Trustee by the Company, or purchased by the Note Trustee, for cancellation, (ii) the amount of money held by the Note Trustee and available and designated for the payment of principal of, and/or interest on, the Notes secured thereby, regardless of the source of payment to the Note Trustee of such moneys and (iii) the amount by which principal of and interest due on the Pledged Bond exceeds principal of and interest due on the Notes secured thereby. The Note Trustee shall make notation on the Pledged Bond of any such credit. LIEN AND SECURITY The Pledged Bond is secured by the lien of the Mortgage equally and proportionately with all other Bonds. The Mortgage constitutes a first lien (subject to "excepted encumbrances" as defined in the Mortgage) on substantially all the property and franchises of the Company now owned or hereafter acquired, for the equal and ratable benefit of all Bonds now or hereafter outstanding under the Mortgage. The Mortgage excepts from its lien materials and supplies consumable in the operation of the Company, merchandise and products acquired, manufactured, produced or held for sale in the usual course of business, motor vehicles, and cash, accounts receivable, stocks, bonds, notes, and securities which are neither specifically pledged with the Mortgage Trustee nor required by the Mortgage to be so pledged (Granting Clause). There are certain conditions which must be complied with relating to the lien of the Mortgage in case of a merger, consolidation or sale of all the assets of the Company. (Article VII) ISSUANCE OF ADDITIONAL BONDS Additional Bonds, ranking equally with all outstanding Bonds, may be issued under the Mortgage, without limit as to aggregate principal amount, upon compliance with Article III of the Mortgage and after obtaining the approval of the New Jersey Board of Public Utilities ("BPU"). The principal provisions for the issuance of additional Bonds are summarized below. Additional Bonds may be issued in principal amount not exceeding: (i) 60% of the cost or fair value (whichever is less) of property additions which consist of real and personal property constructed or acquired by the Company subject to the lien of the Mortgage and not previously utilized under the Mortgage as the basis for additional bonds or certain other purposes, located in the State of New Jersey, and used or useful by the Company in connection with its business, after deducting from such cost or fair value the excess, if any, of the cost of -14- mortgaged property retired (as defined in the Mortgage) and certain amounts relating to depreciation of the mortgaged property which are calculated in the annual certificate for the replacement fund hereafter referred to; provided that: (a) the net earnings of the Company (as defined in the Mortgage) for 12 consecutive months within the preceding 15 months shall have been at least 2 times the annual interest charges on all prior lien obligations and all Bonds to be outstanding after the authentication of those about to be authenticated; and (b) if such property additions are subject to a prior lien: (x) 166-2/3% of the principal amount of the outstanding obligations secured by such prior lien shall be deducted from the cost or fair value of such property additions (unless such deduction has been made previously); and (y) if the deduction referred to in clause (x) has not previously been made, then the aggregate principal amount of all outstanding prior lien obligations upon all property additions used as the basis for authentication of Bonds, withdrawal of money, or release of property under the Mortgage or as a credit against a payment to any improvement or sinking fund for Bonds of a particular series, or the replacement fund hereinafter referred to, shall not exceed 10% of the principal amount of all Bonds to be outstanding after authentication of those about to be authenticated (Section 3.04); (ii) the principal amount of other Bonds acquired, paid, retired, or with respect to which payment has been provided for excluding, however, any such Bonds paid or retired by the operation of any sinking, replacement, purchase or other analogous fund or otherwise used as a credit against the obligations of the Company, with certain specified exceptions; provided that if such Bonds were not theretofore bona-fide issued and bear interest at a lower rate than the Bonds to be authenticated, the net earnings condition specified above in paragraph (i) must be complied with (Sections 3.04 and 3.06); and (iii) the amount of money deposited with the Mortgage Trustee for that purpose (Sections 3.03 and 3.07). Money so deposited may be withdrawn by the Company upon the same conditions as would entitle it to obtain the authentication of Bonds of an equal principal amount under the above clauses (i) or (ii), except that if the net earnings condition specified in clause (i) was complied with at the time of the deposit of such money and included all interest charges on prior lien obligations existing at the time of the requested withdrawal, it need not be again complied with upon the withdrawal thereof. Pending such withdrawal, such money may be invested by the Mortgage Trustee in obligations of the United States and the net proceeds of any sale thereof withdrawn as aforesaid (Section 3.08 and 3.09). If the additional Bonds are to be issued on the basis of property additions, the Mortgage requires the delivery to the Mortgage Trustee of a certificate of an engineer, appraiser, or other expert as to the fair value of such additions to the Company as of a specified date not more than three months before the application for the additional Bonds is filed with the Mortgage Trustee. If any of such additions were acquired from another gas utility, the Mortgage requires that the initial appraisal be performed by an engineer, appraiser or other expert who is independent of the Company (Section 3.04, as amended by 17/th/ Supp.). REPLACEMENT FUND The Mortgage requires that the Company on or before April 1 of each year, deliver a replacement fund certificate and pay to the Mortgage Trustee for a replacement fund an amount equal to $198,000 plus 2% of the cost of all additions made to its depreciable public utility property during the period from 0ctober 1, 1947, to the end of the preceding calendar year, less 2% of the cost of all depreciable public utility property retired by it during such period. The Company may take as a credit against such payment (a) 166-2/3% times the principal amount of bonds which could then be issued on the basis of property additions, and (b) the principal amount of Bonds paid, acquired, or retired by it, to the extent that the same have not been otherwise included in a prior Replacement Fund Certificate filed with the Mortgage Trustee. So long as any Bonds of the Fourteenth Series, Fifteenth Series, Sixteenth Series, Seventeenth Series, Eighteenth Series, Nineteenth or Twentieth Series remain outstanding, the Company will satisfy its obligations under the replacement fund through the use of cash only if it has first used all available property additions and retired bonds, and then only to the extent such amounts are not sufficient to satisfy such obligations. All money in the replacement fund shall, upon request by the Company, be applied as described below under "Release and Substitution of Property" in the case of proceeds from the sale of released property (Sections 5.19 and 6.07; 15/th/ Supp., Section 3.2; 16th Supp., Section 3.2; 18th Supp., Section 3.2.; 19th Supp., Section 3.2.; 20th Supp., Section 3.2; 21/st/ Supp., Section 3.2; and 22/nd/ Supp. Section 3.2). -15- RELEASE AND SUBSTITUTION OF PROPERTY Upon substitution of other property of equal value, the Company may dispose of, free from the lien of the Mortgage and without procuring a release therefrom, any machinery, tools, implements, fixtures, or equipment unsuitable or not required for the conduct of its business (Section 6.03). Any property no longer necessary for the proper conduct of its business may be sold, exchanged or disposed of by the Company, and released from the lien of the Mortgage, upon receipt by the Company of a consideration, which shall be paid or delivered to the Mortgage Trustee (unless required to be paid or delivered to the trustee of a prior lien), equal to at least the fair value thereof and which shall consist of (i) money, (ii) obligations of any federal, state, municipal, or other governmental body or agency purchasing such property, (iii) obligations maturing within 15 years, secured by a purchase money mortgage on such property, and constituting not more than 60% of such consideration, and/or (iv) property additions (not otherwise utilized under the Mortgage) which might have formed the basis for the authentication of additional Bonds (Sections 6.04 and 6.05). Property taken by eminent domain proceedings or under governmental power of purchase shall be released from the Mortgage and the proceeds of such taking or purchase shall be paid to the Trustee (Section 6.08). Proceeds received by the condemnation or from the sale of property released from the Mortgage (i) may be withdrawn by the Company upon compliance with the same conditions that would authorize the authentication of Bonds of an equal principal amount, except that no earnings condition shall be applicable, and except that money may be withdrawn on the basis of property additions up to 100% of the cost or fair value (whichever is less) thereof after deducting the required amount on account of any prior lien obligations and without any deduction for the cost of property retired; (ii) may be temporarily invested by the Mortgage Trustee in obligations of the United States; or (iii) may be applied to the purchase or redemption of Bonds; provided that all such proceeds (including proceeds temporarily invested as aforesaid) not withdrawn or applied for 5 years after receipt by the Mortgage Trustee shall be applied to the purchase or redemption of Bonds (Section 6.07). Proceeds of insurance on mortgaged property, except on losses of less than $10,000, are payable to the Mortgage Trustee and may be applied by it (i) to reimburse the Company for the cost of repairing, renewing, or replacing property damaged or destroyed or (ii) as above provided in the case of proceeds of the sale of property released from the Mortgage (Section 5.12). No prior notice is required in connection with any releases or substitutions of property, but Section 8.03 contains provisions relating to the transmission by the Mortgage Trustee to Bondholders, from time to time, of reports of such releases or substitutions, and the consideration received therefor. RESTRICTIONS ON DIVIDENDS So long as any Bonds of the Twentieth Series shall remain outstanding, the Company will not declare or pay any dividend on any shares of its Common Stock (other than dividends payable in shares of its Common Stock) or make any distribution on such shares, or purchase or otherwise acquire any such shares (except shares acquired without cost to the Company), or advance any amount to or invest any amount in the property, securities or indebtedness of, or guarantee any indebtedness of, any subsidiary if, after giving effect to such action, the sum of the aggregate amounts so declared, paid, distributed, purchased, acquired, advanced, invested or guaranteed after December 31, 1997 would exceed the aggregate net income of the Company available for dividends on its Common Stock earned after such date plus the sum of $56,000,000. (Section 3.1; 22/nd/ Supp.) For the purposes of this restriction, "subsidiary" shall mean any corporation directly or indirectly controlled by or under common control with the Company. For the purpose of calculating the requirements of this restriction, the net income of the Company available for dividends on its Common Stock shall be determined in accordance with such system of accounts as may be prescribed by any governmental authority having jurisdiction in the premises or in the absence thereof in accordance with generally accepted accounting principles as in effect at such time; provided, however, that (a) the deductions for depreciation or renewal or replacement reserves in respect of each year shall be the amount taken therefor on the accounts of the Company or the amount required to be stated in item (1) of the Replacement Fund Certificate to be filed under the Mortgage with respect to the period ending at the close of such year, whichever be greater, and (b) no deduction or adjustment shall be made from gross income for or in respect of (i) expenses in connection with the redemption or retirement of any securities issued by the Company, including any amount paid in excess of the principal or par or stated value of securities redeemed or retired, and, if such redemption or retirement is effected with the proceeds of sale of other securities of the Company, interest on the securities redeemed or retired from the date on which the funds required for such redemption or retirement shall be deposited in trust for such purpose to the date of such redemption or retirement, (ii) profits or losses from sales of -16- capital assets or taxes in respect of such profits, (iii) any adjustments to retained earnings (including tax adjustments) applicable to any period prior to January 1, 1998, (iv) charges for the write-off of unamortized debt discount and expense carried on the books of the Company at December 31, 1997, or (v) charges for the write-off or write-down of the amount at which any property of the Company was carried on its books at December 31, 1997, to the extent that the same shall be approved by, or be made pursuant to any rule, regulation, or order of, any governmental authority having jurisdiction in the premises and shall not be required by such authority to be charged against earning accumulated after December 31, 1997. (Section 3.1; 22/nd/ Supp.) REDEMPTION Bonds of the Twentieth Series, including the Pledged Bond, shall be subject to redemption, either as a whole or in part, from time to time upon payment of the principal amount thereof through the application of proceeds available under the Mortgage from the condemnation of property subject to the lien of the Mortgage, or proceeds of sale of such property to a governmental body or agency having the power of eminent domain made as a result of the threat (evidenced in writing by such body or agency) of condemnation of such property together with accrued interest to the date fixed for redemption in accordance with the terms of the Mortgage, which provides that if less than all Bonds of all Series are redeemed then proceeds from the sale of such property will be applied to the redemption of all Bonds, including the Pledged Bond, on a pro rata basis, based on the amount of the Bonds then outstanding. (Section 1.7, 22/nd/ Supp.) CONSOLIDATION, MERGER, OR SALE Subject to the approval of the BPU, the Mortgage does not prevent a consolidation or merger of the Company with or into any other corporation or a conveyance and transfer of all of the property and franchises of the Company to any other corporation, if (i) the consolidation, merger, or conveyance and transfer is subject to the continuing lien of the Mortgage on the mortgaged property and will not impair the lien or any of the rights or powers of the Trustee or Bondholders; (ii) the corporation formed by the consolidation or into which the Company is merged or which acquires the mortgaged property assumes and agrees in writing to pay the Bondholders the principal of and interest on all the Bonds, as and when due; (iii) any such successor corporation executes and delivers a supplemental indenture which contains, among other things: (w) an agreement to perform all obligations of the Company under the Mortgage, (x) a stipulation that such consolidation, merger, or conveyance and transfer is not a waiver or release of any rights or powers of the Mortgage Trustee or the Bondholders, (y) a grant confirming the lien of the Mortgage Trustee upon the mortgaged property and (z) a grant to the Mortgage Trustee subjecting to the lien of the Mortgage property additions to be used in the future and certain after-acquired property; and (iv) the Mortgage Trustee shall have consented to the consolidation, merger, or conveyance and transfer, which consent the Mortgage Trustee is required to give upon receiving an opinion of counsel that the foregoing conditions in the Mortgage have been satisfied unless in the Mortgage Trustee's opinion the transaction would be prejudicial to the interests of the bondholders. (Section 7.01) MODIFICATIONS OF MORTGAGE With the written consent of the holders of 66-2/3% in principal amount of the Bonds outstanding, any of the provisions of the Mortgage or of the Bonds may be altered, amended or eliminated, or additional provisions added. If such change pertains only to the Bonds of one or more Series, but less than all Series, only the written consent of the holders of 66-2/3% in principal amount of the then outstanding Bonds of each Series to which such change pertains is needed. However, no such change may (i) alter or modify the right (expressed in Section 9.16) of any Bondholder to receive payment of the principal of and interest on his Bonds on or after the respective due dates thereof; (ii) change any of the provisions of any Bond with respect to the time, terms, manner, or amount of any payment of the principal thereof or interest thereon without the consent of the holder of such Bonds; or (iii) reduce the percentage of Bondholders whose consent shall be required for the execution of any subsequent supplemental indenture. The consent of the BPU may be required before certain of the above actions may be taken (Section 10.02). Certain other modifications and amendments described in the Mortgage may be made without the consent of the Bondholders (Section 10.01). -17- PERCENTAGE OF BONDHOLDERS REQUIRED TO TAKE CERTAIN ACTION Upon the occurrence of a Mortgage Event of Default (as defined below), the Mortgage Trustee or the holders of 25% in principal amount of the Bonds then outstanding may by written declaration accelerate the maturity of the principal of all the Bonds (Section 9.03); but if the Company shall cure all Mortgage Events of Default, the holders of a majority in principal amount of the Bonds then outstanding may rescind, or require the Mortgage Trustee to rescind, such acceleration (Section 9.13). The holders of 66-2/3% in principal amount of the Bonds then outstanding may waive any past default under the Mortgage and its consequences except a default in the payment of principal of or interest on any of the Bonds (Section 9.13). No bondholder may enforce the lien of the Mortgage unless the holders of 25% in principal amount of the Bonds then outstanding have requested the Mortgage Trustee to do so and offered to indemnify it against expenses and liabilities in connection therewith, and unless the Mortgage Trustee has failed to take such action within 60 days (Section 9.15). The holders of a majority in principal amount of the Bonds then outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Mortgage Trustee or exercising any trust or power conferred on it, unless such action would be contrary to law or the provisions of the Mortgage or would, in the opinion of the Mortgage Trustee, be unjustly prejudicial to the other Bondholders (Section 9.18). For the purpose of computing the percentage of holders of Bonds requisite for the taking of any action permitted under the Mortgage (including the modification of the Mortgage) the calculation will be on the basis of the principal amount of all Bonds outstanding exclusive of Bonds held by the Company and all Bonds known to the Mortgage Trustee to be held by or any person controlling or controlled by or under common control with the Company shall be disregarded (Article I). DEFAULTS AND NOTICE THEREOF The following constitute events of default under the Mortgage (a "Mortgage Event of Default"): (i) defaults in the payment of principal of any Bond or prior lien obligation; (ii) default for 60 days in the payment of interest on any Bond or any prior lien obligations, or in the payment of any sinking, replacement, purchase or analogous fund; (iii) default for 60 days after notice in the performance of any other covenant in the Mortgage or in any prior lien mortgage in certain cases; (iv) default occurs in observing or performing any covenant or condition in any mortgage constituting a prior lien on mortgaged property and the mortgagee or trustee thereunder institutes proceedings to invoke rights or remedies available by reason of such default, and (v) certain events of bankruptcy, insolvency or reorganization (Section 9.02). The 15th Supp., 16th Supp., 18th Supp., 19th Supp., 20th Supp., 21/st/ Supp and 22/nd/ Supp. provide that the following also constitute events of default under the Mortgage: (i) default in the payment of principal of any Bond of the Fourteenth Series, Fifteenth Series, Sixteenth Series, Seventeenth Series, Eighteenth Series, Nineteenth Series or Twentieth Series, respectively, at maturity or upon redemption pursuant to the provisions of any sinking, replacement, purchase or analogous fund or pursuant to any optional or other redemption or otherwise provided if payment is made by wire transfer reasonably expected to be effective on such due date, which transfer is not credited to the Bondholder's account on such date, default shall not occur until after five days following the due date; (ii) and default for ten days in the payment of interest on any Bond of the Fourteenth Series, Fifteenth Series, Sixteenth Series, Seventeenth Series, Eighteenth Series, Nineteenth Series or Twentieth Series respectively (15th Supp., Section 6.1; 16th Supp., Section 6.1; 18th Supp., Section 6.1; 19th Supp., Section 6.1; 20th Supp., Section 7.1; 21/st/ Supp. Section 7.1 and 22/nd/ Supp. Section 7.1). The 15th Supp., 16th Supp., 18th Supp., 19th Supp., 20th Supp. 21/st/ Supp. and 22/nd/ Supp. also provide that it shall be an event of default under the Mortgage if the Company shall default in the performance of or compliance with any covenant, condition or term in the Mortgage or the 15th Supp., 16th Supp., 18th Supp., 19th Supp., 20th Supp., 21/st/ Supp. or 22/nd/ Supp., respectively, and such default shall continue for 30 days after the Company shall have knowledge thereof. Within 90 days after the occurrence thereof, the Mortgage Trustee shall give notice of any defaults to the Bondholders, provided that in the case of default in the payment of principal of or interest on any Bond or of any sinking fund or purchase fund installment, the Mortgage Trustee is not required to give notice to the Bondholders of any default under the Mortgage if the Mortgage Trustee in good faith determines that the withholding of such notice is in the interest of the Bondholders (Section 11.05). Periodic evidence of compliance with certain provisions of the Mortgage is required to be submitted to the Mortgage Trustee (Sections 5.09, 5.12, 5.18 and 5.19). The Mortgage Trustee, subject to its duty to use the same degree of care and skill as a prudent man would use in the conduct of his own affairs (Section 11.02), before proceeding to enforce the lien of the Mortgage, is -18- entitled to be indemnified to its satisfaction against all its prospective costs, expenses, and liability in connection therewith. (Section 11.01) DISCHARGE AND SATISFACTION Whenever all amounts due or to become due on all outstanding Bonds issued under the Mortgage shall have been paid or provision for the payment thereof shall have been made (as such provision for payment is defined below), and all amounts payable by the Company to the Mortgage Trustee under the Mortgage shall have been paid, the Mortgage Trustee shall, upon the request and at the expense of the Company, satisfy or discharge the Mortgage of record wherever recorded, and convey, transfer, assign, and deliver the mortgaged property to or upon the order of the Company, and all the title, estate, rights, and powers of the Mortgage Trustee shall forthwith cease, the mortgaged property shall revert to the Company, and all responsibility of the Mortgage Trustee and all obligations of the Company under the Mortgage (except as expressly provided therein) shall then cease. "Provision for payment of a Bond" shall be deemed to have been made if (a) when the principal of such Bond shall have become due and payable, whether by maturity, call for redemption, declaration, or otherwise, all amounts due thereon shall have been paid or shall have been deposited in trust with and shall be held by the Mortgage Trustee for the account of the holder thereof, or (b) at any time in advance of the maturity thereof, the Company (1) shall have either (i) deposited with the Mortgage Trustee in trust all amounts to become due thereon up to and upon the maturity date thereof or (ii) duly called such Bond for redemption on a date specified, in accordance with the provisions of the Mortgage, given all notices required to make such call effective or made provision satisfactory to the Mortgage Trustee for giving all such notices, and deposited with the Mortgage Trustee in trust all amounts to become due upon such Bond up to and upon such redemption date, and (2) shall have irrevocably authorized the Mortgage Trustee forthwith to pay to the holder thereof, out of the funds so deposited with it, all amounts so to become due on such Bond up to and upon the maturity date or the redemption date, as the case may be, such payment to be made upon such Bond whenever the same shall be presented for that purpose without awaiting the maturity date or the redemption date, and shall have given at least one notice by publication of such deposit and authorization or shall have made provision satisfactory to the Mortgage Trustee for giving such notice. PLAN OF DISTRIBUTION The Notes are being offered on a continuing basis by the Company through the Agents, each of which has agreed to use reasonable best efforts to solicit purchases of the Notes. The Notes may also be sold to an Agent as principal for reoffering as described below. The Company will have the sole right to accept offers to purchase Notes and may reject any proposed purchase of Notes in whole or in part. Each Agent will have the right, in its discretion reasonably exercised, to reject any proposed purchase of Notes through it in whole or in part. The Company will pay a commission to an Agent, depending upon maturity, ranging from ____% to ____% of the principal amount of any Notes sold through such Agent. Unless otherwise specified in the applicable Pricing Supplement, any Notes sold to an Agent as principal will be purchased by such Agent at a price equal to 100% of the principal amount thereof less a percentage equal to the commission applicable to any agency sale of a Note of identical maturity. Such Note may be resold by an Agent to investors and other purchasers from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale or may be resold to certain dealers. Resales of notes by an Agent to a dealer may be made at a discount, which will not be in excess of the discount to be received by such Agent from the Company. After the initial public offering of Notes, the public offering price (in the case of Notes to be resold on a fixed public offering price basis), the commission and the discount may be changed. The Company reserves the right to withdraw, cancel or modify the offer made hereby without notice and may reject orders in whole or in part placed through an Agent. Unless otherwise specified in an applicable Pricing Supplement, payment of the purchase price of the Notes will be required to be made in immediately available funds in New York City on the date of settlement. No Note will have an established trading market when issued. The Notes will not be listed on any securities exchange. Each Agent may from time to time purchase and sell Notes in the secondary market, but no Agent is obligated to do so, and there can be no assurance that there will be a secondary market for the Notes or liquidity in the secondary market if one develops. From time to time, the Agents may make a market in the Notes but are not obligated to do so and may discontinue such market-making activity at any time. In connection with the offering, the rules of the Commission permit the Agents to engage in certain transactions that stabilize the price of the Notes. Such transactions consist of bids or purchases for the purpose of pegging, fixing or maintaining the price of the Notes. If the Agents create a short position in the Notes in connection with an offering of Notes (i.e., if they sell more Notes than are set forth on the cover page of the Pricing Supplement), the Agents may reduce that short position by purchasing Notes in the open market. PaineWebber Incorporated, on behalf of the Agents, may also impose a penalty bid on certain of the Agents. This means that if PaineWebber Incorporated, on behalf of the Agents, purchases Notes in the open market to reduce the Agents' short position or to stabilize the price of the Notes, it may reclaim the amount of the selling concession from the Agents who sold the Notes as part of the offering. In general, purchases of a security for the purpose of stabilization or to reduce a short position could cause the price of the security to be higher than it might be in the absence of such purchases. The imposition of a penalty bid might also have an effect on the price of a security to the extent that it were to discourage resales of the security. Neither the Company nor any of the Agents makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above might have on the price of the Notes. In addition, neither the Company nor any of the Agents make any representation that they will engage in such transactions or that such transactions, once commenced, will not be discontinued without notice. The Agents may be deemed to be "underwriters" within the meaning of the Securities Act of 1933, as amended. The Company has agreed to indemnify the Agents against certain liabilities, including liabilities under -19- such Act, and to contribute to payments the Agents may be required to make in respect thereof. In addition, the Company has agreed to reimburse the Agents for certain expenses related to the offering made hereby. LEGAL MATTERS Certain legal matters will be passed upon for the Company by Dechert Price & Rhoads, Philadelphia, Pennsylvania, counsel to the Company, and for the Agents by Chapman and Cutler, Chicago, Illinois. EXPERTS The financial statements and the related financial statement schedules included in the Company's Annual Report on Form 10-K incorporated in this prospectus by reference have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report, which is incorporated herein by reference, and have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. -20- ================================================================================ NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND ANY PRICING SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY AGENT. THIS PROSPECTUS AND ANY PRICING SUPPLEMENT 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 AND ANY PRICING SUPPLEMENT 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 AND ANY PRICING SUPPLEMENT 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 COMPANY 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
PAGE ---- Available Information..................................................... 2 Incorporation of Certain Documents by Reference........................... 2 The Company............................................................... 4 Use of Proceeds........................................................... 4 Description of Securities................................................. 4 Description of Notes...................................................... 5 Description of the Pledged Bond........................................... 13 Plan of Distribution...................................................... 19 Legal Matters............................................................. 20 Experts................................................................... 20
_________ $100,000,000 SOUTH JERSEY GAS COMPANY [LOGO] SECURED MEDIUM TERM NOTES SERIES A ---------- PROSPECTUS ---------- PAINEWEBBER INCORPORATED PRUDENTIAL SECURITIES INCORPORATED FIRST UNION CAPITAL MARKETS __________ AUGUST , 1998 ================================================================================ PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. SEC Registration Fee................................................. $ 29,500 Legal Fees and Expenses.............................................. 200,000 Accounting Fees and Expenses......................................... 110,000 Rating Agency Fees................................................... 105,000 Printing and Certificate Engraving................................... 150,000 Miscellaneous (including Blue Sky Fees and Expenses)................. 20,000 ------- Total................................................................ $ 614,500 ======= 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, the Company: (1) has power to indemnify each director and officer of the Company (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 the Company, if (a) such director or officer acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, 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 the Company against expenses in connection with any proceeding by or in the right of the Company 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 the Company; 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 the Company, 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 the Company 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. II-1 Indemnification may be awarded by a court under (1) or (2) as well as under (3) above, notwithstanding a prior determination by the Company that the director or officer has not met the applicable standard of conduct. 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 the Company's Bylaws provides, in pertinent part, as follows: (1) the Company 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 the Company 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, the Company 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 the Company'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 the Company shall have the power to (a) purchase and maintain, at the Company's expense, insurance on behalf of the Company 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. The Company maintains and pays all premiums on directors and officers liability insurance policies with a primary liability limit of $35,000,000. ITEM 16. EXHIBITS. EXHIBIT NO. EXHIBIT DESCRIPTION 1(a)* Form of Distribution Agreement. (4)(a) Form of Stock Certificate for Common Stock. Incorporated by reference from Exhibit (4)(a) of Form 10 filed March 1997 (4)(b)(i) First Mortgage Indenture dated October 1, 1947. Incorporated by reference from Exhibit (4)(b)(i) of Form 10-K of SJI for 1987 (1-6364) (4)(b)(ii) Twelfth Supplemental Indenture dated as of June 1, 1980. Incorporated by reference from Exhibit 5(b) of Form S-7 of SJI (2-68038). (4)(b)(iii) Sixteenth Supplemental Indenture dated as of April 1, 1989, 10 1/4% Series due 2008. Incorporated by reference from Exhibit (4)(b)(xv) of Form 10-Q of SJI for the quarter ended March 31, 1988 (1-6364). (4)(b)(iv) Seventeenth Supplemental Indenture dated as of May 1, 1989. Incorporated by reference from Exhibit (4)(b)(xv) of Form 10-K of SJI for 1989 (1-6364). (4)(b)(v) Eighteenth Supplemental Indenture dated as of March 1, 1990. Incorporated by reference from Exhibit (4)(e) of Form S-3 of SJI (33-36581). II-2 EXHIBIT NO. EXHIBIT DESCRIPTION (4)(b)(vi) Nineteenth Supplemental Indenture dated as of April 1, 1992. Incorporated by reference from Exhibit (4)(b)(xvii) of Form 10- K of SJI for 1992 (1-6364). (4)(b)(vii) Twentieth Supplemental Indenture dated as of June 1, 1993. Incorporated by reference from Exhibit (4)(b)(xviii) of Form 10-K of SJI for 1993 (1-6364). (4)(b)(viii) Twenty-First Supplemental Indenture dated as of March 1, 1997. Incorporated by reference from Exhibit (4)(b)(xviv) of Form 10- K of SJI for 1997 (1-6364). (4)(b)(ix) Form of Twenty-Second Supplemental Indenture. (4)(c) Indenture dated as of January 31, 1995; 8.60% Debenture Notes due February 1, 2010. Incorporated by reference from Exhibit (4)(c) of Form 10-K of SJI for 1994 (1-6364). (4)(d) Certificate of Trust for SJG Capital Trust. Incorporated by reference from Exhibit 3(a) of Form S-3 of SJG Capital Trust and South Jersey Gas Company as filed March 27, 1997, as amended April 18, 1997 and April 23, 1997 (333-24065). (4)(d)(i) Trust Agreement of SJG Capital Trust. Incorporated by reference from Exhibit 3(b) of Form S-3 of SJG Capital Trust and South Jersey Gas Company as filed March 27, 1997, as amended April 18, 1997 and April 23, 1997 (333-24065). (4)(d)(ii) Form of Amended and Restated Trust Agreement for SJG Capital Trust. Incorporated by reference from Exhibit 3(c) of Form S-3 of SJG Capital Trust and South Jersey Gas Company as filed March 27, 1997, as amended April 18, 1997 and April 23, 1997 (333-24065). (4)(d)(iii) Form of Preferred Security for SJG Capital Trust. Incorporated by reference from Exhibit 4(a) of Form S-3 of SJG Capital Trust and South Jersey Gas Company as filed March 27, 1997, as amended April 18, 1997 and April 23, 1997 (333-24065). (4)(d)(iv) Form of Deferrable Interest Subordinated Debenture. Incorporated by reference from Exhibit 4(b) of Form S-3 of SJG Capital Trust and South Jersey Gas Company as filed March 27, 1997, as amended April 18, 1997 and April 23, 1997 (333-24065). (4)(d)(v) Form of Deferrable Interest Subordinated Debenture. Incorporated by reference from Exhibit 4(c) of Form S-3 of SJG Capital Trust and South Jersey Gas Company as filed March 27, 1997, as amended April 18, 1997 and April 23, 1997 (333-24065). (4)(d)(vi) Form of Guaranty Agreement between South Jersey Gas Company and SJG Capital Trust. Incorporated by reference from Exhibit 4(d) of Form S-3 of SJG Capital Trust and South Jersey Gas Company as filed March 27, 1997, as amended April 18, 1997 and April 23, 1997 (333-24065). (4)(e) Form of Medium Term Note Indenture 5* Opinion of Dechert Price & Rhoads (12) Calculation of Ratio of Earnings to Fixed Charges (Before Federal Income Taxes) (filed herewith). (23)(a) Consent of Deloitte & Touche LLP (see page II-6 hereof). (23)(b) Consent of Dechert Price & Rhoads (included in Exhibit 5). (24) Power of Attorney (See page II-5 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 Medium Term Note Indenture (filed herewith). (27) Financial Data Schedule (submitted only in electronic format to the Securities and Exchange Commission). * To be filed by amendment. ITEM 17. UNDERTAKINGS. A. Undertaking required by Item 512(a) of Regulation S-K. The undersigned 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 this Registration Statement or any material change to such information in this 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. The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the undersigned Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended 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(h) of Regulation S-K. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of the undersigned Registrant pursuant to the foregoing provisions, or otherwise, the undersigned Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the undersigned Registrant of expenses incurred or paid by a director, officer or controlling person of the undersigned Registrant 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 undersigned Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-4 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 21 day of August 1998. SOUTH JERSEY GAS COMPANY By: /s George L. Baulig ------------------- George L. Baulig, Senior Vice President and Corporate Secretary 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. KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears below constitutes and appoints George L. Baulig 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 any registration statements filed pursuant to Rule 462 promulgated under the Securities Act of 1933 and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto 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 said attorney-in-fact and agent or his substitute or substitutes, may lawfully do or cause to be done by virtue thereof.
NAME TITLE DATE SIGNATURE C. Biscieglia President (principal August 21, 1998 s/ C. Biscieglia executive officer) and Director D.A. Kindlick Senior Vice President August 21, 1998 s/ D.A. Kindlick principal financial officer) W.J. Smethurst, Vice President and August 21, 1998 s/ W.J. Smethurst, Jr. Jr. Treasurer (principal accounting officer) F.R. Raring Director August 21, 1998 /s F.R. Raring A.G. Dickson Director August 21, 1998 /s A.G. Dickson R.L. Dunham Director C.D. McCormick Director August 21, 1998 /s C.D. McCormick S.M. Vioni Director August 21, 1998 /s S.M. Vioni
II-5 EXHIBIT 23(a) CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in this Registration Statement of South Jersey Gas Company on Form S-3 of our report dated February 18, 1998 appearing in the Annual Report on Form 10-K of South Jersey Gas Company for the year ended December 31, 1997, 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 August 21, 1998 II-6 EX-4.B(IX) 2 FORM OF TWENTY-SECOND SUPPLEMENTAL INDENTURE EXHIBIT 4(b) (ix) This instrument was prepared by ______________________________ George W. Patrick, Esquire MORTGAGE ________________________________________________________________________________ SOUTH JERSEY GAS COMPANY TO THE BANK OF NEW YORK, TRUSTEE _____________________________________ TWENTY-SECOND SUPPLEMENTAL INDENTURE DATED AS OF______________, 1998 ______________________________________ PROVIDING FOR THE ISSUANCE OF FIRST MORTGAGE BONDS, 10% MEDIUM TERM NOTES SERIES A AND FURTHER SUPPLEMENTING THE INDENTURE OF MORTGAGE DATED OCTOBER 1, 1947 ______________________________________ (THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS) ________________________________________________________________________________ THIS TWENTY-SECOND SUPPLEMENTAL INDENTURE dated as of_____, 1998_____ between SOUTH JERSEY GAS COMPANY, a New Jersey corporation, with principal offices at Number One South Jersey Plaza, Route 54, Folsom, New Jersey 08037, party of the first part, hereinafter called the "Company," and The Bank of New York (successor trustee to Guarantee Bank), a New York banking corporation with a corporate trust office at 385 Rifle Camp Road, West Paterson, New Jersey 07424, party of the second part, hereinafter called "Trustee," as Trustee under the Indenture of Mortgage hereinafter mentioned, Witnesseth that: Whereas, the Company has heretofore duly executed, acknowledged and delivered to Guarantee Bank and Trust Company (name later changed to Guarantee Bank), as Trustee, a certain Indenture of Mortgage dated October 1, 1947 (hereinafter called the "Original Indenture" and collectively with all supplements thereto, the "Indenture") to provide for the issuance of, and to secure, its First Mortgage Bonds (the "Bonds"), issuable in series and without limit as to aggregate principal amount (except as provided under Article III of the Original Indenture), and by the Original Indenture granted and conveyed unto the Trustee, upon the trusts and for the uses and purposes therein specifically set forth, certain real estate, franchises and other property therein described or which might be thereafter acquired by it, to secure the payment of the principal of and interest on the Bonds from time to time issued thereunder, and pursuant to which the Company provided for the creation of an initial series of First Mortgage Bonds designated as "South Jersey Gas Company First Mortgage Bonds, 4 1/8% Series due 1977" (herein and in the Original Indenture sometimes called the "Bonds of the Initial Series"); and Whereas, the Original Indenture provides that Bonds may be issued thereunder from time to time and in one or more series, upon conditions therein fully provided, the Bonds of each series to be substantially in the forms therein recited for the Bonds of the Initial Series but with such omissions, variations and insertions as are authorized or permitted by the Original Indenture and determined and specified by the Board of Directors of the Company; and Whereas, the Company has heretofore duly executed, acknowledged and delivered to the Trustee a First Supplemental Indenture dated as of October 1, 1952, a Second Supplemental Indenture dated as of February 1, 1961, a Third Supplemental Indenture dated as of July 1, 1963, a Fourth Supplemental Indenture dated as of August 1, 1966, a Fifth Supplemental Indenture dated as of September 1, 1968, a Sixth Supplemental Indenture dated as of July 1, 1969, a Seventh Supplemental Indenture dated as of July 1, 1971, an Eight Supplemental Indenture dated as of June 1, 1973, a Ninth Supplemental Indenture dated as of July 1, 1974, a Tenth Supplemental Indenture dated as of November 10, 1976, an Eleventh Supplemental Indenture dated as of December 1, 1979, a Twelfth Supplemental Indenture dated as of June 1, 1980, a Thirteenth Supplemental Indenture dated as of August 1, 1981, a Fourteenth Supplemental Indenture dated as of August 1, 1984, a Fifteenth Supplemental Indenture dated as of July 1, 1986, a Sixteenth Supplemental Indenture dated as of April 1, 1988, a Seventeenth Supplemental Indenture dated of as May 1, 1989, an Eighteenth Supplemental Indenture dated as of March 1, 1990, a Nineteenth Supplemental Indenture dated as of April 1, 1992, a Twentieth Supplemental Indenture dated as of June 1, 1993 and a Twenty- First Supplemental Indenture dated as of -2- March 1, 1997 (hereinafter called, respectively, the "First Supplement," the "Second Supplement," the "Third Supplement," the "Fourth Supplement," the "Fifth Supplement," the "Sixth Supplement," the "Seventh Supplement," the "Eighth Supplement," the "Ninth Supplement," the "Tenth Supplement," the "Eleventh Supplement," the "Twelfth Supplement," the "Thirteenth Supplement," the "Fourteenth Supplement," the "Fifteenth Supplement," the "Sixteenth Supplement," the "Seventeenth Supplement," the "Eighteenth Supplement," the Nineteenth Supplement," the "Twentieth Supplement" and the "Twenty-First Supplement") (the Original Indenture, all such supplemental indentures and the Twenty-Second Supplemental Indenture being hereinafter collectively referred to as the "Indenture"), pursuant to which the Company provided for the creation of a second series of Bonds designated as "South Jersey Gas Company First Mortgage Bonds, 3 7/8% Series due 1977" (herein and in the First Supplement sometimes called the "Bonds of the Second Series"), a third series of Bonds designated as "South Jersey Gas Company First Mortgage Bonds, 5% Series due 1986" (herein and in the Second Supplement sometimes called the "Bonds of the Third Series"), a fourth series of Bonds designated as "South Jersey Gas Company First Mortgage Bonds, 4 1/2% Series due 1988" (herein and in the Third Supplement sometimes called the "Bonds of the Fourth Series"), a fifth series of Bonds designated as "South Jersey Gas Company First Mortgage Bonds, 5.70% Series due 1991" (herein and in the Fourth Supplement sometimes called the "Bonds of the Fifth Series"), a sixth series of Bonds designated as "South Jersey Gas Company First Mortgage Bonds, 7% Series due 1993" (herein and in the Fifth Supplement sometimes called the "Bonds of the Sixth Series"), a seventh series of Bonds designated as "South Jersey Gas Company First Mortgage Bonds, 7 7/8% Series due 1994" (herein and in the Sixth Supplement sometimes called the "Bonds of the Seventh Series"), an eighth series of Bonds designated as "South Jersey Gas Company First Mortgage Bonds, 8 1/4% Series due 1996" (herein and in the Seventh Supplement sometimes called the "Bonds of the Eighth Series"), a ninth series of Bonds designated as "South Jersey Gas Company First Mortgage Bonds, 8 1/4% Series due 1998" (herein and in the Eighth Supplement sometimes called the "Bonds of the Ninth Series"), a tenth series of Bonds designated as "South Jersey Gas Company First Mortgage Bonds, 9 1/2% Series due 1989" (herein and in the Ninth Supplement sometimes called the "Bonds of the Tenth Series"), an eleventh series of Bonds designated as "South Jersey Gas Company First Mortgage Bonds, 8% Series due 1995" (herein and in the Twelfth Supplement sometimes called the "Bonds of the Eleventh Series"), a twelfth series of Bonds designated as "South Jersey Gas Company First Mortgage Bonds, 15 3/4% Series due 1996" (herein and in the Thirteenth Supplement sometimes called the "Bonds of the Twelfth Series"), a thirteenth series of Bonds designated as "South Jersey Gas Company First Mortgage Bonds, 14 3/8% Series due 1996" (herein and in the Fourteenth Supplement sometimes called the "Bonds of the Thirteenth Series"), a fourteenth series of Bonds designated as "South Jersey Gas Company First Mortgage Bonds, 9.20% Series due 1998" (herein and in the Fifteenth Supplement sometimes called the "Bonds of the Fourteenth Series"), a fifteenth series of Bonds designated as "South Jersey Gas -3- Company First Mortgage Bonds, 10 1/4% Series due 2008" (herein and in the Sixteenth Supplement sometimes called the "Bonds of the Fifteenth Series"), a sixteenth series of Bonds designated as "South Jersey Gas Company First Mortgage Bonds, 9% Series due 2010" (herein and in the Eighteenth Supplement sometimes called the "Bonds of the Sixteenth Series"), a seventeenth series of Bonds designated as "South Jersey Gas Company First Mortgage Bonds, 8.19% Series due 2007" (herein and in the Nineteenth Supplement sometimes called the "Bonds of the Seventeenth Series"), an eighteenth series of Bonds designated "South Jersey Gas Company First Mortgage Bonds 6.95% Series Due 2013 (herein and in the Twentieth Supplement sometimes called the "Bonds of the Eighteenth Series") and a nineteenth series of Bonds designated as "South Jersey Gas Company First Mortgage Bonds, 7.70% Series due 2027 (herein and in the Twenty-First Supplement sometimes called the "Bonds of the Nineteenth Series") and Whereas, pursuant to the Indenture there have been executed, authenticated and issued, and there are outstanding as of the date of execution hereof by the Company, First Mortgage Bonds of series and in principal amounts as follows:
SERIES ISSUED NOW OUTSTANDING Bonds of the Initial Series $ 4,000,000 -0- Bonds of the Second Series $ 4,500,000 -0- Bonds of the Third Series $ 4,500,000 -0- Bonds of the Fourth Series $ 5,000,000 -0- Bonds of the Fifth Series $ 5,000,000 -0- Bonds of the Sixth Series $ 6,000,000 -0- Bonds of the Seventh Series $ 6,000,000 -0- Bonds of the Eighth Series $ 4,000,000 -0- Bonds of the Ninth Series $ 6,000,000 -0- Bonds of the Tenth Series $ 6,000,000 -0- Bonds of the Eleventh Series $ 1,000,000 -0- Bonds of the Twelfth Series $20,000,000 -0- Bonds of the Thirteenth Series $10,000,000 -0- Bonds of the Fourteenth Series $20,000,000 -0- Bonds of the Fifteenth Series $25,000,000 $20,454,000 Bonds of the Sixteenth Series $35,000,000 $26,250,000 Bonds of the Seventeenth Series $25,000,000 $20,454,000 Bonds of the Eighteenth Series $35,000,000 $35,000,000 Bonds of the Nineteenth Series $35,000,000 $35,000,000
; and Whereas, said Bonds of the Fifteenth Series, Bonds of the Sixteenth Series, Bonds of the Seventeenth Series, Bonds of the Eighteenth Series and Bonds of the Nineteenth constitute the only Bonds outstanding under the Indenture; and Whereas, the Company is making provisions for the issuance and sale of its Medium-Term Notes Series A (the "Notes"), to be issued under an Indenture of Trust (the "Note Indenture") to be dated as of________, 1998 between the Company and The Bank of New York, as -4- trustee (the "Note Trustee") and to be secured by Bonds of the Twentieth Series (as defined below); and Whereas, the Company, by appropriate resolutions adopted by its Board of Directors pursuant to the terms of the Original Indenture, has duly determined to create a new series of Bonds to be issued under the Indenture, including this Twenty-Second Supplemental Indenture dated as of , 1998 (hereinafter called the "Twenty-Second Supplement"), to be designated as "South Jersey Gas Company First Mortgage Bonds, 10% Medium Term Notes Series A (hereinafter sometimes called the "Bonds of the Twentieth Series"), and has duly determined that the terms and form of the Bonds of the Twentieth Series, which will be fully registered bonds, and the form of the Trustee's Certificate of Authentication to be set forth on the Bonds of the Twentieth Series, shall be substantially as follows respectively: -5- [FORM OF BOND] This Bond is not transferable except as provided in the Indenture and in the Indenture of Trust dated as of_______, 1998 between the Company and The Bank of New York, as Trustee. REGISTERED REGISTERED NUMBER AMOUNT R $100,000,000 SOUTH JERSEY GAS COMPANY FIRST MORTGAGE BOND, 10% MEDIUM TERM NOTES SERIES A South Jersey Gas Company, a New Jersey corporation (hereinafter called the "Company"), for value received, promises to pay on________, 2038 to The Bank of New York, as trustee under the Indenture of Trust dated as of________, 1998, between the Company and such trustee (the "Trustee") or registered assigns, on the surrender hereof, the principal sum of One Hundred Million Dollars, and to pay interest thereon from the date hereof, at the rate of 10% per annum (computed on the basis of a 360 day year of twelve 30 day months), such interest to be payable May 1 and November 1 in each year until the obligation of the Company with respect to the payment thereof shall be discharged; provided, however that the Company shall receive certain credits against such obligations as set forth in the Twenty-Second Supplemental Indenture dated________, 1998 referred to below. All payments of principal hereof and interest hereon shall be paid at the corporate trust office of the Trustee, or at such other places as the Company may agree, in such coin or currency of the United States of America as at the time of payment shall constitute legal tender for the payment of public and private debts; provided however, that any such payments of principal and interest shall be subject to receipt of certain credits against such payment obligations as set forth in the Twenty-Second Supplemental Indenture dated ________, 1998 referred to below. This Bond is one of an authorized issue of Bonds of the Company, designated as its First Mortgage Bonds, without specified limit as to aggregate authorized principal amount and issuable in one or more series (each of which is hereinafter referred to as a "Series"), all issued or to be issued under and (except in respect of any sinking, replacement, purchase, or other analogous fund provided in said indenture or in any supplement thereto for any one or more particular series of Bonds) equally and ratably secured by an indenture dated October 1, 1947 (hereinafter called the "Original Indenture") between the Company and Guarantee Bank and Trust Company, as predecessor trustee, as supplemented by indentures supplemental thereto, including a Twenty-Second Supplemental Indenture dated as of_______, 1998 (hereinafter called the "Twenty- Second Supplement"), duly executed by the Company to the Trustee, to which Original -6- Indenture and all indentures supplemental thereto (herein sometimes collectively called the "Indenture") reference is hereby made for a description of the property mortgaged and pledged and the respective rights of the Company, the Trustee, and the Bondholders in respect thereof, and for a specification of the principal amount of said Bonds from time to time issuable thereunder and the conditions upon which said Bonds may be issued and shall be secured. The Bonds of the 10% Medium Term Notes Series A, of which this Bond is one, are of similar tenor hereto, and are limited to the aggregate authorized principal amount of $100,000,000, except as provided in Section 2.11 of the Original Indenture (relating to replacement of mutilated, lost, destroyed or stolen Bonds). On certain defaults by the Company, as provided in the Indenture, the principal of said Bonds may become payable in advance of the expressed maturity thereof. As more fully provided in the Indenture, the Bonds of this Series are subject to redemption, either as a whole or in part from time to time, on not more than 60 nor less than 30 days' written notice in advance of the date fixed for redemption through the application of proceeds from the condemnation of property subject to the lien of the Indenture, or proceeds of sale of such property to a governmental body or agency having the power of eminent domain made as the result of the threat (evidenced in writing by such body or agency) of condemnation of such property, but not through the application of funds from any other source, upon payment of the principal amount thereof together with accrued interest to the date fixed for redemption. Except as set forth in this paragraph, the Bonds of this Series are not subject to redemption. This Bond is transferable, but only as provided in the Indenture and the Indenture of Trust dated as of_______, 1998, between the Company and The Bank of New York, as trustee, upon surrender hereof, by the registered owner in person or by attorney duly authorized in writing, at either of said offices where the principal hereof and interest hereon are payable. Upon any such transfer a new fully registered Bond similar hereto will be issued to the transferee. This Bond may in like manner be exchanged for one or more new fully registered Bonds of the same series of other authorized denominations but of the same aggregate principal amount. No service charge shall be made for any such transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto. The Company and the Trustee hereunder and any paying agent may deem and treat the person in whose name this Bond is registered as the absolute owner hereof for the purpose of receiving payment of or on account of the principal hereof and the interest hereon and for all other purposes; and neither the Company nor the Trustee hereunder nor any paying agent shall be affected by any notice to the contrary. The Bonds of this series are issuable only in fully registered form, in any denomination authorized by the Company. As more fully provided in the Indenture, any of the provisions of the Indenture or any Bonds issued pursuant thereto may be altered, amended, or eliminated, or additional provisions -7- added, with the consent of the holders or registered owners (evidenced as provided in the Indenture) of at least 66 2/3% in principal amount of the bonds issued thereunder and then outstanding, or, if such change pertains only to the Bonds of one or more Series but less than all Series of Bonds outstanding, the holders or registered owners of at least 66 2/3% in principal amount of the then outstanding Bonds of each Series to which such change pertains; provided, however, that none of the provisions of any Bond with respect to the time, terms, manner, or amount of any payment of the principal thereof or interest thereon shall be changed without the consent of the holder or registered owner of such Bond nor shall there be reduced the percentage of Bonds the holders of which are required to consent to the execution of any supplemental indenture. No recourse under or upon any obligation, covenant or agreement contained in the Indenture or in any indenture supplemental thereto, or in any Bond issued under the Indenture or coupon thereby secured or because of any indebtedness thereby secured, shall be had against any incorporator, or against any past, present or future stockholder, officer or director, as such, of the Company or of any successor corporation, either directly or through the Company or any successor corporation, under any rule or law, statue or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, it being expressly agreed and understood that the Indenture and any indenture supplemental thereto, and the obligations thereby secured, are solely corporate obligations, and that no personal liability whatever shall attach to, or be incurred by, such incorporators, stockholders, officers or directors, as such, of the Company, or of any successor corporation, or any of them, because of the incurring of the indebtedness thereby authorized, or under or by reason of any of the obligations, covenants or agreements contained in the Indenture or in any indenture supplemental thereto, or in any of the Bonds or coupons thereby secured, or implied therefrom. The execution by the Trustee, or by its successor in trust under the Indenture, of the Trustee's certificate of authentication set forth hereon is essential to the validity of this Bond. IN WITNESS WHEREOF, SOUTH JERSEY GAS COMPANY has caused this Bond to be duly executed by the manual or facsimile signatures of its proper officers under its corporate seal or a facsimile thereof. Date:__________________,_______ SOUTH JERSEY GAS COMPANY By:________________________________ President [CORPORATE SEAL] Attest: -8- __________________________________ Secretary [FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION] The within Bond is one of the Bonds of the Series designated therein, which are described or provided for in the within-mentioned Indenture. The Bank of New York, Trustee By ________________________ Authorized Signatory ; and WHEREAS, the Company deems it advisable and has determined pursuant to the provisions of the Original Indenture, to convey, transfer and assign to the Trustee and to subject to the lien of the Indenture with the same effect as though included in the granting clauses of the Original Indenture certain additional property now owned by the Company; and WHEREAS, the execution and delivery of the Twenty-Second Supplement have been duly authorized by the Board of Directors of the Company at a meeting duly called and held according to the law; and WHEREAS, all acts and things prescribed by law, by the charter and bylaws of the Company and by the Indenture necessary to make the Bonds of the Twentieth Series, when executed by the Company and authenticated by the Trustee as in the Indenture provided, valid, binding and legal obligations of the Company, and to make the Twenty-Second Supplement a valid, binding and legal instrument in accordance with its terms, have been done, performed and fulfilled, and the execution and delivery hereof have been in all respects duly authorized; NOW, THEREFORE, THIS TWENTY-SECOND SUPPLEMENT WITNESSETH, that by way of further assurance and in consideration of the premises and of the acceptance by the Trustee of the trusts hereby created, and in order to secure further payment of the principal of, the premium, if any, and the interest on all Bonds at any time issued and outstanding under the Indenture, according to their tenor and effect, and the performance and observance by the Company of the covenants and conditions contained in the Indenture and in said Bonds, the Company has executed and delivered the Twenty-Second Supplement, and has granted, bargained, sold, conveyed, aliened, enfeoffed, mortgaged, pledged, released, confirmed, assigned, transferred and set over, and by these presents does grant, bargain, sell, convey, alien, enfeoff, mortgage, pledge, release, confirm, assign, transfer and set over unto the Trustee, its successors in the trust and its and their assigns, the following described property: 1. All and singular its lands, real estate and any and every interest in lands or real estate wheresoever situate. -10- 2. All buildings, structures, machinery, apparatus and equipment situate upon the premises referred to above or appurtenant thereto or used in connection therewith, and all property of the Company used or useful in and about the business of manufacturing, transmitting and disposing of gas for light, heat, power or other purposes and consisting of, inter alia, gas works and plants, engines, furnaces, boilers generators, machinery, shafting, belting, retorts, tanks, condensers, pumps, steam holders, gas holders, purifiers, scrubbers, tar extractors, separators, dehydrators, pressure regulators, blowers, compressors, motors, exhausters, tracks and sidings, oil-gas generators, expansions tanks, gas mains, pipes, gas transmissions systems, gas distribution systems, tunnels, service pipes, pipe line fittings, gates, valves, connections, implements, gas meters, lamps and all other appliances, instruments, equipment, stores, repair parts and the like, now owned by the Company, and all other property for similar uses hereafter in any way acquired by the Company or to which it may hereafter be entitled, it being hereby expressly agreed that any and all personal property covered by the foregoing description, whether or not located in or upon the real property of the Company, shall be considered as fixtures and appurtenances constituting part of the real property of the Company. 3. All easements, rights of way, rights, franchises, contracts, permits, leases, licenses, privileges and appurtenances belonging or in any way appertaining to the premises and property hereinbefore referred to, or to any other property now owned by the Company or hereafter acquired by it, and every part thereof, or derived or acquired by the Company in any manner whatsoever; and all the reversions, remainders, revenues, rents, issues, and profits of all property at any time subject hereto and all the estate, right, title, interest, property, possession, claim, and demand whatsoever, as well at law as in equity, of the Company, of, in, and to the same and every part thereof. 4. All other property of whatever kind and description, whether real or personal, now owned or which may at any time hereafter be acquired by the Company, and whether or not specifically described or referred to herein, excepting, however, all materials and supplies consumable in the operation of the properties of the Company, all merchandise and products acquired, manufactured, produced, or held for sale in the usual course of business, all automobiles and motor vehicles, and all cash, accounts receivable, stocks, bonds, notes, and other securities which are neither specifically pledged with the Trustee nor required by any provision of the Indenture to be pledged with the Trustee. 5. All money, securities, or property of any kind which may at any time be paid, conveyed, assigned, transferred or delivered to the Trustee by the Company or any other person, to be held hereunder as additional security for all the Bonds, which money, securities, or property the Trustee is hereby authorized to receive and accept. UNDER AND SUBJECT to any excepted encumbrances of the character defined in Subdivision A of Section 3.04 of the Original Indenture. -11- TO HAVE AND TO HOLD the same unto the Trustee, its successors and assigns, forever. IN TRUST, NEVERTHELESS, upon the terms, conditions and trusts set forth in the Indenture as heretofore and hereby amended and supplemented, to the end that the said property shall be subject to the lien of the Indenture as heretofore and hereby amended and supplemented, with the same force and effect as though said property had been included in the Granting Clauses of the Indenture at the time of the execution and delivery thereof; PROVIDED, HOWEVER, and these presents are upon the condition that if the Company, its successors or assigns, shall pay or cause to be paid the principal of and interest on all said Bonds, or shall provide, as permitted by the Indenture, for the payment thereof by depositing with the Trustee the entire amount due or to become due thereon for principal, interest and premium, if any, and if the Company shall also pay or cause to be paid all other sums payable under the Indenture by it, then the Indenture, including this Twenty-Second Supplement, and the estate and rights thereby granted shall cease, determine and be void, otherwise to be and remain in full force and effect. IT IS HEREBY FURTHER COVENANTED, DECLARED AND AGREED by and between the Company and the Trustee for the benefit of those who shall hold Bonds of the Twentieth Series, or any of them, as follows: ARTICLE I DESCRIPTION OF BONDS OF THE TWENTIETH SERIES SECTION 1.1 The Bonds of the Twentieth Series shall be designated as "South Jersey Gas Company First Mortgage Bonds, 10% Medium Term Notes Series A," and shall be issuable as fully registered Bonds, substantially in the form hereinbefore recited, but they may bear and contain such legends and modifications as may be required by law or as may be necessary to comply with requirements of any stock exchange or of any regulatory board, body or official and shall be issued initially to the Trustee. Except as provided in Section 2.11 of the Original Indenture, the aggregate principal amount of Bonds authorized by the Twenty-Second Supplement is limited to $100,000,000, and except as aforesaid, and except for exchanges and transfers, the Company shall not execute and the Trustee shall not authenticate or deliver Bonds of the Twentieth Series in excess of such aggregate principal amount. SECTION 1.2 Except as otherwise provided in Section 2.11 of the Original Indenture, Bonds of the Twentieth Series shall be dated and shall bear interest from the May 1 or November 1 next preceding the date of authentication thereof by the Trustee, except that if the authentication date is an interest payment date, such Bonds shall be dated, and shall bear interest from, the authentication date; provided, however, that if upon authentication of any Bonds of the Twentieth Series upon transfer or in exchange for other such Bonds, interest on the Bonds of the Twentieth Series shall be in default, the date from which such Bond shall bear interest shall be the date to which interest shall have been paid upon the Bonds transferred or surrendered in exchange for the Bond so authenticated; and provided further, however, that in the case of the authentication of Bonds of the -12- Twentieth Series upon an original issue hereunder, such Bonds may be dated the date of authentication thereof and in such case shall bear interest from such date of authentication. SECTION 1.3 Bonds of the Twentieth Series shall mature_______, 2038, and shall bear interest on the unpaid principal amount thereof at the rate of 10% per annum (computed on the basis of a 360-day year of twelve 30-day months), payable on May 1 and November 1 in each year, until the obligation of the Company with respect to the payment thereof shall be discharged; provided, however, that the Company shall receive certain credits against principal and interest as set forth in Section 2.1 hereof. Subject to the provisions of Section 2.1 below, all payments of principal and interest shall be made at the corporate trust office of the Trustee, or at such other places as the Company may agree, in such coin or currency of the United States of America as at the time of payment shall constitute legal tender for the payment of public and private debts. SECTION 1.4 Bonds of the Twentieth Series shall be issuable only in the form of fully registered Bonds in any denomination authorized by the Company. SECTION 1.5 Bonds of the Twentieth Series shall be transferable and exchangeable, but only as provided in the Indenture and the Note Indenture, upon surrender thereof for cancellation by the registered owner in person or by attorney duly authorized in writing at either of said offices. The Company hereby waives any right to make a charge for any transfer or exchange of Bonds of the Twentieth Series, but the Company may require payment of a sum sufficient to cover any tax or any other governmental charge that may be imposed in relation thereto. SECTION 1.6 On the Substitution Date (as defined below), the Trustee will deliver to the Company for cancellation all Bonds of the Twentieth Series. The Company will cause the Trustee to provide notice to all holders of Bonds of the Twentieth Series prior to the occurrence of the Substitution Date. "Substitution Date" shall mean the date that all Bonds issued and outstanding under the Indenture, other than the Bonds of the Twentieth Series (the "First Mortgage Bonds"), have been retired (at, before or after the maturity thereof) through payment, redemption or otherwise (including those First Mortgage Bonds deemed to be paid within the meaning of the Indenture). -13- SECTION 1.7 Bonds of the Twentieth Series shall be subject to redemption, either as a whole or in part from time to time upon payment of the principal amount thereof through the application pursuant to Subdivision C of Section 6.07 of the Original Indenture of proceeds from the condemnation of property subject to the lien of the Indenture, or proceeds of sale of such property to a governmental body or agency having the power of eminent domain made as a result of the threat (evidenced in writing by such body or agency) or condemnation of such property, but not through the application of money from any other source together with accrued interest to the date fixed for redemption. Except as set forth in this Section 1.7, the Bonds of the Twentieth Series are not subject to redemption. The election of the Company to redeem any of the Bonds of the Twentieth Series shall be evidenced by a resolution of its Board of Directors calling all or a stated principal amount thereof for redemption on a stated date. At least 40 days prior to such redemption date (or at such later time as shall be satisfactory to the Trustee), the Company shall file with the Trustee a certified copy of such resolution. The Company shall on or before such redemption date deposit with the Trustee the total redemption price of all Bonds so called, with accrued interest thereon to the redemption date. If the Company elects to redeem less than all of the Bonds of the Twentieth Series, the particular Bonds to be redeemed shall be selected by the Trustee in the manner set forth in this Section 1.7 of the Twenty-Second Supplement from the Bonds of the Twentieth Series then outstanding. The Trustee shall certify to the Company the numbers of the Bonds selected and the portion of the principal amount of each Bond that is to be redeemed. The Trustee shall, not more than 60 nor less than 30 days in advance of such redemption date, give, in the name of the Company, written notice that Bonds of the Twentieth Series bearing the serial numbers specified have been called for redemption, that they will be due and payable on such redemption date at the corporate trust office of the Trustee at a stated amount (which shall be the applicable redemption price), and that all interest thereon will cease to accrue after said date (unless the Company shall default in payment of the amount necessary to effect such redemption). If all the Bonds of the Twentieth Series be called, the notice shall so state and may omit the numbers thereof. The notice shall state that the Bonds will be payable at the stated redemption price, plus accrued interest to the redemption date. If the redemption date is an interest payment date, the notice may state that the interest payment due on such date will be paid in the usual manner. Such notice of redemption shall be given to the registered owners of Bonds which, or portions of which, are to be redeemed by mailing the same to such registered owners, at their respective addresses as the same appear on the aforementioned registry books. Before any money shall be applied by the Trustee to the redemption of Bonds under this Section, the Company shall deliver to the Trustee a certificate of the President or a Vice President of the Company stating that all conditions precedent provided for herein (including compliance with all applicable covenants) relating to such redemption have been complied with. -14- Each Bond so called for redemption shall be due and payable at the places and price and on the date specified in such notice. Subject to any agreement as described below, beginning on the date when each Bond shall be due and payable as aforesaid, the holder thereof may present the same for redemption, in negotiable form, and the Trustee shall, out of the money deposited with it under the provisions of this Section, cause the same to be paid and redeemed; after said date (unless upon such presentation on or after the due date the Trustee shall have refused or failed to make such payment) all further interest shall cease to accrue thereon. In any case where the redemption date is an interest payment date, the interest payment due on such date on Bonds called for redemption may be paid in the usual manner. Whenever less than all of the outstanding Bonds of the Twentieth Series are to be redeemed, the principal amount of Bonds of the Twentieth Series to be redeemed, shall be prorated among the holders of the Bonds of the Twentieth Series in the proportion, as nearly as practicable, that their respective holdings bear to the aggregate principal amount of Bonds of the Twentieth Series outstanding on the date of selection. In making any proration pursuant to this provision, the Trustee may make such adjustment as it may determine, with the approval of the Company, to the end that the principal amount prorated to each holder of Bonds shall be in each instance $1,000 or an integral multiple thereof. If only a part of any fully registered Bond shall be selected by the Trustee in the manner set forth above, the notice of redemption hereinbefore provided for shall specify the distinctive number of such Bond and the portion of the principal amount thereof to be redeemed. Upon surrender of such Bond for partial redemption and upon payment of the portion so called for redemption, a new Bond or Bonds of the Twentieth Series, in aggregate principal amount equal to the unredeemed portion of such surrendered Bond, shall be executed by the Company, authenticated by the Trustee, and delivered to the registered owner thereof, without expense to such holder. The Company may enter into an agreement with the registered owners of any Bond of the Twentieth Series (or prospective registered owner of any such Bond) providing for the payment without the surrender of such Bond to such registered owner (or to such prospective registered owner, upon becoming a registered owner of any such Bond) of the principal of and the premium, if any, and interest on such Bond or any part thereof at a place other than the offices or agencies therein specified, and for the making of notation as to principal payments, if any, on such Bond by such registered owner or by any agent of the Company or of the Trustee. A copy of any such agreement shall be filed with the Trustee. The Trustee is authorized to approve any such agreement, and shall thereafter make all payments on such Bond as provided in such agreement. The Trustee shall not be liable for any act or omission to act on the part of the Company, any such registered owner or any agent of the Company in connection with any such agreement. So long as any of the Bonds of the Twentieth Series shall remain outstanding, upon any application by the Trustee of funds from sources described in this Section 1.7 of the Twenty-Second Supplement to the redemption of Bonds pursuant to Subdivision C of Section 6.07 of the -15- Original Indenture, if less than all Bonds of all Series then outstanding are to be redeemed, a principal amount of Bonds of the Twentieth Series shall be redeemed by the application of a portion of such funds, such portion to be determined by multiplying the total amount of such funds so to be applied by a fraction the numerator of which shall be the aggregate amount required for the redemption, pursuant to Subdivision C of Section 6.07 (exclusive of accrued interest, if any), of all of the Bonds of the Twentieth Series outstanding on the date of the selection for such redemption and the denominator of which shall be the aggregate amount required for the redemption, pursuant to such Subdivision C of Section 6.07 (exclusive of accrued interest, if any), of all of the Bonds of all Series outstanding on such date; provided, however, that nothing in this Section 1.7 shall restrict the manner (pro rata, by lot or otherwise) by which the remaining balance of such funds shall be applied to the redemption of Bonds of any Series other than the Twentieth Series. ARTICLE II CREDITS WITH RESPECT TO BONDS OF THE TWENTIETH SERIES SECTION 2.1 In addition to any other credit, payment or satisfaction to which the Company is entitled with respect to the Bonds of the Twentieth Series, the Company shall be entitled to credits against amounts otherwise payable in respect of the Bonds of the Twentieth Series in an amount corresponding to (i) the principal amount of any of the Company's Notes issued under the Note Indenture surrendered to the Note Trustee by the Company, or purchased by the Note Trustee, for cancellation, (ii) the amount of money held by the Note Trustee and available and designated for the payment of principal of, and/or interest on, the Notes, regardless of the source of payment to the Note Trustee of such moneys and (iii) the amount by which principal of and interest due on the Bonds of the Twentieth Series exceeds principal of and interest due on the Notes. The Note Trustee shall make notation on such Bonds authorized hereby of any such credit. SECTION 2.2 A certificate of the Company signed by the President or any Vice President, and attested to by the Secretary or any Assistant Secretary, and consented to by the Note Trustee, stating that the Company is entitled to a credit under Section 2.1 hereof or that Bonds of the Twentieth Series have been canceled, and setting forth the basis therefor in reasonable detail, shall be conclusive evidence of such entitlement, and the Trustee shall accept such certificate as such evidence without further investigation or verification of the matters stated therein. SECTION 2.3 Notwithstanding anything in this Supplemental Indenture to the contrary the obligation of the Company to make payment with respect to the principal of and premium, if any, and interest on the Bonds of the Twentieth Series shall be deemed satisfied and discharged: (i) on the Substitution Date or (ii) if at any time: (x) the Company shall have paid or caused to be paid the principal of and premium, if any, and interest on all the outstanding Notes, as and when the same shall have become due and payable, (y) the Company shall have delivered -16- to the Note Trustee for cancellation all outstanding Notes, or (z) the Company shall have irrevocably deposited or caused to be irrevocably deposited with the Note Trustee as trust funds the entire amount in (A) cash, (B) U.S. Government obligations maturing as to principal and interest in such amounts and at such times as will insure the availability of cash, or (C) a combination of cash and U.S. Government obligations, in any case sufficient, without reinvestment, as certified by an independent public accounting firm of national reputation in a written certification delivered to the Trustee, to pay at maturity or the applicable redemption date (provided that notice of redemption shall have been duly given or irrevocable provision satisfactory to the Note Trustee shall have been duly made for the giving of any notice of redemption) all outstanding Notes, including principal and any premium and interest due or to become due to such date of maturity, as the case may be. When the obligation of the Company to make payment with respect to the principal of and premium, if any, and interest on the Bonds of the Twentieth Series shall be satisfied or deemed satisfied pursuant to this Section 2.3 hereof, the holders of Bonds of the Twentieth Series shall, upon written request of the Company, deliver without cost to the Company all of the Bonds of the Twentieth Series, together with such appropriate instruments of transfer or release as may be reasonably requested by the Company. All Bonds of the Twentieth Series delivered to the Company in accordance with this Section 2.3 shall be delivered by the Company to the Trustee for cancellation. ARTICLE III ADDITIONAL COVENANTS OF THE COMPANY SECTION 3.1 So long as any Bonds of the Twentieth Series shall remain outstanding, the Company will not declare or pay any dividend on any shares of its Common Stock (other than dividends payable in shares of its Common Stock) or make any distribution on such shares, or purchase or otherwise acquire any such shares (except shares acquired without cost to the Company), or advance any amount to or invest any amount in the property, securities or indebtedness of, or guarantee any indebtedness of, any subsidiary if, after giving effect to such action, the sum of the aggregate amounts so declared, paid, distributed, purchased, acquired, advanced, invested or guaranteed after December 31, 1997 would exceed the aggregate net income of the Company available for dividends on its Common Stock earned after such date plus the sum of $56,000,000. For the purposes of this Section 3.1, "subsidiary" shall mean any corporation directly or indirectly controlled by or under common control with the Company. For the purpose of calculating the requirements of this Section 3.1, the net income of the Company available for dividends on its Common Stock shall be determined in accordance with such system of accounts as may be prescribed by any governmental authority having jurisdiction in the premises or in the absence thereof in accordance with generally accepted accounting principles as in effect at such time; provided, however, that (a) the deductions for depreciation or renewal or -17- replacement reserves in respect of each year shall be the amount taken therefor on the accounts of the Company or the amount required to be stated in item (1) of the Replacement Fund Certificate to be filed under Section 5.19 of the Original Indenture with respect to the period ending at the close of such year, whichever be greater, and (b) no deduction or adjustment shall be made from gross income for or in respect of (i) expenses in connection with the redemption or retirement of any securities issued by the Company, including any amount paid in excess of the principal or par or stated value of securities redeemed or retired, and, if such redemption or retirement is effected with the proceeds of sale of other securities of the Company, interest on the securities redeemed or retired from the date on which the funds required for such redemption or retirement shall be deposited in trust for such purpose to the date of such redemption or retirement, (ii) profits or losses from sales of capital assets or taxes in respect of such profits, (iii) any adjustments to retained earnings (including tax adjustments) applicable to any period prior to January 1, 1998, (iv) charges for the write-off of unamortized debt discount and expense carried on the books of the Company at December 31, 1997, or (v) charges for the write- off or write-down of the amount at which any property of the Company was carried on its books at December 31, 1997, to the extent that the same shall be approved by, or be made pursuant to any rule, regulation, or order of, any governmental authority having jurisdiction in the premises and shall not be required by such authority to be charged against earnings accumulated after December 31, 1997. SECTION 3.2 So long as any Bonds of the Twentieth Series shall remain outstanding, the Company will satisfy its obligations under the Replacement Fund provided for in Section 5.19 of the Original Indenture first through the use of all available property additions and retired Bonds of any Series and then, if and only to the extent that said property additions and retired Bonds are not sufficient to satisfy such obligations, through the use of cash. SECTION 3.3 So long as any Bonds of the Twentieth Series remain outstanding, in the event that the Company shall consolidate or merge with or into any corporation or corporations, or the Company shall transfer all of its property and franchises to any other corporation, the corporation formed by any such consolidation, or into which the Company shall be so merged, or which shall acquire such property of the Company, shall be a corporation incorporated under the laws of the United States, any State or the District of Columbia. SECTION 3.4 So long as any Bonds of the Twentieth Series shall remain outstanding, no owner of any portion of the mortgaged property will be entitled to any credit against interest payable on any Bonds by reason of the payment of any tax on such property. -18- ARTICLE IV ISSUE AND AUTHENTICATION OF BONDS OF THE TWENTIETH SERIES Upon compliance by the Company with the requirements of the Indenture, including the Twenty-Second Supplement, for the issuance of additional Bonds, Bonds of the Twentieth Series up to an aggregate principal amount of $100,000,000 may forthwith, or from time to time, be executed by the Company and delivered to the Trustee, and the Trustee shall thereupon authenticate and deliver said Bonds in accordance with the provisions of Article III of the Original Indenture. The signature of the officers of the Company on Bonds of the Twentieth Series may be by facsimile if so authorized by the Company's Board of Directors. ARTICLE V AMENDMENT TO THE ORIGINAL INDENTURE SECTION 5.1 Section 3.06. of the Original Indenture shall be amended to delete paragraph (2) of subsection A thereof, so that such Section shall thereafter read in full as follows: "SECTION 3.06. ADDITIONAL BONDS - CONDITIONS FOR AUTHENTICATION - ACQUISITION OR REFUNDING OF BONDS ISSUED HEREUNDER. Whenever any Bonds shall have been acquired, paid, or retired by the Company, or whenever the Company shall have made provision for the payment of any Bonds (as such provision for payment is defined in Article I), or shall surrender any Bonds to the Trustee, thereupon or at any time thereafter additional Bonds shall be authenticated and delivered by the Trustee in a principal amount not exceeding the principal amount of the Bonds so acquired, paid, retired, surrendered, or for the payment of which such provision shall have been made, upon application by the Company and upon compliance with the following conditions, in addition to those specified in Section 3.03: A. Any Bonds so acquired, paid, retired or surrendered, or for which payment shall have been so provided, may, when deposited with the Trustee as below provided in Subdivision B, be uncancelled or may have been cancelled; provided, however, that in respect of any which shall have been cancelled prior to or concurrently with the application for such authentication (and, for the purposes of this Subdivision A, in case payment shall have been so provided for such Bonds, the same shall be deemed to have been cancelled upon the date of such provision for payment) no Bond shall have been authenticated in lieu thereof or in exchange therefor or by virtue of the acquisition, payment, retirement, cancellation, or such provision for payment thereof; nor shall any money have been withdrawn hereunder by virtue of such acquisition, payment, retirement, cancellation, or provision. -19- B. There shall be delivered to the Trustee the following documents: (1) The Bonds so acquired, paid, retired, or surrendered. Any of such Bonds which shall be uncancelled shall be in negotiable form or accompanied by proper instruments of assignment and transfer, and shall be accompanied by all unmatured coupons, if any, appertaining thereto. In the case of any Bonds for which payment shall have been so provided, such Bonds shall not then be required to be deposited, but in lieu thereof the Company shall deliver to the Trustee a statement describing the same; thereafter, upon payment of such Bonds, the same shall forthwith be delivered to the Trustee for cancellation. In the case of any Bonds which shall have been paid or retired or surrendered and which shall have theretofore been cancelled and cremated by the Trustee, such Bonds shall not be required to be deposited, but in lieu thereof the Company shall deliver to the Trustee a statement describing the same and specifying the date upon which the same were paid or retired or surrendered and were cancelled and cremated. (2) If the Bonds so deposited shall be cancelled Bonds, or if in lieu of such deposit of Bonds a statement by the Company shall be delivered as provided in subparagraph (1) of this Subdivision B, a certificate by the President or a Vice-President of the Company, stating such facts in connection therewith as may reasonably be required to show compliance with the conditions specified in Subdivision A. C. If the Bonds so acquired, paid, retired, surrendered, or the payment of which has been so provided for, shall not at any time theretofore have been bona fide issued by the Company, and if they shall bear interest at a lower rate per annum than the new Bonds the authentication of which is then applied for, the net earnings condition specified in Subdivision C of Section 3.04 shall be complied with, and the Company shall deliver to the Trustee (i) a net earnings certificate, conforming to the provision of Subdivision E (3) of Section 3.04, showing the fixed charges and net earnings of the Company in such reasonable detail as may be required to show compliance with said condition, (ii) an opinion of counsel conforming to the provisions of Subdivision E(4)(b) of Section 3.04, and (iii) a certificate by the trustee or mortgagee of each prior lien conforming to the provisions of Subdivision E(5) of Section 3.04" -20- SECTION 5.2 The foregoing amendment to Section 3.06 of the Original Indenture shall become effective upon the earlier to occur of the following: (a) the date as of which no Bonds remain outstanding that were part of a series of Bonds initially issued prior to the issuance of Bonds of the Twentieth Series; (b) the date as of which a supplemental indenture to the Indenture is executed by the Company and the Trustee setting forth the foregoing amendment to Section 3.06 of the Original Indenture, after the holders of at least 66 2/3% of the Bonds then outstanding have consented to and approved the execution of such supplemental indenture, all in accordance with Article X and the other relevant provisions of the Original Indenture. SECTION 5.3 Each holder of any Bonds of the Twentieth Series, by the acceptance by such holder of such Bonds, (a) consents to and approves the foregoing amendment to Section 3.06 of the Original Indenture, and consents to and approves the execution by the Company and the Trustee of a supplemental indenture to the Indenture setting forth such amendment, and (b) agrees to execute such instrument or instruments as may be requested by the Company or the Trustee to evidence such consent and approval in accordance with Section 10.02 of the Original Indenture. ARTICLE VI CONCERNING THE TRUSTEE SECTION 6.1 The Trustee, for itself and its successors in said trusts, hereby accepts the trust hereby provided and agrees to perform the same upon the terms and conditions contained in the Indenture, including the Twenty-Second Supplement. The Trustee shall not be responsible in any manner whatsoever for the recitals in the Twenty-Second Supplement. SECTION 6.2 So long as any Bonds of the Twentieth Series shall remain outstanding, any successor trustee to the Trustee shall at all times be a corporation which shall have at all times a combined capital and surplus of not less than $100,000,000. If any such successor trustee publishes reports of condition annually, pursuant to law or to the requirements of a supervising or examining authority, the combined capital and surplus of such successor trustee at any time for the purposes of this Section shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. ARTICLE VII CONCERNING EVENTS OF DEFAULT -21- SECTION 7.1 So long as any Bonds of the Twentieth Series shall remain outstanding, the following shall constitute events of default within the meaning of Section 9.02 of the Original Indenture (in addition to the events of default set forth in Section 9.02 of the Original Indenture); (a) If the Company shall default in the payment of any portion of the principal of any Bond of the Twentieth Series, as and when the same shall have become due, whether at the stated maturity thereof or upon proceedings for redemption (pursuant to the provisions of any sinking, replacement, purchase or other analogous fund established in the Original Indenture or pursuant to any optional or other redemption) or otherwise; provided, however, that in the event the Company and the Trustee shall have taken all action required to be taken so that each such payment of principal by means of wire transfer could reasonably be expected to be effective on the due date thereof, but nevertheless, any such transfer shall not have been credited to the account of a registered owner of Bonds of the Twentieth Series to whom such payment is required to be made effective as of the due date, the Company shall not be deemed to have defaulted upon the obligation to make such payment until the expiration of five days following said due date; (b) if the Company shall default in the payment of any installment of interest due on any Bond of the Twentieth Series and such default shall continue for a period of 10 days; or (c) if the Company shall default in the performance of or compliance with any other covenant, condition or term contained in the Indenture, including the Twenty-Second Supplement, and such default shall continue for 30 days after the Company shall have knowledge thereof. SECTION 7.2 So long as any Bonds of the Twentieth Series shall remain outstanding, the Company covenants that if at any time or times or from time to time an event of default referred to in Section 6.1 of the Twenty-Second Supplement shall occur, the Company will, on demand of the Trustee, forthwith pay to the Trustee, for the benefit of all holders of Bonds then outstanding under the Indenture, a sum equal to the total amount then due for principal and interest on all Bonds then outstanding under the Indenture, with interest thereon (to the extent that payment of such interest is enforceable under applicable law) in accordance with the terms of the respective Bonds. Should said sum not be so paid to the Trustee, it shall be entitled, at any time or times and from time to time, in its own name and as Trustee of an express trust and without the possession or production of any Bonds of any Series or coupons, to recover judgment for the same against the Company or any other obligor upon such Bonds. -22- ARTICLE VIII MISCELLANEOUS SECTION 8.1 As supplemented by the Twenty-Second Supplement, the Indenture is in all respects ratified and confirmed, and the Indenture, including the Twenty-Second Supplement, shall be read as one instrument. All terms used in the Twenty-Second Supplement shall have the same meaning as used elsewhere in the Indenture except where the context clearly indicates otherwise. SECTION 8.2 The Twenty-Second Supplement has been dated as of , 1998 for convenience. The date of actual execution hereof by each of the parties is the date shown by the acknowledgment of execution hereof by its officers. SECTION 8.3 The Twenty-Second Supplement may be executed in several counterparts, each of which shall be considered an original and all collectively as but one instrument. SECTION 8.4 The approval of the New Jersey BPU of the execution and delivery of these presents, and of the issue of any Bonds of the Twentieth Series, shall not be construed as approval of said New Jersey BPU of any other act, matter or thing which requires approval of said New Jersey BPU under the laws of the States of New Jersey; nor shall the approval of said New Jersey BPU of the issue of any such Bonds bind said New Jersey BPU or any other public body or authority of the State of New Jersey having jurisdiction in the premises in any future application for the issuance of Bonds under the Indenture. -23- IN WITNESS WHEREOF, the Company and the Trustee have caused these presents to be duly executed under the respective corporate seals by their respective proper officers, all duly authorized thereunto, and have caused these presents to be dated as of the day and year first above written. SOUTH JERSEY GAS COMPANY By: _________________________ Charles Biscieglia President ATTEST: [SEAL] ______________________ G. L. Baulig Secretary THE BANK OF NEW YORK By: _________________________ ATTEST: [SEAL] ______________________ -24- STATE OF NEW JERSEY : : ss: COUNTY OF ATLANTIC : Be it remembered, that on this ____________, before me, a Notary Public of New Jersey, personally appeared William F. Ryan, who, I am satisfied, is President of South Jersey Gas Company, one of the corporations named in the foregoing deed or instrument, and I having first made known to him the contents thereof, he acknowledged that he had signed the same as such officer for and on behalf of such corporation, that the same was made by such corporation as its voluntary act and deed, and sealed with its corporate seal, by virtue of authority of its board of directors, and that he has received, without charge, a true copy of said foregoing deed or instrument. All of which is hereby certified. _____________________________ Notary Public of New Jersey My Commission Expires: STATE OF NEW JERSEY : : ss: COUNTY OF MERCER : Be it remembered, that on this ____________, before me, a Notary Public of New Jersey, personally appeared, who, I am satisfied, is an Assistant Vice President of The Bank of New York, one of the corporations named in the foregoing deed or instrument, and I have first made known to him the contents thereof, he acknowledged that he had signed the same as such officer for and on behalf of such corporation, that the same was made by such corporation as its voluntary act and deed, and sealed with its corporate seal, by virtue of authority of its board of directors. All of which is hereby certified. _____________________________ Notary Public of New Jersey My Commission Expires: -25- The within Twenty-Second Supplemental Indenture has been recorded and filed as follows:
County Date of Recordation Book Page ------ ------------------- ---- ---- New Jersey: Atlantic Burlington Camden Cape May Cumberland Gloucester Salem
-26- EX-4.E 3 FORM OF MEDIUM TERM NOTE INDENTURE EXHIBIT 4(E) ______________________________________________________________________________ SOUTH JERSEY GAS COMPANY AND THE BANK OF NEW YORK TRUSTEE ____________ INDENTURE OF TRUST DATED AS OF ____________, 1998 ______________________________________________________________________________ CONTENTS
ARTICLE ONE DEFINITIONS............................................................... 1 Section 1.1 GENERAL................................................................... 1 Section 1.2 TRUST INDENTURE ACT....................................................... 2 Section 1.3 DEFINITIONS............................................................... 2 ARTICLE TWO FORM, ISSUE, EXECUTION, REGISTRATION AND EXCHANGE OF NOTES......................... 10 Section 2.1 FORM GENERALLY............................................................ 10 Section 2.2 FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION........................... 10 Section 2.3 AMOUNT UNLIMITED.......................................................... 10 Section 2.4 DENOMINATIONS, DATES, INTEREST PAYMENT AND RECORD DATES................... 10 Section 2.5 EXECUTION, AUTHENTICATION, DELIVERY AND DATING............................ 12 Section 2.6 EXCHANGE AND REGISTRATION OF TRANSFER OF NOTES............................ 15 Section 2.7 MUTILATED, DESTROYED, LOST OR STOLEN NOTES................................ 15 Section 2.8 TEMPORARY NOTES........................................................... 16 Section 2.9 CANCELLATION OF NOTES PAID, ETC........................................... 16 Section 2.10 INTEREST RIGHTS PRESERVED................................................. 17 Section 2.11 SPECIAL RECORD DATE....................................................... 17 Section 2.12 PAYMENT OF NOTES.......................................................... 17 Section 2.13 NOTES ISSUABLE IN THE FORM OF A GLOBAL NOTE............................... 18 ARTICLE THREE REDEMPTION OF NOTES....................................................... 20 Section 3.1 APPLICABILITY OF ARTICLE.................................................. 20 Section 3.2 NOTICE OF REDEMPTION; SELECTION OF NOTES.................................. 20 Section 3.2 PAYMENT OF NOTES ON REDEMPTION; DEPOSIT OF REDEMPTION PRICE............... 21 Section 3.4 REDEMPTION OF FIRST MORTGAGE BONDS........................................ 22 ARTICLE FOUR PLEDGED FIRST MORTGAGE BONDS; PLEDGED SUBSTITUTED MORTGAGE BONDS.......... 22 Section 4.1 PLEDGE.................................................................... 22 Section 4.2 RECEIPT................................................................... 23 Section 4.3 FIRST MORTGAGE BONDS HELD BY THE TRUSTEE.................................. 23 Section 4.4 NO TRANSFER OF PLEDGED FIRST MORTGAGE BONDS; EXCEPTION.................... 23 Section 4.6 DELIVERY TO THE COMPANY OF ALL PLEDGED FIRST MORTGAGE BONDS............... 24 Section 4.6 FURTHER ASSURANCES........................................................ 24 Section 4.7 EXCHANGE AND SURRENDER OF PLEDGED FIRST MORTGAGE BONDS.................... 24 Section 4.9 ACCEPTANCE OF ADDITIONAL PLEDGED FIRST MORTGAGE BONDS..................... 25
-i- Section 4.9 TERMS OF PLEDGED FIRST MORTGAGE BONDS..................................... 25 Section 4.10 PLEDGED FIRST MORTGAGE BONDS AS SECURITY FOR NOTES........................ 25 Section 4.11 PLEDGED SUBSTITUTED MORTGAGE BONDS........................................ 25 ARTICLE FIVE SATISFACTION AND DISCHARGE; UNCLAIMED MONEYS.............................. 26 Section 5.1 SATISFACTION AND DISCHARGE................................................ 26 Section 5.2 DEPOSITED MONEYS TO BE HELD IN TRUST BY TRUSTEE........................... 28 Section 5.3 PAYING AGENT TO REPAY MONEYS HELD......................................... 28 Section 5.4 RETURN OF UNCLAIMED MONEYS................................................ 28 ARTICLE SIX PARTICULAR COVENANTS OF THE COMPANY....................................... 28 Section 6.1 PAYMENT OF PRINCIPAL PREMIUM AND INTEREST................................. 29 Section 6.2 OFFICE FOR NOTICES AND PAYMENTS, ETC...................................... 29 Section 6.3 APPOINTMENTS TO FILL VACANCIES IN TRUSTEE'S OFFICE........................ 29 Section 6.4 PROVISION AS TO PAYING AGENT.............................................. 29 Section 6.5 OPINIONS OF COUNSEL....................................................... 30 Section 6.6 CERTIFICATES AND NOTICE TO TRUSTEE........................................ 31 ARTICLE SEVEN NOTEHOLDER LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE............... 32 Section 7.1 NOTEHOLDER LISTS.......................................................... 32 Section 7.2 SECURITIES AND EXCHANGE COMMISSION REPORTS................................ 33 Section 7.3 REPORTS BY THE TRUSTEE.................................................... 33 ARTICLE EIGHT REMEDIES OF THE TRUSTEE AND NOTEHOLDERS ON EVENTS OF DEFAULT.............. 34 Section 8.1 EVENTS OF DEFAULT......................................................... 34 Section 8.2 ENFORCEMENT BY TRUSTEE.................................................... 36 Section 8.3 APPLICATION OF MONEYS COLLECTED BY TRUSTEE................................ 37 Section 8.4 PROCEEDINGS BY NOTEHOLDERS................................................ 37 Section 8.5 PROCEEDINGS BY TRUSTEE.................................................... 38 Section 8.6 REMEDIES CUMULATIVE AND CONTINUING........................................ 38 Section 8.7 DIRECTION OF PROCEEDINGS AND WAIVER OF DEFAULTS BY MAJORITY OF NOTEHOLDERS 38 Section 8.8 NOTICE OF DEFAULT......................................................... 39 Section 8.9 UNDERTAKING TO PAY COSTS.................................................. 39 ARTICLE NINE CONCERNING THE TRUSTEE.................................................... 39 Section 9.1 DUTIES AND RESPONSIBILITIES OF TRUSTEE.................................... 39 Section 9.2 RELIANCE ON DOCUMENTS, OPINIONS, ETC...................................... 40 Section 9.3 NO RESPONSIBILITY FOR RECITALS, ETC....................................... 41 Section 9.4 TRUSTEE, AUTHENTICATING AGENT, PAYING AGENT OR REGISTRAR MAY OWN NOTES.... 41 Section 9.5 MONEYS TO BE HELD IN TRUST................................................ 41 Section 9.6 COMPENSATION AND EXPENSES OF TRUSTEE...................................... 42 Section 9.7 OFFICERS' CERTIFICATE AS EVIDENCE......................................... 42 Section 9.8 CONFLICTING INTEREST OF TRUSTEE........................................... 42 Section 9.9 EXISTENCE AND ELIGIBILITY OF TRUSTEE...................................... 42
-ii- Section 9.10 RESIGNATION OR REMOVAL OF TRUSTEE......................................... 43 Section 9.11 APPOINTMENT OF SUCCESSOR TRUSTEE.......................................... 43 Section 9.12 ACCEPTANCE BY SUCCESSOR TRUSTEE........................................... 44 Section 9.13 SUCCESSION BY MERGER, ETC................................................. 44 Section 9.14 LIMITATIONS ON RIGHTS OF TRUSTEE AS A CREDITOR............................ 44 Section 9.15 AUTHENTICATING AGENT...................................................... 45 ARTICLE TEN CONCERNING THE NOTEHOLDERS 45 Section 10.1 ACTION BY NOTEHOLDERS..................................................... 45 Section 10.2 PROOF OF EXECUTION BY NOTEHOLDERS......................................... 46 Section 10.3 WHO DEEMED ABSOLUTE OWNERS................................................ 46 Section 10.4 COMPANY-OWNED NOTES DISREGARDED........................................... 46 Section 10.5 REVOCATION OF CONSENTS; FUTURE HOLDERS BOUND.............................. 46 Section 10.6 RECORD DATE FOR NOTEHOLDER ACTS........................................... 47 ARTICLE ELEVEN NOTEHOLDERS' MEETING...................................................... 47 Section 11.1 PURPOSES OF MEETINGS...................................................... 47 Section 11.2 CALL OF MEETINGS BY TRUSTEE............................................... 47 Section 11.3 CALL OF MEETINGS BY COMPANY OR NOTEHOLDERS................................ 48 Section 11.4 QUALIFICATIONS FOR VOTING................................................. 48 Section 11.5 REGULATIONS............................................................... 48 Section 11.6 VOTING.................................................................... 49 Section 11.7 RIGHTS OF TRUSTEE OR NOTEHOLDERS NOT DELAYED.............................. 49 ARTICLE TWELVE CONSOLIDATION, MERGER, SALE, TRANSFER OR OTHER DISPOSITION................ 49 Section 12.1 COMPANY MAY CONSOLIDATE, ETC. ONLY ON CERTAIN TERMS....................... 49 Section 12.2 SUCCESSOR CORPORATION SUBSTITUTED......................................... 50 ARTICLE THIRTEEN SUPPLEMENTAL INDENTURES................................................... 50 Section 13.1 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF NOTEHOLDERS.................... 50 Section 13.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF NOTEHOLDERS....................... 51 Section 13.3 COMPLIANCE WITH TRUST INDENTURE ACT; EFFECT OF SUPPLEMENTAL INDENTURES.... 52 Section 13.4 NOTATION ON NOTES......................................................... 52 Section 13.5 EVIDENCE OF COMPLIANCE OF SUPPLEMENTAL INDENTURE TO BE FURNISHED TRUSTEE.. 52 ARTICLE FOURTEEN IMMUNITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS AND DIRECTORS........... 52 Section 14.1 INDENTURE AND NOTES SOLELY CORPORATE OBLIGATIONS.......................... 52 ARTICLE FIFTEEN MISCELLANEOUS PROVISIONS.................................................. 53 Section 15.1 PROVISIONS BINDING ON COMPANY'S SUCCESSORS................................ 53 Section 15.2 OFFICIAL ACTS BY SUCCESSOR CORPORATION.................................... 53
-iii- Section 15.3 NOTICES................................................................... 53 Section 15.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.......................... 54 Section 15.6 BUSINESS DAYS............................................................. 55 Section 15.7 TRUST INDENTURE ACT TO CONTROL............................................ 55 Section 15.8 TABLE OF CONTENTS, HEADINGS, ETC.......................................... 55 Section 15.9 EXECUTION IN COUNTERPARTS................................................. 55 Section 15.10 MANNER OF MAILING NOTICE TO NOTEHOLDERS................................... 55 Section 15.11 APPROVAL BY TRUSTEE OF COUNSEL............................................ 55
-iv- CROSS REFERENCE SHEET SHOWING THE LOCATION IN THE INDENTURE OF THE PROVISIONS INSERTED PURSUANT TO SECTIONS 310 THROUGH 318(A) INCLUSIVE OF THE TRUST INDENTURE ACT OF 1939
SECTION OF TRUST INDENTURE ACT SECTION OF INDENTURE PAGE - ------------- -------------------- ---- 310(a)(1) 9.9 42 310(a)(2) 9.9 42 310(a)(3) NOT APPLICABLE -- 310(a)(4) NOT APPLICABLE -- 310(a)(5) 9.9 42 310(b) 9.8 42 310(c) NOT APPLICABLE -- 311(a) 9.14 44 311(b) 9.14 44 311(c) NOT APPLICABLE -- 312(a) 7.1(a) 32 312(b) 7.1(b) 32 312(c) 7.1(c) 33 313(a) 7.3(a) 33 313(b) 7.3(b) 33 313(c) 7.3(d) 34 313(d) 7.3(c) and 7.3(d) 34 314(a) 7.2(a), 7.2(b), 7.2(c) and 6.6 33,31 314(b) 6.5 30 314(c)(1) Definition of Officers' Certificate, 6.6 and 15.5(a) 31,54 314(c)(2) Definition of Opinion of Counsel and 15.5 54 314(c)(3) NOT APPLICABLE -- 314(d)(1) 4.6 24 314(d)(2) 4.6 24 314(d)(3) 4.6 24 314(e) 15.5(b) 54 314(f) NOT APPLICABLE -- 315(a) 9.1 and 9.2 39,40 315(b) 8.8 39 315(c) 9.1(a) 39 315(d) 9.1(b) 40 315(e) 8.9 39 316(a) 8.7 38 10.4 46 13.2 51 316(b) 8.4 37 13.2 51
-v-
SECTION OF TRUST INDENTURE ACT SECTION OF INDENTURE PAGE - ------------- -------------------- ---- 316(c) 10.6 47 317(a)(1) 8.2(b) 36 317(a)(2) 8.2(a) 36 317(b) 5.2 28 6.4 29 318(a) 15.7 55
-vi- THIS INDENTURE OF TRUST, dated as of ___________, 1998, between SOUTH JERSEY GAS COMPANY, a corporation organized and existing under the laws of the State of New Jersey (the "Company"), and The Bank of New York, as trustee (the "Trustee"). WITNESSETH WHEREAS, the Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its Notes (the "Notes"), to be issued as in this Indenture provided; WHEREAS, subject to the provisions of Section 4.10 hereof, the Company has issued Pledged First Mortgage Bonds (as hereinafter defined) and has delivered such Pledged First Mortgage Bonds to the Trustee to hold in trust for the benefit of the respective Holders (as hereinafter defined) from time to time of the Initial Notes, and, pursuant to the terms and provisions hereof, the Company may deliver additional Pledged First Mortgage Bonds to the Trustee for such purpose or require the Trustee to deliver to the Company for cancellation any and all Pledged First Mortgage Bonds held by the Trustee; AND WHEREAS, all acts and things necessary to make this Indenture a valid agreement according to its terms have been done and performed, and the execution of this Indenture and the issue hereunder of the Notes have in all respects been duly authorized; NOW THEREFORE, THIS INDENTURE WITNESSETH: That in order to declare the terms and conditions upon which the Notes are, and are to be authenticated, issued and delivered and in consideration of the premises and of the purchase and acceptance of the Notes by the Holders thereof and of the sum of One Dollar duly paid to it by the Trustee at the execution of this Indenture, the receipt whereof is hereby acknowledged, the Company covenants and agrees with the Trustee for the equal and proportionate benefit of the respective Holders from time to time of the Notes, as follows: ARTICLE ONE DEFINITIONS SECTION 1.1 GENERAL The terms defined in this Article One (except as herein otherwise expressly provided or unless the context otherwise requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective meanings specified in this Article One. -1- SECTION 1.2 TRUST INDENTURE ACT (a) Whenever this Indenture refers to a provision of the Trust Indenture Act of 1939, as amended (the "TIA"), such provision is incorporated by reference in and made a part of this Indenture. (b) Unless otherwise indicated, all terms used in this Indenture that are defined by the TIA, by reference to another statute or defined by a rule of the SEC (as hereinafter defined) under the TIA shall have the meanings assigned to them in the TIA or such statute or rule as in force on the date of execution of this Indenture. SECTION 1.3 DEFINITIONS For purposes of this Indenture, the following terms shall have the following meanings. AUTHENTICATING AGENT: The term "Authenticating Agent" shall mean any agent of the Trustee which shall be appointed and acting pursuant to Section 9.15 hereof. AUTHORIZED AGENT: The term "Authorized Agent" shall mean any agent of the Company designated as such by an Officers' Certificate delivered to the Trustee. BOARD OF DIRECTORS: The term "Board of Directors" shall mean the Board of Directors of the Company or any other duly authorized committee of such Board of Directors. BOARD RESOLUTION: The term "Board Resolution" shall mean a copy of a resolution certified by the Secretary or an 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. BONDHOLDERS' CERTIFICATE: The term "Bondholders' Certificate" shall mean a certificate signed by the inspectors of votes, or any other party performing such duties, of the applicable meeting of the holders of the First Mortgage Bonds issued under the applicable First Mortgage or by the applicable Mortgage Trustee in the case of consents of such holders that are sought without a meeting. BUSINESS DAY: The term "Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions or trust companies in the Borough of Manhattan, The City of New York, or in the city where the corporate trust office of the Trustee is located, are obligated or authorized by law or executive order to close. -2- COMPANY: The term "Company" shall mean the corporation named as the "Company" in the first paragraph of this Indenture, and its successors and assigns permitted hereunder. COMPANY ORDER: The term "Company Order" shall mean a written order signed in the name of the Company by one of the Chairman, the President, any Vice President, the Treasurer or an Assistant Treasurer, and the Secretary or an Assistant Secretary of the Company, and delivered to the Trustee. CORPORATE TRUST OFFICE OF THE TRUSTEE: The term "corporate trust office of the Trustee", or other similar term, shall mean the corporate trust office of the Trustee, at which at any particular time its corporate trust business shall be principally administered, which office is at the date of the execution of this Indenture located at 101 Barclay Street, New York, NY 10286. DEBT: The term "Debt" shall mean indebtedness for money borrowed, but shall exclude indebtedness maturing by its terms in twelve months or less from the date of determination. DEPOSITORY: The term "Depository" shall mean, unless otherwise specified in a Company Order pursuant to Section 2.5 hereof, The Depository Trust Company, New York, New York, or any successor thereto registered and qualified under the Securities and Exchange Act of 1934, as amended, or other applicable statute or regulation. EVENT OF DEFAULT: The term "Event of Default" shall mean any event specified in Section 8.1 hereof, continued for the period of time, if any, and after the giving of the notice, if any, therein designated. FIRST MORTGAGE: The term "First Mortgage" shall mean, the First Mortgage dated as of October 1, 1947, from the Company to The Bank of New York, as successor trustee to Guarantee Bank and Trust Company, as supplemented and amended from time to time. FIRST MORTGAGE BONDS: The term "First Mortgage Bonds" shall mean all first mortgage bonds issued by the Company and outstanding under the First Mortgage, other than Pledged Bonds. -3- GLOBAL NOTE: The term "Global Note" shall mean a Note that pursuant to Section 2.5 hereof is issued to evidence Notes, that is delivered to the Depository or pursuant to the instructions of the Depository and that shall be registered in the name of the Depository or its nominee. INDENTURE: The term "Indenture" shall mean this instrument as originally executed or, if amended or supplemented as herein provided, as so amended or supplemented. INITIAL NOTES: The term "Initial Notes" shall mean Notes designated as South Jersey Gas Company Secured Medium Term Notes, Series A limited to an aggregate principal amount of $100,000,000, $___________ of which has been authenticated and delivered upon the execution of this Indenture. INTEREST PAYMENT DATE: The term "Interest Payment Date" shall mean, unless otherwise specified in a Company Order pursuant to Section 2.5 hereof, (a) each May 1 and November 1 during the period any Note is outstanding (provided that the first Interest Payment Date for any Note, the Original Issue Date of which is after a Regular Record Date but prior to the respective Interest Payment Date, shall be the Interest Payment Date following the next succeeding Regular Record Date), (b) a date of maturity of such Note and (c) only with respect to defaulted interest on such Note, the date established by the Trustee for the payment of such defaulted interest pursuant to Section 2.11 hereof. MATURITY: The term "maturity," when used with respect to any Note, shall mean the date on which the principal of such Note becomes due and payable as therein or herein provided, whether at the stated maturity thereof or by declaration of acceleration, redemption or otherwise. MORTGAGE: The term "Mortgage" shall mean and include any mortgage, pledge, lien or security interest. MORTGAGE TRUSTEE: The term "Mortgage Trustee" shall mean the Person serving as trustee at the time under the First Mortgage or a Substituted Mortgage. NOTE OR NOTES: The term "Note" or "Notes" shall mean any Note or Notes, as the case may be, authenticated and delivered under this Indenture, including any Global Note. -4- NOTEHOLDER: The term "Noteholder," "Holder of Notes" or "Holder" shall mean any Person in whose name at the time a particular Note is registered on the books of the Trustee kept for that purpose in accordance with the terms hereof. OFFICERS' CERTIFICATE: The term "Officers' Certificate" when used with respect to the Company, shall mean a certificate signed by one of the Chairman, the President, any Vice President, the Treasurer or an Assistant Treasurer, and by the Secretary or an Assistant Secretary of the Company. OPINION OF COUNSEL: The term "Opinion of Counsel" shall mean an opinion in writing signed by legal counsel reasonably acceptable to the Trustee, which legal counsel may be an employee of the Company, meeting the applicable requirements of Section 15.5 hereof. If the Indenture requires the delivery of an Opinion of Counsel to the Trustee, the text and substance of which has been previously delivered to the Trustee, the Company may satisfy such requirement by the delivery by the legal counsel that delivered such previous Opinion of Counsel of a letter to the Trustee to the effect that the Trustee may rely on such previous Opinion of Counsel as if such Opinion of Counsel was dated and delivered the date delivery of such Opinion of Counsel is required. Any Opinion of Counsel may contain conditions and qualifications reasonably satisfactory to the Trustee. ORIGINAL ISSUE DATE: The term "Original Issue Date" shall mean for a Note, or portions thereof, the date upon which it, or such portion, was issued by the Company pursuant to this Indenture and authenticated by the Trustee (other than in connection with a transfer, exchange or substitution). OUTSTANDING: The term "outstanding," when used with reference to Notes, shall, subject to Section 10.4 hereof, mean, as of any particular time, all Notes authenticated and delivered by the Trustee under this Indenture, except (a) Notes theretofore canceled by the Trustee or delivered to the Trustee for cancellation; (b) Notes, or portions thereof, for the payment or redemption of which moneys in the necessary amount shall have been deposited in trust with the Trustee or with any paying agent (other than the Company), provided that if such Notes are to be redeemed prior to the maturity thereof notice of such redemption shall have been given as provided in Article Three, or provisions satisfactory to the Trustee shall have been made for giving such notice; (c) Notes, or portions thereof that have been paid and discharged or are deemed to have been paid and discharged pursuant to the provisions of this Indenture; and (d) Notes in lieu of or in substitution for which other Notes shall have been authenticated and delivered, or which have been paid, pursuant to Section 2.7 hereof. -5- PERMITTED ENCUMBRANCES: The term "Permitted Encumbrances" shall mean any of the following: (a) Liens for taxes, assessments or governmental charges or levies for the then current year and taxes, assessments or governmental charges or levies not then delinquent or which thereafter can be paid without penalty or are being contested in good faith; liens for worker's compensation awards and similar obligations not then delinquent or which thereafter can be paid without penalty or are being contested in good faith; liens imposed by law, such as carriers', warehousemen's, landlords', suppliers', mechanics', laborers', materialmen's and other similar liens not then delinquent or which are being contested in good faith; (b) Liens and charges incidental to construction or current operation which have not at such time been filed or asserted or the payment of which has been adequately secured or which are insignificant in amount; (c) Liens securing obligations not assumed by the Company and on account of which it has not customarily paid and does not expect to pay interest and existing upon real estate over or in respect of which the Company has a right of way or other easement or right for pipelines, rights of way, transmission, distribution or similar purposes; provided that the loss of all such easements would not materially adversely affect the operations of the Company; (d) Any right which the United States of America or any municipal or governmental body or agency may have by virtue of any franchise, license, contract or statute to recapture or to purchase, or designate a purchaser of or order the sale of, any property of the Company upon payment of reasonable compensation therefor, or upon reasonable compensation or conditions to terminate any franchise, license or other rights before the expiration date thereof or to regulate the property and business of the Company; (e) Liens of judgments covered by insurance, or upon appeal or other proceeding for review, or not exceeding at any one time $10 million in aggregate amount; (f) Easements or reservations in respect of any property of the Company for the purpose of transmission or distribution lines or other rights- of-way, including overhead and underground transmission and distribution lines and pipelines, or similar purposes, zoning ordinances, regulations, reservations, survey exceptions, building restrictions, covenants, party wall agreements, conditions of records and such other encumbrances or charges against real property as are of a nature generally existing with respect to properties of a similar character; (g) Liens on the property of the Company incurred in the ordinary course of business to secure performance of obligations with respect to statutory or regulatory requirements, performance or return-of-money bonds, surety bonds or other obligations of a like nature, in each case which are not incurred in connection with the borrowing of money, the obtaining of advances or credit or the payment of the deferred purchase price of property; (h) Pledges or deposits by the Company under workmen's compensation laws, unemployment insurance laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Debt) or leases to which the Company is a party, or deposits to secure public or statutory obligations of the Company, or deposits of cash or United States government bonds to secure surety or appeals bonds obtained in the ordinary course of business to which the Company is a party, or deposits as security for taxes (that shall not at the time be delinquent or thereafter can be paid without penalty or are being contested in -6- good faith) or import duties incurred in the ordinary course of business, or deposits for the payment of rent or performance of other obligations under a lease, in each case incurred in the ordinary course of business; (i) Rights reserved to or vested in any municipality or public authority by the terms of any franchise, grant, license, or governmental consent or permit, or by any provision of law, to acquire, purchase, or recapture at fair value, or to designate a purchaser of such property; (j) Rights reserved to or vested in any municipality or public authority to use or control or regulate such property; (k) Any obligations or duties, affecting such property, to any municipality or public authority with respect to any franchise, grant, license or permit; (l) Exceptions or reservations therefrom of minerals, precious metals, gas, oil, petroleum, hydrocarbons, or any other substances, which exceptions or reservations exist at the time of acquisition by the Company of the property and which do not materially and adversely affect the use made or proposed to be made by it of such property; or (m) Liens existing on the Substitution Date not otherwise described in clauses (a) through (l) above. PERSON: The term "Person" shall mean any individual, corporation, partnership, limited partnership, joint venture, limited liability company, limited liability partnership, association, joint-stock company, trust, unincorporated organization or government or any agent or political subdivision thereof. PLEDGED FIRST MORTGAGE BONDS: The term "Pledged First Mortgage Bonds" shall mean the first mortgage bonds of the Company issued from time to time under the First Mortgage pledged and delivered by the Company to the Trustee pursuant to Section 4.1 or 4.8 hereof. PLEDGED SUBSTITUTED MORTGAGE BONDS: The term "Pledged Substituted Mortgage Bonds" shall mean any mortgage bonds issued by the Company under a Substituted Mortgage and delivered to the Trustee pursuant to Section 4.11 hereof. PRINCIPAL EXECUTIVE OFFICE OF THE COMPANY: The term "principal executive office of the Company" shall mean Number One South Jersey Plaza, Route 54, Folsom, New Jersey 08037, or such other place where the main corporate offices of the Company are located as designated in writing to the Trustee by an Authorized Agent. PRINCIPAL PROPERTY: -7- The term "Principal Property" shall mean (i) any interest in real property owned by the Company, and (ii) any asset owned by the Company that is depreciable in accordance with generally accepted accounting principles, provided that such real property interest or other depreciable asset is Utility Property. REGULAR RECORD DATE: The term "Regular Record Date" shall mean, unless otherwise specified in a Company Order pursuant to Section 2.5, for an Interest Payment Date for a particular Note the December 15 or the June 15 next preceding the applicable Interest Payment Date unless such Interest Payment Date is the date of maturity of such Note, in which event, the Regular Record Date shall be the date of maturity of such Note. RELATED SERIES OF NOTES: The term "related series of Notes," when used in reference to a series of Pledged First Mortgage Bonds, shall mean the series of Notes in respect of which such Pledged First Mortgage Bonds were delivered to the Trustee pursuant to Section 4.8 hereof upon the initial authentication and issuance of such Notes pursuant to Section 2.5 hereof and when used in reference to a series of Pledged Substituted Mortgage Bonds shall mean the series of Notes in respect of which such Pledged Substituted Mortgage Bonds were delivered to the Trustee pursuant to Section 4.11 hereof. RELATED SERIES OF PLEDGED FIRST MORTGAGE BONDS: The term "related series of Pledged First Mortgage Bonds," when used in reference to a series of Notes, shall mean the series of Pledged First Mortgage Bonds delivered to the Trustee pursuant to Section 4.8 hereof in connection with the initial authentication and issuance of such Notes pursuant to Section 2.5 hereof. RELATED SERIES OF PLEDGED SUBSTITUTED MORTGAGE BONDS: The term "related series of Pledged Substituted Mortgage Bonds," when used in reference to an series of Notes, shall mean the series of Pledged Substituted Mortgage Bonds delivered to the Trustee pursuant to Section 4.11 hereof. RESPONSIBLE OFFICER: The term "responsible officer" or "responsible officers" when used with respect to the Trustee shall mean any officer in the Corporate Trust Administration department of the Trustee, or any other officer or assistant officer of the Trustee customarily performing functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of his or her knowledge of and familiarity with the particular subject. -8- SEC: The term "SEC" shall mean the United States Securities and Exchange Commission or, if at any time hereafter the SEC is not existing or performing the duties now assigned to it under the TIA, then the body performing such duties. SPECIAL RECORD DATE: The term "Special Record Date" shall mean, with respect to any Note, the date established by the Trustee in connection with the payment of defaulted interest on such Note pursuant to Section 2.11 hereof. STATED MATURITY: The term "stated maturity" shall mean, with respect to any Note, the last date on which principal on such Note becomes due and payable as therein or herein provided, other than by declaration of acceleration or by redemption. SUBSTITUTED MORTGAGE: The term "Substituted Mortgage" shall mean a mortgage indenture of the Company designated by the Company to the Trustee as a Substituted Mortgage pursuant to Section 4.11 hereof. SUBSTITUTION DATE: The term "Substitution Date" shall mean the date as of which all First Mortgage Bonds other than Pledged First Mortgage Bonds have been retired through payment, redemption, or otherwise (including those First Mortgage Bonds the payment for which has been provided for in accordance with the applicable First Mortgage) at, before or after the maturity thereof. TRUSTEE: The term "Trustee" shall mean The Bank of New York and, subject to Article Nine, shall also include any successor Trustee. U.S. GOVERNMENT OBLIGATIONS: The term "U.S. Government Obligations" shall mean (i) direct non-callable obligations of, or noncallable obligations guaranteed as to timely payment of principal and interest by, the United States of America or an agency thereof for the payment of which obligations or guarantee the full faith and credit of the United States is pledged or (ii) certificates or receipts representing direct ownership interests in obligations or specified portions (such as principal or interest) of obligations described in clause (i) above, which obligations are held by a custodian in safekeeping in a manner satisfactory to the Trustee. UTILITY PROPERTY: The term "Utility Property" shall mean and comprise property of the Company, located in the State of New Jersey or in any state contiguous thereto which (except as provided below) is used by or useful to the Company in the business of furnishing, purchasing, storing, processing, manufacturing, utilizing, transmitting, supplying, liquefying, distributing and/or disposing of gas, -9- whether manufactured, natural or liquefied petroleum gases or a mixture of any thereof, for heat, light, power, or refrigeration or any other uses, or in any business which is incidental thereto. ARTICLE TWO FORM, ISSUE, EXECUTION, REGISTRATION AND EXCHANGE OF NOTES SECTION 2.1 FORM GENERALLY (a) If the Notes are in the form of a Global Note they shall be in substantially the form set forth in Exhibit A (or, following the Substitution Date, Exhibit C) to this Indenture, and, if the Notes are not in the form of a Global Note, they shall be in substantially the form set forth in Exhibit B (or, following the Substitution Date, Exhibit D) to this Indenture, or, in any case, in such other form as shall be established by a Board Resolution, or a Company Order pursuant to a Board Resolution, or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with applicable rules of any securities exchange or of the Depository or with applicable law, including without limitation, applicable securities laws, or as may, consistently herewith, be determined by the officers executing such Notes, as evidenced by their execution of such Notes. (b) The definitive Notes shall be typed, printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Notes, as evidenced by their execution of such Notes. SECTION 2.2 FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION The Trustee's certificate of authentication on all Notes shall be in substantially the following form: Trustee's Certificate of Authentication This Note is one of the Notes of the series herein designated, described or provided for in the within-mentioned Indenture. ___________________________________ as Trustee By:________________________________ Authorized Officer SECTION 2.3 AMOUNT UNLIMITED The aggregate principal amount of Notes that may be authenticated and delivered under this Indenture is unlimited, subject to compliance with the provisions of this Indenture, and may be issued from time to time in one o more series. SECTION 2.4 DENOMINATIONS, DATES, INTEREST PAYMENT AND RECORD DATES -10- (a) The Notes shall be issuable in registered form without coupons in denominations of $1,000 and integral multiples thereof or such other amount or amounts as may be authorized by the Board of Directors or a Company Order pursuant to a Board Resolution or in one or more indentures supplemental hereto; provided, however, that the principal amount of a Global Note shall not exceed the amount, if any, specified by the Depository from time to time. (b) Each Note shall be dated and issued as of the date of its authentication by the Trustee and shall bear an Original Issue Date or, as provided in Section 2.13(e) hereof, two or more Original Issue Dates; each Note issued upon transfer, exchange or substitution of a Note shall bear the Original Issue Date or Dates of such transferred, exchanged or substituted Note, subject to the provisions of Section 2.13(e) hereof. (c) Each Note shall bear interest from the later of (1) its Original Issue Date (or, if pursuant to Section 2.13 hereof, a Global Note has two or more Original Issue Dates, interest shall, beginning on each such Original Issue Date, begin to accrue for that part of the principal amount of such Global Note to which that Original Issue Date is applicable), or (2) the most recent date to which interest has been paid or duly provided for with respect to such Note until the principal of such Note is paid or made available for payment, and interest on each Note shall be payable on each Interest Payment Date after the Original Issue Date. (d) Each Note shall mature on a stated maturity specified in the Note not less than one year nor more than thirty years after the applicable Original Issue Date. The principal amount of each outstanding Note shall be payable on the maturity date or dates specified therein. (e) Unless otherwise specified in a Company Order pursuant to Section 2.5 hereof, interest on each of the Notes shall be calculated on the basis of a 360- day year of twelve 30-day months and shall be computed at a fixed rate until the maturity of such Notes. The method of computing interest on any Notes not bearing a fixed rate of interest shall be set forth in a Company Order pursuant to Section 2.5 hereof. Unless otherwise specified in a Company Order pursuant to Section 2.5 hereof, principal, interest and premium, if any, on the Notes shall be payable in the currency of the United States. (f) Except as provided in the following sentence, the Person in whose name any Note is registered at the close of business on any Regular Record Date or Special Record Date with respect to an Interest Payment Date for such Note shall be entitled to receive the interest payable on such Interest Payment Date notwithstanding the cancellation of such Note upon any registration of transfer, exchange or substitution of such Note subsequent to such Regular Record Date or Special Record Date and prior to such Interest Payment Date. Any interest payable at maturity shall be paid to the Person to whom the principal of such Note is payable. (g) Promptly after each Regular Record Date that is not a date of maturity, the Trustee shall furnish to the Company a notice setting forth the total amount of the interest payments to be made on the applicable Interest Payment Date, and to the Depository a notice setting forth the total amount of interest payments to be made on Global Notes on such Interest Payment Date. The Trustee (or any duly selected paying agent) shall provide to the Company during each month that precedes an Interest Payment Date a list of the principal, interest and premium, if any, to be paid on Notes on such Interest Payment Date and to the Depository a list of the principal, interest and premium, if any, to be paid on Global Notes on such Interest Payment Date. Promptly after the first Business Day of each month, the Trustee shall furnish to the Company a written notice setting forth the aggregate principal amount of the Global Notes. -11- The Trustee, as long as it is paying agent, shall assume responsibility for withholding taxes on interest paid as required by law except with respect to any Global Note. SECTION 2.5 EXECUTION, AUTHENTICATION, DELIVERY AND DATING (a) The Notes shall be executed on behalf of the Company by one of the Chairman, the President, any Vice President, the Treasurer or an Assistant Treasurer of the Company and attested by the Secretary or an Assistant Secretary of the Company. The signature of any of these officers on the Notes may be manual or facsimile. (b) Notes bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall continue to be valid obligations of the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Notes or did not hold such offices at the date of such Notes. (c) At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Notes executed by the Company to the Trustee for authentication, together with or preceded by one or more Company Orders for the authentication and delivery of such Notes, and the Trustee in accordance with any such Company Order shall authenticate and deliver such Notes. The Notes shall be issued in series. Such Company Order shall specify the following with respect to each series of Notes: (i) any limitations on the aggregate principal amount of the Notes to be issued as part of such series, (ii) the Original Issue Date or Dates for such Notes, (iii) the stated maturity of such Notes, (iv) the interest rate or rates, or method of calculation of such rate or rates, for such Notes, (v) the terms, if any, regarding the optional or mandatory redemption of such Notes, including the redemption date or dates, if any, and the price or prices applicable to such redemption (including any premium), (vi) whether or not such Notes shall be entitled to the benefit of any sinking fund, and the terms, if any, of such sinking fund, (vii) whether or not such Notes shall be issued in whole or in part in the form of a Global Note and, if so, the Depository for such Global Note, (viii) the designation of such Notes, (ix) if the form of such Notes is not as described in Exhibit A, Exhibit B, Exhibit C, or Exhibit D hereto, the form of such Notes, (x) the maximum annual interest rate, if any, of the Notes permitted for such issue, (xi) any other information necessary to complete the Notes of such series, (xii) if prior to the Substitution Date, the series of Pledged First Mortgage Bonds pledged as security with respect to such series of Notes, (xiii) if on or after the Substitution Date, the issue of Pledged Substituted Mortgage Bonds, if any, (xiv) the establishment of any office or agency pursuant to Section 6.2 hereof and (xv) any other terms of such series not inconsistent with this Indenture. Prior to authenticating any Notes, and in accepting the additional responsibilities under this Indenture in relation to such Notes, the Trustee shall receive from the Company the following at or before the issuance of such Notes, and (subject to Section 9.1 hereof) shall be fully protected in relying upon: (1) A Board Resolution authorizing such Company Order or Orders and, if the form of Notes is established by a Board Resolution or a Company Order pursuant to a Board Resolution, a copy of such Board Resolution; (2) an Opinion of Counsel stating substantially the following, subject to customary qualifications and exceptions: (A) if the form of Notes has been established by or pursuant to a Board Resolution, a Company Order pursuant to a Board Resolution or in a supplemental -12- indenture as permitted by Section 2.1 hereof, that such form has been established in conformity with this Indenture; (B) that this Indenture has been duly authorized, executed and delivered by the Company and constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except to the extent that enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws of general application relating to or affecting the enforcement of creditors' rights and the application of general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity) and except as enforcement of provisions of the Indenture may be limited by state laws affecting the remedies for the enforcement of the security provided for in the Indenture; (C) if prior to the Substitution Date, that the issuance of the series of First Mortgage Bonds that service and secure the payment of the principal and interest in respect of such series of Notes has been duly authorized, executed and delivered, and that such Pledged First Mortgage Bonds and the applicable First Mortgage are valid and binding obligations of the Company, enforceable in accordance with their terms, except to the extent that enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws of general application relating to or affecting the enforcement of creditors' rights and the application of general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity) and except as enforcement of provisions thereof may be limited by state laws affecting the remedies for the enforcement of the security provided for in the First Mortgage; and that such Pledged First Mortgage Bonds are entitled to the benefit of the applicable First Mortgage, equally and ratably, with all First Mortgage Bonds and other Pledged First Mortgage Bonds (if any) outstanding under the applicable First Mortgage, except as to sinking fund provisions; (D) that the Indenture and, if any Pledged First Mortgage Bonds are, or are to be, outstanding, the applicable First Mortgage are qualified to the extent necessary under the TIA; (E) if any Pledged Substituted Mortgage Bonds are to be delivered, that the issue of Pledged Substituted Mortgage Bonds being delivered to the Trustee in connection with the issuance of such Notes has been duly authorized, executed and delivered, and that such Pledged Substituted Mortgage Bonds and the Substituted Mortgage are valid and binding obligations of the Company, enforceable in accordance with their terms, except to the extent that enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws of general application relating to or affecting the enforcement of creditors' rights and the application of general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity) and except as enforcement of provisions thereof may be limited by state laws affecting the remedies for the enforcement of the security provided for in the Substituted Mortgage; and that such Pledged Substituted Mortgage Bonds are entitled to the benefit of the Substituted Mortgage, equally and ratably, with all Pledged Substituted Mortgage Bonds (if any) outstanding thereunder, except as to sinking fund provisions; (F) that the Indenture is qualified to the extent necessary under the TIA; (G) that such Notes have been duly authorized and executed by the Company, and when authenticated by the Trustee and issued by the Company in the manner -13- and subject to any conditions specified in such Opinion of Counsel, will constitute valid and binding obligations of the Company, enforceable in accordance with their terms, except to the extent that enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws of general application relating to or affecting the enforcement of creditors' rights and the application of general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity) and except as enforcement of provisions of this Indenture may be limited by state laws affecting the remedies for the enforcement of the security provided for in this Indenture; (H) that the issuance of the Notes and, if applicable, the delivery by the Company of a series of Pledged First Mortgage Bonds or Pledged Substituted Mortgage Bonds in connection therewith will not result in any default under this Indenture, the First Mortgage or the Substituted Mortgage (if applicable), or any other contract, indenture, loan agreement or other instrument to which the Company is a party or by which it or any of its property is bound; (I) that all consents or approvals of the New Jersey Board of Public Utilities (or any successor agency) and of any other federal or state regulatory agency required in connection with the Company's execution and delivery of this Indenture, such Notes and any Pledged First Mortgage Bonds or Pledged Substituted Mortgage Bonds have been obtained and are not withdrawn (except that no statement need be made with respect to state securities laws); and (J) if applicable, that the First Mortgage or the Substituted Mortgage and all financing statements have been duly filed and recorded in all places where such filing or recording is necessary for the perfection or preservation of the lien of the First Mortgage or the Substituted Mortgage, and the First Mortgage or the Substituted Mortgage constitutes a valid and perfected first lien upon the property purported to be covered thereby, subject only to permitted encumbrances (as defined in the First Mortgage or the Substituted Mortgage). (3) an Officers' Certificate stating that (i) the Company is not, and upon the authentication by the Trustee of such Notes will not be, in default under any of the terms or covenants contained in this Indenture, (ii) all conditions that must be met by the Company to issue Notes under this Indenture have been met, and (iii) if applicable, the series of Pledged First Mortgage Bonds or the series of Pledged Substituted Mortgage Bonds securing the Notes pledged or being pledged to the Trustee meets the requirements of Section 4.10 or Section 4.11, as applicable, hereof. (d) No Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Note a certificate of authentication substantially in the form provided for herein executed by the Trustee by the manual signature of an authorized officer, and such certificate upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture. (e) Notwithstanding any other provision in this Section 2.5 to the contrary, for each issuance of Notes after the first issuance of Notes of such series, the Company shall be required to deliver to the Trustee only the Note and a request from an Authorized Agent to authenticate and deliver such Note in accordance with the instructions specified therein. Any such request shall constitute a representation and warranty by the Company that all of the conditions precedent provided for in this Indenture relating to the authentication and delivery of such Notes -14- have been complied with and that no event has occurred and is continuing which is, or after notice or lapse of time or both, would become an Event of Default. SECTION 2.6 EXCHANGE AND REGISTRATION OF TRANSFER OF NOTES (a) Subject to Section 2.13 hereof, Notes may be exchanged for one or more new Notes of any authorized denominations and of a like aggregate principal amount, series and stated maturity and having the same terms and Original Issue Date or Dates. Notes to be exchanged shall be surrendered at any of the offices or agencies to be maintained pursuant to Section 6.2 hereof and the Trustee shall deliver in exchange therefor the Note or Notes which the Noteholder making the exchange shall be entitled to receive. (b) The Company hereby appoints the Trustee registrar for the Notes. The Trustee shall keep, at one of said offices or agencies, a register or registers in which, subject to such reasonable regulations as it may prescribe, the Trustee shall register or cause to be registered Notes and shall register or cause to be registered the transfer of Notes as in this Article Two provided. Such register shall be in written form or in any other form capable of being converted into written form within a reasonable time. At all reasonable times, such register shall be open for inspection by the Company. Upon due presentment for registration of transfer of any Note at any such office or agency, the Company shall execute and the Trustee shall register, authenticate and deliver in the name of the transferee or transferees one or more new Notes of any authorized denominations and of a like aggregate principal amount, series and stated maturity and having the same terms and Original Issue Date or Dates. (c) All Notes presented for registration of transfer or for exchange, redemption or payment shall be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Company and the Trustee and duly executed by the Holder or the attorney in fact of such Holder duly authorized in writing. (d) No service charge shall be made for any exchange or registration of transfer of Notes, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. (e) The Trustee shall not be required to exchange or register a transfer of any Notes selected, called or being called for redemption (including Notes, if any, redeemable at the option of the Holder, provided such Notes are then redeemable at such Holder's option), except, in the case of any Note to be redeemed in part, the portion thereof not to be so redeemed. (f) If the principal amount, and applicable premium, if any, of part, but not all, of a Global Note is paid, then upon surrender to the Trustee of such Global Note, the Company shall execute, and the Trustee shall authenticate, deliver and register, a Global Note in an authorized denomination in aggregate principal amount equal to, and having the same terms, Original Issue Date or Dates and series as, the unpaid portion of such Global Note. SECTION 2.7 MUTILATED, DESTROYED, LOST OR STOLEN NOTES (a) If any temporary or definitive Note shall become mutilated or be destroyed, lost or stolen, the Company shall execute, and upon its request the Trustee shall authenticate and deliver, a new Note of like form and principal amount and having the same terms and Original Issue Date or Dates and bearing a number not contemporaneously outstanding, in exchange and substitution for the mutilated Note, or in lieu of and in substitution for the Note so destroyed, lost or stolen. In every case the applicant for a substituted Note shall furnish to the Company, the -15- Trustee and any paying agent or Authenticating Agent such security or indemnity as may be required by them to save each of them harmless, and, in every case of destruction, loss or theft of a Note, the applicant shall also furnish to the Company and to the Trustee evidence to their satisfaction of the destruction, loss or theft of such Note and of the ownership thereof. (b) The Trustee shall authenticate any such substituted Note and deliver the same upon the written request or authorization of any officer of the Company. Upon the issuance of any substituted Note, 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 connected therewith. If any Note which has matured, is about to mature, has been redeemed or called for redemption shall become mutilated or be destroyed, lost or stolen, the Company may, instead of issuing a substituted Note, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated Note) if the applicant for such payment shall furnish to the Company, the Trustee and any paying agent or Authenticating Agent such security or indemnity as may be required by them to save each of them harmless and, in case of destruction, loss or theft, evidence satisfactory to the Company and the Trustee of the destruction, loss or theft of such Note and of the ownership thereof. (c) Every substituted Note issued pursuant to this Section 2.7 by virtue of the fact that any Note is mutilated, destroyed, lost or stolen shall constitute an additional contractual obligation of the Company, whether or not such destroyed, lost or stolen Note shall be found at any time, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder. All Notes shall be held and owned upon the express condition that, to the extent permitted by law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender. SECTION 2.8 TEMPORARY NOTES Pending the preparation of definitive Notes, the Company may execute and the Trustee shall authenticate and deliver temporary Notes (printed, lithographed or otherwise reproduced). Temporary Notes shall be issuable in any authorized denomination and substantially in the form of the definitive Notes but with such omissions, insertions and variations as may be appropriate for temporary Notes, all as may be determined by the Company. Every such temporary Note shall be authenticated by the Trustee upon the same conditions and in substantially the same manner, and with the same effect, as the definitive Notes. Without unreasonable delay the Company shall execute and shall deliver to the Trustee definitive Notes and thereupon any or all temporary Notes shall be surrendered in exchange therefor at the corporate trust office of the Trustee, and the Trustee shall authenticate, deliver and register in exchange for such temporary Notes an equal aggregate principal amount of definitive Notes. Such exchange shall be made by the Company at its own expense and without any charge therefor to the Noteholders. Until so exchanged, the temporary Notes shall in all respects be entitled to the same benefits under this Indenture as definitive Notes authenticated and delivered hereunder. SECTION 2.9 CANCELLATION OF NOTES PAID, ETC. All Notes surrendered for the purpose of payment, redemption, exchange or registration of transfer shall be surrendered to the Trustee for cancellation and promptly canceled by it and no Notes shall be issued in lieu thereof except as expressly permitted by this Indenture. The Company's acquisition of any Notes shall operate as a redemption or satisfaction of the -16- indebtedness represented by such Notes and such Notes shall be surrendered by the Company to and canceled by the Trustee. SECTION 2.10 INTEREST RIGHTS PRESERVED Each Note delivered under this Indenture upon transfer of or in exchange for or in lieu of any other Note shall carry all the rights to interest accrued and unpaid, and to accrue, which were carried by such other Note, and each such Note shall be so dated that neither gain nor loss of interest shall result from such transfer, exchange or substitution. SECTION 2.11 SPECIAL RECORD DATE If and to the extent that the Company fails to make timely payment or provision for timely payment of interest on any series of Notes (other than on an Interest Payment Date that is a maturity date), that interest shall cease to be payable to the Persons who were the Noteholders of such issue at the applicable Regular Record Date. In that event, when moneys become available for payment of that interest, the Trustee shall (a) establish a date of payment of such interest and a Special Record Date for the payment of that interest, which Special Record Date shall be not more than 15 or fewer than 10 days prior to the date of the proposed payment and (b) mail notice of the date of payment and of the Special Record Date not fewer than 10 days preceding the Special Record Date to each Noteholder of such issue at the close of business on the 15th day preceding the mailing at the address of such Noteholder, as it appears on the register for the Notes. On the day so established by the Trustee the interest shall be payable to the Holders of the applicable Notes at the close of business on the Special Record Date. SECTION 2.12 PAYMENT OF NOTES Payment of the principal, interest and premium on all Notes shall be payable as follows: (a) On or before 11:00 a.m., New York City time, of the day on which payment of principal, interest and premium, if any, is due on any Global Note pursuant to the terms thereof, the Company shall deliver to the Trustee funds available on such date sufficient to make such payment, by wire transfer of immediately available funds or by instructing the Trustee to withdraw sufficient funds from an account maintained by the Company with the Trustee or such other method as is acceptable to the Trustee and, if applicable, the Depository. On or before 2:00 p.m., New York City time, or such other time as shall be agreed upon between the Trustee and, if applicable, the Depository, of the day on which any payment of interest is due on any Global Note (other than at maturity), the Trustee shall pay to the Depository such interest in same day funds. On or before 2:00 p.m., New York City time or such other time as shall be agreed upon between the Trustee and the Depository, of the day on which principal, interest payable at maturity and premium, if any, is due on any Global Note, the Trustee shall deposit with the Depository the amount equal to the principal, interest payable at maturity and premium, if any, by wire transfer into the account specified by the Depository. As a condition to the payment at maturity of any part of the principal and applicable premium of any Global Note, the Depository shall surrender, or cause to be surrendered, such Global Note to the Trustee, whereupon a new Global Note shall be issued to the Depository pursuant to Section 2.6(f). (b) With respect to any Note that is not a Global Note, principal, applicable premium, if any, and interest due at the maturity of the Note shall be payable in immediately available funds when due upon presentation and surrender of such Note at the corporate trust office of the Trustee or at the authorized office of any paying agent. Interest on any Note that is not a Global Note (other than interest payable at maturity) shall be paid to the Holder thereof as -17- its name appears on the register as of the close of business on the Regular Record Date relating to the applicable Interest Payment Date by check mailed on such Interest Payment Date or wire transfer payable in clearinghouse or similar next day funds; provided that if the Trustee receives a written request from any Holder of Notes, the aggregate principal amount of which having the same Interest Payment Date equals or exceeds $10,000,000, on or before the applicable Regular Record Date for such Interest Payment Date, interest shall be paid by wire transfer of immediately available funds to a bank located within the continental United States and designated by such Holder in its request or by direct deposit into the account of such Holder designated by such Holder in its request if such account is maintained with the Trustee or any paying agent. (c) The Trustee shall receive the Pledged First Mortgage Bonds or Pledged Substituted Mortgage Bonds from the Company as provided in this Indenture and shall hold the Pledged First Mortgage Bonds or Pledged Substituted Mortgage Bonds, and any and all sums payable thereon or with respect thereto or realized therefrom, in trust for the benefit of the Holders of the Notes, as herein provided. Subject to Article Eight hereof, the Company's obligations to make payments with respect to the principal of, premium or interest on Pledged First Mortgage Bonds or Pledged Substituted Mortgage Bonds will be fully or partially, as the case may be, satisfied and discharged to the extent that, at the time that any such payment shall be due, the then due principal of, premium or interest on the related series of Notes shall have been fully or partially paid or there shall have been deposited with the Trustee pursuant to this Section 2.12 sufficient available funds to fully or partially pay the then due principal of, premium, if any, or interest on such related series of Notes. SECTION 2.13 NOTES ISSUABLE IN THE FORM OF A GLOBAL NOTE (a) If the Company shall establish pursuant to Section 2.5 hereof that the Notes of a particular series are to be issued in whole or in part in the form of one or more Global Notes, then the Company shall execute and the Trustee shall, in accordance with Section 2.5 hereof and the Company Order delivered to the Trustee thereunder, authenticate and deliver such Global Note or Notes, which (i) shall represent, shall be denominated in an amount equal to the aggregate principal amount of, and shall have the same terms as, the outstanding Notes to be represented by such Global Note or Notes, (ii) shall be registered in the name of the Depository or its nominee, (iii) shall be delivered by the Trustee to the Depository or pursuant to the Depository's instruction and (iv) shall bear a legend substantially to the following effect: "This Note is a Global Note registered in the name of the Depository (referred to herein) or a nominee thereof and, unless and until it is exchanged in whole or in part for the individual Notes represented hereby, this Global Note may not be transferred except as a whole by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. Unless this Global Note is presented by an authorized representative of The Depository Trust Company, to the trustee for registration of transfer, exchange or payment, and any certificate 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 is made to Cede & Co., any transfer, pledge or other use hereof for value or otherwise by or to any person is wrongful since the registered owner hereof, Cede & Co., has an interest herein" or such other legend as may be required by the rules and regulations of the Depository. (b) Notwithstanding any other provision of Section 2.6 hereof or of this Section 2.13, unless the terms of a Global Note expressly permit such Global Note to be exchanged in whole or in part for individual Notes, a Global Note may be transferred, in whole but not in part, only as described in the legend thereto. -18- (c) (i) If at any time the Depository for a Global Note notifies the Company that it is unwilling or unable to continue as Depository for such Global Note or if at any time the Depository for the Global Note shall no longer be eligible or in good standing under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or other applicable statute or regulation, the Company shall appoint a successor Depository, with respect to such Global Note. If a successor Depository for such Global Note is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such ineligibility, the Company's election pursuant to Section 2.5(c)(vii) hereof shall no longer be effective with respect to the series of Notes evidenced by such Global Note and the Company shall execute, and the Trustee, upon receipt of a Company Order for the authentication and delivery of individual Notes of such series in exchange for such Global Note, shall authenticate and deliver, individual Notes of such series of like tenor and terms in definitive form in an aggregate principal amount equal to the amount of the Global Note in exchange for such Global Note. The Trustee shall not be charged with knowledge or notice of the ineligibility of a Depository unless a responsible officer assigned to and working in its corporate trustee administration department shall have actual knowledge thereof. (ii) The Company may at any time and in its sole discretion determine that all (but not less than all) outstanding Notes of a series issued or issuable in the form of one or more Global Notes shall no longer be represented by such Global Note or Notes. In such event the Company shall execute, and the Trustee, upon receipt of a Company Order for the authentication and delivery of individual Notes in exchange for such Global Note, shall authenticate and deliver individual Notes of like tenor and terms in definitive form in an aggregate principal amount equal to the principal amount of such Global Note or Notes in exchange for such Global Note or Notes. (iii) In any exchange provided for in any of the preceding two paragraphs, the Company will execute and the Trustee will authenticate and deliver individual Notes in definitive registered form in authorized denominations. Upon the exchange of a Global Note for individual Notes, such Global Note shall be canceled by the Trustee. Notes issued in exchange for a Global Note pursuant to this Section shall be registered in such names and in such authorized denominations as the Depository for such Global Note, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. The Trustee shall deliver such Notes to the Depository for delivery to the persons in whose names such Notes are so registered, or if the Depository shall refuse or be unable to deliver such Notes, the Trustee shall deliver such Notes to the persons in whose names such Notes are registered, unless otherwise agreed upon between the Trustee and the Company, in which event the Company shall cause the Notes to be delivered to the persons in whose names such Notes are registered. (d) Neither the Company, the Trustee, any Authenticating Agent nor any paying agent shall have any responsibility or liability for any aspect of the records relating to, or payments made on account of beneficial ownership interests of a Global Note or for maintaining, supervising or reviewing any records relating to such beneficial ownership interest. (e) Pursuant to the provisions of this subsection, at the option of the Trustee and upon 30 days' written notice to the Depository but not prior to the first Interest Payment Date of the respective Global Notes, the Depository shall be required to surrender any two or more Global Notes which have identical terms, including, without limitation, identical maturities, interest rates and redemption provisions (but which may have differing Original Issue Dates) to the Trustee, and the Company shall execute, and the Trustee shall authenticate and deliver to, or at the direction of, the Depository, a Global Note in principal amount equal to the aggregate principal amount of, and with all terms identical to, the Global Notes surrendered thereto and that -19- shall indicate each applicable Original Issue Date and the principal amount applicable to each such Original Issue Date. The exchange contemplated in this subsection shall be consummated at least 30 days prior to any Interest Payment Date applicable to any of the Global Notes surrendered to the Trustee. Upon any exchange of any Global Note with two or more Original Issue Dates, whether pursuant to this Section or pursuant to Section 2.6 or Section 3.3 hereof, the aggregate principal amount of the Notes with a particular Original Issue Date shall be the same before and after such exchange, after giving effect to any retirement of Notes and the Original Issue Dates applicable to such Notes occurring in connection with such exchange. (f) Except as provided above, owners of beneficial interests in a Global Note shall not be entitled to have Notes represented by such Global Note registered in their names, shall not receive or be entitled to receive physical delivery of Notes in certificated form and shall not be considered the Holders thereof for any purpose under this Indenture. Members of or participants in the Depository shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depository and such Depository may be treated by the Company, the Trustee, and any agent of the Company or the Trustee as the owner and Holder of such Global Note 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 Depository or impair, as between the Depository and its members or participants, the operation of customary practices governing the exercise of the rights of a Holder of any Note, 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. ARTICLE THREE REDEMPTION OF NOTES SECTION 3.1 APPLICABILITY OF ARTICLE Such of the Notes as are, by their terms, redeemable prior to their stated maturity date at the option of the Company, may be redeemed by the Company at such times, in such amounts and at such prices as may be specified therein and in accordance with the provisions of this Article Three. SECTION 3.2 NOTICE OF REDEMPTION; SELECTION OF NOTES (a) The election of the Company to redeem any Notes shall be evidenced by a Board Resolution or a Company Order which shall be given with notice of redemption to the Trustee at least 45 days (or such shorter period acceptable to the Trustee in its sole discretion) prior to the redemption date specified in such notice. (b) Following receipt of the Company's notice pursuant to Section 3.2(a) hereof, notice of redemption to each Holder of Notes to be redeemed as a whole or in part shall be given by the Trustee, at the expense of the Company, in the manner provided in Section 15.10 hereof, no less than 30 or more than 60 days prior to the date fixed for redemption. Any notice which is given in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the Noteholder receives the notice. In any case, failure duly to give such notice, or any defect in such notice, to the Holder of any Note designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any Note. -20- (c) Each such notice shall specify the date fixed for redemption, the places of redemption and the redemption price at which such Notes are to be redeemed, and shall state that payment of the redemption price of such Notes or portion thereof to be redeemed will be made upon surrender of such Notes at such places of redemption, that interest accrued to the date fixed for redemption will be paid as specified in such notice, and that from and after such date interest thereon shall cease to accrue. If less than all of a series of Notes having the same terms are to be redeemed, the notice shall specify the Notes or portions thereof to be redeemed. If any Note is to be redeemed in part only, the notice which relates to such Note shall state the portion of the principal amount thereof to be redeemed, and shall state that, upon surrender of such Note, a new Note or Notes having the same terms in aggregate principal amount equal to the unredeemed portion thereof will be issued. (d) Unless otherwise provided by a supplemental indenture or Company Order under Section 2.5 hereof, if less than all of a series of Notes having the same terms are to be redeemed, the Trustee shall select pro rata or by lot, or in such other manner as it shall deem appropriate and fair in its discretion the particular Notes to be redeemed in whole or in part and shall thereafter promptly notify the Company in writing of the Notes so to be redeemed. If less than all of a series of Notes represented by a Global Note are to be redeemed, the particular Notes or portions thereof of such series to be redeemed shall be selected by the Depository for such series of Notes in such manner as the Depository shall determine. Notes shall be redeemed only in denominations of $1,000, provided that any remaining principal amount of a Note redeemed in part shall be a denomination authorized under this Indenture. (e) If at the time of the mailing of any notice of redemption the Company shall not have irrevocably directed the Trustee to apply funds deposited with the Trustee or held by it and available to be used for the redemption of Notes to redeem all the Notes called for redemption, such notice, at the election of the Company, may state that it is subject to the receipt of the redemption moneys by the Trustee before the date fixed for redemption and that such notice shall be of no effect unless such moneys are so received before such date. SECTION 3.3 PAYMENT OF NOTES ON REDEMPTION; DEPOSIT OF REDEMPTION PRICE (a) If notice of redemption for any Notes shall have been given as provided in Section 3.2 hereof and such notice shall not contain the language permitted at the Company's option under Section 3.2(e) hereof, such Notes or portions of Notes called for redemption shall become due and payable on the date and at the places stated in such notice at the applicable redemption price, together with interest accrued to the date fixed for redemption of such Notes. Interest on the Notes or portions thereof so called for redemption shall cease to accrue and such Notes or portions thereof shall be deemed not to be entitled to any benefit under this Indenture except to receive payment of the redemption price together with interest accrued thereon to the date fixed for redemption. Upon presentation and surrender of such Notes at such a place of payment in such notice specified, such Notes or the specified portions thereof shall be paid and redeemed at the applicable redemption price, together with interest accrued thereon to the date fixed for redemption. (b) If notice of redemption shall have been given as provided in Section 3.2 hereof and such notice shall contain the language permitted at the Company's option under Section 3.2(e) hereof, such Notes or portions of Notes called for redemption shall become due and payable on the date and at the places stated in such notice at the applicable redemption price, together with interest accrued to the date fixed for redemption of such Notes, and interest on the Notes or portions thereof so called for redemption shall cease to accrue and such Notes or -21- portions thereof shall be deemed not to be entitled to any benefit under this Indenture except to receive payment of the redemption price together with interest accrued thereon to the date fixed for redemption; provided that, in each case, the Company shall have deposited with the Trustee or a paying agent on or prior to such redemption date an amount sufficient to pay the redemption price together with interest accrued to the date fixed for redemption. Upon the Company making such deposit and upon presentation and surrender of such Notes at the place of payment in such notice specified, such Notes or the specified portions thereof shall be paid and redeemed at the applicable redemption price, together with interest accrued thereon to the date fixed for redemption. If the Company shall not make such deposit on or prior to the redemption date, the notice of redemption shall be of no force and effect and the principal on such Notes or specified portions thereof shall continue to bear interest as if the notice of redemption had not been given. (c) No notice of redemption of Notes shall be mailed during the continuance of any Event of Default, except (1) that, when notice of redemption of any Notes has been mailed, the Company shall redeem such Notes but only if funds sufficient for that purpose have prior to the occurrence of such Event of Default been deposited with the Trustee or a paying agent for such purpose, and (2) that notices of redemption of all outstanding Notes may be given during the continuance of an Event of Default. (d) Upon surrender of any Note redeemed in part only, the Company shall execute, and the Trustee shall authenticate, deliver and register, a new Note or Notes of authorized denominations in aggregate principal amount equal to, and having the same terms, Original Issue Date or Dates and series as, the unredeemed portion of the Note so surrendered. SECTION 3.4 REDEMPTION OF FIRST MORTGAGE BONDS In the event that the First Mortgage Bonds securing any series of Notes hereunder are redeemed in whole or in part by the Company pursuant to the terms of such First Mortgage Bonds, the Trustee shall use the proceeds of such redemption to redeem a like amount of the related series of Notes. Any notice of redemption of all or part of the First Mortgage Bonds delivered by the Company to the Mortgage Trustee shall be deemed to be a notice of redemption delivered to the Trustee pursuant to Section 3.2(a) hereof to redeem a like amount of the related series of Notes. ARTICLE FOUR PLEDGED FIRST MORTGAGE BONDS; PLEDGED SUBSTITUTED MORTGAGE BONDS SECTION 4.1 PLEDGE The Company hereby delivers to and pledges to the Trustee, for the benefit of the Holders from time to time of Series A Notes issued under this Indenture, South Jersey Gas First Mortgage Bonds, 15% Medium Term Notes Series A Bonds (the "Medium-Term Notes Series A Bonds"), in an aggregate principal amount equal to $100,000,000, that are fully registered in the name of the Trustee, in trust for the Holders of the Series A Notes issued, as security for (1) the full and prompt payment of the principal of each Series A Note when and as the same shall become due at maturity in accordance with the terms and provisions of this Indenture, either at the stated maturity thereof, upon acceleration of the maturity thereof, upon acceleration of the maturity thereof or upon call for redemption, and (2) the full and prompt payment of any interest on each Series A Note when and as the same shall become due on any Interest Payment Date in accordance with the terms and provisions of this Indenture. -22- SECTION 4.2 RECEIPT The Trustee acknowledges receipt of the Medium-Term Notes Series A Bonds in an aggregate principal amount of $100,000,000 for the benefit of the Holders from time to time of the Series A Notes issued under this Indenture. Medium- Term Notes Series A Bonds may be held either directly by the Trustee or by any other Person acting on its behalf in New Jersey (or any other jurisdiction acceptable to the Company, provided the Trustee shall have received an Opinion of Counsel as to the matter set forth in Section 2.5(c)(2)(I). SECTION 4.3 FIRST MORTGAGE BONDS HELD BY THE TRUSTEE The Trustee, as the holder of one or more series of First Mortgage Bonds, may attend any meeting of bondholders under the applicable First Mortgage as to which it receives due notice or at its option may deliver its proxy in connection therewith. Either at such meeting, or otherwise where any action, amendment, modification, waiver or consent to or in respect of the applicable First Mortgage or the first mortgage bonds issued under the applicable First Mortgage is sought without a meeting (referred to in this Section 4.3 as a "proposed action"), the Trustee shall vote each series of First Mortgage Bonds held by it, or will consent with respect thereto, as described below. The Trustee may agree to any proposed action without the consent of or notice to the Noteholders of any series where such proposed action would not adversely affect the Holders of such series of Notes. In the event that any proposed action would adversely affect the Holders of any series of outstanding Notes, the Trustee shall not vote the First Mortgage Bonds that service and secure such series of Notes without notice to and the approval of the Holders of at least a majority in aggregate principal amount of the Notes of such series then outstanding. SECTION 4.4 NO TRANSFER OF PLEDGED FIRST MORTGAGE BONDS; EXCEPTION Except as required to effect an assignment to a successor trustee under this Indenture or pursuant to Section 4.5 or Section 4.7 hereof, the Trustee shall not sell, assign or transfer the Pledged First Mortgage Bonds and the Company shall issue stop transfer instructions to the Mortgage Trustee and any transfer agent under the First Mortgage to effect compliance with this Section 4.4. -23- SECTION 4.5 DELIVERY TO THE COMPANY OF ALL PLEDGED FIRST MORTGAGE BONDS When the obligation of the Company to make payment with respect to the principal of and premium, if any, and interest on the Pledged First Mortgage Bonds shall be satisfied or deemed satisfied pursuant to Section 4.10 or Section 5.1(a) hereof, the Trustee shall, upon written request of the Company, deliver without cost to the Company all of the Pledged First Mortgage Bonds, together with such appropriate instruments of transfer or release as may be reasonably requested by the Company. All Pledged First Mortgage Bonds delivered to the Company in accordance with this Section 4.5 shall be delivered by the Company to the Mortgage Trustee for cancellation. SECTION 4.6 FURTHER ASSURANCES The Company, at its own expense, shall do such further lawful acts and things, and execute and deliver such additional conveyances, assignments, assurances, agreements and instruments, as may be necessary in order to better assign, assure and confirm to the Trustee its interest in the Pledged First Mortgage Bonds and for maintaining, protecting and preserving such interest. SECTION 4.7 EXCHANGE AND SURRENDER OF PLEDGED FIRST MORTGAGE BONDS At any time at the written direction of the Company, the Trustee shall surrender to the Company all or part of the Pledged First Mortgage Bonds in exchange for Pledged First Mortgage Bonds equal in aggregate outstanding principal amounts to, in different denominations than, but of the same series and with all other terms identical to, the Pledged First Mortgage Bonds so surrendered to the Company. In addition, at any time a Note shall cease to be entitled to any lien, benefit or security under this Indenture pursuant to Section 5.1(b) hereof, the Trustee shall surrender an equal principal amount of the related series of Pledged First Mortgage Bonds, subject to the limitations of this Section 4.7, to the Company for cancellation. The Trustee shall, together with such Pledged First Mortgage Bonds, deliver to the Company such appropriate instruments of transfer or release as the Company may reasonably request. Prior to the surrender required by this paragraph, the Trustee shall receive from the Company, and (subject to Section 9.1 hereof) shall be fully protected in relying upon, an Officers' Certificate stating (i) the aggregate outstanding principal amount of the Pledged First Mortgage Bonds of the series surrendered by the Trustee, after giving effect to such surrender, (ii) the aggregate outstanding principal amount of the related series of Notes, (iii) that the surrender of the Pledged First Mortgage Bonds will not result in any default under this Indenture, and (iv) that any Pledged First Mortgage Bonds to be received in exchange for the Pledged First Mortgage Bonds being surrendered comply with the provisions of this Section. The Company shall not be permitted to cause the surrender or exchange of all or any part of a series of Pledged First Mortgage Bonds contemplated in this Section, if after such surrender or exchange, the aggregate outstanding principal amount of the related series of Notes would exceed the aggregate outstanding principal amount of such series of Pledged First Mortgage Bonds held by the Trustee. Any Pledged First Mortgage Bonds received by the Company pursuant to this Section 4.7 shall be delivered to the Mortgage Trustee for cancellation. -24- SECTION 4.8 ACCEPTANCE OF ADDITIONAL PLEDGED FIRST MORTGAGE BONDS At any time prior to the Substitution Date, at the option of the Company, the Company may deliver to the Trustee, and the Trustee shall accept one or more additional series of Pledged First Mortgage Bonds registered in the name of the Trustee conforming to the requirements of Section 4.9 hereof. SECTION 4.9 TERMS OF PLEDGED FIRST MORTGAGE BONDS Each series of Pledged First Mortgage Bonds delivered to the Trustee pursuant to Section 4.1 or Section 4.8 hereof shall have the same stated rate or rates of interest (or interest calculated in the same manner), Interest Payment Dates, stated maturity date and redemption provisions, and shall be in the same aggregate principal amount, as the related series of Notes. SECTION 4.10 PLEDGED FIRST MORTGAGE BONDS AS SECURITY FOR NOTES Until the Substitution Date and subject to Article Five hereof, Pledged First Mortgage Bonds delivered to the Trustee, in trust for the benefit of the Holders of the related series of Notes, shall serve as security for any and all obligations of the Company under the related series of Notes, including, but not limited to (1) the full and prompt payment of the principal of and premium, if any, on such related series of Notes when and as the same shall become due and payable in accordance with the terms and provisions of this Indenture or such related series of Notes, either at the stated maturity thereof upon acceleration of the maturity thereof or upon redemption, and (2) the full and prompt payment of any interest on such related series of Notes when and as the same shall become due and payable in accordance with the terms and provisions of this Indenture or such related series of Notes. Notwithstanding anything in this Indenture to the contrary, from and after the Substitution Date, the obligation of the Company to make payment with respect to the principal of and premium, if any, and interest on the Pledged First Mortgage Bonds shall be deemed satisfied and discharged as provided in the supplemental trust indenture or indentures to the First Mortgage creating such Pledged Mortgage Bonds and the Pledged First Mortgage Bonds shall cease to secure in any manner Notes theretofore or subsequently issued. From and after the Substitution Date, any conditions to the issuance of Notes that refer or relate to Pledged First Mortgage Bonds or the First Mortgage shall be inapplicable. Following the Substitution Date, the Company shall cause the First Mortgage to be closed and the Company shall not issue any additional First Mortgage Bonds or Pledged First Mortgage Bonds under the First Mortgage. Notice of the occurrence of the Substitution Date shall be given by the Trustee to the Holders of the Notes in the manner provided in Section 15.10 hereof not later than 30 days after the Company notifies the Trustee of the occurrence of the Substitution Date. SECTION 4.11 PLEDGED SUBSTITUTED MORTGAGE BONDS (a) The Company shall notify the Trustee not less than 90 days prior to the Substitution Date that the Company has determined to deliver to the Trustee on the Substitution Date Pledged Substituted Mortgage Bonds in an aggregate principal amount equal to the aggregate principal amount of Notes outstanding on the Substitution Date in trust for the benefit of the Holders from time to time of the Notes issued under this Indenture as security for any and all obligations of the Company under the Notes, including but not limited to, (1) the full and prompt payment of the principal of and premium, if any, on the Notes when and as the same shall -25- become due and payable in accordance with the terms and provisions of this Indenture or the Notes, either at the stated maturity thereof, upon acceleration of the maturity thereof or upon redemption, and (2) the full and prompt payment of any interest on the Notes when and as the same shall become due and payable in accordance with the terms and provisions of this Indenture or the Notes. (b) The Pledged Substituted Mortgage Bonds to be delivered pursuant to the notice described in Section 4.11(a) shall be delivered in separate series corresponding to the series of Notes outstanding on the Substitution Date, each series of Pledged Substituted Mortgage Bonds having the same stated rate or rates of interest (or interest calculated in the same manner), Interest Payment Dates, stated maturity date and redemption provisions, and in the same aggregate principal amount, as the related series of Notes outstanding on the Substitution Date. (c) The notice described in Section 4.11(a), shall also state that on the Substitution Date the Company shall deliver to the Trustee a supplemental indenture to this Indenture that will provide, among other things, that upon the issuance of Notes hereunder on or after the Substitution Date, the Company shall deliver to the Trustee in trust for the benefit of the Holders as described in Section 4.11(a) hereof, and the Trustee shall accept therefor, a related series of Pledged Substituted Mortgage Bonds registered in the name of the Trustee and conforming to the requirements therein specified. (d) The determination whether to deliver Pledged Substituted Mortgage Bonds shall be made in the Company's sole discretion and without any obligation to do so. (e) In the event that the Company does not deliver the notice described in Section 4.11(a), the Notes outstanding on the Substitution Date shall, as of the Substitution Date, no longer be entitled to the benefit of the pledge of the Pledged Mortgage Bonds and shall thereafter be general unsecured obligations of the Company. ARTICLE FIVE SATISFACTION AND DISCHARGE; UNCLAIMED MONEYS SECTION 5.1 SATISFACTION AND DISCHARGE (a) If at any time: (1) the Company shall have paid or caused to be paid the principal of and premium, if any, and interest on all the outstanding Notes, as and when the same shall have become due and payable, (2) the Company shall have delivered to the Trustee for cancellation all outstanding Notes, or (3) the Company shall have irrevocably deposited or caused to be irrevocably deposited with the Trustee as trust funds the entire amount in (A) cash, (B) U.S. Government Obligations maturing as to principal and interest in such amounts and at such times as will insure the availability of cash, or (C) a combination of cash and U.S. Government Obligations, in any case sufficient, without reinvestment, as certified by an independent public accounting firm of national reputation in a written certification delivered to the Trustee, to pay at maturity or the applicable redemption date (provided that notice of redemption shall have been duly given or irrevocable provision satisfactory to the Trustee shall have been duly made for the -26- giving of any notice of redemption) all outstanding Notes, including principal and any premium and interest due or to become due to such date of maturity, as the case may be, and if, in any such case, the Company shall also pay or cause to be paid all other sums payable hereunder by the Company, then this Indenture shall cease to be of further effect (except as to (i) rights of registration of transfer and exchange of Notes, (ii) substitution of mutilated, defaced, destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments of principal thereof and any premium and interest thereon, upon the original stated due dates therefor or upon the applicable redemption date (but not upon acceleration of maturity) from the moneys and U.S. Government Obligations held by the Trustee pursuant to Section 5.2 hereof, (iv) the rights and immunities of the Trustee hereunder, (v) the rights of the Holders of Notes as beneficiaries hereof with respect to the property so deposited with the Trustee payable to all or any of them, (vi) the obligations and rights of the Trustee and the Company under Section 5.4 hereof, and (vii) the duties of the Trustee with respect to any of the foregoing), and the Company shall be deemed to have paid and discharged the entire indebtedness represented by, and its obligations under, the Notes, and the Trustee, on demand of the Company and at the cost and expense of the Company, shall execute proper instruments acknowledging such satisfaction of and discharging this Indenture and the Trustee shall at the request of the Company return to the Company all Pledged First Mortgage Bonds and all Pledged Substituted Mortgage Bonds and all other property and money held by it under this Indenture and determined by it from time to time in accordance with the certification pursuant to this Section 5.1(a)(3) to be in excess of the amount required to be held under this Section. If the Notes are deemed to be paid and discharged pursuant to this Section 5.1(a)(3) within 15 days after those Notes are so deemed to be paid and discharged, the Trustee shall cause a written notice to be given to each Holder in the manner provided by Section 15.10 hereof. The notice shall: (i) state that the Notes are deemed to be paid and discharged; (ii) set forth a description of any U.S. Government Obligations and cash held by the Trustee as described above; (iii) if any Notes will be called for redemption, specify the date or dates on which those Notes are to be called for redemption. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 9.6 hereof shall survive. If the Notes are deemed paid and discharged pursuant to this Section 5.1, the obligation of the Company to make payment with respect to the principal of and premium, if any, and interest on the related series of Pledged First Mortgage Bonds or the related series of Pledged Substituted Mortgage Bonds shall be satisfied and discharged and the related series of Pledged First Mortgage Bonds or the related series of Pledged Substituted Mortgage Bonds shall cease to secure the Notes in any manner. (b) If at any time: (1) the Company shall have paid or caused to be paid the principal of and premium, if any, and interest on any Note, as and when the same shall have become due and payable, -27- (2) the Company shall have delivered to the Trustee for cancellation any outstanding Note, or (3) the Company shall have irrevocably deposited or caused to be irrevocably deposited with the Trustee as trust funds the entire amount in (A) cash, (B) U.S. Government Obligations maturing as to principal and interest in such amounts and at such times as will insure the availability of cash, or (C) a combination of cash and U.S. Government Obligations, in any case sufficient, without reinvestment, as certified by an independent public accounting firm of national reputation in a written certification delivered to the Trustee, to pay at maturity or the applicable redemption date (provided that notice of redemption shall have been duly given or irrevocable provision satisfactory to the Trustee shall have been duly made for the giving of any notice of redemption) any outstanding Note, including principal and any premium and interest due or to become due to such date of maturity, as the case may be, such Note shall cease to be entitled to any lien, benefit or security under this Indenture and this Indenture will cease to be of further effect with respect to such Note. Upon a Note ceasing to be entitled to any lien, benefit or security under this Indenture, the obligation of the Company to make payment with respect to principal of and premium, if any, and interest on a principal amount of the related series of Pledged First Mortgage Bonds or the related series of Pledged Substituted Mortgage Bonds equal to the principal amount of such Note shall be satisfied and discharged and such portion of the principal amount of such Pledged First Mortgage Bonds or Pledged Substituted Mortgage Bonds shall cease to secure the Notes in any manner. SECTION 5.2 DEPOSITED MONEYS TO BE HELD IN TRUST BY TRUSTEE All moneys and U.S. Government Obligations deposited with the Trustee pursuant to Section 5.1 hereof shall be held in trust and applied by it to the payment, either directly or through any paying agent (including the Company if acting as its own paying agent), to the Holders of the particular Notes for the payment or redemption of which such moneys and U.S. Government Obligations have been deposited with the Trustee of all sums due and to become due thereon for principal and premium, if any, and interest. SECTION 5.3 PAYING AGENT TO REPAY MONEYS HELD Upon the satisfaction and discharge of this Indenture all moneys then held by any paying agent for the Notes (other than the Trustee) shall, upon written demand by an Authorized Agent, be repaid to the Company or paid to the Trustee, and thereupon such paying agent shall be released from all further liability with respect to such moneys. SECTION 5.4 RETURN OF UNCLAIMED MONEYS Any moneys deposited with or paid to the Trustee for payment of the principal of or any premium or interest on any Notes and not applied but remaining unclaimed by the Holders of such Notes for one year after the date upon which the principal of or any premium or interest on such Notes, as the case may be, shall have become due and payable, shall be repaid to the Company by the Trustee on written demand by an Authorized Agent, and all liability of the Trustee shall thereupon cease; and any Holder of any of such Notes shall thereafter look only to the Company for any payment which such Holder may be entitled to collect. ARTICLE SIX PARTICULAR COVENANTS OF THE COMPANY -28- SECTION 6.1 PAYMENT OF PRINCIPAL PREMIUM AND INTEREST The Company covenants and agrees for the benefit of the Holders of each series of Notes that it will duly and punctually pay or cause to be paid the principal of and any premium and interest on each of the Notes at the places, at the respective times and in the manner provided in such series of Notes or in this Indenture. SECTION 6.2 OFFICE FOR NOTICES AND PAYMENTS, ETC. So long as any of the Notes remain outstanding, the Company at its option may cause to be maintained in the city and state of New York, or elsewhere, an office or agency where the Notes may be presented for registration of transfer and for exchange as in this Indenture provided, and where, at any time when the Company is obligated to make a payment of principal and premium upon Notes, the Notes may be surrendered for payment, and may maintain at any such office or agency and at its principal office an office or agency where notices and demands to or upon the Company in respect of the Notes or of this Indenture may be served. The Company will give to the Trustee written notice of the location of each such office or agency and of any change of location thereof. If the Company shall fail to give such notice of the location or of any change in the location of any such office or agency, presentations may be made and notices and demands may be served at the corporate trust office of the Trustee. SECTION 6.3 APPOINTMENTS TO FILL VACANCIES IN TRUSTEE'S OFFICE The Company, whenever necessary to avoid or fill a vacancy in the office of Trustee, will appoint, in the manner provided in Section 9.11 hereof, a Trustee so that there shall at all times be a Trustee hereunder. SECTION 6.4 PROVISION AS TO PAYING AGENT The Trustee shall be the paying agent for the Notes and, at the option of the Company, the Company may appoint additional paying agents (including without limitation itself). Whenever the Company shall appoint an additional paying agent, it shall cause such paying agent to execute and deliver to the Trustee an instrument in which such agent shall agree with the Trustee, subject to this Section 6.4: (1) that it will hold in trust for the benefit of the Holders and the Trustee all sums held by it as such agent for the payment of the principal of and any premium or interest on the Notes (whether such sums have been paid to it by the Company or by any other obligor on such Notes) in trust for the benefit of the Holders of such Notes; (2) that it will give to the Trustee notice of any failure by the Company (or by any other obligor on such Notes) to make any payment of the principal of and any premium or interest on such Notes when the same shall be due and payable; and (3) that it will at any time during the continuance of any such failure, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such paying agent. If the Company shall act as its own paying agent with respect to any Notes, it will, on or before each due date of the principal of and any premium or interest on such Notes, set aside, segregate and hold in trust for the benefit of the Holders of such Notes a sum sufficient to pay -29- such principal and any premium or interest so becoming due and will notify the Trustee of any failure by it to take such action and of any failure by the Company (or by any other obligor on such Notes) to make any payment of the principal of and any premium or interest on such Notes when the same shall become due and payable. Whenever the Company shall have one or more paying agents, it will, on or prior to each due date of the principal of (and premium, if any) or interest, if any, on any Notes, deposit with such paying agent a sum sufficient to pay the principal (and premium, if any) or interest, if any, so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, if any, and (unless such paying agent is the Trustee) the Company shall promptly notify the Trustee of any failure on its part to so act. Anything in this Section 6.4 to the contrary notwithstanding, the Company may, at any time, for the purpose of obtaining a satisfaction and discharge of this Indenture, or for any other reason, pay or cause to be paid to the Trustee all sums held in trust by it or any paying agent hereunder, as required by this Section 6.4, such sums to be held by the Trustee upon the trusts herein contained. Anything in this Section 6.4 to the contrary notwithstanding, the agreement to hold sums in trust as provided in this Section 6.4 is subject to Sections 5.3 and 5.4 hereof. SECTION 6.5 OPINIONS OF COUNSEL The Company will cause this Indenture, any indentures supplemental to this Indenture, and any financing or continuation statements to be promptly recorded and filed and re-recorded and refiled in such manner and in such places, as may be required by law in order fully to preserve, protect and perfect the security of the Noteholders and all rights of the Trustee, and shall deliver to the Trustee: (a) promptly after the execution and delivery of this Indenture and of any indenture supplemental to this Indenture, an Opinion of Counsel either stating that, in the opinion of such counsel, this Indenture or such supplemental indenture and any financing or continuation statements have been properly recorded and filed so as to make effective and to perfect the interest of the Trustee intended to be created by this Indenture for the benefit of the Holders from time to time of the Notes in the Pledged First Mortgage Bonds or the Pledged Substituted Mortgage Bonds, and reciting the details of such action, or stating that, in the opinion of such counsel, no such action is necessary to perfect or make such interest effective and stating what, if any, action of the foregoing character may reasonably be expected to become necessary prior to the next succeeding October 1 to maintain, perfect and make such interest effective; and (b) on or before October 1 of each year, beginning in 1999, and prior to the Substitution Date, an Opinion of Counsel either stating that in the opinion of such counsel such action has been taken, since the date of the most recent Opinion of Counsel furnished pursuant to this Section 6.5(b) or the first Opinion of Counsel furnished pursuant to Section 6.5(a) hereof, with respect to the recording, filing, re-recording, or refiling of this Indenture, each supplemental indenture and any financing or continuation statements, as is necessary to maintain and perfect the interest of the Trustee intended to be created by this Indenture for the benefit of the Holders from time to time of the Notes in the Pledged First Mortgage Bonds or the Pledged Substituted Mortgage Bonds, and reciting the details of such action, or stating that in the opinion of such counsel no such action is necessary to maintain and perfect such interest and stating what, if any, action of the foregoing character may reasonably be expected to become necessary prior to the next succeeding October 1 to maintain, perfect and make such security interest effective. -30- SECTION 6.6 CERTIFICATES AND NOTICE TO TRUSTEE The Company shall, on or before October 1 of each year, beginning in 1999, deliver to the Trustee a certificate from its principal executive officer, principal financial officer or principal accounting officer covering the preceding calendar year and stating whether or not, to the knowledge of such party, the Company has complied with all conditions and covenants under this Indenture, and, if not, describing in reasonable detail any failure by the Company to comply with any such conditions or covenants. For purposes of this Section, compliance shall be determined without regard to any period of grace or requirement of notice provided under this Indenture. SECTION 6.7 NEGATIVE COVENANTS On and after the Substitution Date, if and only if no Pledged Substituted Mortgage Bonds have been delivered to the Trustee, the Company will not create, assume, incur or suffer to exist any Mortgage upon any Principal Property, whether owned or leased on the Substitution Date or thereafter acquired, to secure any Debt of the Company or any other Person (other than the Notes), without in any such case making effective provision whereby all of the Notes outstanding hereunder (other than such Notes, if any, which shall by their terms be expressly excluded from the operation of this Section 6.7) shall be directly secured equally and ratably with such Debt, excluding, however, from the operation of the foregoing provisions: (i) any Mortgage upon property existing at the time of acquisition thereof including acquisition by means of merger or consolidation (but excluding any extension thereof or addition thereto unless the terms of the Mortgage as of the date of the acquisition of such property provide that such Mortgage shall be secured by such extensions or additions); (ii) any Mortgage to secure the payment of all or any part of the purchase price of property or to secure any Debt incurred prior to, at the time of or within 180 days after the acquisition of such property for the purpose of financing all or any part of the purchase price thereof; (iii) any Mortgage existing at the Substitution Date; (iv) any Permitted Encumbrance; and (v) any extension, refinancing, renewal of replacement (or successive extensions refinancings, renewals or replacements) in whole or in part of any Mortgage referred to in any of the foregoing clauses (i) to (iv), inclusive; provided, however, that the principal amount of Debt secured thereby shall not exceed the principal amount of Debt (plus any premium or fee payable in connection with such extension, refinancing, renewal or replacement) so secured at the time of such extension, refinancing, renewal or replacement; and provided, further, that such Mortgage shall be limited to all or such part of the property which was subject to the Mortgage so extended, refinanced, renewed or replaced (plus improvements on such property). Notwithstanding the foregoing provisions of this Section 6.7, the Company may create, assume, incur or suffer to exist any Mortgage upon any Principal Property which is not excepted by any of clauses (i) through (v) above without equally and ratably securing the Notes, provided that the aggregate amount of all Debt then outstanding secured by such Mortgage and all similar Mortgages, does not exceed 15% of the total consolidated capitalization of the Company as shown on the audited consolidated balance sheet contained in the latest annual report of the Company filed with the SEC. For the purposes of this Section 6.7, any Mortgage in favor of the United States of America or any States thereof, or any other country, or any political subdivision -31- of any of the foregoing, to secure partial, progress, advance or other payments pursuant to the provisions of any contract or statute, or any Mortgage securing industrial development, pollution control or similar revenue bonds shall not be deemed to create a Mortgage to secure any Debt. ARTICLE SEVEN NOTEHOLDER LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE SECTION 7.1 NOTEHOLDER LISTS (a) The Company shall furnish or cause to be furnished to the Trustee semiannually, not later than 15 days after each Regular Record Date for each Interest Payment Date that is not a maturity date and at such other times as such Trustee may request in writing, within 30 days after receipt by the Company of any such request, a list in such form as the Trustee may reasonably require containing all the information in the possession or control of the Company, or any paying agents other than the Trustee, as to the names and addresses of the Holders of Notes, obtained since the date as of which the next previous list, if any, was furnished. Any such list may be dated as of a date not more than 15 days prior to the time such information is furnished or caused to be furnished and need not include information received after such date; provided that as long as the Trustee is the registrar for the Notes, no such list shall be required to be furnished. The Trustee shall preserve any list provided to it pursuant to this Section until such time as the Company or any paying agent, as applicable, shall provide it with a more recent list. (b) Within five Business Days after the receipt by the Trustee of a written application by any three or more Holders stating that the applicants desire to communicate with other Holders with respect to their rights under the Indenture or under the Notes, and accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, and by reasonable proof that each such applicant has owned a Note for a period of at least six months preceding the date of such application, the Trustee shall, at its election, either: (i) afford to such applicants access to all information furnished to or received by the Trustee pursuant to Section 7.1(a) hereof or, if applicable, in its capacity as registrar for the Notes; or (ii) inform such applicants as to the approximate number of Holders according to the most recent information furnished to or received by the Trustee under Section 7.1(a) hereof or if applicable in its capacity as registrar for the Notes, and as to the approximate cost of mailing to such Holders the form of proxy or other communication, if any, specified in such application. If the Trustee shall elect not to afford such applicants access to such information, the Trustee shall, upon the written request of such applicants, mail to each Holder of Notes a copy of the form of proxy or other communication which is specified in such request, with reasonable promptness after a tender to the Trustee of the material to be mailed and of payment, or provision for the payment, of the reasonable expenses of such mailing, unless within five days after such tender the Trustee shall mail to such applicants and file with the SEC, together with a copy of the material to be mailed, a written statement to the effect that, in the opinion of the Trustee, such mailing would be contrary to the best interests of the Holders or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. If the SEC, after -32- opportunity for a hearing upon the objections specified in the written statement so filed, shall enter an order refusing to sustain any of such objections or after the entry of an order sustaining one or more of such objections, the SEC shall find, after notice and opportunity for hearing, that all the objections so sustained have been met and shall enter an order so declaring, the Trustee shall mail copies of such material to all Holders with reasonable promptness after the entry of such order and the renewal of such tender; otherwise the Trustee shall be relieved of any obligation or duty to such applicants respecting their application. (c) Every Holder of a Note, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any paying agent nor any Authenticating Agent shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders in accordance with this Section, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under this Section. SECTION 7.2 SECURITIES AND EXCHANGE COMMISSION REPORTS The Company shall: (a) file with the Trustee, within 15 days after the Company is required to file the same with the SEC, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may from time to time by rules and regulations prescribe) which the Company may be required to file with the SEC pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if the Company is not required to file information, documents or reports pursuant to either of said Sections, then it will file with the Trustee and the SEC, in accordance with rules and regulations prescribed from time to time by the SEC, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Exchange Act in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations; (b) file with the Trustee and the SEC, in accordance with rules and regulations prescribed from time to time by the SEC, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations, including, in the case of annual reports, if required by such rules and regulations, certificates or opinions of independent public accountants, conforming to the requirements of Section 15.5 hereof, as to compliance with conditions or covenants, compliance with which is subject to verification by accountants; and (c) transmit by mail to all Holders, as their names and addresses appear in the register, within 30 days after the filing thereof with the Trustee, such summaries of any information, documents and reports required to be filed by the Company pursuant to paragraphs (a) and (b) of this Section as may be required by rules and regulations prescribed from time to time by the SEC. SECTION 7.3 REPORTS BY THE TRUSTEE (a) Within 60 days after October 1 of each year, beginning with the October 1 after the first issuance of Notes hereunder, the Trustee shall transmit by mail a brief report dated as of such date that complies with Section 313(a) of the TIA (to the extent required by such Section). -33- (b) The Trustee shall from time to time transmit by mail brief reports that comply, both in content and date of delivery, with Section 313(b) of the TIA (to the extent required by such Section). (c) A copy of each such report filed pursuant to this section shall, at the time of such transmission to such Holders, be filed by the Trustee with each stock exchange upon which any Notes are listed and also with the SEC. The Company will notify the Trustee promptly upon the listing of such Notes on any stock exchange. (d) Reports pursuant to this Section shall be transmitted (1) by mail to all Holders of Notes, as their names and addresses appear in the register for the Notes; (2) by mail to such Holders of Notes as have, within the two years preceding such transmission, filed their names and addresses with the Trustee for such purpose; (3) by mail, except in the case of reports pursuant to Section 7.3(b) and (c) hereof, to all Holders of Notes whose names and addresses have been furnished to or received by the Trustee pursuant to Section 7.1 hereof; and (4) at the time such report is transmitted to the Holders of the Notes, to each exchange on which Notes are listed and also with the SEC. ARTICLE EIGHT REMEDIES OF THE TRUSTEE AND NOTEHOLDERS ON EVENTS OF DEFAULT SECTION 8.1 EVENTS OF DEFAULT (a) If one or more of the following Events of Default shall have occurred and be continuing: (1) default in the payment of any installment of interest upon any of the Notes as and when the same shall become due and payable, and continuance of such default for a period of 30 days; (2) default in the payment of the principal of or premium, if any, on any of the Notes as and when the same shall become due and payable and continuance of such default for five days; (3) failure on the part of the Company duly to observe or perform any other of the covenants or agreements on the part of the Company contained in the Notes or in this Indenture for a period of 90 days after the date on which written notice of such failure, requiring the same to be remedied and stating that such notice is a "Notice of Default" hereunder, shall have been given to the Company by the Trustee by registered mail, or to the Company and the Trustee by the Holders of at least a majority in aggregate principal amount of the Notes at the time outstanding; (4) prior to the Substitution Date, a default (as defined in the First Mortgage under which the Pledged First Mortgage Bonds are outstanding) has occurred and is -34- continuing, and the Mortgage Trustee or Holders of at least a majority in aggregate principal amount of the Notes at the time outstanding shall have given written notice thereof to the Trustee; (5) if any Pledged Substituted Mortgage Bonds are outstanding, a default (as defined in the Substituted Mortgage) has occurred and is continuing, and the Mortgage Trustee or Holders of at least a majority in aggregate principal amount of the Notes at the time outstanding shall have given written notice thereof to the Trustee; (6) the entry of a decree or order by a court having jurisdiction over the Company for relief in respect of the Company under the United States Bankruptcy Code, 11 U.S.C. (S) 101-1330, as now constituted or hereafter amended (the "Bankruptcy Code"), or any other applicable federal or state bankruptcy, insolvency or other similar law, or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or similar official of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; or (7) the filing by the Company with respect to itself or its property of a petition or answer or consent seeking relief under the Bankruptcy Code, or any other applicable federal or state bankruptcy, insolvency or other similar law, or the consent by it to the institution of proceedings thereunder or to the filing of any such petition or to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Company or of any substantial part of its property, or the failure of the Company generally to pay its debts as such debts become due, or the taking of corporate action by the Company to effectuate any such action; then and in each and every such case other than an Event of Default specified in Section 8.1(4) or 8.1(5), either the Trustee or the Holders of a majority in aggregate principal amount of the Notes of such series then outstanding, by notice in writing to the company (and to the Trustee if given by Noteholders) may declare the principal of all of the Notes of such series to be due and payable immediately and upon any such declaration the same shall become and shall be immediately due and payable, notwithstanding anything to the contrary contained in this Indenture or in the Notes of such series; provided, however, that if, at any time after the principal of the Notes of such series shall have been so declared due and payable and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided and prior to the mailing to the Trustee by the Mortgage Trustee of a firm, valid and unconditional notice to the Trustee of the acceleration of all of the first mortgage bonds issued and outstanding under either the First Mortgage or the Substituted Mortgage, as applicable, the Company shall pay or shall deposit with the Trustee a sum of money sufficient to pay (i) all matured installments of interest upon all of the Notes of such series, (ii) the principal of and any premium on all Notes of such series which shall have become due otherwise than by acceleration (with interest on overdue installments of interest, to the extent that payment of such interest is enforceable under applicable law, and on such principal and applicable premium at the rate borne by the Notes to the date of such payment or deposit), (iii) all sums paid or advanced by the Trustee hereunder, and (iv) the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 9.6, and if any and all defaults under this Indenture, other than the non-payment of principal of and interest and premium, if any, on the Notes of such series which shall have become due solely by such declaration of acceleration, shall have been cured or waived (including any defaults under either the First Mortgage or the Substituted Mortgage, as applicable, as evidenced by notice thereof from the Mortgage Trustee to the Trustee), then and in every such case the Holders of a majority in aggregate principal amount of the Notes of such series then outstanding may, by written notice to -35- the Company and the Trustee, waive all such defaults and rescind and annul such declaration of acceleration and its consequences; provided, however, that no such waiver or rescission and annulment shall extend to or shall affect any subsequent default, or shall impair any right consequent thereon. If an Event of Default specified in either Section 8.1(4) or Section 8.1(5) occurs, the principal of all of the Notes, together with interest accrued thereon, shall become due and payable immediately with respect thereto, without the necessity of any action by the Trustee or any Noteholder; provided, however, that a rescission and annulment of the declaration that the first mortgage bonds outstanding under either the First Mortgage or the Substituted Mortgage, as applicable, be due and payable prior to their stated maturities shall constitute a waiver of the Event of Default under Section 8.1(4) or Section 8.1(5) and of its consequences, but no such waiver shall extend to or affect any subsequent Event of Default under Section 8.1(4) or Section 8.1(5). (b) If the Trustee shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned because of such rescission or annulment or for any other reason or shall have been determined adversely to the Trustee, then and in every such case the Company and the Trustee shall be restored respectively to their several positions and rights hereunder, and all rights, remedies and powers of the Company and the Trustee shall continue as though no such proceeding had been taken. SECTION 8.2 ENFORCEMENT BY TRUSTEE (a) If there shall be pending proceedings for the bankruptcy or for the reorganization of the Company or any other obligor on the Notes under the Bankruptcy Code or any other applicable law, or in case a receiver or trustee shall have been appointed for the property of the Company or such other obligor, or in the case of any similar judicial proceedings relative to the Company or other obligor on the Notes, or to the creditors or property of the Company or such other obligor, the Trustee, irrespective of whether the principal of the Notes shall then be due and payable as therein expressed or by declaration or otherwise, shall be entitled and empowered, by intervention in such proceedings or otherwise, to file and prove a claim or claims for the whole amount of principal and any premium and interest owing and unpaid in respect of the Notes, and, in case of any judicial proceedings, to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including, prior to the Substitution Date, any claims of the Trustee as holder of Pledged First Mortgage Bonds or, if applicable, on and after the Substitution Date, any claims of the Trustee as holder of Pledged Substituted Mortgage Bonds, and including any amounts due to the Trustee under Section 9.6 hereof) and of the Holders of Notes allowed in such judicial proceedings relative to the Company or any other obligor on the Notes, its or their creditors, or its or their property, and to collect and receive any moneys or other property payable or deliverable on any such claims, and to distribute the same after the deduction of its charges and expenses. (b) All claims and rights of action under this Indenture, or under any of the Notes, may be enforced by the Trustee without the possession of any of the Notes, or the production thereof in any trial or other proceeding relative thereto, and any such suit or proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall be for the ratable benefit of the Holders of the Notes in respect of which such action was taken. (c) Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or to accept or adopt on behalf of any Noteholder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any -36- Holder thereof or to authorize the Trustee to vote in respect of the claim of any Noteholder in any such proceeding. SECTION 8.3 APPLICATION OF MONEYS COLLECTED BY TRUSTEE Any moneys collected by the Trustee with respect to any of the Notes pursuant to this Article shall be applied in the order following, at the date or dates fixed by the Trustee for the distribution of such moneys, upon presentation of the several Notes, and stamping thereon the payment, if only partially paid, and upon surrender thereof if fully paid. FIRST: To the payment of all amounts due to the Trustee pursuant to Section 9.6 hereof; SECOND: If the principal of the outstanding Notes in respect of which such moneys have been collected shall not have become due and be unpaid, to the payment of interest on the Notes, in the order of the maturity of the installments of such interest, with interest (to the extent allowed by law and to the extent that such interest has been collected by the Trustee) upon the overdue installments of interest at the rate borne by the Notes, such payments to be made ratably to the persons entitled thereto, and then to the payment to the Holders entitled thereto of the unpaid principal of and applicable premium on any of the Notes which shall have become due (other than Notes previously called for redemption for the payment of which moneys are held pursuant to the provisions of this Indenture), whether at stated maturity or by redemption, in the order of their due dates, beginning with the earliest due date, and if the amount available is not sufficient to pay in full all Notes due on any particular date, then to the payment thereof ratably, according to the amounts of principal and applicable premium due on that date, to the Holders entitled thereto, without any discrimination or privilege; THIRD: If the principal of the outstanding Notes in respect of which such moneys have been collected shall have become due, by declaration or otherwise, to the payment of the whole amount then owing and unpaid upon the Notes for principal and premium, if any, and interest thereon, with interest on the overdue principal and any premium and (to the extent allowed by law and to the extent that such interest has been collected by the Trustee) upon overdue installments of interest at the rate borne by the Notes; and in case such moneys shall be insufficient to pay in full the whole amount so due and unpaid upon the Notes, then to the payment of such principal and any premium and interest without preference or priority of principal and any premium over interest, or of interest over principal and any premium or of any installment of interest over any other installment of interest, or of any Note over any other Note, ratably to the aggregate of such principal and premium, if any, and accrued and unpaid interest; and FOURTH: to the payment of the remainder, if any, to the Company or its successors or assigns, or to whomsoever may lawfully be entitled to the same, or as a court of competent jurisdiction may determine. SECTION 8.4 PROCEEDINGS BY NOTEHOLDERS (a) No Holder of any Note shall have any right by virtue of or by availing of any provision of this Indenture to institute any suit, action or proceeding in equity or at law upon or under or with respect to this Indenture or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless such Holder previously shall have given to the Trustee written notice of an Event of Default with respect to such Note and of the continuance thereof, as hereinabove provided, and unless also Noteholders of a majority in aggregate principal amount of the Notes then outstanding affected by such Event of Default shall have made written request upon the Trustee to institute such action, suit or proceeding in its own name as Trustee hereunder -37- and shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee for 60 days after its receipt of such notice, request and offer of indemnity, shall have neglected or refused to institute any such action, suit or proceeding. (b) Notwithstanding any other provision in this Indenture, however, the rights of any Holder of any Note to receive payment of the principal of and any premium and interest on such Note, on or after the respective due dates expressed in such Note or on the applicable redemption date, or to institute suit for the enforcement of any such payment on or after such respective dates shall not be impaired or affected without the consent of such Holder. SECTION 8.5 PROCEEDINGS BY TRUSTEE In case of an Event of Default hereunder the Trustee may in its discretion proceed to protect and enforce the rights vested in it by this Indenture, including its rights as holder of the Pledged First Mortgage Bonds or the Pledged Substituted Mortgage Bonds, by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any of such rights, either by suit in equity or by action at law or by proceeding in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted to it under this Indenture, or to enforce any other legal or equitable right vested in the Trustee by this Indenture or by law. SECTION 8.6 REMEDIES CUMULATIVE AND CONTINUING All powers and remedies given by this Article Eight to the Trustee or to the Noteholders shall, to the extent permitted by law, be deemed cumulative and not exclusive of any powers and remedies hereof or of any other powers and remedies available to the Trustee or the Holders of the Notes, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in this Indenture, and no delay or omission of the Trustee or of any Holder of any of the Notes in exercising any right or power accruing upon any default occurring and continuing as aforesaid shall impair any such right or power, or shall be construed to be a waiver of any such default or an acquiescence therein; and, subject to Section 8.4 hereof, every power and remedy given by this Article Eight or by law to the Trustee or to the Noteholders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or by the Noteholders. SECTION 8.7 DIRECTION OF PROCEEDINGS AND WAIVER OF DEFAULTS BY MAJORITY OF NOTEHOLDERS The Holders of a majority in aggregate principal amount of the Notes at the time outstanding shall have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee; provided, that (subject to Section 9.1 hereof) the Trustee shall have the right to decline to follow any such direction if the Trustee being advised by counsel determines that the action or proceeding so directed may not lawfully be taken or if the Trustee in good faith by its board of directors or trustees, executive committee, or a trust committee of directors or trustees or responsible officers shall determine that the action or proceeding so directed would involve the Trustee in personal liability or would be unduly prejudicial to the rights of Noteholders not joining in such directions. The Holders of a majority in aggregate principal amount of the Notes at the time outstanding may on behalf of all of the Holders of the Notes waive any past default or Event of Default hereunder and its consequences except a default in the payment of principal of or any premium or interest on the Notes. Upon any such waiver the Company, the Trustee and the -38- Holders of the Notes shall be restored to their former positions and rights hereunder, respectively, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. Whenever any default or Event of Default hereunder shall have been waived as permitted by this Section 8.7, said default or Event of Default shall for all purposes of the Notes and this Indenture be deemed to have been cured and to be not continuing. SECTION 8.8 NOTICE OF DEFAULT The Trustee shall within 90 days after the occurrence of a default known to it, give to all Holders of the Notes, in the manner provided in Section 15.10 hereof, notice of such default, unless such default shall have been cured before the giving of such notice, the term "default" for the purpose of this Section 8.8 being hereby defined to be any event which is or after notice or lapse of time or both would become an Event of Default; provided that, except in the case of default in the payment of the principal of or any premium or interest on any of the Notes, or in the payment of any sinking or purchase fund installments, the Trustee shall be protected in withholding such notice if and so long as its board of directors or trustees, executive committee, or a trust committee of directors or trustees or responsible officers in good faith determines that the withholding of such notice is in the interests of the Holders of the Notes. The Trustee shall not be charged with knowledge of any Event of Default unless a responsible officer of the Trustee assigned to the corporate trustee department of the Trustee shall have actual knowledge of such Event of Default. SECTION 8.9 UNDERTAKING TO PAY COSTS All parties to this Indenture agree, and each Holder of any Note by acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, 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, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but this Section 8.9 shall not apply to any suit instituted by the Trustee, or to any suit instituted by any Noteholder, or group of Noteholders, holding in the aggregate more than 10% in principal amount of the Notes outstanding, or to any suit instituted by any Noteholder for the enforcement of the payment of the principal of or any premium or interest on any Note on or after the due date expressed in such Note or the applicable redemption date. ARTICLE NINE CONCERNING THE TRUSTEE SECTION 9.1 DUTIES AND RESPONSIBILITIES OF TRUSTEE (a) The Trustee, prior to the occurrence of an Event of Default and after the curing of all Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. If an Event of Default has occurred (which has not been cured or waived), the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. -39- (b) No provisions of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (1) prior to the occurrence of any Event of Default and after the curing or waiving of all Events of Default which may have occurred (A) the duties and obligations of the Trustee shall be determined solely by the express provisions of this Indenture, and the Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (B) in the absence of bad faith on the part of the Trustee, the 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 Trustee and conforming to the requirements of this Indenture; but, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture as to form; (2) the Trustee shall not be liable for any error of judgment made in good faith by a responsible officer or officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with Section 8.7 hereof relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under this Indenture. SECTION 9.2 RELIANCE ON DOCUMENTS, OPINIONS, ETC. Except as otherwise provided in Section 9.1 hereof: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, note 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) any request, direction, order or demand of the Company mentioned herein shall be sufficiently evidenced by an Officers' Certificate (unless other evidence in respect thereof is herein specifically prescribed); and any Board Resolution may be evidenced to the Trustee by a copy thereof certified by the Secretary or an Assistant Secretary of the Company; (c) the Trustee may consult with counsel and any advice or 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 accordance with such advice or Opinion of Counsel; (d) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Noteholders, pursuant to this Indenture, unless such Noteholders shall have offered to the Trustee reasonable -40- security or indemnity against the costs, expenses and liabilities which may be incurred by such exercise; (e) the Trustee shall not be liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture; (f) prior to the occurrence of an Event of Default hereunder and after the curing or waiving of all Events of Default, the 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, consent, order, approval, note or other paper or document, unless requested in writing to do so by the Holders of at least a majority in principal amount of the then outstanding Notes; provided that if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by this Indenture, the Trustee may require reasonable indemnity against such expense or liability as a condition to so proceeding; (g) no provision of this Indenture shall require the Trustee to extend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it 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; and (h) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or through agents or attorneys; provided that the Trustee shall not be liable for the conduct or acts of any such agent or attorney that shall have been appointed in accordance herewith with due care. SECTION 9.3 NO RESPONSIBILITY FOR RECITALS, ETC. The recitals contained herein and in the Notes (except in the certificate of authentication) shall be taken as the statements of the Company, and the Trustee assumes no responsibility for the correctness of the same. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Notes. The Trustee shall not be accountable for the use or application by the Company of any Notes or the proceeds of any Notes authenticated and delivered by the Trustee in conformity with this Indenture. The Trustee shall not be responsible for recording or filing this Indenture, any supplemental indenture, or any financing or continuation statement in any public office at any time or times. SECTION 9.4 TRUSTEE, AUTHENTICATING AGENT, PAYING AGENT OR REGISTRAR MAY OWN NOTES The Trustee and any Authenticating Agent, paying agent or registrar, in its individual or other capacity, may become the owner or pledgee of Notes with the same rights it would have if it were not Trustee, Authenticating Agent, paying agent or registrar. SECTION 9.5 MONEYS TO BE HELD IN TRUST Subject to Section 5.4 hereof all moneys received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by law. The Trustee may -41- allow and credit to the Company interest on any money received hereunder at such rate, if any, as may be agreed upon by the Company and the Trustee from time to time as may be permitted by law. SECTION 9.6 COMPENSATION AND EXPENSES OF TRUSTEE The Company covenants and agrees to pay to the Trustee from time to time, and the Trustee shall be entitled to, reasonable compensation (which shall not be limited by any law in regard to the compensation of a trustee of an express trust), and the Company shall pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with this Indenture (including the reasonable compensation and the reasonable expenses and disbursements of its counsel and agents, including any Authenticating Agents, and of all persons not regularly in its employ) except any such expense, disbursement or advance as may arise from its negligence or bad faith. The Company also covenants to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on the part of the Trustee and 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. The obligations of the Company under this Section 9.6 to compensate the Trustee and to pay or reimburse the Trustee for expenses, disbursements and advances shall constitute additional indebtedness hereunder. Such additional indebtedness shall be secured by a lien prior to that of the Notes upon all property and funds held or collected by the Trustee as such, except funds held in trust for the benefit of the Holders of any particular Notes. SECTION 9.7 OFFICERS' CERTIFICATE AS EVIDENCE Whenever in the administration of this Indenture, the Trustee shall deem it necessary or desirable that a matter be proved or established prior to the taking, suffering or omitting of any action hereunder, such matter (unless other evidence in respect thereof is herein specifically prescribed) may, in the absence of negligence or bad faith on the part of the Trustee, be deemed to be conclusively proved and established by an Officers' Certificate delivered to the Trustee, and such Officers' Certificate, in the absence of negligence or bad faith on the part of the Trustee, shall be full warrant to the Trustee for any action taken, suffered or omitted by it under this Indenture in reliance thereon. SECTION 9.8 CONFLICTING INTEREST OF TRUSTEE The Trustee shall be subject to and shall comply with the provisions of Section 310 of the TIA; provided that, to the extent permitted by law, The Bank of New York shall not be deemed to have a conflicting interest for purposes of Section 310(b) of the TIA because of its capacity as trustee under the First Mortgage or the Substituted Mortgage. Nothing in this Indenture shall be deemed to prohibit the Trustee or the Company from making any application permitted pursuant to such section. SECTION 9.9 EXISTENCE AND ELIGIBILITY OF TRUSTEE There shall at all times be a Trustee hereunder which Trustee shall at all times be a corporation organized and doing business under the laws of the United States or any State thereof or of the District of Columbia (or a corporation or other Person permitted to act as trustee by the SEC), subject to supervision or examination by such bodies and authorized under such laws to exercise corporate trust powers and having a combined capital and surplus of at least -42- $150,000,000. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid authority, then for the purposes of this Section 9.9, the combined capital and surplus shall be deemed to be as set forth in its most recent report of condition so published. No obligor upon the Notes or Person directly or indirectly controlling, controlled by, or under common control with such obligor shall serve as Trustee. If at any time the Trustee shall cease to be eligible in accordance with this Section 9.9, the Trustee shall resign immediately in the manner and with the effect specified in Section 9.10 hereof. SECTION 9.10 RESIGNATION OR REMOVAL OF TRUSTEE (a) Pursuant to the provisions of this Article, the Trustee may at any time resign and be discharged of the trusts created by this Indenture by giving written notice to the Company specifying the day upon which such resignation shall take effect, and such resignation shall take effect immediately upon the later of the appointment of a successor trustee and such day. (b) Any Trustee may be removed at any time by an instrument or concurrent instruments in writing filed with such Trustee and signed and acknowledged by the Holders of a majority in principal amount of the then outstanding Notes or by their attorneys in fact duly authorized. (c) If at any time (1) the Trustee shall cease to be eligible in accordance with Section 9.9 hereof and shall fail to resign after written request therefor by the Company or by any Holder who has been a bona fide Holder for at least six months, (2) the Trustee shall fail to comply with Section 9.8 hereof after written request therefor by the Company or any such Holder, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then the Trustee may be removed forthwith by an instrument or concurrent instruments in writing filed with the Trustee and either: (1) signed by the President, any Vice President, the Treasurer or any Assistant Treasurer of the Company and attested by the Secretary or an Assistant Secretary of the Company; or (2) signed and acknowledged by the Holders of a majority in principal amount of outstanding Notes or by their attorneys in fact duly authorized. (d) Any resignation or removal of the Trustee shall not become effective until acceptance of appointment by the successor Trustee as provided in Section 9.11 hereof. SECTION 9.11 APPOINTMENT OF SUCCESSOR TRUSTEE (a) If at any time the Trustee shall resign or be removed, the Company shall promptly appoint a successor Trustee. (b) The successor Trustee shall provide written notice of its appointment to the Holder of each Note outstanding following any such appointment. (c) If no appointment of a successor Trustee shall be made pursuant to Section 9.11(a) hereof within 60 days after appointment shall be required, any Noteholder or the resigning Trustee may apply to any court of competent jurisdiction to appoint a successor Trustee. Said court may thereupon after such notice, if any, as such court may deem proper and prescribe, appoint a successor Trustee. -43- (d) Any Trustee appointed under this Section 9.11 as a successor Trustee shall be a bank or trust company eligible under Section 9.9 hereof and qualified under Section 9.8 hereof. SECTION 9.12 ACCEPTANCE BY SUCCESSOR TRUSTEE (a) Any successor Trustee appointed as provided in Section 9.11 hereof shall execute, acknowledge and deliver to the Company and to its predecessor Trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as Trustee herein; but nevertheless, on the written request of the Company or of the successor Trustee, the Trustee ceasing to act shall, upon payment of any amounts then due it pursuant to Section 9.6 hereof execute and deliver an instrument transferring to such successor Trustee all the rights and powers of the Trustee so ceasing to act, including all right, title and interest, if any, in the Pledged First Mortgage Bonds or Pledged Substituted Mortgage Bonds. Upon request of any such successor Trustee, the Company shall execute any and all instruments in writing in order more fully and certainly to vest in and confirm to such successor Trustee all such rights and powers. Any Trustee ceasing to act shall, nevertheless, retain a lien upon all property or funds held or collected by such Trustee to secure any amounts then due it pursuant to Section 9.6 hereof. (b) No successor Trustee shall accept appointment as provided in this Section 9.12 unless at the time of such acceptance such successor Trustee shall be qualified under Section 9.8 hereof and eligible under Section 9.9 hereof. (c) Upon acceptance of appointment by a successor Trustee as provided in this Section 9.12, the successor Trustee shall mail notice of its succession hereunder to all Holders of Notes as the names and addresses of such Holders appear on the registry books. SECTION 9.13 SUCCESSION BY MERGER, ETC. (a) Any corporation into which the Trustee may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided such corporation shall be otherwise qualified and eligible under this Article. (b) If at the time such successor to the Trustee shall succeed to the trusts created by this Indenture any of the Notes shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor Trustee, and deliver such Notes so authenticated; and in case at that time any of the Notes shall not have been authenticated, any successor to the Trustee may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Notes or in this Indenture provided that the certificates of the Trustee shall have; provided that the right to adopt the certificate of authentication of any predecessor Trustee or authenticate Notes in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation. SECTION 9.14 LIMITATIONS ON RIGHTS OF TRUSTEE AS A CREDITOR -44- The Trustee shall be subject to, and shall comply with, the provisions of Section 311 of the TIA. SECTION 9.15 AUTHENTICATING AGENT (a) There may be one or more Authenticating Agents appointed by the Trustee with the written consent of the Company, with power to act on its behalf and subject to the direction of the Trustee in the authentication and delivery of Notes in connection with transfers and exchanges under Sections 2.6, 2.7, 2.8, 2.13, 3.3, and 13.4 hereof as fully to all intents and purposes as though such Authenticating Agents had been expressly authorized by those Sections to authenticate and deliver Notes. For all purposes of this Indenture, the authentication and delivery of Notes by any Authenticating Agent pursuant to this Section 9.15 shall be deemed to be the authentication and delivery of such Notes "by the Trustee." Any such Authenticating Agent shall be a bank or trust company or other Person of the character and qualifications set forth in Section 9.9 hereof. (b) Any corporation into which any Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which any Authenticating Agent shall be a party, or any corporation succeeding to the corporate trust business of any Authenticating Agent, shall be the successor of such Authenticating Agent hereunder, if such successor corporation is otherwise eligible under this Section 9.15, without the execution or filing of any paper or any further act on the part of the parties hereto or such Authenticating Agent or such successor corporation. (c) Any Authenticating Agent may at any time resign by giving written notice of resignation to the Trustee and to the Company. The Trustee may at any time terminate the agency of any Authenticating Agent by giving written notice of termination to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time any Authenticating Agent shall cease to be eligible under this Section 9.15, the Trustee may, with the written consent of the Company, appoint a successor Authenticating Agent, and upon so doing shall give written notice of such appointment to the Company and shall mail, in the manner provided in Section 15.10, notice of such appointment to the Holders of Notes. (d) The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services. (e) Sections 9.2, 9.3, 9.6, 9.7 and 9.9 hereof shall be applicable to any Authenticating Agent. ARTICLE TEN CONCERNING THE NOTEHOLDERS SECTION 10.1 ACTION BY NOTEHOLDERS Whenever in this Indenture it is provided that the Holders of a specified percentage in aggregate principal amount of the Notes may take any action, the fact that at the time of taking any such action the Holders of such specified percentage have joined therein may be evidenced (a) by any instrument or any number of instruments of similar tenor executed by such Noteholders in person or by agent or proxy appointed in writing, (b) by the record of such Noteholders voting in favor thereof at any meeting of Noteholders duly called and held in accordance with Article -45- Eleven hereof or (c) by a combination of such instrument or instruments and any such record of such a meeting of Noteholders. SECTION 10.2 PROOF OF EXECUTION BY NOTEHOLDERS (a) Subject to Sections 9.1, 9.2 and 11.5 hereof, proof of the execution of any instruments by a Noteholder or the agent or proxy for such Noteholder shall be sufficient if made in accordance with such reasonable rules and regulations as may be prescribed by the Trustee or in such manner as shall be satisfactory to the Trustee. The ownership of Notes shall be proved by the register for the Notes maintained by the Trustee. (b) The record of any Noteholders' meeting shall be proven in the manner provided in Section 11.6 hereof. SECTION 10.3 WHO DEEMED ABSOLUTE OWNERS Subject to Sections 2.4(f) and 10.1 hereof, the Company, the Trustee, any paying agent and any Authenticating Agent shall deem the person in whose name any Note shall be registered upon the register for the Notes to be, and shall treat such person as, the absolute owner of such Note (whether or not such Note shall be overdue) for the purpose of receiving payment of or on account of the principal and premium, if any, and interest on such Note, and for all other purposes; and neither the Company nor the Trustee nor any paying agent nor any Authenticating Agent shall be affected by any notice to the contrary. All such payments shall be valid and effectual to satisfy and discharge the liability upon any such Note to the extent of the sum or sums so paid. SECTION 10.4 COMPANY-OWNED NOTES DISREGARDED In determining whether the Holders of the requisite aggregate principal amount of outstanding Notes have concurred in any direction, consent or waiver under this Indenture, Notes which are owned by the Company or any other obligor on the Notes or by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any other obligor on the Notes shall be disregarded and deemed not to be outstanding for the purpose of any such determination; provided that, for the purposes of determining whether the Trustee shall be protected in relying on any such direction, consent or waiver, only Notes which the Trustee knows are so owned shall be so disregarded. Notes so owned which have been pledged in good faith to third parties may be regarded as outstanding for the purposes of this Section 10.4 if the pledgee shall establish to the satisfaction of the Trustee the pledgee's right to take action with respect to such Notes and that the pledgee is not a person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any such other obligor. In the case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee. SECTION 10.5 REVOCATION OF CONSENTS; FUTURE HOLDERS BOUND Except as may be otherwise required in the case of a Global Note by the applicable rules and regulations of the Depository, at any time prior to the taking of any action by the Holders of the percentage in aggregate principal amount of the Notes specified in this Indenture in connection with such action, any Holder of a Note, which has been included in the Notes the Holders of which have consented to such action may, by filing written notice with the Trustee at the corporate trust office of the Trustee and upon proof of ownership as provided in Section 10.2(a) hereof, revoke such action so far as it concerns such Note. Except as aforesaid any such -46- action taken by the Holder of any Note shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Note and of any Notes issued in exchange, substitution or upon registration of transfer therefor, irrespective of whether or not any notation thereof is made upon such Note or such other Notes. SECTION 10.6 RECORD DATE FOR NOTEHOLDER ACTS If the Company shall solicit from the Noteholders any request, demand, authorization, direction, notice, consent, waiver or other act, the Company may, at its option, by Board Resolution, fix in advance a record date for the determination of Noteholders 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 the record date, but only the Noteholders of record at the close of business on the record date shall be deemed to be Noteholders for the purpose of determining whether Holders of the requisite aggregate principal amount of outstanding Notes have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other act, and for that purpose the outstanding Notes shall be computed as of the record date; provided that no such request, demand, authorization, direction, notice, consent, waiver or other act by the Noteholders on the record date shall be deemed effective unless it shall become effective pursuant to this Indenture not later than six months after the record date. ARTICLE ELEVEN NOTEHOLDERS' MEETING SECTION 11.1 PURPOSES OF MEETINGS A meeting of Noteholders may be called at any time and from time to time pursuant to this Article Eleven for any of the following purposes: (a) to give any notice to the Company or to the Trustee, or to give any directions to the Trustee, or to consent to the waiving of any Event of Default hereunder and its consequences, or to take any other action authorized to be taken by Noteholders pursuant to Article Eight; (b) to remove the Trustee pursuant to Article Nine; (c) to consent to the execution of an indenture or indentures supplemental hereto pursuant to Section 13.2 hereof; or (d) to take any other action authorized to be taken by or on behalf of the Holders of any specified aggregate principal amount of the Notes, as the case may be, under any other provision of this Indenture or under applicable law. SECTION 11.2 CALL OF MEETINGS BY TRUSTEE The Trustee may at any time call a meeting of Holders of Notes to take any action specified in Section 11.1 hereof, to be held at such time and at such place as the Trustee shall determine. Notice of every such meeting of Noteholders, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be given to Holders of the Notes that may be affected by the action proposed to be taken at such meeting -47- in the manner provided in Section 15.10 hereof. Such notice shall be given not less than 20 nor more than 90 days prior to the date fixed for such meeting. SECTION 11.3 CALL OF MEETINGS BY COMPANY OR NOTEHOLDERS If at any time the Company, pursuant to a Board Resolution, or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding, shall have requested the Trustee to call a meeting of Noteholders, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have mailed the notice of such meeting within 20 days after receipt of such request, then the Company or such Noteholders may determine the time and the place for such meeting and may call such meeting to take any action authorized in Section 11.1 hereof by giving notice thereof as provided in Section 11.2 hereof. SECTION 11.4 QUALIFICATIONS FOR VOTING To be entitled to vote at any meetings of Noteholders a Person shall (a) be a Holder of one or more Notes affected by the action proposed to be taken or (b) be a Person appointed by an instrument in writing as proxy by a Holder of one or more such Notes. The only Persons who shall be entitled to be present or to speak at any meeting of Noteholders shall be the Persons entitled to vote at such meeting and their counsel and any representatives (including employees) of the Trustee and its counsel and any representatives (including employees) of the Company and its counsel. SECTION 11.5 REGULATIONS (a) Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Noteholders in regard to proof of the holding of Notes and of the appointment of proxies, and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall think fit. (b) The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company or by the Noteholders as provided in Section 11.3 hereof in which case the Company or Noteholders calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by the Holders of a majority in aggregate principal amount of the Notes present in person or by proxy at the meeting. (c) Subject to Section 10.4 hereof, at any meeting each Noteholder or proxy shall be entitled to one vote for each $1,000 principal amount of Notes held or represented by such Noteholder; provided that no vote shall be cast or counted at any meeting in respect of any Note ruled by the chairman of the meeting to be not outstanding. The chairman of the meeting shall have no right to vote other than by virtue of Notes held by such chairman or instruments in writing as aforesaid duly designating such chairman as the person to vote on behalf of other Noteholders. At any meeting of Noteholders duly called pursuant to Section 11.2 or 11.3 hereof, the presence of persons holding or representing Notes in an aggregate principal amount sufficient to take action on any business for the transaction for which such meeting was called shall constitute a quorum. Any meeting of Noteholders duly called pursuant to Section 11.2 or 11.3 hereof may be adjourned from time to time by the Holders of a majority in aggregate principal -48- amount of the Notes present in person or by proxy at the meeting, whether or not constituting a quorum, and the meeting may be held as so adjourned without further notice. SECTION 11.6 VOTING The vote upon any resolution submitted to any meeting of Noteholders shall be by written ballots on which shall be subscribed the signatures of the Holders of Notes or of their representatives by proxy and the principal amount of Notes held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in duplicate of all votes cast at the meeting. A record in duplicate of the proceedings of such meeting of Noteholders shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was given as provided in Section 11.2 hereof. The record shall show the aggregate principal amount of the Notes voting in favor of or against any resolution. The record shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one of the duplicates shall be delivered to the Company and the other to the Trustee to be preserved by the Trustee and the Trustee shall have the ballots taken at the meeting attached to such duplicate. Any record so signed and verified shall be conclusive evidence of the matters therein stated. SECTION 11.7 RIGHTS OF TRUSTEE OR NOTEHOLDERS NOT DELAYED Nothing in this Article Eleven shall be deemed or construed to authorize or permit, by reason of any call of a meeting of Noteholders or any rights expressly or impliedly conferred hereunder to make such call, any hindrance or delay in the exercise of any right or rights conferred upon or reserved to the Trustee or to the Holders of Notes under any of the provisions of this Indenture or of the Notes. ARTICLE TWELVE CONSOLIDATION, MERGER, SALE, TRANSFER OR OTHER DISPOSITION SECTION 12.1 COMPANY MAY CONSOLIDATE, ETC. ONLY ON CERTAIN TERMS The Company shall not consolidate with or merge into any other corporation or sell, or otherwise dispose of all or substantially all of its assets unless the corporation formed by such consolidation or into which the Company is merged or the Person which receives all or substantially all of the assets pursuant to such sale, transfer or other disposition (a) shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of and premium and interest on all of the Notes and the performance of every covenant of this Indenture on the part of the Company to be performed or observed, (b) if such consolidation, merger, sale, transfer or other disposition occurs prior to the Substitution Date, shall expressly assume, by an indenture supplemental to the First Mortgage, executed and delivered to the Trustee and the Mortgage Trustee, in form satisfactory to the Trustee and the Mortgage Trustee, the due and punctual payment of the principal of, premium, if any, and interest on all of the Pledged First Mortgage Bonds and the performance of every covenant of the First Mortgage on the part of the Company to be performed or observed and (c) if such consolidation, merger, sale, transfer or other disposition occurs on and after the Substitution Date and Pledged Substituted Mortgage Bonds -49- are outstanding, shall expressly assume, by an indenture supplemental to the Substituted Mortgage, executed and delivered to the Trustee and the Mortgage Trustee, the due and punctual payment of the principal of, premium, if any, and interest on all of the Pledged Substituted Mortgage Bonds and the performance of every covenant of the Substituted Mortgage on the part of the Company to be performed or observed. For purposes of this Article Twelve, the phrase "all or substantially all of its assets" shall mean 50% or more of the total assets of the Company as shown on the balance sheet of the Company as of the end of the calendar year immediately preceding the day of the year in which such determination is made and nothing in this Indenture shall prevent or hinder the Company from selling, transferring or otherwise disposing during any calendar year (in one transaction or a series of transactions) less than 50% of the amount of its total assets as shown on the balance sheet of the Company as of the end of the immediately preceding calendar year. SECTION 12.2 SUCCESSOR CORPORATION SUBSTITUTED Upon any consolidation or merger, or any sale, transfer or other disposition of all or substantially all of the assets of the Company in accordance with Section 12.1 hereof, the successor corporation formed by such consolidation or into which the Company is merged or to which such sale, transfer or other disposition is made shall succeed to, and be substituted for and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor corporation had been named as the Company herein and the Company shall be released from all obligations hereunder. ARTICLE THIRTEEN SUPPLEMENTAL INDENTURES SECTION 13.1 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF NOTEHOLDERS (a) The Company and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto without the consent of any Noteholder for one or more of the following purposes: (1) to make such provision in regard to matters or questions arising under this Indenture as may be necessary or desirable, and not inconsistent with this Indenture or prejudicial to the interests of the Holders, for the purpose of supplying any omission, curing any ambiguity, or curing, correcting or supplementing any defective or inconsistent provision; (2) to change or eliminate any of the provisions of this Indenture, provided that any such change or elimination shall become effective only when there is no Note outstanding created prior to the execution of such supplemental indenture which is entitled to the benefit of such provision or such change or elimination is applicable only to Notes issued after the effective date of such change or elimination; (3) to establish the form of Notes as permitted by Section 2.1 hereof or to establish or reflect any terms of any Note determined pursuant to Section 2.5 hereof; (4) to evidence the succession of another corporation to the Company, and the assumption by any such successor of the covenants of the Company herein and in the Notes; (5) to grant to or confer upon the Trustee for the benefit of the Holders any additional rights, remedies, powers or authority; (6) to permit the Trustee to comply with any duties imposed upon it by law; (7) to specify further the duties and responsibilities of and to define further the relationships among the Trustee, any Authenticating Agent and any paying agent; (8) to add to the covenants of the Company for the benefit of the Holders, to add to the security for the Notes or to surrender a right or power conferred on the Company herein; and (9) to make any other change that is not prejudicial to the Trustee or the Holders. -50- (b) The Trustee is hereby authorized to join with the Company in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be therein contained and to accept the conveyance, transfer and assignment of any property thereunder, but the Trustee shall not be obligated to enter into any such supplemental indenture which adversely affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. (c) Any supplemental indenture authorized by this Section 13.1 may be executed by the Company and the Trustee without the consent of the Holders of any of the Notes at the time outstanding, notwithstanding any of the provisions of Section 13.2 hereof. SECTION 13.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF NOTEHOLDERS (a) With the consent (evidenced as provided in Section 10.1 hereof) of the Holders of a majority in aggregate principal amount of the Notes at the time outstanding, the Company, when authorized by Board Resolution, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the Noteholders; provided that no such supplemental indenture shall: (1) change the maturity date of any Note, or reduce the rate or extend the time of payment of interest thereon, or reduce the principal amount thereof or any premium thereon, or change the coin or currency in which the principal of any Note or any premium or interest thereon is payable, or change the date on which any Note may be redeemed or adversely affect the rights of the Noteholders to institute suit for the enforcement of any payment of principal of or any premium or interest on any Note, or impair the interest hereunder of the Trustee in the Pledged First Mortgage Bonds or Pledged Substituted Mortgage Bonds, or reduce the principal amount of any series of Pledged First Mortgage Bonds (except, as provided in this Indenture, upon the Substitution Date) or Pledged Substituted Mortgage Bonds to an amount less than the principal amount of the related series of Notes or alter the payment provisions of such Pledged First Mortgage Bonds or Pledged Substituted Mortgage Bonds in a manner adverse to the Holders of the Notes, in each case without the consent of the Holder of each Note so affected; or (2) modify this Section 13.2(a) or reduce the aforesaid percentage of Notes, the Holders of which are required to consent to any such supplemental indenture or to reduce the percentage of Notes, the Holders of which are required to waive Events of Default, in each case, without the consent of the Holders of all of the Notes then outstanding. (b) Upon the request of the Company, accompanied by a copy of the Board Resolution authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of Noteholders as aforesaid, the Trustee shall join with the Company in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture. (c) It shall not be necessary for the consent of the Holders of Notes under this Section 13.2 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. (d) Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to this Section 13.2, the Trustee shall give notice in the manner provided in Section 15.10 hereof, setting forth in general terms the substance of such -51- supplemental indenture, to all Noteholders. Any failure of the Trustee to give such notice or any defect therein shall not, however, in any way impair or affect the validity of any such supplemental indenture. (e) Notwithstanding anything to the contrary in this Section 13.2, if any proposed supplemental indenture would affect only a limited number of series or issues of Notes, only the Holders of the Notes so affected shall be entitled to consent to such supplemental indenture, and, subject to Sections 13.2(a)(1) and (2), such supplemental indenture may be approved with the consent of the Holders of a majority in aggregate principal amount of the Notes so affected. SECTION 13.3 COMPLIANCE WITH TRUST INDENTURE ACT; EFFECT OF SUPPLEMENTAL INDENTURES Any supplemental indenture executed pursuant to this Article Thirteen shall comply with the TIA. Upon the execution of any supplemental indenture pursuant to this Article Thirteen, the Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company and the Noteholders shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. SECTION 13.4 NOTATION ON NOTES Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Article Thirteen may 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 Notes so modified as approved by the Trustee and the Board of Directors with respect to any modification of this Indenture contained in any such supplemental indenture may be prepared and executed by the Company, authenticated by the Trustee and delivered in exchange for the Notes then outstanding. SECTION 13.5 EVIDENCE OF COMPLIANCE OF SUPPLEMENTAL INDENTURE TO BE FURNISHED TRUSTEE The Trustee, subject to Sections 9.1 and 9.2 hereof, shall receive an Officers' Certificate and an Opinion of Counsel pursuant to Section 15.5 hereof as conclusive evidence that any supplemental indenture executed pursuant hereto complies with the requirements of this Article Thirteen. ARTICLE FOURTEEN IMMUNITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS AND DIRECTORS SECTION 14.1 INDENTURE AND NOTES SOLELY CORPORATE OBLIGATIONS No recourse for the payment of the principal of or any premium or interest on any Note, any Pledged First Mortgage Bond or any Pledged Substituted Mortgage Bond, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company, contained in this Indenture, the First Mortgage, the Substituted Mortgage or in any supplemental indenture, or in any Note or in any Pledged First -52- Mortgage Bond or any Pledged Substituted Mortgage Bond, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, shareholder, officer or director, as such, past, present or future, of the Company or any successor corporation, either directly or through the Company or any successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issuance of the Notes. ARTICLE FIFTEEN MISCELLANEOUS PROVISIONS SECTION 15.1 PROVISIONS BINDING ON COMPANY'S SUCCESSORS All the covenants, stipulations, promises and agreements made by the Company in this Indenture shall bind its successors and assigns whether so expressed or not. SECTION 15.2 OFFICIAL ACTS BY SUCCESSOR CORPORATION Any act or proceeding by any provision of this Indenture authorized or required to be done or performed by any board, committee or officer of the Company shall and may be done and performed with like force and effect by the like board, committee or officer of any corporation that shall at the time be the lawful successor of the Company. SECTION 15.3 NOTICES (a) Any notice or demand which by any provision of this Indenture is required or permitted to be given or served by the Trustee or by the Noteholders on the Company may be given or served by confirmed facsimile transmission, by delivery to an overnight courier providing evidence of receipt or by being deposited postage prepaid in a post office letter box, in each case sent or transmitted to the facsimile number or address (until another facsimile number or address is filed by the Company with the Trustee) of the principal executive offices of the Company, to the attention of the Secretary or Treasurer. Any notice, direction, request or demand by any Noteholder, the Company or the Mortgage Trustee to or upon the Trustee shall be deemed to have been sufficiently given or made, for all purposes, if given or made in writing, by any type of delivery described above, at the corporate trust office of the Trustee, Attention: Manager, Corporate Trust Department. (b) The Company shall provide any notices required under this Indenture by publication, but only to the extent that such publication is required by the TIA, the rules and regulations of the SEC or any securities exchange upon which any of the Notes are listed. SECTION 15.4 GOVERNING LAW This Indenture and each Note shall be deemed to be a contract made under the laws of the State of New York, and for all purposes shall be construed in accordance with the internal laws of said State without giving effect to conflict of laws rules thereof. -53- SECTION 15.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT (a) Upon any application or demand by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture (including any covenants compliance with which constitutes a condition precedent) relating to the proposed action have been complied with and an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with. (b) Each certificate or opinion provided for in this Indenture and delivered to the Trustee with respect to compliance with a condition or covenant provided for in this Indenture (other than the certificates delivered pursuant to Section 6.6 hereof) shall include (1) a statement that each Person making such certificate or opinion has read such covenant or condition and the definitions relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion 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 as to whether or not, in the opinion of each such Person, such condition or covenant has been complied with. (c) In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. (d) Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which such certificate or opinion is based are erroneous. Any such certificate or opinion of counsel delivered under the Indenture may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such person knows, or in the exercise of reasonable care should know, that the certificate or opinion of representations with respect to such matters are erroneous. Any opinion of counsel delivered hereunder may contain standard exceptions and qualifications satisfactory to the Trustee. (e) Any certificate, statement or opinion of any officer of the Company, or of counsel, may be based, insofar as it relates to accounting matters, upon a certificate or opinion of or representations by an independent public accountant or firm of accountants, unless such officer or counsel, as the case may be, knows that the certificate or opinions or representations with respect to the accounting matters upon which the certificate, statement or opinion of such officer or counsel may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate or opinion of any firm of independent public accountants filed with the Trustee shall contain a statement that such firm is independent. (f) Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. -54- SECTION 15.6 BUSINESS DAYS Unless otherwise provided pursuant to Section 2.5(c) hereof, in any case where the date of maturity of the principal of or any premium or interest on any Note or the date fixed for redemption of any Note is not a Business Day, then payment of such principal or any premium or interest need not be made on such date but may be made on the next succeeding Business Day with the same force and effect as if made on the date of maturity or the date fixed for redemption, and, in the case of timely payment thereof, no interest shall accrue for the period from and after such Interest Payment Date or the date on which the principal of the Note is required to be paid. SECTION 15.7 TRUST INDENTURE ACT TO CONTROL If and to the extent that any provision of this Indenture limits, qualifies or conflicts with the duties imposed by any of Sections 310 to 317, inclusive, of the TIA, such required provision of the TIA shall govern. SECTION 15.8 TABLE OF CONTENTS, HEADINGS, ETC. The table of contents and the titles 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 15.9 EXECUTION IN COUNTERPARTS This Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument. SECTION 15.10 MANNER OF MAILING NOTICE TO NOTEHOLDERS Any notice or demand which by any provision of this Indenture is required or permitted to be given or served by the Trustee or the Company to or on the Holders of Notes, as the case may be, shall be given or served by confirmed facsimile transmission, by delivery to an overnight courier providing evidence of receipt or by first-class mail, postage prepaid, in each case sent or transmitted to the Holders of such Notes at their last facsimile numbers or addresses as the same appear on the register for the Notes referred to in Section 2.6, and any such notice shall be deemed to be given or served by being deposited in a post office letter box (or by any other form of delivery described above) in the form and manner provided in this Section 15.10. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give notice to any Holder by mail, then such notification to such Holder as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. SECTION 15.11 APPROVAL BY TRUSTEE OF COUNSEL Whenever the Trustee is required to approve counsel who is to furnish evidence of compliance with conditions precedent in this Indenture, such approval by the Trustee shall be deemed to have been given upon the taking of any action by the Trustee pursuant to and in accordance with the certificate or opinion so furnished by such counsel. -55- IN WITNESS WHEREOF, SOUTH JERSEY GAS COMPANY has caused this Indenture to be signed and acknowledged by one of its Vice Presidents, and attested by its Secretary, and ________________________________________________ has caused this Indenture to be signed and acknowledged by one of its Vice Presidents, and attested by one of its Vice Presidents, as of the day and year first written above. SOUTH JERSEY GAS COMPANY By:_________________________ ATTEST: The Bank of New York, as Trustee By:___________________________________________________ ATTEST: -56- EXHIBIT A FORM OF GLOBAL NOTE PRIOR TO SUBSTITUTION DATE THIS NOTE IS A GLOBAL NOTE REGISTERED IN THE NAME OF THE DEPOSITORY (REFERRED TO HEREIN) OR A NOMINEE THEREOF AND, UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR THE INDIVIDUAL NOTES REPRESENTED HEREBY, THIS GLOBAL NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY UNLESS THIS GLOBAL NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET NEW YORK, NEW YORK), TO THE TRUSTEE FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE 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 IS MADE TO CEDE & CO. ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. REGISTERED REGISTERED CUSIP: SOUTH JERSEY GAS COMPANY MEDIUM-TERM NOTE, SERIES ______ ORIGINAL ISSUE DATE: PRINCIPAL AMOUNT: INTEREST RATE: STATED MATURITY DATE: REDEMPTION TERMS, IF ANY: OTHER TERMS: SOUTH JERSEY GAS COMPANY, a corporation of the state of New Jersey (the "Company"), for value received hereby promises to pay to Cede & Co. or registered assigns, the principal sum of DOLLARS on the Maturity Date set forth above, and to pay interest thereon from the Original Issue Date (or if this Global Note has two or more Original Issue Dates, interest shall, beginning on each such Original Issue Date, begin to accrue for that part of the principal amount to which that Original Issue Date is applicable) set forth above or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semiannually in arrears on the ____________ and ____________ in each year (each, an "Interest Payment Date"), commencing on the first such Interest Payment Date succeeding the applicable Original Issue Date set forth above, at the per annum Interest Rate set forth above, until the principal hereof is paid or made available for payment. No interest shall accrue on the Maturity Date, so long as the principal amount of this Global Note is paid on the Maturity Date. The interest so payable and punctually paid or duly provided for on any such Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Note is registered at the close -1- of business on the Regular Record Date for such interest, which shall be the ___________ or ____________, as the case may be, next preceding such Interest Payment Date; provided that the first Interest Payment Date for any part of this Note, the Original Issue Date of which is after a Regular Record Date but prior to the applicable Interest Payment Date, shall be the Interest Payment Date following the next succeeding Regular Record Date; and provided that interest payable on the Maturity Date set forth above or, if applicable, upon redemption or acceleration, shall be payable to the Person to whom principal shall be payable. Except as otherwise provided in the Indenture (as defined below), any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and shall be paid to the Person in whose name this Note is registered at the close of business on a Special Record Date for the payment of such defaulted interest to be fixed by the Trustee, notice whereof shall be given to Noteholders not more than 15 days or fewer than 10 days prior to such Special Record Date. On or before __________, New York City time, or such other time as shall be agreed upon between the Trustee and the Depository, of the day on which such payment of interest is due on this Global Note (other than maturity), the Trustee shall pay to the Depository such interest in same day funds. On or before _________, New York City time, or such other time as shall be agreed upon between the Trustee and the Depository, of the day on which principal, interest payable at maturity and premium, if any, is due on this Global Note, the Trustee shall deposit with the Depository the amount equal to the principal, interest payable at maturity and premium, if any, by wire transfer into the account specified by the Depository. As a condition to the payment, on the Maturity Date or upon redemption or acceleration, of any part of the principal and applicable premium of this Global Note, the Depository shall surrender, or cause to be surrendered, this Global Note to the Trustee, whereupon a new Global Note shall be issued to the Depository. This Global Note is a global security in respect of a duly authorized issue of Medium-Term Notes, Series ____ (the "Notes of this Series," which term includes any Global Notes representing such Notes) of the Company issued and to be issued under an Indenture dated as of _____________, 1998 between the Company and The Bank of New York, as trustee (the "Trustee," which term includes any successor Trustee under the Indenture) and indentures supplemental thereto (collectively, the "Indenture"). Under the Indenture, one or more series of notes may be issued and, as used herein, the term "Notes" refers to the Notes of this series and any other outstanding series of Notes. Reference is hereby made to the Indenture for a more complete statement of the respective rights, limitations of rights, duties and immunities under the Indenture of the Company, the Trustee and the Noteholders and of the terms upon which the Notes are and are to be authenticated and delivered. This Global Note has been issued in respect of the series designated on the first page hereof limited in aggregate principal amount to $__________. Prior to the Substitution Date (as hereinafter defined), the Notes will be secured by first mortgage bonds (the "Pledged First Mortgage Bonds") delivered by the Company to the Trustee for the benefit of the Holders of the Notes, issued under the Indenture of First Mortgage, dated October 1, 1947, from the Company to The Bank of New York as successor trustee to Guarantee Bank and Trust Company (the "Mortgage Trustee"), as supplemented and amended (the "Mortgage"). Reference is made to the Mortgage and the Indenture for a description of the rights of the Trustee as holder of the Pledged First Mortgage Bonds, the property mortgaged and pledged under the Mortgage, the rights of the Company and of the applicable Mortgage Trustee in respect thereof, the duties and immunities of the applicable Mortgage Trustee, the terms and conditions upon which the Pledged First Mortgage Bonds are secured and the circumstances under which additional first mortgage bonds may be issued. -2- FROM AND AFTER SUCH TIME AS ALL FIRST MORTGAGE BONDS (OTHER THAN PLEDGED FIRST MORTGAGE BONDS) ISSUED UNDER THE MORTGAGE HAVE BEEN RETIRED THROUGH PAYMENT, REDEMPTION OR OTHERWISE (INCLUDING THOSE FIRST MORTGAGE BONDS THE PAYMENT FOR WHICH HAS BEEN PROVIDED FOR IN ACCORDANCE WITH THE MORTGAGE) AT, BEFORE OR AFTER THE MATURITY THEREOF (THE "SUBSTITUTION DATE"), THE PLEDGED FIRST MORTGAGE BONDS SHALL CEASE TO SECURE THE NOTES IN ANY MANNER, AND, AT THE OPTION OF THE COMPANY, THE NOTES EITHER (A) WILL BECOME UNSECURED GENERAL OBLIGATIONS OF THE COMPANY OR (B) WILL BE SECURED BY FIRST MORTGAGE BONDS ISSUED UNDER AN INDENTURE OTHER THAN THE FIRST MORTGAGE. IN CERTAIN CIRCUMSTANCES PRIOR TO THE SUBSTITUTION DATE AS PROVIDED IN THE INDENTURE, THE COMPANY IS PERMITTED TO REDUCE THE AGGREGATE PRINCIPAL AMOUNT OF A SERIES OF PLEDGED FIRST MORTGAGE BONDS HELD BY THE TRUSTEE, BUT IN NO EVENT PRIOR TO THE SUBSTITUTION DATE TO AN AMOUNT LESS THAN THE AGGREGATE PRINCIPAL AMOUNT OF THE RELATED SERIES OF NOTES INITIALLY ISSUED CONTEMPORANEOUSLY WITH SUCH PLEDGED FIRST MORTGAGE BONDS. Each Note shall be dated and issued as of the date of its authentication by the Trustee and shall bear an Original Issue Date or Dates. Each Note or Global Note issued upon transfer, exchange or substitution of such Note or Global Note shall bear the Original Issue Date or Dates of such transferred, exchanged or substituted Note or Global Note, as the case may be. [If applicable, one of the following two sentences: This Global Note may not be redeemed prior to ____________, _____. This Global Note is not redeemable prior to the Maturity Date set forth on the first page hereof.] [If applicable: On or after _______________, ____, this Global Note is redeemable in whole or in part in increments of $1,000 (provided that any remaining principal amount of this Global Note shall be at least $100,000) at the option of the Company at the following redemption prices (expressed as a percentage of the principal amount to be redeemed) plus accrued interest to the redemption date: Redemption Periods Redemption Prices - ____________________________. Notice of redemption will be given by mail to Holders of Notes of this issue not less than 30 or more than 60 days prior to the date fixed for redemption, all as provided in the Indenture. In the event of redemption of this Global Note in part only, a new Global Note or Notes of like tenor and series for the unredeemed portion hereof will be issued in the name of the Noteholder hereof upon the surrender hereof.] Interest payments for this Global Note shall be computed and paid on the basis of a 360-day year of twelve 30-day months. If any Interest Payment Date or the date on which the principal of this Global Note is required to be paid is not a Business Day, then payment of principal, premium or interest need not be made on such date but may be made on the next succeeding Business Day with the same force and effect as if made on such Interest Payment Date or date on which the principal of this Global Note is required to be paid and, in the case of timely payment thereof no interest shall accrue for the period from and after such Interest Payment Date or the date on which the principal of this Global Note is required to be paid. The Company, at its option, and subject to the terms and conditions provided in the Indenture, will be discharged from any and all obligations in respect of the Notes (except for certain obligations as specifically set forth in the Indenture) if the Company deposits with the -3- Trustee money, U.S. Government Obligations which through the payment of interest thereon and principal thereof in accordance with their terms will provide money, or a combination of money and U.S. Government Obligations, in any event in an amount sufficient, without reinvestment, as certified by an independent public accounting firm of national reputation in a written certification delivered to the Trustee, to pay at maturity or the applicable redemption date (provided that notice of redemption shall have been duly given or irrevocable provision satisfactory to the Trustee shall have been duly made for the giving of any notice of redemption) all outstanding Notes, including principal and any premium and interest due or to become due to such date of maturity, as the case may be. If an Event of Default shall occur and be continuing, the principal of the Notes may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modifications of the rights and obligations of the Company and the rights of the Noteholders under the Indenture at any time by the Company and the Trustee with the consent of the Holders of not less than a majority in principal amount of the outstanding Notes affected by such amendment or modifications. Any such consent or waiver by the Holder of this Global Note shall be conclusive and binding upon such Holder and upon all future Holders of this Global Note and of any Note issued upon the registration of transfer hereof or in exchange therefor or in lieu thereof whether or not notation of such consent or waiver is made upon the Note. As set forth in and subject to the provisions of the Indenture, no Holder of any Notes will have any right to institute any proceeding with respect to the Indenture or for any remedy thereunder unless such Holder shall have previously given to the Trustee written notice of a continuing Event of Default with respect to such Notes, the Holders of not less than a majority in principal amount of the outstanding Notes affected by such Event of Default shall have made written request and offered reasonable indemnity to the Trustee to institute such proceeding as Trustee and the Trustee shall have failed to institute such proceeding within 60 days; provided that such limitations do not apply to a suit instituted by the Holder hereof for the enforcement of payment of the principal of and any premium or interest on this Note on or after the respective due dates expressed herein. No reference herein to the Indenture and to provisions of this Global Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and any premium and interest on this Global Note at the times, places and rates and the coin or currency prescribed in the Indenture. As provided in the Indenture and subject to certain limitations therein set forth, this Global Note may be transferred only as permitted by the legend hereto. If at any time the Depository for this Global Note notifies the Company that it is unwilling or unable to continue as Depository for this Global Note or if at any time the Depository for this Global Note shall no longer be eligible or in good standing under the Securities Exchange Act of 1934, as amended, or other applicable statute or regulation, the Company shall appoint a successor Depository with respect to this Global Note. If a successor Depository for this Global Note is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such ineligibility, the Company's election to issue this Note in global form shall no longer be effective with respect to this Global Note and the Company will execute, and the Trustee, upon receipt of a Company Order for the authentication and delivery of individual Notes in exchange for this Global Note, will authenticate and deliver individual Notes of like tenor and -4- terms in definitive form in an aggregate principal amount equal to the principal amount of this Global Note. The Company may at any time and in its sole discretion determine that all Notes of this series (but not less than all) issued or issuable in the form of one or more Global Notes shall no longer be represented by such Global Note or Notes. In such event, the Company shall execute, and the Trustee, upon receipt of a Company Order for the authentication and delivery of individual Notes in exchange for such Global Note, shall authenticate and deliver, individual Notes of like tenor and terms in definitive form in an aggregate principal amount equal to the principal amount of such Global Note or Notes in exchange for such Global Note or Notes. Under certain circumstances specified in the Indenture, the Depository may be required to surrender any two or more Global Notes which have identical terms (but which may have differing Original Issue Dates) to the Trustee, and the Company shall execute and the Trustee shall authenticate and deliver to, or at the direction of, the Depository a Global Note in principal or amount equal to the aggregate principal amount of, and with all terms identical to, the Global Notes surrendered thereto and that shall indicate all Original Issue Dates and the principal amount applicable to each such Original Issue Date. The Indenture and the Notes shall be governed by, and construed in accordance with, the laws of the state of New York. Unless the certificate of authentication hereon has been executed by the Trustee, directly or through an Authenticating Agent by manual signature of an authorized officer, this Global Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. All capitalized terms used but not otherwise defined in this Global Note shall have the respective meanings assigned to them in the Indenture unless otherwise indicated herein. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed. Dated:___________ SOUTH JERSEY GAS COMPANY By:__________________________ Title:________________________ Attest:__________________________________ Title:___________________________________ -5- TRUSTEE'S CERTIFICATE OF AUTHENTICATION This Note is one of the Notes of the series herein designated, described or provided for in the within-mentioned Indenture. ____________________________________ __________________________, as Trustee By:_________________________________ Authorized Officer -6- ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - _____ Custodian _________ (Cust) (Minor) TEN ENT - as tenants by the entireties Under Uniform Gifts to Minors JT TEN - as joint tenants with right of survivorship and not as tenants in common. Additional abbreviations may also be used though not in the above list. -7- FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and transfer(s) unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE ______________________. Please print or type name and address including postal zip code of assignee the within note and all rights thereunder, hereby irrevocably constituting and appointing attorney to transfer said note on the books of the Company, with full power of substitution in the premises. Dated:________________ _____________________ NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within instrument in every particular, without alteration or enlargement or any change whatever -8- EXHIBIT B FORM OF NOTE PRIOR TO SUBSTITUTION DATE REGISTERED REGISTERED CUSIP: SOUTH JERSEY GAS COMPANY MEDIUM-TERM NOTE, SERIES ______ ORIGINAL ISSUE DATE: PRINCIPAL AMOUNT: INTEREST RATE: STATED MATURITY DATE: REDEMPTION TERMS, IF ANY: OTHER TERMS: SOUTH JERSEY GAS COMPANY, a corporation of the state of New Jersey (the "Company"), for value received hereby promises to pay to DOLLARS or registered assigns, the principal sum of on the Maturity Date set forth above, and to pay interest thereon from the Original Issue Date set forth above or from the most recent date to which interest has been paid or duly provided for, semiannually in arrears on __________ and __________ in each year (each, an "Interest Payment Date"), commencing on the first such Interest Payment Date succeeding the Original Issue Date set forth above, at the per annum Interest Rate set forth above, until the principal hereof is paid or made available for payment. No interest shall accrue on the Maturity Date, so long as the principal amount of this Note is paid in full on the Maturity Date. The interest so payable and punctually paid or duly provided for on any such Interest Payment Date will, as provided in the Indenture (as defined below), be paid to the Person in whose name this Note is registered at the close of business on the Regular Record Date for such interest, which shall be the ___________ or ___________, as the case may be, next preceding such Interest Payment Date; provided that the first Interest Payment Date for any Note, the Original Issue Date of which is after a Regular Record Date but prior to the applicable Interest Payment Date, shall be the Interest Payment Date following the next succeeding Regular Record Date; and provided, further, that interest payable on the Maturity Date set forth above or, if applicable, upon redemption or acceleration, shall be payable to the Person to whom principal shall be payable. Except as otherwise provided in the Indenture (referred to on the reverse hereof), any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and shall be paid to the Person in whose name this Note is registered at the close of business on a Special Record Date for the payment of such defaulted interest to be fixed by the Trustee, notice whereof shall be given to Noteholders not more than 15 days nor fewer than 10 days prior to such Special Record Date. Principal, applicable premium and interest due at the maturity of this Note shall be payable in immediately available funds when due upon presentation and surrender of this Note at the corporate trust office of the Trustee or at the authorized office of any paying agent. Interest on this Note (other than interest payable at maturity) shall be paid by check or wire transfer payable in clearinghouse or similar next day funds to the Holder as its name appears on the register as of the close of business on the Regular Record Date; provided that if the Trustee receives a written request from any Holder of Notes, the aggregate principal amount of which having the same Interest Payment Date as this Note equals or exceeds $10,000,000, on or before the applicable Regular Record Date, interest on this -9- Note shall be paid by wire transfer of immediately available funds to a bank located within the continental United States designated by such Holder in its request or by direct deposit into the account of such Holder designated by such Holder in its request if such account is maintained with the Trustee or any paying agent. REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS NOTE SET FORTH IN FULL ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH IN FULL AT THIS PLACE. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof directly or through an Authenticating Agent by manual signature of an authorized officer, this Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed. SOUTH JERSEY GAS COMPANY By:________________________ Title:_______________________ Attest:__________________________ Title:___________________________ -10- TRUSTEE'S CERTIFICATE OF AUTHENTICATION This Note is one of the Notes of the series herein designated, described or provided for in the within-mentioned Indenture. ___________________________________ __________________________, as Trustee By:_________________________________ Authorized Officer -11- [FORM OF REVERSE OF NOTE] SOUTH JERSEY GAS COMPANY MEDIUM-TERM NOTES SERIES This Note is one of a duly authorized issue of Medium-Term Notes, Series ____ (the "Notes of this Series") of the Company issued and to be issued under an Indenture dated as of _____________, 1998 between the Company and The Bank of New York, as trustee (the "Trustee", which term includes any successor Trustee under the Indenture) and indentures supplemental thereto (collectively, the "Indenture"). Under the Indenture, one or more series of notes may be issued and, as used herein, the term "Notes" refers to the Notes of this series and any other outstanding series of Notes. Reference is hereby made for a more complete statement of the respective rights, limitations of rights, duties and immunities under the Indenture of the Company, the Trustee and the Noteholders and of the terms upon which the Notes are and are to be authenticated and delivered. This Note is one of the series designated on the face hereof limited in aggregate principal amount to $___________. Prior to the Substitution Date (as hereinafter defined), the Notes will be secured by first mortgage bonds (the "Pledged First Mortgage Bonds") delivered by the Company to the Trustee for the benefit of the Holders of the Notes, issued under the Indenture of First Mortgage, dated October 1, 1947 from the Company to The Bank of New York as successor trustee to Guarantee Bank and Trust Company ("Mortgage Trustee"), as supplemented and amended (the "Mortgage"). Reference is made to the Mortgage and the Indenture for a description of the rights of the Trustee as holder of the Pledged First Mortgage Bonds, the property mortgaged and pledged under the Mortgage, the rights of the Company and of the applicable Mortgage Trustee in respect thereof, the duties and immunities of the applicable Mortgage Trustee, the terms and conditions upon which the Pledged First Mortgage Bonds are secured and the circumstances under which additional first mortgage bonds may be issued. FROM AND AFTER SUCH TIME AS ALL FIRST MORTGAGE BONDS (OTHER THAN PLEDGED FIRST MORTGAGE BONDS) ISSUED UNDER THE MORTGAGE HAVE BEEN RETIRED THROUGH PAYMENT, REDEMPTION OR OTHERWISE (INCLUDING THOSE FIRST MORTGAGE BONDS THE PAYMENT FOR WHICH HAS BEEN PROVIDED FOR IN ACCORDANCE WITH THE MORTGAGE) AT, BEFORE OR AFTER THE MATURITY THEREOF (THE "SUBSTITUTION DATE"), THE PLEDGED FIRST MORTGAGE BONDS SHALL CEASE TO SECURE THE NOTES IN ANY MANNER, AND, AT THE OPTION OF THE COMPANY, THE NOTES EITHER (A) WILL BECOME UNSECURED GENERAL OBLIGATIONS OF THE COMPANY OR (B) WILL BE SECURED BY FIRST MORTGAGE BONDS ISSUED UNDER AN INDENTURE OTHER THAN THE FIRST MORTGAGE. IN CERTAIN CIRCUMSTANCES PRIOR TO THE SUBSTITUTION DATE AS PROVIDED IN THE INDENTURE, THE COMPANY IS PERMITTED TO REDUCE THE AGGREGATE PRINCIPAL AMOUNT OF A SERIES OF PLEDGED FIRST MORTGAGE BONDS HELD BY THE TRUSTEE, BUT IN NO EVENT PRIOR TO THE SUBSTITUTION DATE TO AN AMOUNT LESS THAN THE AGGREGATE OUTSTANDING PRINCIPAL AMOUNT OF THE RELATED SERIES OF NOTES INITIALLY ISSUED CONTEMPORANEOUSLY WITH SUCH PLEDGED FIRST MORTGAGE BONDS. [If applicable, one of the following two sentences: This Note may not be redeemed prior to ____________, _____. This Note is not redeemable prior to the Maturity Date set forth on the face hereof] [If applicable: On or after __________, _____________, this Note is redeemable in whole or in part in increments of $1,000 (provided that any remaining principal amount of this Note shall be at least $1,000) at the option of the Company at the following redemption prices -12- (expressed as a percentage of the principal amount to be redeemed) plus accrued interest to the redemption date: Redemption Periods Redemption Prices - Notice of redemption will be given by mail to Holders of Notes of this issue not less than 30 or more than 60 days prior to the date fixed for redemption, all as provided in the Indenture. In the event of redemption of this Note in part only, a new Note or Notes of like tenor for the unredeemed portion hereof will be issued in the name of the Noteholder hereof upon the surrender hereof.] Interest payments for this Note shall be computed and paid on the basis of a 360-day year of twelve 30-day months. If any Interest Payment Date or the date on which the principal of this Note is required to paid is not a Business Day, then payment of principal, premium or interest need not be made on such date but may be made on the next succeeding Business Day with the same force and effect as if made on such Interest Payment Date or the date on which the principal of this Note is required to be paid, and, in the case of timely payment thereof, no interest shall accrue for the period from and after such Interest Payment Date or the date on which the principal of this Note is required to be paid. The Company, at its option, and subject to the terms and conditions provided in the Indenture, will be discharged from any and all obligations in respect of the Notes (except for certain obligations as specifically set forth in the Indenture) if the Company deposits with the Trustee money, U.S. Government Obligations which through the payment of interest thereon and principal thereof in accordance with their terms will provide money, or a combination of money and U.S. Government Obligations, in any event in an amount sufficient, without reinvestment, as certified by an independent public accounting firm of national reputation in a written certification delivered to the Trustee, to pay at maturity or the applicable redemption date (provided that notice of redemption shall have been duly given or irrevocable provision satisfactory to the Trustee shall have been duly made for the giving of any notice of redemption) all outstanding Notes, including principal and any premium and interest due or to become due to such date of maturity, as the case may be. If an Event of Default shall occur and be continuing, the principal of the Notes may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modifications of the rights and obligations of the Company and the rights of the Noteholders under the Indenture at any time by the Company and the Trustee with the consent of the Holders of not less than a majority in principal amount of the outstanding Notes affected by such amendment or modifications. Any such consent or waiver by the Holder of this Note shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange therefor in lieu thereof whether or not notation of such consent or waiver is made upon the Note. As set forth in and subject to the provisions of the Indenture, no Holder of any Notes will have any right to institute any proceeding with respect to the Indenture or for any remedy thereunder unless such Holder shall have previously given to the Trustee written notice of a continuing Event of Default with respect to such Notes, the Holders of not less than a majority in principal amount of the outstanding Notes affected by such Event of Default shall have made written request and offered reasonable indemnity to the Trustee to institute such proceeding as Trustee and the Trustee shall have failed to institute such proceeding within 60 days; provided that such limitations do not apply to a suit instituted by the Holder hereof for the enforcement of payment of the principal of and any premium or interest on this Note on or after the respective due dates expressed herein. -13- No reference herein to the Indenture and to provisions of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and any premium and interest on this Note at the times, places and rates and the coin or currency prescribed in the Indenture. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Note is registrable in the Note register. Upon surrender of this Note for registration or transfer at the corporate trust office of the Trustee or such other office or agency as may be designated by the Company in the city and state of New York, endorsed by or accompanied by a written instrument of transfer in form satisfactory to the Company and the Note registrar, duly executed by the Holder hereof or the attorney in fact of such Holder duly authorized in writing, one or more new Notes of like tenor and of authorized denominations and for the same aggregate principal amount will be issued to the designated transferee or transferees. The Notes of this series are issuable only in registered form, without coupons, in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Notes are exchangeable for a like aggregate principal amount of Notes of like tenor and of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Note for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Note is registered as the owner thereof for all purposes, whether or not this Note is overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. The Indenture and the Notes shall be governed by, and construed in accordance with, the laws of the state of New York. All capitalized terms used but not otherwise defined in this Note shall have the respective meanings assigned to them in the Indenture. The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - _____ Custodian _________ (Cust) (Minor) TEN ENT - as tenants by the entireties Under Uniform Gifts to Minors JT TEN - as joint tenants with right of survivorship and not as tenants in common. Additional abbreviations may also be used though not in the above list. -14- FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and transfer(s) unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE ___________________________________________. Please print or type name and address including postal zip code of assignee the within note and all rights thereunder, hereby irrevocably constituting and appointing attorney to transfer said note on the books of the Company, with full power of substitution in the premises. Dated:_____________________ ________________________ -15- NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within instrument in every particular, without alteration or enlargement or any change whatever. -16- EXHIBIT C FORM OF GLOBAL NOTE FOLLOWING SUBSTITUTION DATE THIS NOTE IS A GLOBAL NOTE REGISTERED IN THE NAME OF THE DEPOSITORY (REFERRED TO HEREIN) OR A NOMINEE THEREOF AND, UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR THE INDIVIDUAL NOTES REPRESENTED HEREBY, THIS GLOBAL NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY UNLESS THIS GLOBAL NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET NEW YORK, NEW YORK), TO THE TRUSTEE FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE 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 IS MADE TO CEDE & CO. ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. REGISTERED REGISTERED CUSIP: SOUTH JERSEY GAS COMPANY MEDIUM-TERM NOTE, SERIES ______ ORIGINAL ISSUE DATE: PRINCIPAL AMOUNT: INTEREST RATE: STATED MATURITY DATE: REDEMPTION TERMS, IF ANY: OTHER TERMS: SOUTH JERSEY GAS COMPANY, a corporation of the state of New Jersey (the "Company"), for value received hereby promises to pay to Cede & Co. or registered assigns, the principal sum of DOLLARS on the Maturity Date set forth above, and to pay interest thereon from the Original Issue Date (or if this Global Note has two or more Original Issue Dates, interest shall, beginning on each such Original Issue Date, begin to accrue for that part of the principal amount to which that Original Issue Date is applicable) set forth above or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semiannually in arrears on the __________ and __________ in each year (each, an "Interest Payment Date"), commencing on the first such Interest Payment Date succeeding the applicable Original Issue Date set forth above, at the per annum Interest Rate set forth above, until the principal hereof is paid or made available for payment. No interest shall accrue on the Maturity Date, so long as the principal amount of this Global Note is paid on the Maturity Date. The interest so payable and punctually paid or duly provided for on any such Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Note is registered at the close of business on the Regular Record Date -17- for such interest, which shall be the ___________ or ____________, as the case may be, next preceding such Interest Payment Date; provided that the first Interest Payment Date for any part of this Note, the Original Issue Date of which is after a Regular Record Date but prior to the applicable Interest Payment Date, shall be the Interest Payment Date following the next succeeding Regular Record Date; and provided that interest payable on the Maturity Date set forth above or, if applicable, upon redemption or acceleration, shall be payable to the Person to whom principal shall be payable. Except as otherwise provided in the Indenture (as defined below), any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and shall be paid to the Person in whose name this Note is registered at the close of business on a Special Record Date for the payment of such defaulted interest to be fixed by the Trustee, notice whereof shall be given to Noteholders not more than fifteen days or fewer than ten days prior to such Special Record Date. On or before ______, New York City time, or such other time as shall be agreed upon between the Trustee and the Depository, of the day on which such payment of interest is due on this Global Note (other than maturity), the Trustee shall pay to the Depository such interest in same day funds. On or before _______, New York City time, or such other time as shall be agreed upon between the Trustee and the Depository, of the day on which principal, interest payable at maturity and premium, if any, is due on this Global Note, the Trustee shall deposit with the Depository the amount equal to the principal, interest payable at maturity and premium, if any, by wire transfer into the account specified by the Depository. As a condition to the payment, on the Maturity Date or upon redemption or acceleration, of any part of the principal and applicable premium of this Global Note, the Depository shall surrender, or cause to be surrendered, this Global Note to the Trustee, whereupon a new Global Note shall be issued to the Depository. This Global Note is a global security in respect of a duly authorized issue of Medium Term Notes, Series ___ (the "Notes of this Series," which term includes any Global Notes representing such Notes) of the Company issued and to be issued under an Indenture dated as of ________, 1998 between the Company and The Bank of New York, as trustee (the "Trustee," which term includes any successor Trustee under the Indenture) and indentures supplemental thereto (collectively, the "Indenture"). Under the Indenture, one or more series of notes may be issued and, as used herein, the term "Notes" refers to the Notes of this series and any other outstanding series of Notes. Reference is hereby made to the Indenture for a more complete statement of the respective rights, limitations of rights, duties and immunities under the Indenture of the Company, the Trustee and the Noteholders and of the terms upon which the Notes are and are to be authenticated and delivered. This Global Note has been issued in respect of the series designated on the first page hereof limited in aggregate principal amount to $__________. [Include the following paragraph if the Company elects to issue Pledged Substituted Mortgage Bonds (as defined in the Indenture): The Notes will be secured by first mortgage bonds (the "Pledged First Mortgage Bonds") delivered by the Company to the Trustee for the benefit of the Holders of the Notes, issued under [the Substituted Mortgage (as defined in the Indenture)] from the Company to ________________, as trustee (the "Mortgage Trustee"), as supplemented and amended (the "First Mortgage"). Reference is made to the First Mortgage and the Indenture for a description of the rights of the Trustee as holder of the Pledged First Mortgage Bonds, the property mortgaged and pledged under the First Mortgage, the rights of the Company and of the Mortgage Trustee in respect thereof, the duties and immunities of the Mortgage Trustee, the terms and conditions upon which the Pledged First Mortgage Bonds are secured and the circumstances under which additional first mortgage bonds may be issued.] Each Note shall be dated and issued as of the date of its authentication by the Trustee and shall bear an Original Issue Date or Dates. Each Note or Global Note issued upon transfer, -18- exchange or substitution of such Note or Global Note shall bear the Original Issue Date or Dates of such transferred, exchanged or substituted Note or Global Note, as the case may be. [If applicable, one of the following two sentences: This Global Note may not be redeemed prior to ____________, ____. This Global Note is not redeemable prior to the Maturity Date set forth on the first page hereof.] [If applicable: On or after _______________, ____, this Global Note is redeemable in whole or in part in increments of $1,000 (provided that any remaining principal amount of this Global Note shall be at least $100,000) at the option of the Company at the following redemption prices (expressed as a percentage of the principal amount to be redeemed) plus accrued interest to the redemption date: Redemption Periods Redemption Prices - ____________________________________ Notice of redemption will be given by mail to Holders of Notes of this issue not less than 30 or more than 60 days prior to the date fixed for redemption, all as provided in the Indenture. In the event of redemption of this Global Note in part only, a new Global Note or Notes of like tenor and series for the unredeemed portion hereof will be issued in the name of the Noteholder hereof upon the surrender hereof.] Interest payments for this Global Note shall be computed and paid on the basis of a 360-day year of twelve 30-day months. If any Interest Payment Date or the date on which the principal of this Global Note is required to be paid is not a Business Day, then payment of principal, premium or interest need not be made on such date but may be made on the next succeeding Business Day with the same force and effect as if made on such Interest Payment Date or date on which the principal of this Global Note is required to be paid and, in the case of timely payment thereof no interest shall accrue for the period from and after such Interest Payment Date or the date on which the principal of this Global Note is required to be paid. The Company, at its option, and subject to the terms and conditions provided in the Indenture, will be discharged from any and all obligations in respect of the Notes (except for certain obligations specifically as set forth in the Indenture) if the Company deposits with the Trustee money, U.S. Government Obligations which through the payment of interest thereon and principal thereof in accordance with their terms will provide money, or a combination of money and U.S. Government Obligations, in any event in an amount sufficient, without reinvestment, as certified by an independent public accounting firm of national reputation in a written certification delivered to the Trustee, to pay at maturity or the applicable redemption date (provided that notice of redemption shall have been duly given or irrevocable provision satisfactory to the Trustee shall have been duly made for the giving of any notice of redemption) all outstanding Notes, including principal and any premium and interest due or to become due to such date of maturity, as the case may be. If an Event of Default shall occur and be continuing, the principal of the Notes may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modifications of the rights and obligations of the Company and the rights of the Noteholders under the Indenture at any time by the Company and the Trustee with the consent of the Holders of not less than a majority in principal amount of the outstanding Notes affected by such amendment or modifications. Any such consent or waiver by the Holder of this Global Note shall be conclusive and binding upon such Holder and upon all future Holders of this Global Note and of any Note issued upon the registration of transfer hereof or in exchange therefor or in lieu thereof whether or not notation of such consent or waiver is made upon the Note. -19- As set forth in and subject to the provisions of the Indenture, no Holder of any Notes will have any right to institute any proceeding with respect to the Indenture or for any remedy thereunder unless such Holder shall have previously given to the Trustee written notice of a continuing Event of Default with respect to such Notes, the Holders of not less than a majority in principal amount of the outstanding Notes affected by such Event of Default shall have made written request and offered reasonable indemnity to the Trustee to institute such proceeding as Trustee and the Trustee shall have failed to institute such proceeding within 60 days; provided that such limitations do not apply to a suit instituted by the Holder hereof for the enforcement of payment of the principal of and any premium or interest on this Note on or after the respective due dates expressed herein. No reference herein to the Indenture and to provisions of this Global Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and any premium and interest on this Global Note at the times, places and rates and the coin or currency prescribed in the Indenture. As provided in the Indenture and subject to certain limitations therein set forth, this Global Note may be transferred only as permitted by the legend hereto. If at any time the Depository for this Global Note notifies the Company that it is unwilling or unable to continue as Depository for this Global Note or if at any time the Depository for this Global Note shall no longer be eligible or in good standing under the Securities Exchange Act of 1934, as amended, or other applicable statute or regulation, the Company shall appoint a successor Depository with respect to this Global Note. If a successor Depository for this Global Note is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such ineligibility, the Company's election to issue this Note in global form shall no longer be effective with respect to this Global Note and the Company will execute, and the Trustee, upon receipt of a Company Order for the authentication and delivery of individual Notes in exchange for this Global Note, will authenticate and deliver individual Notes of like tenor and terms in definitive form in an aggregate principal amount equal to the principal amount of this Global Note. The Company may at any time and in its sole discretion determine that all Notes (but not less than all) issued or issuable in the form of one or more Global Notes shall no longer be represented by such Global Note or Notes. In such event, the Company shall execute, and the Trustee, upon receipt of a Company Order for the authentication and delivery of individual Notes in exchange for such Global Note, shall authenticate and deliver, individual Notes of like tenor and terms in definitive form in an aggregate principal amount equal to the principal amount of such Global Note or Notes in exchange for such Global Note or Notes. Under certain circumstances specified in the Indenture, the Depository may be required to surrender any two or more Global Notes which have identical terms (but which may have differing Original Issue Dates) to the Trustee, and the Company shall execute and the Trustee shall authenticate and deliver to, or at the direction of, the Depository a Global Note in principal or amount equal to the aggregate principal amount of, and with all terms identical to, the Global Notes surrendered thereto and that shall indicate all Original Issue Dates and the principal amount applicable to each such Original Issue Date. The Indenture and the Notes shall be governed by, and construed in accordance with, the laws of the state of New York. -20- Unless the certificate of authentication hereon has been executed by the Trustee, directly or through an Authenticating Agent by manual signature of an authorized officer, this Global Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. All capitalized terms used but not otherwise defined in this Global Note shall have the respective meanings assigned to them in the Indenture unless otherwise indicated herein. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed. Dated:_____________ SOUTH JERSEY GAS COMPANY By:___________________________ Title:________________________ Attest:________________________ Title:_________________________ TRUSTEE'S CERTIFICATE OF AUTHENTICATION This Note is one of the Notes of the series herein designated, described or provided for in the within-mentioned Indenture. _______________________________________ __________________________, as Trustee By:____________________________________ Authorized Officer -21- ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - _____ Custodian _______ (Cust)(Minor) TEN ENT - as tenants by the entireties Under Uniform Gifts to Minors JT TEN - as joint tenants with right of survivorship and not as tenants in common. Additional abbreviations may also be used though not in the above list. -22- FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and transfer(s) unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE ___________________________________. Please print or type name and address including postal zip code of assignee the within note and all rights thereunder, hereby irrevocably constituting and appointing attorney to transfer said note on the books of the Company, with full power of substitution in the premises. Dated:_________________ ________________________ NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within instrument in every particular, without alteration or enlargement or any change whatever. -23- EXHIBIT D FORM OF NOTE FOLLOWING SUBSTITUTION DATE REGISTERED REGISTERED CUSIP: SOUTH JERSEY GAS COMPANY MEDIUM-TERM NOTE, SERIES ______ ORIGINAL ISSUE DATE: PRINCIPAL AMOUNT: INTEREST RATE: STATED MATURITY DATE: REDEMPTION TERMS, IF ANY: OTHER TERMS: SOUTH JERSEY GAS COMPANY, a corporation of the state of New Jersey (the "Company"), for value received hereby promises to pay to or registered assigns, the principal sum of DOLLARS on the Maturity Date set forth above, and to pay interest thereon from the Original Issue Date set forth above or from the most recent date to which interest has been paid or duly provided for, semiannually in arrears on __________ and __________ in each year (each, an "Interest Payment Date"), commencing on the first such Interest Payment Date succeeding the Original Issue Date set forth above, at the per annum Interest Rate set forth above, until the principal hereof is paid or made available for payment. No interest shall accrue on the Maturity Date, so long as the principal amount of this Note is paid in full on the Maturity Date. The interest so payable and punctually paid or duly provided, further, for on any such Interest Payment Date will, as provided in the Indenture (as defined below), be paid to the Person in whose name this Note is registered at the close of business on the Regular Record Date for such interest, which shall be the __________ or __________ , as the case may be, next preceding such Interest Payment Date; provided that the first Interest Payment Date for any Note, the Original Issue Date of which is after a Regular Record Date but prior to the applicable Interest Payment Date, shall be the Interest Payment Date following the next succeeding Regular Record Date; and provided, further, that interest payable on the Maturity Date set forth above or, if applicable, upon redemption or acceleration, shall be payable to the Person to whom principal shall be payable. Except as otherwise provided in the Indenture (referred to on the reverse hereof), any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and shall be paid to the Person in whose name this Note is registered at the close of business on a Special Record Date for the payment of such defaulted interest to be fixed by the Trustee, notice whereof shall be given to Noteholders not more than 15 days nor fewer than 10 days prior to such Special Record Date. Principal, applicable premium and interest due at the maturity of this Note shall be payable in immediately available funds when due upon presentation and surrender of this Note at the corporate trust office of the Trustee or at the authorized office of any paying agent. Interest on this Note (other than interest payable at maturity) shall be paid by check or wire transfer payable in clearinghouse or similar next day funds to the Holder as its name appears on the register as of the close of business on the Regular Record Date; provided, that if the Trustee receives a written request from any Holder of Notes, the aggregate principal amount of which having the same Interest Payment Date as this Note equals or exceeds $10,000,000, on or before the applicable Regular Record Date, interest on the Note shall be paid by wire transfer of immediately available funds to a bank located within the -24- continental United States designated by such Holder in its request or by direct deposit into the account of such Holder designated by such Holder in its request if such account is maintained with the Trustee or any Paying agent. REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS NOTE SET FORTH IN FULL ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH IN FULL AT THIS PLACE. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof directly or through an Authenticating Agent by manual signature of an authorized officer, this Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. -25- IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed. Dated:______________ SOUTH JERSEY GAS COMPANY By:________________________ Title:_______________________ Attest:___________________________ Title:____________________________ -26- TRUSTEE'S CERTIFICATE OF AUTHENTICATION This Note is one of the Notes of the series herein designated, described or provided for in the within-mentioned Indenture. ______________________________________ __________________________, as Trustee By:___________________________________ Authorized Officer -27- [FORM OF REVERSE OF NOTE] SOUTH JERSEY GAS COMPANY MEDIUM-TERM NOTE, SERIES This Note is one of a duly authorized issue of Medium-Term Notes, Series ___ (the "Notes of this Series") of the Company issued and to be issued under an Indenture dated as of ________, 1998, between the Company and The Bank of New York, as trustee (herein called the "Trustee"), which term includes any successor Trustee under the Indenture) and indentures supplemental thereto (collectively, the "Indenture"). Under the Indenture, one or more series of notes may be issued and, as used herein, the term "Notes" refers to the Notes of this series and any other outstanding series of Notes. Reference is hereby made for a more complete statement of the respective rights, limitations of rights, duties and immunities under the Indenture of the Company, the Trustee and the Noteholders and of the terms upon which the Notes are and are to be authenticated and delivered. This Note is one of the series designated on the face hereof limited in aggregate principal amount to $__________. [Include the following paragraph if the Company elects to issue Pledged Substituted Mortgage Bonds (as defined in the Indenture): The Notes will be secured by first mortgage bonds (the "Pledged First Mortgage Bonds") delivered by the Company to the Trustee for the benefit of the Holders of the Notes, issued under [the Substituted Mortgage (as defined in the Indenture)] from the Company to ________________, as trustee (the "Mortgage Trustee"), as supplemented and amended (the "First Mortgage"). Reference is made to the First Mortgage and the Indenture for a description of the rights of the Trustee as holder of the Pledged First Mortgage Bonds, the property mortgaged and pledged under the First Mortgage, the rights of the Company and of the Mortgage Trustee in respect thereof, the duties and immunities of the Mortgage Trustee, the terms and conditions upon which the Pledged First Mortgage Bonds are secured and the circumstances under which additional first mortgage bonds may be issued.] [If applicable, one of the following two sentences: This Note may not be redeemed prior to __________, ____. This Note is not redeemable prior to the Maturity Date set forth on the face hereof.] [If applicable: On or after ________, ____, this Note is redeemable in whole or in part in increments of $1,000 (provided that any remaining principal amount of this Note shall be at least $1,000) at the option of the Company at the following redemption prices (expressed as a percentage of the principal amount to be redeemed) plus accrued interest to the redemption date: Redemption Periods Redemption Prices - ___________________________. Notice of redemption will be given by mail to Holders of Notes of this issue not less than 30 or more than 60 days prior to the date fixed for redemption, all as provided in the Indenture. In the event of redemption of this Note in part only, a new Note or Notes of like tenor for the unredeemed portion hereof will be issued in the name of the Noteholder hereof upon the surrender hereof.] Interest payments for this Note shall be computed and paid on the basis of a 360-day year of twelve 30-day months. If any Interest Payment Date or the date on which the principal of this Note is required to paid is not a Business Day, then payment of principal, premium or interest need not be made on such date but may be made on the next succeeding Business Day with the same force and effect as if made on such Interest Payment Date or the date on which the principal of this Note is required to be paid, and, in the case of timely payment thereof, no interest shall accrue for the period from and after such Interest Payment Date or the date on which the principal of this Note is required to be paid. -28- The Company, at its option, and subject to the terms and conditions provided in the Indenture, will be discharged from any and all obligations in respect of the Notes (except for certain obligations as specifically set forth in the Indenture) if the Company deposits with the Trustee money, U.S. Government Obligations which through the payment of interest thereon and principal thereof in accordance with their terms will provide money, or a combination of money and U.S. Government Obligations, in any event in an amount sufficient, without reinvestment, as certified by an independent public accounting firm of national reputation in a written certification delivered to the Trustee, to pay at maturity or the applicable redemption date (provided that notice of redemption shall have been duly given or irrevocable provision satisfactory to the Trustee shall have been duly made for the giving of any notice of redemption) all outstanding Notes, including principal and any premium and interest due or to become due to such date of maturity, as the case may be. If an Event of Default shall occur and be continuing, the principal of the Notes may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modifications of the rights and obligations of the Company and the rights of the Noteholders under the Indenture at any time by the Company and the Trustee with the consent of the Holders of not less than a majority in principal amount of the outstanding Notes affected by such amendment or modification. Any such consent or waiver by the Holder of this Note shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange therefor in lieu thereof whether or not notation of such consent or waiver is made upon the Note. As set forth in and subject to the provisions of the Indenture, no Holder of any Notes will have any right to institute any proceeding with respect to the Indenture or for any remedy thereunder unless such Holder shall have previously given to the Trustee written notice of a continuing Event of Default with respect to such Notes, the Holders of not less than a majority in principal amount of the outstanding Notes affected by such Event of Default shall have made written request and offered reasonable indemnity to the Trustee to institute such proceeding as Trustee and the Trustee shall have failed to institute such proceeding within 60 days; provided that such limitations do not apply to a suit instituted by the Holder hereof for the enforcement of payment of the principal of and any premium or interest on this Note on or after the respective due dates expressed herein. No reference herein to the Indenture and to provisions of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and any premium and interest on this Note at the times, places and rates and the coin or currency prescribed in the Indenture. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Note is registrable in the Note register. Upon surrender of this Note for registration or transfer at the corporate trust office of the Trustee or such other office or agency as may be designated by the Company in the Borough of Manhattan, the City and State of New York, endorsed by or accompanied by a written instrument of transfer in form satisfactory to the Company and the Note registrar, duly executed by the Holder hereof or the attorney in fact of such Holder duly authorized in writing, one or more new Notes of like tenor and of authorized denominations and for the same aggregate principal amount will be issued to the designated transferee or transferees. -29- The Notes of this series are issuable only in registered form, without coupons, in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Notes are exchangeable for a like aggregate principal amount of Notes of like tenor and of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Note for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Note is registered as the owner thereof for all purposes, whether or not this Note is overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. The Indenture and the Notes shall be governed by, and construed in accordance with, the laws of the state of New York. All capitalized terms used but not otherwise defined in this Note shall have the respective meanings assigned to them in the Indenture. ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - _____ Custodian _________ (Cust) (Minor) TEN ENT - as tenants by the entireties Under Uniform Gifts to Minors JT TEN - as joint tenants with right of survivorship and not as tenants in common. Additional abbreviations may also be used though not in the above list. -30- FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and transfer(s) unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE _______________________________. Please print or type name and address including postal zip code of assignee the within note and all rights thereunder, hereby irrevocably constituting and appointing attorney to transfer said note on the books of the Company, with full power of substitution in the premises. Dated:________________ ________________________ NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within instrument in every particular, without alteration or enlargement or any change whatever. -31- EX-12 4 RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12 SOUTH JERSEY GAS COMPANY CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES (IN THOUSANDS)
Fiscal Year Ended December 31, -------- ----------------------------------------------- June 30, 1998 1997 1996 1995 1994 1993 ---- ---------------------------------------------- Net Income* $16,209 $19,898 $19,215 $15,813 $11,017 $15,432 Federal and State Income Taxes 12,099 11,559 10,627 9,278 5,881 7,832 Fixed Charges** 20,845 20,205 19,748 19,723 14,831 14,314 Capitalized Interest (113) (107) (114) (98) (120) (191) ----------------------------------------------------------- Total Available for Coverage $49,040 $51,555 $49,476 $44,716 $31,609 $37,387 =========================================================== Total Available 2.4x 2.6x 2.5x 2.3x 2.1x 2.6x Fixed Charges
* Net Income before a Cumulative Effect of a Change in Accounting Principle (1993). ** Fixed charges include interest and preferred securities dividend requirements. EX-25 5 STATEMENT OF ELIGIBILITY ================================================================================ 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.) One Wall Street, New York, N.Y. 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) _______________________ Debt 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 17 C.F.R. 229.10(D). 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.) -2- 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. 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 19th day of August, 1998. THE BANK OF NEW YORK By: /s/ ILIANA ACEVEDO ------------------------------- Name: ILIANA ACEVEDO Title: ASSISTANT TREASURER - -------------------------------------------------------------------------------- Consolidated Report of Condition of Exhibit 7 --------- THE BANK OF NEW YORK of 48 Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business March 31, 1998, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts ASSETS in Thousands Cash and balances due from depos- itory institutions: Noninterest-bearing balances and currency and coin........................................... $ 6,397,993 Interest-bearing balances.................................... 1,138,362 Securities: Held-to-maturity securities.................................. 1,062,074 Available-for-sale securities................................ 4,167,240 Federal funds sold and Securities pur- chased under agreements to resell............................ 391,650 Loans and lease financing receivables: Loans and leases, net of unearned income .................................................... 36,538,242 LESS: Allowance for loan and lease losses .............................................. 631,725 LESS: Allocated transfer risk reserve.................................................... 0 Loans and leases, net of unearned income, allowance, and reserve 35,906,517 Assets held in trading accounts................................ 2,145,149 Premises and fixed assets (including capitalized leases).......................................... 663,928 Other real estate owned........................................ 10,895 Investments in unconsolidated subsidiaries and associated companies.................................................... 237,991 Customers' liability to this bank on acceptances outstanding...................................... 992,747 Intangible assets.............................................. 1,072,517 Other assets................................................... 1,643,173 ----------- Total assets................................................... $55,830,236 =========== LIABILITIES Deposits: In domestic offices.......................................... $24,849,054 Noninterest-bearing ......................................... 10,011,422 Interest-bearing ............................................ 14,837,632 In foreign offices, Edge and Agreement subsidiaries, and IBFs............................. 15,319,002 Noninterest-bearing ......................................... 707,820 Interest-bearing ............................................ 14,611,182 Federal funds purchased and Securities sold under agreements to repurchase. 1,906,066 Demand notes issued to the U.S. Treasury..................................................... 215,985 Trading liabilities............................................ 1,591,288 Other borrowed money: With remaining maturity of one year or less.................................................... 1,991,119 With remaining maturity of more than one year through three years............................... 0 With remaining maturity of more than three years................................................ 25,574 Bank's liability on acceptances exe- cuted and outstanding........................................ 998,145 Subordinated notes and debentures.............................. 1,314,000 Other liabilities.............................................. 2,421,281 ----------- Total liabilities.............................................. 50,631,514 ----------- EQUITY CAPITAL Common stock................................................... 1,135,284 Surplus........................................................ 731,319 Undivided profits and capital reserves..................................................... 3,328,050 Net unrealized holding gains (losses) on available-for-sale securities................................................... 40,198 Cumulative foreign currency transla- tion adjustments............................................. ( 36,129) ----------- Total equity capital........................................... 5,198,722 ----------- Total liabilities and equity capital .......................... $55,830,236 ===========
I, Robert E. Keilman, Senior Vice President and Comptroller of the above- named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Robert E. Keilman We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. Thomas A. Renyi ) Alan R. Griffith ) Directors J. Carter Bacot ) - -------------------------------------------------------------------------------- EX-27 6 FINANCIAL DATA SCHEDULE
UT 1,000 6-MOS DEC-31-1998 JUN-30-1998 PER-BOOK 471,120 0 72,702 102,758 1,384 647,964 5,848 102,817 59,697 168,362 35,000 2,134 166,853 72,300 0 0 8,876 0 0 0 194,439 647,964 160,704 9,451 129,159 138,610 22,094 0 22,094 8,135 13,959 2,276 11,663 8,106 6,783 12,583 4.99 4.99
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